[Federal Register Volume 83, Number 74 (Tuesday, April 17, 2018)]
[Rules and Regulations]
[Pages 16930-17071]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-07355]
[[Page 16929]]
Vol. 83
Tuesday,
No. 74
April 17, 2018
Part II
Department of Health and Human Services
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45 CFR Parts 147, 153, 154, et al.
Patient Protection and Affordable Care Act; HHS Notice of Benefit and
Payment Parameters for 2019; Final Rule
Federal Register / Vol. 83 , No. 74 / Tuesday, April 17, 2018 / Rules
and Regulations
[[Page 16930]]
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DEPARTMENT OF HEALTH AND HUMAN SERVICES
45 CFR Parts 147, 153, 154, 155, 156, 157, and 158
[CMS-9930-F]
RIN 0938-AT12
Patient Protection and Affordable Care Act; HHS Notice of Benefit
and Payment Parameters for 2019
AGENCY: Centers for Medicare & Medicaid Services (CMS), HHS.
ACTION: Final rule.
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SUMMARY: This final rule sets forth payment parameters and provisions
related to the risk adjustment and risk adjustment data validation
programs; cost-sharing parameters; and user fees for Federally-
facilitated Exchanges and State Exchanges on the Federal platform. It
finalizes changes that provide additional flexibility to States to
apply the definition of essential health benefits (EHB) to their
markets, enhance the role of States regarding the certification of
qualified health plans (QHPs); and provide States with additional
flexibility in the operation and establishment of Exchanges, including
the Small Business Health Options Program (SHOP) Exchanges. It includes
changes to standards related to Exchanges; the required functions of
the SHOPs; actuarial value for stand-alone dental plans; the rate
review program; the medical loss ratio program; eligibility and
enrollment; exemptions; and other related topics.
DATES: Effective Date: These regulations are effective on June 18,
2018.
FOR FURTHER INFORMATION CONTACT:
Lindsey Murtagh, (301) 492-4106, Rachel Arguello, (301) 492-4263,
Alper Ozinal, (301) 492-4178, or Abigail Walker, (410) 786-1725, for
general information.
Krutika Amin, (301) 492-5153, for matters related to risk
adjustment, and user fees for Federally-facilitated Exchanges and
State-Exchanges on the Federal platform.
Adrianne Patterson, (410) 786-0686, or Abigail Walker, (410) 786-
1725, for matters related to sequestration.
Melissa Jaffe, (301) 492-4129, for matters related to risk
adjustment data validation, cost-sharing reductions, and the premium
adjustment percentage.
Lisa Cuozzo, (410) 786-1746, for matters related to rate review.
Jenny Chen, (301) 492-5156, for matters related to establishing a
State Exchange, and State Exchanges on the Federal platform.
Emily Ames, (301) 492-4246, for matters related to Navigators and
non-Navigator assistance personnel.
Elissa Dines, (301) 492-4388, for matters related to employer-
sponsored coverage verification.
Kendra May, (301) 492-4477, for matters related to the requirement
to file an income tax return and reconcile APTC and terminations.
Carolyn Kraemer, (301) 492-4197, for matters related to special
enrollment periods under part 155.
Amanda Brander, (202) 690-7892, for matters related to exemptions
from the individual shared responsibility payment.
Terence Kane, (301) 492-4449, for matters related to income
inconsistencies.
Jacob Schnur, (410) 786-7703, for matters related to direct
enrollment.
Laura Eldon, (301) 492-4372, for matters related to the Federally-
facilitated SHOP.
Shilpa Gogna, (301) 492-4257, for matters related to SHOP in State
Exchanges.
Leigha Basini, (301) 492-4380, Rebecca Zimmermann, (301) 492-4396,
or Allison Yadsko, (410) 786-1740, for matters related to standardized
options, essential health benefits, stand-alone dental plans and other
standards for QHP issuers.
Cam Moultrie Clemmons, (206) 615-2338, for matters related to
minimum essential coverage.
Christina Whitefield, (301) 492-4172, for matters related to the
medical loss ratio program.
SUPPLEMENTARY INFORMATION:
Table of Contents
I. Executive Summary
II. Background
A. Legislative and Regulatory Overview
B. Stakeholder Consultation and Input
C. Structure of Final Rule
III. Provisions of the Proposed Rule and Analysis of and Responses
to Public Comments
A. Part 147--Health Insurance Reform Requirements for the Group
and Individual Health Insurance Markets
B. Part 153--Standards Related to Reinsurance, Risk Corridors,
and Risk Adjustment Under the Affordable Care Act
C. Part 154--Health Insurance Issuer Rate Increases: Disclosure
and Review Requirements
D. Part 155--Exchange Establishment Standards and Other Related
Standards Under the Affordable Care Act
E. Part 156--Health Insurance Issuer Standards Under the
Affordable Care Act, Including Standards Related to Exchanges
F. Part 157--Employer Interactions With Exchanges and SHOP
Participation
G. Part 158--Issuer Use of Premium Revenue: Reporting and Rebate
Requirements
IV. Collection of Information Requirements
A. Wage Estimates
B. ICRs Regarding State Flexibility for Risk Adjustment
C. ICRs Regarding Risk Adjustment Data Validation
D. ICRs Regarding Health Insurance Issuer Rate Increases:
Disclosure and Review Requirements--Applicability
E. ICRs Regarding Rate Increases Subject To Review
F. ICRs Regarding the Small Business Health Options Program
G. ICRs Regarding Essential Health Benefits
H. ICRs Regarding Medical Loss Ratio
I. Summary of Annual Burden Estimates for Final Requirements
J. Submission of PRA-Related Comments
V. 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
I. Reducing Regulation and Controlling Regulatory Costs
I. Executive Summary
American Health Benefit Exchanges, or ``Exchanges'' (also called
``Marketplaces'') are entities established under the Patient Protection
and Affordable Care Act (PPACA) through which qualified individuals and
qualified employers can purchase health insurance coverage. Many
individuals who enroll in qualified health plans (QHPs) through
individual market Exchanges are eligible to receive a premium tax
credit (PTC) to reduce their costs for health insurance premiums, and
receive reductions in required cost-sharing payments to reduce out-of-
pocket expenses for health care services. The PPACA also established
the risk adjustment program, which is intended to mitigate the
potential impact of adverse selection and stabilize the price of health
insurance in the individual and small group markets, both on and off
Exchanges.
Over time, issuer exits and increasing insurance premiums have
threatened the stability of the individual and small group Exchanges in
many geographic areas. In previous rulemaking, we established
provisions and parameters to implement many PPACA provisions and
programs. In this final rule, we amend these provisions and parameters,
with a focus on enhancing the role of States in these programs and
providing States with additional flexibilities, reducing unnecessary
regulatory burden
[[Page 16931]]
on stakeholders, empowering consumers, and improving affordability.
On January 20, 2017, the President issued an Executive Order which
stated that, to the maximum extent permitted by law, the Secretary of
HHS and heads of all other executive departments and agencies with
authorities and responsibilities under the PPACA should exercise all
authority and discretion available to them to waive, defer, grant
exemptions from, or delay the implementation of any provision or
requirement of the PPACA that would impose a fiscal burden on any State
or a cost, fee, tax, penalty, or regulatory burden on individuals,
families, health care providers, health insurers, patients, recipients
of health care services, purchasers of health insurance, or makers of
medical devices, products, or medications. In this rule, within the
limitations of the current statute, we are finalizing policies to
reduce fiscal and regulatory burdens across different program areas,
and to support innovative health insurance models.
We are finalizing several changes that would significantly expand
the role of States in the administration of the PPACA. We received
comments on additional ways to support State Exchanges (SBEs) in
adopting innovative approaches to operating and sustaining their
Exchanges, and to make the State Exchange on the Federal platform (SBE-
FP) model a more appealing and viable model for States. We finalize
policies under which States assume a larger role in reviewing the QHP
certification standards of network adequacy and essential community
providers for the Federally-facilitated Exchanges (FFEs). This will
confirm States' traditional role in overseeing their health insurance
markets, and reduce the issuer burden associated with having to comply
with duplicative State and Federal reviews.
This rule also finalizes several policies that will provide States
with greater flexibility. For example, this rule provides States with
additional flexibility in applying the definition of EHBs to their
markets starting with the 2020 plan year. In addition to granting
States more flexibility regulating their markets, we believe this
change would permit States to modify EHBs to increase affordability of
health insurance in the individual and small group markets. This rule
also provides States with significantly more flexibility in how they
operate a Small Business Health Options Program (SHOP), permitting them
to operate these Exchanges more efficiently, and therefore benefitting
States, issuers, employers, and employees. These changes would allow
for a more efficient SHOP, such that employers and employees could
enroll in SHOP coverage by working with a QHP issuer or SHOP-registered
agent or broker. Additionally, the finalized policies provide States
more flexibility regarding risk adjustment transfers in their markets.
We also make it easier for States to apply for and be granted an
adjustment to the individual market medical loss ratio (MLR) standard
in their State. We believe this change provides States with an
additional tool to help stabilize, innovate and provide relief in their
individual markets. Additionally, we make other changes to the MLR
program to reduce the burden on issuers.
Risk adjustment continues to be a core program for stabilizing the
individual and small group markets both on and off Exchanges, and we
are finalizing recalibrated parameters for the HHS risk adjustment
methodology. We are also finalizing several changes related to the risk
adjustment data validation program that are intended to ensure the
integrity of the results of risk adjustment, while alleviating issuer
burden.
As we do every year in the HHS notice of benefit and payment
parameters final rule, we are finalizing updated parameters applicable
in the individual and small group markets. We are finalizing the user
fee rate for issuers participating on FFEs and SBE-FPs for 2019 to be
3.5 and 3.0 percent of premiums, respectively. We are finalizing the
premium adjustment percentage for 2019, which is used to set the rate
of increase for several parameters detailed in the PPACA, including the
maximum annual limitation on cost sharing for 2019, the required
contribution percentage used to determine eligibility for certain
exemptions under section 5000A of the Internal Revenue Code of 1986
(the Code), and the assessable payment amounts under section 4980H(a)
and (b) of the Code. We are finalizing updates to the maximum annual
limitations on cost sharing for the 2019 benefit year for cost-sharing
reductions plan variations.
We are finalizing a number of changes related to rate review that
are intended to reduce regulatory burden on States and issuers in
regard to the rate filing process. Specifically, we are exempting
student health insurance coverage from Federal rate review
requirements, beginning with coverage effective on or after July 1,
2018. We are also modifying the 10 percent threshold for reasonableness
review to a 15 percent default threshold.
Recognizing that Exchanges, including the FFEs, face resource
constraints, we are changing the requirements regarding Navigators, and
the requirements regarding non-Navigator assistance personnel subject
to Sec. 155.215, to enable Exchanges to more easily operate these
programs with limited resources. Similarly, we are allowing an agent,
broker or issuer participating in direct enrollment to have its
selected third-party entity conduct operational readiness reviews,
rather than requiring that those reviews be conducted by entities
approved by HHS.
We also finalize relatively minor adjustments to our programs and
rules as we do each year in the HHS notice of benefit and payment
parameters. We are finalizing a number of incremental amendments to our
policies around coverage, eligibility, enrollment, and affordability
exemptions.
We continue to be very interested in exploring ways to improve
Exchange program integrity. In the proposed rule, we sought comment on
a number of program integrity items, including whether we should
consider shortening the length of time the Exchanges are authorized to
obtain enrollee tax information, as well as ways to prompt more timely
consumer reporting of changes in circumstances during the benefit year
that may impact an individual's eligibility for coverage and financial
assistance. In addition, we requested comment on any additional program
integrity improvements that were not outlined in the proposed rule, but
could be beneficial in a future rulemaking.
Finally, as noted in the proposed rule, we intend to consider
proposals in future rulemaking that would help reduce drug costs and
promote drug price transparency. We also intend to provide guidance on
other aspects of Exchange eligibility in the near future. In
particular, we intend to reconsider the appropriate thresholds for
changes in income that will trigger a data matching inconsistency,
processes for denying eligibility for advance subsidies for individuals
who fail to reconcile advance payments of the premium tax credit (APTC)
on their Federal income tax return, processes for matching enrollment
data with the Medicare and Medicaid programs in order to help consumers
avoid duplicate enrollments, and the appropriate manner of
recalculating APTC following a midyear change in eligibility, and
sought comments on each of these issues as we prepare rulemaking on
these topics.
Instituting strong program safeguards to ensure that only
individuals who are eligible are enrolled in Exchange coverage, and
that they are only
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receiving the amount of financial assistance for which they are
eligible, is essential to ensuring that the Exchanges operate as
intended, and is also a key priority for the Administration. We have
already taken action to strengthen safeguards around Exchange
eligibility, most recently through the implementation of pre-enrollment
verification for special enrollment periods; however, we continue to be
interested in exploring ways to further safeguard Federal tax dollars
flowing through Exchanges.
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 final rule, we refer to the two
statutes collectively as the ``Patient Protection and Affordable Care
Act'' or ``PPACA.''
Subtitles A and C of title I of the PPACA reorganized, amended, and
added to the provisions of part A of title XXVII of the Public Health
Service Act (PHS Act) relating to group health plans and health
insurance issuers in the group and individual markets.
Section 2701 of the PHS Act, as added by the PPACA, 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. These factors are family
size, rating area, age and tobacco use.
Section 2701 of the PHS Act operates in coordination with section
1312(c) of the PPACA. Section 1312(c) of the PPACA generally requires a
health insurance issuer to consider all enrollees in all health plans
(except for grandfathered health plans) offered by such issuer to be
members of a single risk pool for each of its individual and small
group markets. States have the option to merge the individual market
and small group market risk pools under section 1312(c)(3) of the
PPACA.
Section 2702 of the PHS Act, as added by the PPACA, 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.\1\
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\1\ Before enactment of the Patient Protection and Affordable
Care Act, the Health Insurance Portability and Accountability Act of
1996 (HIPAA) 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 PPACA, and sections
2712 and 2741 of the PHS Act, as added by the Health Insurance
Portability and Accountability Act of 1996 (Pub. L. 104-191) (HIPAA)
prior to the enactment of the PPACA, 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 PPACA, generally
requires health insurance issuers to submit an annual MLR report to
HHS, and provide rebates to enrollees if the issuers do not achieve
specified MLR thresholds.
Section 2794 of the PHS Act, as added by the PPACA, 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.'' \2\ The law also requires
health insurance issuers to submit to the Secretary and the applicable
State justifications for unreasonable premium increases prior to the
implementation of the increases. Section 2794(b)(2) of the PHS Act
further specifies that beginning with plan years starting in 2014, the
Secretary, in conjunction with the States, will monitor premium
increases of health insurance coverage offered through an Exchange and
outside of an Exchange.
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\2\ The implementing regulations in part 154 limit the scope of
the requirements under section 2794 of the PHS Act to health
insurance issuers offering health insurance coverage in the
individual market or small group market. See Rate Increase
Disclosure and Review; Final Rule, 76 FR 29964, 29966 (May 23,
2011).
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Section 1252 of the PPACA provides that any standard or requirement
adopted by a State under title I of the PPACA, or any amendment made by
title I of the PPACA, is to be applied uniformly to all health plans in
each insurance market to which the standard and requirement apply.
Section 1302 of the PPACA provides for the establishment of an EHB
package that includes coverage of EHB (as defined by the Secretary),
cost-sharing limits, and actuarial value requirements. The law directs
that EHBs be equal in scope to the benefits provided under 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 PPACA directs all issuers of QHPs to
cover the EHB package described in section 1302(a) of the PPACA,
including coverage of the services described in section 1302(b) of the
PPACA, to adhere to the cost-sharing limits described in section
1302(c) of the PPACA and to meet the AV levels established in section
1302(d) of the PPACA. 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 health insurance coverage, irrespective of
whether such coverage is offered through an Exchange. In addition,
section 2707(b) of the PHS Act directs non-grandfathered group health
plans to ensure that cost sharing under the plan does not exceed the
limitations described in sections 1302(c)(1) of the PPACA.
Section 1302(d) of the PPACA describes the various levels of
coverage based on actuarial value (AV). Consistent with section
1302(d)(2)(A) of the PPACA, AV is calculated based on the provision of
EHB to a standard population. Section 1302(d)(3) of the PPACA directs
the Secretary to develop guidelines that allow for de minimis variation
in AV calculations.
Section 1311(b)(1)(B) of the PPACA directs that the Small Business
Health Options Program assist qualified small employers in facilitating
the enrollment of their employees in QHPs offered in the small group
market. Sections 1312(f)(1) and (2) of the PPACA define qualified
individuals and qualified employers. Under section 1312(f)(2)(B) of the
PPACA, beginning in 2017, States have the option to allow issuers to
offer QHPs in the large group market through an Exchange.\3\ Section
1312(a)(2) of the PPACA provides that in a SHOP, a qualified employer
may select a level of coverage, and that employees may then, in turn,
choose SHOP plans within the level selected by the qualified employer.
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\3\ If a State elects this option, the rating rules in section
2701 of the PHS Act and its implementing regulations will apply to
all coverage offered in such State's large group market (except for
self-insured group health plans) pursuant to section 2701(a)(5) of
the PHS Act.
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Section 1311(c)(1)(B) of the PPACA 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 PPACA requires the Secretary to continue
to operate, maintain, and update the internet portal developed under
section 1103 of the PPACA to provide information to consumers and small
businesses on affordable health insurance coverage options.
Sections 1311(d)(4)(K) and 1311(i) of the PPACA direct all
Exchanges to establish a Navigator program.
Section 1311(c)(6)(C) of the PPACA establishes special enrollment
periods and section 1311(c)(6)(D) of the PPACA establishes the monthly
enrollment period for Indians, as defined by section 4 of the Indian
Health Care Improvement Act.
Section 1312(e) of the PPACA 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 PPACA 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 PPACA. Section 1321(a)(1) of the PPACA directs the
Secretary to issue regulations that set standards for meeting the
requirements of title I of the PPACA with respect to, among other
things, the establishment and operation of Exchanges.
Sections 1313 and 1321 of the PPACA 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 PPACA
provides for State flexibility in the operation and enforcement of
Exchanges and related requirements.
When operating an FFE under section 1321(c)(1) of the PPACA, HHS
has the authority under sections 1321(c)(1) and 1311(d)(5)(A) of the
PPACA to collect and spend user fees. In addition, 31 U.S.C. 9701
permits a Federal agency to establish a charge for a service provided
by the agency. Office of Management and Budget (OMB) Circular A-25
Revised establishes Federal policy regarding user fees and specifies
that a user charge will be assessed against each identifiable recipient
for special benefits derived from Federal activities beyond those
received by the general public.
Section 1321(c)(2) of the PPACA authorizes the Secretary to enforce
the Exchange standards using civil money penalties (CMPs) on the same
basis as detailed in section 2723(b) of the PHS Act. Section 2723(b) of
the PHS Act authorizes the Secretary to impose CMPs as a means of
enforcing the individual and group market reforms contained in Part A
of title XXVII of the PHS Act when a State fails to substantially
enforce these provisions.
Section 1321(d) of the PPACA provides that nothing in title I of
the PPACA should be construed to preempt any State law that does not
prevent the application of title I of the PPACA. Section 1311(k) of the
PPACA specifies that Exchanges may not establish rules that conflict
with or prevent the application of regulations issued by the Secretary.
Section 1343 of the PPACA establishes a permanent risk adjustment
program to provide payments to health insurance issuers that attract
higher-risk populations, such as those with chronic conditions, funded
by payments from those that attract lower-risk populations; thereby,
reducing incentives for issuers to avoid higher-risk enrollees.
Section 1402 of the PPACA provides for, among other things,
reductions in cost sharing for EHB for qualified low- and moderate-
income enrollees in silver level health plans offered through the
individual market Exchanges. This section also provides for reductions
in cost sharing for Indians enrolled in QHPs at any metal level.
Section 5000A of the Code, as added by section 1501(b) of the
PPACA, requires all applicable individuals to maintain minimum
essential coverage (MEC) for each month or make an individual shared
responsibility payment. Section 5000A(f) of the Code defines MEC as any
of the following: (1) Coverage under a specified government sponsored
program; (2) coverage under an eligible employer-sponsored plan; (3)
coverage under a health plan offered in the individual market within a
State; and (4) coverage under a grandfathered health plan. In addition,
the HEALTHY KIDS Act amended section 5000A(f)(1)(A)(iii) of the Code to
include in the definition of MEC CHIP look-alike plans, which are CHIP
buy-in programs that provide benefits that are at least identical to
the benefits provided by the title XXI CHIP program.\4\ Section
5000A(f)(1)(E) of the Code authorizes the Secretary of HHS, in
coordination with the Secretary of the Treasury, to designate other
health benefits coverage as MEC. Under tax reform legislation that was
enacted on December 22, 2017, the individual shared responsibility
payment is reduced to $0, effective for months beginning after December
31, 2018.\5\
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\4\ Public Law 115-120, 101 (2018).
\5\ Public Law 115-97, 131 Stat. 2054.
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The Protecting Affordable Coverage for Employees Act (Pub. L. 114-
60) amended section 1304(b) of the PPACA and section 2791(e) of the PHS
Act to amend the definition of small employer in these statutes to
mean, in connection with a group health plan with respect to a calendar
year and a plan year, an employer who employed an average of at least 1
but not more than 50 employees on business days during the preceding
calendar year and who employs at least 1 employee on the first day of
the plan year. It also amended these statutes to make conforming
changes to the definition of large employer, and to provide that a
State may treat as a small employer, with respect to a calendar year
and a plan year, an employer who employed an average of at least 1 but
not more than 100 employees on business days during the preceding
calendar year and who employs at least 1 employee on the first day of
the plan year.
1. Premium Stabilization Programs \6\
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\6\ By ``premium stabilization programs,'' we are referring to
the risk adjustment, risk corridors and reinsurance programs
established by the PPACA.
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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
[[Page 16934]]
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).
In the September 6, 2016 Federal Register (81 FR 61455), we
published a proposed rule outlining the benefit and payment parameters
for the 2018 benefit year, and to further promote stable premiums in
the individual and small group markets. We proposed updates to the risk
adjustment methodology, new policies around the use of external data
for recalibration of our risk adjustment models, and amendments to the
risk adjustment data validation process (proposed 2018 Payment Notice).
We published the 2018 Payment Notice final rule in the December 22,
2016 Federal Register (81 FR 94058).
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 and SHOP, 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 additional standards for SHOP in the 2014 Payment
Notice and in the Amendments to the HHS Notice of Benefit and Payment
Parameters for 2014 interim final rule, published in the March 11, 2013
Federal Register (78 FR 15541). The provisions established in the
interim final rule were finalized in the second Program Integrity Rule.
We also set forth standards related to Exchange user fees in the 2014
Payment Notice. We established an adjustment to the FFE user fee in the
Coverage of Certain Preventive Services Under the Affordable Care Act
final rule, published in the July 2, 2013 Federal Register (78 FR
39869) (Preventive Services Rule).
In a final rule published in the July 17, 2013 Federal Register (78
FR 42823), we established standards for Navigators and non-Navigator
assistance personnel in FFEs and for non-Navigator assistance personnel
funded through an Exchange establishment grant. This final rule also
established a certified application counselor program for Exchanges and
set standards for that program.
In an interim final rule, published in the May 11, 2016 Federal
Register (81 FR 29146), we made amendments to the parameters of certain
special enrollment periods (2016 Interim Final Rule). We finalized
these in the 2018 Payment Notice final rule in the December 22, 2016
Federal Register (81 FR 94058). In the April 18, 2017 Market
Stabilization final rule Federal Register (82 FR 18346), we amended
standards relating to special enrollment periods and QHP certification.
4. Essential Health Benefits and Actuarial Value
On December 16, 2011, HHS released a bulletin \7\ (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.\8\ A proposed rule relating to EHBs and AVs
was published in the November 26, 2012 Federal Register (77 FR 70643).
We established requirements relating to EHBs and AVs in the Standards
Related to Essential Health Benefits, Actuarial Value, and
Accreditation Final Rule, which was published in the February 25, 2013
Federal Register (78 FR 12833) (EHB Rule). In the April 18, 2017 Market
Stabilization final rule (82 FR 18346), we expanded the de minimis
range applicable to plan metal levels.
---------------------------------------------------------------------------
\7\ ``Essential Health Benefits Bulletin.'' December 16, 2011.
Available at https://www.cms.gov/CCIIO/Resources/Files/Downloads/essential_health_benefits_bulletin.pdf.
\8\ ``Actuarial Value and Cost-Sharing Reductions Bulletin.''
February 24, 2012. Available at https://www.cms.gov/CCIIO/Resources/Files/Downloads/Av-csr-bulletin.pdf.
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5. Minimum Essential Coverage
In the February 1, 2013 Federal Register (78 FR 7348), we published
a proposed rule that designates other health benefits coverage as MEC
and outlines substantive and procedural requirements that other types
of coverage must fulfill in order to be recognized as MEC. The
provisions were finalized in the July 1, 2013 Federal Register (78 FR
39494).
In the November 26, 2014 Federal Register (79 FR 70674), we
published a proposed rule seeking comments on whether State high risk
pools should be permanently designated as MEC or whether the
designation should be time-limited. In the February 27, 2015 Federal
Register (80 FR 10750), we designated State high risk pools established
on or before November 26, 2014 as MEC.
6. 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). The 2018 Payment Notice final
rule in the December 22, 2016 Federal Register (81 FR 94058) provided
additional guidance on guaranteed availability and
[[Page 16935]]
guaranteed renewability. In the April 18, 2017 Market Stabilization
final rule (82 FR 18346), we released further guidance related to
guaranteed availability.
7. 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 30239), the February 27, 2015 Federal Register
(80 FR 10749), the March 8, 2016 Federal Register (81 FR 12203) and the
December 22, 2016 Federal Register (81 FR 94058).
8. Medical Loss Ratio
We published a request for comment on section 2718 of the PHS Act
in the April 14, 2010 Federal Register (75 FR 19297), and published an
interim final rule with a 60-day comment period relating to the MLR
program on December 1, 2010 (75 FR 74863). A final rule with a 30-day
comment period was published in the December 7, 2011 Federal Register
(76 FR 76573). An interim final rule with a 60-day comment period was
published in the December 7, 2011 Federal Register (76 FR 76595). A
final rule was published in the Federal Register on May 16, 2012 (77 FR
28790). The medical loss ratio program requirements were amended in
final rules published in the March 11, 2014 Federal Register (79 FR
13743), the May 27, 2014 Federal Register (79 FR 30339), the February
27, 2015 Federal Register (80 FR 10749), the March 8, 2016 Federal
Register (81 FR 12203), and the December 22, 2016 Federal Register (81
FR 94183).
B. Stakeholder Consultation and Input
HHS has consulted with stakeholders on policies related to the
operation of Exchanges, including the SHOP, and the premium
stabilization programs. We have held a number of listening sessions
with consumers, providers, employers, health plans, and the actuarial
community to gather public input. We have solicited input from State
representatives on numerous topics, particularly EHB, QHP certification
and Exchange establishment. We consulted with stakeholders through
regular meetings with the National Association of Insurance
Commissioners (NAIC), regular contact with States through the Exchange
Establishment grant and Exchange Blueprint approval processes, and
meetings with Tribal leaders and representatives, health insurance
issuers, trade groups, consumer advocates, employers, and other
interested parties. We considered all public input we received as we
developed the policies in this final rule.
HHS also received several thousand unique comments in response to a
request for information, entitled ``Reducing Regulatory Burdens Imposed
by the Patient Protection and Affordable Care Act and Improving
Healthcare Choices to Empower Patients'', published in the June 12,
2017 Federal Register (82 FR 26885) (Request for Information). We
anticipate continuing to address comments in future rulemaking and
guidance.
C. Structure of Final Rule
The regulations outlined in this final rule will be codified in 45
CFR parts 147, 153, 154, 155, 156, 157, and 158.
The final regulations in part 147 amend the rules regarding fair
health insurance premiums and guaranteed availability to reflect final
changes related to the SHOPs and special enrollment periods.
In connection with part 153, we are recalibrating the risk
adjustment models consistent with the methodology finalized for the
2018 benefit year with slight modifications to the drug classes
included in the 2019 benefit year adult models and the incorporation of
blended MarketScan[supreg] and the most recent enrollee-level External
Data Gathering Environment (EDGE) data. This final rule addresses the
high-cost risk pooling adjustment, where we are finalizing the same
parameters that applied to the 2018 benefit year for the 2019 benefit
year risk adjustment. The finalized provisions related to part 153
include the risk adjustment user fee and modifications to risk
adjustment data validation. We also finalize a policy to provide States
flexibility to request reductions in risk adjustment transfers in the
small group market starting for the 2020 benefit year and beyond.
The final regulations in part 154 finalize certain modifications to
reduce regulatory burden and enhance State flexibility for the rate
review program. We are finalizing an exemption for student health
insurance coverage from Federal rate review requirements. We are
finalizing a proposal to raise the default threshold for review of
reasonableness in the rate review process from 10 percent to 15
percent. We also are finalizing a proposal to allow States with
Effective Rate Review Programs to set later submission deadlines for
rate filings from issuers that offer non-QHPs only. In addition, we are
finalizing the change to the notification period for States with
Effective Rate Review Programs to provide advance notice to HHS prior
to posting rate increases (from 30 days to 5 business days).
The final regulations in part 155 include modifications to the
functions of an Exchange, and a new approach to operational readiness
reviews for direct enrollment partners which will allow agents,
brokers, and issuers to select their own third-party entities for
conducting those reviews. We are finalizing modifications to the rules
around verification of eligibility. We are also finalizing increased
flexibility in the Navigator program by removing the requirement that
each Exchange must have at least two Navigator entities, one of which
must be a community and consumer focused non-profit, and by removing
the standard requiring physical presence of the Navigator entity in the
Exchange service area. We are modifying the parameters around certain
special enrollment periods. We are modifying the effective date options
for enrollee-initiated terminations, at the option of the Exchange, and
amending the affordability exemption so that it may be based on the
lowest cost Exchange plan if there is no bronze level plan sold through
the Exchange in that rating area.
The final regulations in part 156 include changes to EHB and the
QHP certification process. The final regulations in part 156 set forth
parameters related to cost sharing, including the premium adjustment
percentage, the maximum annual limitation on cost sharing, and the
reductions in the maximum annual limitation for cost-sharing plan
variations for 2019. The regulations at part 156 also include finalized
FFE and SBE-FP user fee rates for the 2019 benefit year for all issuers
participating on the FFEs or SBE-FPs. The regulations at part 156 also
include finalized policies related to actuarial value for stand-alone
dental plans (SADPs).
The final amendments to the regulations in parts 155, 156, and 157
include finalized proposals that would provide SHOPs with additional
operational flexibility, and would modify the requirements for issuers,
employers, and employees interacting with SHOPs.
The final amendments to the regulations in part 158 include
revisions related to reporting quality improvement activity expenses as
part
[[Page 16936]]
of the formula for calculating MLR, and revisions related to State
requests for adjustment to the individual market MLR standard.
III. Provisions of the Proposed Rule and Analysis of and Responses to
Public Comments
In the November 2, 2017 Federal Register (82 FR 51052), we
published the ``Patient Protection and Affordable Care Act; HHS Notice
of Benefit and Payment Parameters for 2019'' proposed rule (proposed
2019 Payment Notice or proposed rule). We received 416 comments,
including 99 comments that were substantially similar to one of four
different letters, each regarding the proposals on EHBs, one addressing
EHBs and the Navigator program, and one addressing proposals related to
EHBs, Navigators, SHOPs and network adequacy. Comments were received
from State entities, such as departments of insurance and State
Exchanges; health insurance issuers; providers, both individuals and
provider groups; consumer groups; industry groups; national interest
groups; and other stakeholders. The comments ranged from general
support of or opposition to the proposed provisions to specific
questions or comments regarding proposed changes. We received a number
of comments and suggestions that were outside the scope of the proposed
rule that will not be addressed in this final rule.
In this final rule, we provide a summary of each proposed
provision, a summary of those public comments received that directly
related to the proposals, our responses to them, and a description of
the provisions we are finalizing.
Comment: We received multiple comments criticizing the short
comment period, stating that the comment period made it difficult for
stakeholders to conduct an in-depth analysis of the proposed rule.
Commenters suggested that HHS adopt a comment period of at least 30
days from rule publication, and to fully comply with notice-and-comment
requirements under the Administrative Procedure Act.
Response: The timeline for publication of this final rule
accommodates issuer filing deadlines for the 2019 benefit year. A
longer comment period would have delayed the publication of this final
rule, and created significant challenges for States, Exchanges,
issuers, and other entities in meeting deadlines related to
implementing these rules. We will continue to try to expand the comment
period for the annual HHS notice of benefit and payment parameters
while also providing industry and other stakeholders with more time to
implement the final rule.
Comment: We received some comments generally supportive of State
flexibility, stating that by removing existing regulatory barriers,
issuers will be able to offer a more diverse selection of coverage
options that meet both the financial and health coverage needs of
consumers while meeting various State needs.
Response: We agree that State flexibility with respect to oversight
of State insurance markets is an important goal, and recognize the
traditional role States have as the primary regulators of their
insurance markets. States are best positioned to address the specific
needs of their consumers, and may be better able than the Federal
government to develop policies that are tailored to allow issuers in
their State to develop plans that address both the needs and cost
concerns of beneficiaries in their State.
Comment: We received numerous comments cautioning us about making
changes that would weaken the PPACA. Some commenters expressed concern
that the proposed changes would remove some of the protections afforded
by the PPACA, such as the certainty of EHBs.
Response: Our top priority at HHS is putting consumers first. While
we have made great strides forward, there is still work to be done,
including ensuring that coverage is affordable to all consumers. We
have already taken important steps to streamline our regulations and
our operations with the goal of reducing unnecessary burden, increasing
efficiencies and improving the consumer experience. Yet, we have
recently seen how regulations intended to protect consumers can,
instead, undermine consumers' access to affordable health coverage. In
this final rule, we finalize policies that are intended to help control
costs of coverage in order to make coverage more affordable for
consumers, particularly unsubsidized consumers. We will continue to
find innovative ways to reduce costs and burdens while meeting the
health needs of all Americans. We are continuing to address feedback we
receive from stakeholders and the public, and in turn we are making
changes that will better serve consumers and allow States to address
the unique health needs of their populations.
Comment: Commenters responded to our request for comment on ideas
for future rulemaking about ways to help reduce drug costs and promote
drug price transparency. All commenters acknowledged the consumer
benefits of lowering drug costs and having more transparent drug
pricing; however, commenters cautioned that any changes be done in a
thoughtful manner, that considers value in addition to cost, with input
from all stakeholders.
Response: We appreciate the ideas for future rulemaking and will
consider these suggestions.
A. Part 147--Health Insurance Reform Requirements for the Group and
Individual Health Insurance Markets
1. Fair Health Insurance Premiums (Sec. 147.102)
As discussed elsewhere in this final rule, we are finalizing
substantial changes to the requirements applicable to SHOPs to provide
those programs with the flexibility to operate in a leaner fashion, a
flexibility that we intend to utilize in the Federally-facilitated
Small Business Health Options Program (FF-SHOP). As part of these
changes and, as discussed in the preamble to Sec. Sec. 156.285 and
156.286, we proposed that, effective on the effective date of this
rule, the requirement in Sec. 156.285(a)(4)(ii) regarding premium
rating standards in the FF-SHOPs would not apply for plan years
beginning on or after January 1, 2018. Therefore, we proposed to delete
from Sec. 147.102(c)(3)(iii)(D) a reference to Sec. 156.285(a)(4),
and to replace the reference to FF-SHOPs with a reference to SHOPs
generally, to reflect that, under the proposed approach for SHOPs, some
SHOPs may want to prohibit issuers from offering average enrollee
premiums.
We did not receive comments on this proposal, and are finalizing
the change as proposed, with one minor typographical correction.
We also sought comment on whether issuers offering coverage through
SHOPs should always be required to offer average enrollee premiums, or
should be required to do so only if required under applicable State
law.
Comment: Comments were mixed regarding whether issuers offering
coverage through SHOPs should always be required to offer average
enrollee premiums. One commenter stated that issuers offering coverage
through SHOPs should always be required to offer average enrollee
premiums, while others stated that issuers should be required to do so
only if required by applicable State law. One of these commenters
further recommended that average premium rating should be permitted
only when a SHOP does not allow employees to choose plans among
multiple issuers. The commenter stated that average enrollee premiums
based
[[Page 16937]]
on employees selecting a particular plan could result in illogical
rates, such as a richer plan having lower rates than a leaner plan
because only younger employees selected the richer plan. Another
commenter stated that all issuers, regardless of whether they are
offering coverage on or off SHOP, should be allowed to offer average
enrollee premiums.
Response: For purposes of consistency, we believe that issuers
offering coverage through a SHOP should be permitted to offer average
enrollee premiums to the same extent that issuers may do so off SHOP
under existing State rules. Also, given the decrease in issuer
participation in the FF-SHOPs, some SHOP employers only have one issuer
offering FF-SHOP plans in their area and will not be able to offer
their employers a choice of plans across issuers. In addition,
historically, a majority of employers have not offered employee choice
across different issuers, thus mitigating the risk of variance in
average premium rates across plans. Therefore, we do not believe
Federal guidance or regulation is currently warranted in this area.
Thus, issuers offering coverage through a SHOP may offer average
enrollee premiums to the extent required or permitted by the applicable
State, and will not be required under Federal law to do so, unless
required by the State.
2. Guaranteed Availability of Coverage (Sec. 147.104)
i. SHOP
As discussed elsewhere in this final rule, we proposed and are
finalizing substantial changes to the requirements applicable to SHOPs
to provide them with the flexibility to operate in a leaner fashion, a
flexibility that we will utilize in the FF-SHOPs. Among those changes,
effective on the effective date of this rule, the requirements in Sec.
156.285 will apply for plan years starting before January 1, 2018. New
Sec. 156.286 specifies those requirements contained in Sec. 156.285
that, effective on the effective date of this rule, will continue to
apply for plan years starting on or after January 1, 2018. Among those
requirements is the requirement in Sec. 156.285(e) which permits a QHP
offered in the SHOP to apply group participation rules under certain
circumstances. This provision will be listed in new Sec. 156.286(e).
The marketwide regulations at Sec. 147.104(b)(1)(i)(B) currently
reference Sec. 156.285(e), and we proposed to add a reference to Sec.
156.286(e) to clarify that, effective on the effective date of this
rule, for plan years that start on or after January 1, 2018, QHPs
offered in the SHOP may restrict the availability of coverage, with
respect to a group health plan that cannot comply with group
participation rules, to an annual enrollment period of November 15
through December 15 of each calendar year. Because we are finalizing
new Sec. 156.286(e) as proposed, we are also finalizing the proposal
to reference new Sec. 156.286(e) in Sec. 147.104(b)(1)(i)(B).
Comment: One commenter supported the proposal to add to Sec.
147.104(b)(1)(i)(B) a reference to Sec. 156.286(e). One commenter
opposed permitting QHPs to restrict coverage availability when a group
health plan cannot comply with group participation rules, while another
commenter stated that an employer that fails to comply with such rules
should not be afforded guaranteed availability of coverage, either
generally or during an annual open enrollment period, either on or off-
SHOP.
Response: As indicated in the section of the preamble discussing
the SHOP rule, we are finalizing, as proposed, the proposal to add new
Sec. 156.286(e), which would apply, to plan years starting on or after
January 1, 2018, the existing regulatory provision that allows QHPs
offered in the SHOP to restrict the availability of coverage with
respect to a group health plan that cannot comply with group
participation rules, to an annual enrollment period of November 15
through December 15 of each calendar year. Thus, we are also finalizing
the proposal to reference new Sec. 156.286(e) in Sec.
147.104(b)(1)(i)(B).
We also proposed, and are finalizing, the removal of the small
group coverage effective dates that are found in the SHOP regulations
at Sec. 155.725 with respect to plan years beginning on or after
January 1, 2018, effective on the effective date of this rule. However,
there are currently requirements in Sec. 147.104(b)(1)(i)(C) that, by
cross-referencing Sec. 155.725, apply those same requirements
marketwide, and we did not propose to remove that marketwide
requirement. We proposed changes to Sec. 147.104 to reflect the SHOP
changes. Specifically, we proposed to eliminate, from Sec.
147.104(b)(1)(i)(C), the cross-reference to Sec. 155.725. We proposed
in place of the cross-reference to explicitly specify in Sec.
147.104(b)(1)(i)(C) those same coverage effective dates for coverage in
the small group market, and for the large group market if such coverage
is offered through a SHOP, that would be eliminated from the SHOP
regulations under our proposal for Sec. 155.725. We are finalizing
this proposal, but are modifying the language that will replace the
cross-reference to clarify that it is permissible for issuers to apply
an effective date of coverage that is before or on the specified dates.
We are also modifying the proposed language so that the effective date
of coverage is tied to the date a group enrollment is received, rather
than to the date a plan selection is received.
Comment: All commenters supported in principle the proposal to
eliminate, from Sec. 147.104(b)(1)(i)(C), the cross reference to the
effective dates of coverage in Sec. 155.725, and in its place
explicitly specify in Sec. 147.104(b)(1)(i)(C) those effective dates
for coverage in the small group market, and for the large group market
if such coverage is offered through a SHOP. However, several commenters
noted that our proposal did not import the provisions in Sec. 155.725,
describing the coverage effective dates, verbatim into Sec.
147.104(b)(1)(i)(C). They observed that the proposed language in Sec.
147.104(b)(1)(i)(C) tied the coverage effective date to the date a plan
selection was received, rather than to the date a group enrollment was
received, and that tying the coverage date to the date a group
enrollment was received (as in the effective-date-of-coverage language
currently set forth in Sec. 155.725) would be more appropriate.
Commenters also stated that the language we proposed to add in Sec.
147.104(b)(1)(i)(C), unlike the language in current regulations in
Sec. 155.725, would prohibit issuers from applying a coverage
effective date that falls before the first day of the following month,
or before the first day of the second following month, as applicable,
after the date a group enrollment is received.
Response: As commenters pointed out, in the language we proposed
for Sec. 147.104(b)(1)(i)(C), we tied the coverage effective date to
the date a plan selection, rather than a group enrollment, was
received. Given that the proposed language we added appears in a
section of the rules (Sec. 147.104) that applies marketwide, and not
just in SHOPs, we agree with the commenters that tying the coverage
date to a group enrollment, which is a broader term than a plan
selection (the latter is a SHOP-specific term), would be more
appropriate. We also agree with the commenters that the existing
language in Sec. 155.725, which requires issuers to ensure a coverage
effective date of, rather than on, the dates specified in the existing
language, permits issuers to apply an enrollment date that falls
before, rather than only on, the first day of the first month or the
first day of the second month (as applicable) following the date a
group enrollment is received, and that issuers should continue to have
[[Page 16938]]
the flexibility to apply an enrollment date that falls before those
dates. Therefore, in light of those comments, we are finalizing
language in Sec. 147.104(b)(1)(i)(C).
ii. Special Enrollment Periods
Section 147.104(b)(2)(i) extends several of the special enrollment
periods that apply to issuers on the Exchange, to all issuers in the
individual market. Although Sec. 147.104(b)(2)(i) is intended to
specify which special enrollment periods offered through the Exchange
must also be offered by health insurance issuers with respect to
coverage offered outside of an Exchange, the paragraph as currently
written could be read to apply the exceptions to any coverage offered
by a health insurance issuer in the individual market. We recognize the
potential for confusion, as coverage offered through an Exchange is
offered by a health insurance issuer in the individual market, but this
coverage is subject to the special enrollment rule at Sec. 155.420(d),
which is intended to require special enrollment periods for qualifying
events including those listed in the exceptions in Sec.
147.104(b)(2)(i). Therefore, we proposed to amend that phrase in Sec.
147.104(b)(2)(i) to clarify that the exceptions in the paragraph only
apply with respect to coverage offered outside of the Exchange in the
individual market. We received no comments on this proposal, and are
finalizing it as proposed.
With respect to the subset of special enrollment periods in Sec.
155.420 that apply off-Exchange, current regulations at Sec.
147.104(b)(2)(ii) state that, in applying Sec. 147.104(b)(2), a
reference in Sec. 155.420 to a ``QHP'' is deemed to refer to a plan, a
reference to ``the Exchange'' is deemed to refer to the applicable
State authority, and a reference to a ``qualified individual'' is
deemed to refer to an individual in the individual market. As discussed
in the preamble to Sec. 155.420, we are finalizing a change to Sec.
155.420(a)(5) to exempt qualified individuals from the prior coverage
requirement that applies to certain special enrollment periods if they
lived in a service area where no qualified health plan was available
through the Exchange for 1 or more days during the 60 days preceding
the qualifying event or during their most recent preceding enrollment
period, as specified in Sec. Sec. 155.410 and 155.420. Section
155.420(a)(5) applies to qualifying individuals seeking off-Exchange
coverage through an applicable special enrollment period, so we
proposed that this exception for individuals living in a service area
where there were no QHPs offered through an Exchange would also
apply.\9\ However, in this instance the reference to ``QHP'' should not
be deemed to refer to a plan for purposes of applying Sec.
147.104(b)(2). Therefore, we proposed to amend Sec. 147.104(b)(2)(ii)
to state that a reference in Sec. 155.420 (other than in Sec.
155.420(a)(5)) to a ``QHP'' is deemed to refer to a plan, a reference
to ``the Exchange'' is deemed to refer to the applicable State
authority, and a reference to a ``qualified individual'' is deemed to
refer to an individual in the individual market. We are finalizing this
change as proposed.
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\9\ As stated in the preamble in the proposed rule to Sec.
155.420, the exception to the requirement to have previous coverage
is intended to relieve individuals of that requirement when there
was no affordable coverage (that is, coverage that could be
purchased through an Exchange to which APTC might apply) available
in their previous service area. We believe affordability is key to
this exception, and therefore, that the scope of the exception
should apply equally, regardless of whether the individual is
seeking to purchase coverage inside or outside an Exchange during
the special enrollment periods for which this exception applies;
that is, the exception should apply if there was no such affordable
coverage available in the individual's previous service area
(regardless of whether or not any coverage was being actively
marketed in that service area outside the Exchange). Also, when an
individual sought to purchase coverage outside an Exchange during
such a special enrollment period, we believe it might be
unreasonably difficult for an issuer to determine if at least one
issuer was actively marketing coverage in the individual's previous
service area outside the Exchange, as opposed to determining if at
least one issuer was making coverage available in that service area
specifically through an Exchange. We solicited comments on this
approach.
---------------------------------------------------------------------------
Comment: All commenters supported this proposal, while some
commenters stated more generally that special enrollment periods should
be the same, regardless of whether an individual is seeking coverage on
or off-Exchange. One commenter suggested that we publish a list of bare
counties so that the exemption to the prior-coverage requirement can be
properly applied both on and off-Exchange.
Response: We are finalizing the proposal, consistent with the way
in which the amendment to Sec. 155.420(a)(5) is being finalized, and
if there are ever any service areas in which no qualified health plans
are offered through the Exchange, we will consider publishing a list of
them, as the commenter suggested. For a more detailed response to
comments regarding the amendment to Sec. 155.420(a)(5), see the
preamble to that section.
Among the special enrollment periods in Sec. 155.420 that apply
off-Exchange are those specified in Sec. 155.420(d)(2)(i), under which
a qualified individual gains a dependent or becomes a new dependent
through marriage, birth, adoption, placement for adoption, or placement
in foster care, or through a child support order or other court order.
We sought comment on whether this special enrollment period should
afford an individual's existing dependents an independent opportunity
to enroll, off-Exchange, in new coverage or make changes to their
existing coverage. As applied to on-Exchange coverage, when a qualified
individual gains or becomes a new dependent under the circumstances
described in Sec. 155.420(d)(2)(i), the qualified individual is
afforded a special enrollment period to enroll in or change Exchange
coverage with his or her dependents, including his or her newly-gained
dependent, in accordance with any applicable metal level restrictions
outlined in Sec. 155.420(a)(4)(i). The new dependent is also afforded
an independent special enrollment period under which he or she can
enroll in or change Exchange coverage as a subscriber, as opposed to as
a dependent of the qualified individual. Under the HIPAA special
enrollment provisions that continue to apply to group health plans and
health insurance issuers in connection with group health coverage,
there are similar special enrollment periods when a child becomes a
dependent of the employee through marriage, birth, adoption, or
placement for adoption.\10\ We sought comment on whether, in the off-
Exchange individual market, the special enrollment periods for when an
individual gains a dependent or becomes a new dependent under the
circumstances described in Sec. 147.104(b)(2), which cross-references
Sec. 155.420(d)(2)(i), should continue to operate in the same manner
as they do on-Exchange, whether they should operate in a manner
consistent with the HIPAA group market regulations, or whether we
should adopt some other approach.
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\10\ See Sec. 146.117(b).
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With respect to off-Exchange coverage, we are maintaining current
policy under which an individual who qualifies for a special enrollment
period for gaining a dependent through marriage, birth, adoption,
placement for adoption, or placement in foster care, or through a child
support order or other court order under Sec. 147.104(b)(2) may enroll
in or change coverage along with his or her dependents, including the
newly-gained dependent(s) and any existing dependents. The new
dependent is also afforded an independent special enrollment period
under which he or she can enroll in or change coverage as a subscriber,
as opposed to as a dependent of the
[[Page 16939]]
individual. This off-Exchange special enrollment period does not
otherwise provide to existing dependents an independent opportunity to
enroll in new coverage or make changes to their existing coverage.
Comment: Some commenters stated that existing dependents should be
entitled to enroll with other family members who have qualified for the
special enrollment period when a qualified individual in their
household gains a dependent or becomes a new dependent through
marriage, birth, adoption, placement for adoption, or placement in
foster care, or through a child support order or other court order,
while others believed they should not, stating that allowing this
practice would contribute to adverse selection. Some commenters stated
that special enrollment periods should apply uniformly on-Exchange and
off-Exchange.
Response: As stated previously, we are continuing to apply the
parameters of the special enrollment period for those who have gained
or become a new dependent through marriage, birth, adoption, foster
care placement, or a child support or other court order off-Exchange in
the same manner as applied on-Exchange. We believe the advantages and
simplicity of uniformity between on-Exchange and off-Exchange coverage
in this instance outweigh the concern about adverse selection.
iii. Technical Changes
We proposed to remove paragraph Sec. 147.104(b)(1)(iii), along
with the cross-reference to it in Sec. 147.104(b)(1)(ii), as paragraph
(b)(1)(iii) applies to plan selections made in 2013, and is therefore
no longer necessary. We received no comments regarding this proposal,
and are finalizing these changes as proposed.
B. 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 2018,\11\ both the transitional
reinsurance program and permanent risk adjustment program are subject
to the fiscal year 2018 sequestration. The Federal government's 2018
fiscal year began October 1, 2017. Although the 2016 benefit year was
the final year of the transitional reinsurance program, HHS will
continue to make reinsurance payments in the 2018 fiscal year, as the
second contribution collection deadline for the 2016 benefit year was
November 15, 2017. Therefore, the reinsurance program will be
sequestered at a rate of 6.6 percent for payments made from fiscal year
2018 resources (that is, funds collected during the 2018 fiscal year).
The risk adjustment program will also be sequestered at a rate of 6.6
percent for payments made from fiscal year 2018 resources (that is,
funds collected during the 2018 fiscal year).
---------------------------------------------------------------------------
\11\ Available at https://www.whitehouse.gov/sites/whitehouse.gov/files/omb/sequestration_reports/2018_jc_sequestration_report_may2017_potus.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 the
reinsurance and risk adjustment programs, the funds that are
sequestered in fiscal year 2018 from the reinsurance and risk
adjustment programs will become available for payment to issuers in
fiscal year 2019 without further Congressional action. If Congress does
not enact deficit reduction provisions that replace the Joint Committee
reductions, these programs would be sequestered in future fiscal years,
and any sequestered funding would become available in the fiscal year
following that in which it was sequestered.
2. Provisions and Parameters for the Risk Adjustment Program
In subparts D and G of part 153, we established standards for the
administration of the risk adjustment program. The risk adjustment
program is a permanent program created by section 1343 of the PPACA
that transfers funds from lower risk, non-grandfathered plans to higher
risk, non-grandfathered plans in the individual and small group
markets, inside and outside the Exchanges. In accordance with Sec.
153.310(a), a State that is approved or conditionally approved by the
Secretary to operate an Exchange may establish a risk adjustment
program, or have HHS do so on its behalf. Beginning with the 2017
benefit year, HHS is operating risk adjustment in every State, and did
not receive any applications from States to operate risk adjustment for
the 2019 benefit year.
a. Overview of the HHS Risk Adjustment Model (Sec. 153.320)
The HHS risk adjustment model predicts plan liability for an
average enrollee based on that person's age, sex, and diagnoses (risk
factors), producing a risk score. The HHS risk adjustment methodology
utilizes separate models for adults, children, and infants to account
for cost differences in each of these age groups. In each of the adult
and child models, the relative risk assigned to an individual's age,
sex, and diagnoses are added together to produce an individual risk
score. Additionally, in the adult models, we added enrollment duration
factors beginning for the 2017 benefit year, and prescription drug
utilization factors (RXCs) beginning for the 2018 benefit year, in the
calculation of enrollees' risk scores. Infant risk scores are
determined by inclusion in one of 25 mutually exclusive groups, based
on the infant's maturity and the severity of 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.
b. Final Updates to the Risk Adjustment Model (Sec. 153.320)
For the 2019 benefit year, we proposed to recalibrate the risk
adjustment models using the methodology finalized for the 2018 benefit
year, with small modifications to the drug classes included in the 2019
benefit year adult models, and incorporation of the 2016 benefit year
enrollee-level EDGE data in the 2019 benefit year risk adjustment model
recalibration.
i. Recalibration Using EDGE Data
To recalibrate the 2016, 2017 and 2018 benefit year risk adjustment
models, we used the 3 most recent years of Truven MarketScan[supreg]
data. This approach allowed for using the blended, or averaged,
coefficients from 3 years of separately solved models, which promotes
stability for the risk adjustment coefficients year-to-year,
particularly for rare conditions with small sample sizes. We finalized
in the 2018 Payment Notice the collection of enrollee-level EDGE data
and the recalibration of the risk adjustment model for the 2019 benefit
year using 2016 benefit year EDGE data. We believe that blending the
coefficients calculated from the 2016 benefit year enrollee-level EDGE
data with MarketScan[supreg] data will provide stability within the
risk
[[Page 16940]]
adjustment program and minimize volatility in changes to risk scores
from the 2018 to 2019 benefit years due to differences in the datasets'
underlying populations. As such, we proposed blending 3 years of data
to recalibrate the coefficients used in the risk adjustment models and,
for the 2019 benefit year, blending separately solved coefficients from
the 2016 benefit year enrollee-level EDGE data and the 2014 and 2015
MarketScan[supreg] data.
Given the timing of the proposed rule, we were not able to
incorporate the 2016 benefit year enrollee-level EDGE data in the
proposed rule. Instead, we used the 2014 and 2015 MarketScan[supreg]
data for the coefficients displayed in the proposed rule. We proposed
to finalize the 2019 benefit year blended coefficients with the
separately solved models from the 2016 benefit year enrollee-level EDGE
data, and the 2014 and 2015 MarketScan[supreg] data. This is similar to
our approach in previous years, in which we updated the final
coefficients using data from the most recently available benefit
year.\12\ We explained that we expected to publish the final risk
adjustment model coefficients for the 2019 benefit year in the final
rule. However, we sought comment on whether we should publish the final
risk adjustment model coefficients in guidance in the spring of 2018,
prior to rate setting for the 2019 benefit year, if we needed
additional time to analyze the 2016 enrollee-level EDGE data. Under
either approach, we proposed that the final risk adjustment model
coefficients for the 2019 benefit year would be determined using the
methodology that we would finalize in this rule, and would be published
prior to the 2019 benefit year rate setting. Additionally, if we found
significant demographic or distributional differences in the enrollee-
level EDGE data compared to the MarketScan[supreg] data, we sought
comment on whether we should make adjustments to the risk adjustment
recalibration model age-sex, hierarchical condition categories (HCCs),
and RXC categories for the 2019 benefit year. In such a case, we
proposed we would make adjustments to the models to better align them
with the enrollee-level EDGE data, to improve the prediction of plan
liability.
---------------------------------------------------------------------------
\12\ See, for example, 2018 Payment Notice, 81 FR 94058
(December 22, 2016).
---------------------------------------------------------------------------
We sought comment on our proposal to determine coefficients based
on a blend of 2014 and 2015 MarketScan[supreg] data and 2016 enrollee-
level EDGE data. We also sought comment on the proposed methodology to
equally weight the separately solved model coefficients from the 2014
MarketScan[supreg], 2015 MarketScan[supreg], and 2016 enrollee-level
EDGE data for the final coefficients, instead of using only the 2016
enrollee-level EDGE data to recalibrate the risk adjustment model
coefficients for the 2019 benefit year.
We are finalizing the approach using equally blended coefficients
from separately solved 2014 MarketScan[supreg], 2015
MarketScan[supreg], and 2016 enrollee-level EDGE data to recalibrate
the risk adjustment model coefficients for the 2019 benefit year. We
are not making any changes to age-sex or HCC categories, because we did
not find significant distributional differences, and we will continue
to assess whether to propose any specific changes to the categories for
future benefit years in future rulemaking. We did not propose and are
not making any changes to the enrollment duration categories. Please
see the preamble section below on ``Prescription Drugs'' for a
discussion of changes being finalized with respect to the RXC
categories. The final risk adjustment model coefficients for the 2019
benefit year risk adjustment program are listed in Tables 2, 4 and 5 of
this rule.
Comment: Commenters supported the use of enrollee-level EDGE data
in model recalibration noting the data would more closely reflect the
relative risk differences of individuals in the individual and small
group markets compared to the MarketScan[supreg] data. Most commenters
also supported equally blending coefficients from separately solved
models using 3 years of data to promote stability year over year,
thereby phasing in the use of enrollee-level EDGE data. A few
commenters supported overweighting the 2016 enrollee-level EDGE data,
with one commenter supporting overweighting of the 2016 data if sample
sizes are adequate. A few commenters supported using only the 2016
enrollee-level EDGE data for recalibration, stating that
MarketScan[supreg] data will have different utilization and risk
patterns, and socioeconomic status for enrollees with employer-based
coverage than the EDGE data, which directly reflects PPACA individual
and small group market enrollees. These commenters also stated that
these differences in the underlying data could cause the risk
adjustment coefficients to over- or under-predict risk differences. One
commenter stated that relying on older data to calibrate the model
could lead to significant gaps in the risk adjustment methodology. One
commenter requested clarification as to the volatility in changes to
risk scores from the 2018 to 2019 benefit years that could occur due to
differences in the datasets' underlying populations. Another commenter
requested that recalibration using EDGE data be postponed until all
States' data is available in the 2017 benefit year.\13\ Some commenters
requested separate publication of the coefficients from the 2016
enrollee-level EDGE data. One commenter requested clarification as to
what weights would be applied in blending coefficients from the 3 years
of data. Most commenters also supported HHS finalizing the 2019 benefit
year coefficients prior to rate setting in guidance, while a few others
requested the coefficients be finalized in the final rule. One
commenter noted that delaying publication of the final coefficients
past the publication of the final rule would pose challenges in
issuers' rate setting timelines, while some commenters suggested that
if HHS needs additional time beyond the publication of the final rule,
the final coefficients for the 2019 benefit year should be published no
later than February 28, 2018.
---------------------------------------------------------------------------
\13\ Massachusetts is not included in the 2016 benefit year
enrollee-level EDGE data, because Massachusetts operated its own
risk adjustment program through the 2016 benefit year.
---------------------------------------------------------------------------
Response: For small sample sizes, year-to-year differences in
spending due to data anomalies can cause significant differences in a
particular solved coefficient. We agree that blending coefficients from
multiple years of data can provide stability in changes in the
recalibrated model coefficients and provide certainty to issuers,
particularly where small sample sizes could lead to volatility in the
solved coefficients from year-to-year. Additionally, while there are
differences in total spending in MarketScan[supreg] compared to
enrollee-level EDGE data, we have found that the relative risk
differences for age-sex, HCC and RXC categories are generally similar
to those in the MarketScan[supreg] data, and therefore, do not believe
that blending the data will cause significant over- or under-prediction
of relative risk scores on average. Enrollee-level EDGE data shows
lower spending and relative risk patterns for shorter enrollment
durations compared to the MarketScan[supreg] data, resulting in smaller
enrollment duration coefficients for all 11 months. This result was
expected, given that enrollees in large group coverage have longer
enrollment duration and a higher proportion of individuals with a full-
year of enrollment on average than enrollees in the individual and
small group markets, and that the greater number of shorter average
enrollment durations in the enrollee-level EDGE
[[Page 16941]]
data account for lower relative risk on average.
Additionally, while Massachusetts is not included in the 2016
benefit year enrollee-level EDGE data, the relative risk differences
for enrollees in Massachusetts are likely similar on average to those
for enrollees in other States. The 2017 benefit year enrollee-level
risk EDGE data will not be available until the end of summer 2018,
after the 2019 benefit year risk adjustment factors need to be
published to support 2019 benefit year benefit design and rate
development, and therefore cannot be used for this recalibration
effort. We believe that a national dataset of individual and small
group market claims experience for the most recent benefit year is the
preferable data source--even without the incorporation of one State--
compared to only using commercial claims data for risk adjustment model
recalibration and risk estimation in the individual and small group
markets.
In all, we believe blending the coefficients promotes stability and
certainty for issuers in rate setting, smoothing any significant
differences as with the EDGE enrollment duration factors, while
maintaining the relative average risk differences stakeholders have
expected from the MarketScan[supreg]-only coefficients. Therefore, we
are finalizing our proposal to equally weight coefficients from
separately solved models using 2014 MarketScan[supreg], 2015
MarketScan[supreg], and 2016 enrollee-level EDGE data for the final
2019 benefit year risk adjustment model recalibration. We also were
able to complete our analysis of the 2016 EDGE data in time to publish
the final coefficients blended with 2016 enrollee-level EDGE data in
this final rule. The final 2019 benefit year risk adjustment model
coefficients listed in Tables 2, 4, and 5 are blended coefficients
using equally weighted coefficients solved from the 2014
MarketScan[supreg], 2015 MarketScan[supreg], and 2016 enrollee-level
EDGE data.
Comment: Commenters requested clarification on the analytical
dataset development process using the 2016 enrollee-level EDGE data,
sample size of the enrollee-level EDGE data, and differences in EDGE
and MarketScan[supreg] data.
Response: We arrived at the 2016 enrollee-level EDGE analytical
dataset using several criteria. We limited the sample to ages 0-64 to
maintain the same age categories as those HHS has used in the
MarketScan[supreg] data, with which the EDGE coefficients are blended.
Currently, we use the age 60-64 factors for those over 65 years of age
enrolled in individual and small group market coverage, and will
continue to do so for the 2019 benefit year. We will consider whether
to propose expanding the age and sex factors to include age groups and
associated costs for enrollees ages 65 and above in future model
recalibrations. We also excluded derived claims, any newborn diagnoses
for infants older than one year of age, anomalous claims (for example,
pregnancy diagnoses if sex is male) and those with sex unknown. There
were approximately 47 million, 28 million and 31 million total unique
enrollees in the 2014 MarketScan[supreg], 2015 MarketScan[supreg], and
2016 enrollee-level EDGE data, respectively. Relative risks were
similar in the 2016 enrollee-level EDGE data for most categories in all
three adult, infant and child samples. As mentioned above, enrollee-
level EDGE data reflected lower spending and relative risk patterns for
shorter enrollment duration enrollees compared to MarketScan[supreg]
data.
Comment: In case of significant demographic or distributional
differences in the EDGE data compared to the MarketScan[supreg] data,
most commenters supported HHS making adjustments to give greater weight
to the EDGE data when recalibrating the model coefficients. However,
commenters did not support making changes to the age-sex, HCC,
enrollment duration or RXC factors categorizations beyond what was in
the proposed rule, and instead supported such changes to be implemented
for the 2020 benefit year.
Response: We did not identify significant differences in the
relative risk for enrollees over 65 compared to those in the 60-64 age
group in the enrollee-level EDGE data compared to the
MarketScan[supreg] data, and therefore, are finalizing the risk
adjustment model categories as proposed. As noted above, we will
continue to assess relative differences in demographic and spending
patterns in the EDGE data and will consider amending the risk
adjustment model categories in future recalibrations, particularly once
we have multiple years of enrollee-level EDGE data.
Comment: A few commenters requested that HHS limit the scope of
enrollee-level EDGE data collection and use, clarify the types of data
elements collected in the enrollee-level EDGE data, proceed with
caution given the data privacy and trade secret information, and
prohibit any other use of the data.
Response: These comments are outside the scope of the proposed
rule. As finalized in the 2018 Payment Notice, HHS is collecting
enrollee-level EDGE data, which provides more granular claims data from
the individual and small group markets, and is being used to improve
the recalibration of HHS programs. Additionally, as noted in the 2018
Payment Notice, HHS recognizes the sensitivity of enrollee-level EDGE
data, and is not collecting masked enrollee IDs from issuers' EDGE
servers, plan or issuer IDs, rating areas, or State data elements to
safeguard the privacy and security of protected health information
(PHI) and minimize potential risks to issuers' proprietary information.
ii. Prescription Drugs
In the 2018 Payment Notice, we finalized the inclusion of 12 RXCs
that interact with HCCs, or drug-diagnosis (RXC-HCC) pairs, in the
adult risk adjustment models for the 2018 benefit year. Ten of the RXC-
HCC pairs have three levels of incremental predicted costs (diagnosis-
only, prescription drug-only, and both diagnosis and prescription
drug), indicating that they can be used to impute a particular
diagnosis. The 2018 benefit year risk adjustment adult models also
included two RXC-HCC pairs that are used for severity-only--that is,
they predict incremental costs for enrollees with the diagnosis-only,
or with both the diagnosis and the prescription drug. For enrollees
without the associated diagnoses documented for these severity-only
RXC-HCC pairs, the presence of the drug alone would not lead to the
attribution of additional plan liability costs to the plan.
For the 2019 benefit year, we proposed to remove the two severity-
only RXCs (RXC 11: Ammonia Detoxicants, and RXC 12: Diuretics, Loop and
Select Potassium-Sparing). Both have low average costs per enrollee per
year and were constrained in the 2018 benefit year adult risk
adjustment models final coefficients to the average cost of the drugs
to avoid overcompensating issuers for these RXCs. Constraining these
RXCs removed overprescribing and gaming incentives to prescribe a low-
cost drug to receive a much larger risk adjustment payment. However,
after constraints, these two severity-only RXCs have extremely small
coefficients that no longer predict meaningful incremental plan risk
associated with a severe health condition. Therefore, we proposed
eliminating these two RXCs from the adult models beginning with the
2019 benefit year. As explained in the proposed rule, we believe the
remaining RXCs do not engender significant gaming concerns due to the
cost and side-effects of the drugs if prescribed
[[Page 16942]]
without cause. As we noted in the 2018 Payment Notice, where the risk
of unintended effects on provider prescribing behavior is low, we will
continue to include a small number of prescription drug classes as
predictors of risk and plan liability. For the remaining RXCs, we
explained there is a high rate of presence of a diagnosis code in the
associated HCC in the MarketScan[supreg] data, indicating a positive
predictive value for using these RXCs to impute missing diagnoses.
Additionally, we noted that we intend to monitor prescription drug
utilization for unintended effects, and may propose to remove drug
classes based on such evidence in future rulemaking. We are finalizing
the removal of RXC11 and RXC12 from the adult risk adjustment models
beginning with the 2019 benefit year. Table 1 contains the final list
of prescription drug factors included in the 2019 benefit year risk
adjustment adult models. We will continue to evaluate the effects of
incorporating prescription drugs in the adult models to determine
whether to continue, broaden or reduce the impact of this set of
factors.
Comment: Most commenters supported the removal of the two severity-
only RXCs due to their low impact in predicting meaningful differences
in risk. Commenters also supported HHS's intention to evaluate the
impact of incorporating the prescription drug factors in the model and
adding or removing drugs in future model recalibrations as appropriate.
Commenters generally supported the inclusion of prescription drug
factors in the HHS risk adjustment model, noting the benefit in
imputing missing diagnoses. Additionally, we note that commenters on
the Request for Information also supported the inclusion of
prescription drugs in the risk adjustment methodology. One commenter to
the proposed rule suggested HHS should use the MedID for drug
classification instead of the RXNorm Concept Unique Identifier (RXCUI)
system. The commenter noted MedID would improve stability,
accessibility and predictability of the RXCs, as acquiring RXCUI
mapping, keeping it up to-date, anticipating changes and ensuring drug
inclusion has been a challenge for issuers in determining formularies
and often excludes some drugs. Another commenter sought clarification
as to whether drugs administered through hospital, office-based or home
health settings and found on medical claims would receive credit for
the RXC factors, in addition to drugs found on pharmacy claims. One
commenter requested HHS release a mapping of RXCUIs to RXC factors for
issuers to adequately assess how inclusion and exclusion of drugs will
impact risk adjustment, and suggested HHS provide a crosswalk with the
RXCUIs mapped to the RXCs prior to January 1, 2018. The commenter also
noted that since there is a lag in the data used for recalibration, HHS
should consider how to incorporate newer drugs that are approved after
the data years and before or during the benefit year. On the other
hand, commenters who had a chance to review the draft RXC crosswalk HHS
released in September 2017 for the 2018 benefit year risk adjustment
adult models suggested that if a drug is included, then all strengths
and formulations of that drug ought to be included in the drug class,
including the generic or brand name drugs, or requested clarification
as to why specific drugs were excluded. A few commenters requested that
HHS consider including prescription drugs used by individuals with
mental health and substance use disorders in the model, with one
suggesting that adding drugs used by those with mental health and
substance use disorders to the model may better capture the costs
associated with these individuals, and citing a study suggesting that
those costs may not be well captured in the associated HCCs in the
current model.\14\
---------------------------------------------------------------------------
\14\ Montz, E., Layton, T., Busch, A.B., Ellis, R.P., Rose, S.,
& McGuire, T.G. (2016). Risk-adjustment simulation: Plans may have
incentives to distort mental health and substance use coverage.
Health Affairs, 35(6), 1022-1028.
---------------------------------------------------------------------------
Response: We are finalizing our proposal to remove the two
severity-only RXCs (RXC 11: Ammonia Detoxicants, and RXC 12: Diuretics,
Loop and Select Potassium-Sparing) from the 2019 benefit year risk
adjustment adult models. As we explained in the 2018 Payment Notice, we
selected the RxNorm tool developed by the U.S. National Library of
Medicine because it is frequently updated, reliable, and easily
accessible, and issuers commented on the ease of the RxNorm tool in
mapping drugs to RXCUIs. As such, we do not see a need to adopt another
classification system at this time. HHS posted an RXC to RXCUI draft
crosswalk on September 18, 2017,\15\ to provide issuers an initial set
of RXCUIs that would be included for 2018 benefit year risk adjustment
adult models in the HHS-operated risk adjustment program. As we noted
in the crosswalk, drugs were excluded based on expert or clinician
input as to drugs' cross indications, empirical and statistical
analyses that indicated a weak association between the drug and the
diagnoses, or if drugs were older or discontinued. Drugs were also
excluded in situations where drugs had substantially lower costs
compared to other drugs included in the RXC, and therefore these drugs
were less likely to be the focus of risk-selection behavior by health
plans. In these instances, USP classes contained a mix of newer, more
expensive drug treatments, and older, often generic, lower-cost drug
treatments. For example, the combined USP classes Immune Suppressants
and Immunomodulators encompass a wide range of drugs. They include
expensive biologics costing several thousands of dollars each month and
drugs like generic methotrexate, a month's supply of which can cost
less than $100. Clinician review determined that many of the drugs in
this class are substitutable and the general prescribing process would
be to first prescribe a cheaper drug, and if the patient does not
respond to that then move to a more expensive biologic. However,
because concern over patient access and health plan selection behavior
(reflected in formulary design) centers around the expensive biologics,
the cheaper non-biologics were removed from RXC 9.
---------------------------------------------------------------------------
\15\ Creation of the 2018 Benefit Year HHS-Operated Risk
Adjustment Adult Models Draft Prescription Drug (RXCUIs) to HHS Drug
Classes (RXCs) Crosswalk Memorandum. September 18, 2017. Available
at https://www.cms.gov/CCIIO/Resources/Regulations-and-Guidance/Downloads/Draft-RxC-Crosswalk-Memo-9-18-17.pdf.
2018 Benefit Year HHS-Operated Risk Adjustment Adult Models
Draft Prescription Drug (RXCUIs) to HHS Drug Classes (RXCs)
Crosswalk. September 18, 2017. Available at https://www.cms.gov/CCIIO/Resources/Regulations-and-Guidance/Downloads/RARx_RxCUIs-Crosswalk-9-6-17.xlsx.
---------------------------------------------------------------------------
We review drugs in the United States Pharmacopeia (USP)
classification and consult clinicians and experts to ensure relevant
drugs are included. However, as some commenters noted in response to
the proposed rule, new drugs have been released since we released the
draft 2018 benefit year crosswalk and a few drugs that may be eligible
under our other criteria were not classified by the USP classification
version used for the draft crosswalk. We expect to publish the final
2018 benefit year crosswalk in the spring of 2019, after the conclusion
of the 2018 benefit year, so that newly approved drugs released through
the end of the year and the latest USP classification are evaluated and
included, as appropriate. As such, we intend to make quarterly updates
to the 2018 benefit year prescription drug crosswalk, to ensure we are
capturing all new drug releases and drug class inclusions or
modifications. We are also reviewing drugs administered through
clinicians in hospital, office-based, or
[[Page 16943]]
home health settings crosswalked to national drug codes (NDCs) to
determine whether it is appropriate under our inclusion criteria to
include these drugs in the 2018 benefit year crosswalk for 2018 benefit
year risk adjustment risk score calculation. However, as these drugs
are often more expensive when administered in hospital, office-based,
or home health settings, we are not including such drugs in the
recalibration of the adult models for the 2019 benefit year to limit
gaming incentives. We anticipate the 2019 benefit year drug crosswalk
will be published on a similar quarterly schedule, following the final
2018 benefit year crosswalk publication. We also intend to monitor the
impact of the drugs included in the adult models on prescribing
incentives and will evaluate adding or removing other RXCs as
appropriate in future recalibrations for future benefit years. We had
previously considered, but did not include, antimanic agents for
depression and bipolar disorders due to their low imputation value in
identifying the risk solely based on the RXC and low relative cost of
the drugs. We are continuing to assess if mental health and substance
use disorder treatments should be included in the adult models in
future benefit years.
Comment: One commenter noted that pharmacy claims should not be
included in the risk adjustment data validation process as no clinical
documentation is available for pharmacy claims, and HHS should not
include data that cannot be easily audited in risk adjustment. Another
commenter sought clarification as to how HHS intends to conduct risk
adjustment data validation for prescription drugs included in the risk
adjustment adult models.
Response: As we noted in the 2018 Payment Notice, HHS does not
perform risk adjustment data validation audits with the intent of
determining whether a clinician correctly diagnosed a patient. Rather,
the goal for the HHS-operated risk adjustment program is to ensure that
enrollees' diagnoses on paid claims reflect the appropriately assigned
HCCs, and were diagnosed by a licensed clinician. Likewise, in
validating pharmacy claims, we intend to validate factors such as
whether the prescription was filled and paid by the issuer, and whether
the appropriate RXC interaction was assigned. We understand commenters'
concerns regarding prescription drug data and intend to closely monitor
prescribing behavior in the 2018 benefit year and beyond. We will
consider whether additional adjustments to the risk adjustment data
validation process are needed for the 2018 benefit year to ensure risk
adjustment data validation appropriately audits pharmacy claims
submitted to EDGE by issuers.
Table 1--Final Drug-Diagnosis (RXC-HCC) Pairs for the 2019 Adult Model
----------------------------------------------------------------------------------------------------------------
RXC RXC label HCC HCC label Final RXC use
----------------------------------------------------------------------------------------------------------------
RXC 01............. Anti-HIV Agents. 001....................... HIV/AIDS............ imputation/severity.
RXC 02............. Anti-Hepatitis C 037C, 036, 035, 034....... Chronic Hepatitis C, imputation/severity.
(HCV) Agents. Cirrhosis of Liver,
End-Stage Liver
Disease, and Liver
Transplant Status/
Complications.
RXC 03............. Antiarrhythmics. 142....................... Specified Heart imputation/severity.
Arrhythmias.
RXC 04............. Phosphate 184, 183, 187, 188........ End Stage Renal imputation/severity.
Binders. Disease, Kidney
Transplant Status,
Chronic Kidney
Disease, Stage 5,
Chronic Kidney
Disease, Severe
(Stage 4).
RXC 05............. Inflammatory 048, 041.................. Inflammatory Bowel imputation/severity.
Bowel Disease Disease, Intestine
Agents. Transplant Status/
Complications.
RXC 06............. Insulin......... 019, 020, 021, 018........ Diabetes with Acute imputation/severity.
Complications;
Diabetes with
Chronic
Complications;
Diabetes without
Complication,
Pancreas Transplant
Status/
Complications.
RXC 07............. Anti-Diabetic 019, 020, 021, 018........ Diabetes with Acute imputation/severity.
Agents, Except Complications,
Insulin and Diabetes with
Metformin Only. Chronic
Complications,
Diabetes without
Complication,
Pancreas Transplant
Status/
Complications.
RXC 08............. Multiple 118....................... Multiple Sclerosis.. imputation/severity.
Sclerosis
Agents.
RXC 09............. Immune 056, 057, 048, 041........ Rheumatoid Arthritis imputation/severity.
Suppressants and Specified
and Autoimmune
Immunomodulator Disorders, Systemic
s. Lupus Erythematosus
and Other
Autoimmune
Disorders,
Inflammatory Bowel
Disease, Intestine
Transplant Status/
Complications.
RXC 10............. Cystic Fibrosis 159, 158.................. Cystic Fibrosis, imputation/severity.
Agents. Lung Transplant
Status/
Complications.
----------------------------------------------------------------------------------------------------------------
iii. High-Cost Risk Pool Adjustment
HHS finalized a high-cost risk pool adjustment in the 2018 Payment
Notice to account for the incorporation of risk associated with high-
cost enrollees in the risk adjustment model. Specifically, we finalized
adjusting the risk adjustment model for high-cost enrollees beginning
for the 2018 benefit year 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, because the average risk associated with
HCCs and RXCs is better accounted for without the inclusion of the
high-cost enrollees. In addition, to account for issuers' risk
associated with the high-cost enrollees, issuers will be compensated
for a percentage of costs above the threshold. We 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 high-cost enrollees will receive a
payment 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 based on the
threshold and the coinsurance rate. HHS will then calculate a charge as
a percentage of the issuers' total premiums in the individual
(including catastrophic and non-catastrophic plans and merged
[[Page 16944]]
market plans), or small group markets, which will be applied to the
total transfer amount in that market, maintaining the balance of
payments and charges within the risk adjustment program. In the 2018
Payment Notice, we finalized a threshold of $1 million and a
coinsurance rate of 60 percent across all States for the individual
(including catastrophic and non-catastrophic plans and merged market
plans) and small group markets for the 2018 benefit year.
For the 2019 benefit year, we proposed to maintain the same
parameters that apply to the 2018 benefit year. Therefore, we proposed
to maintain a $1 million threshold and 60 percent coinsurance rate for
the high-cost risk pool for the 2019 benefit year risk adjustment
program. We explained that we believe this threshold and coinsurance
rate would result in total payments or charges nationally that are very
small as a percentage of premiums for issuers, and will prevent States
and issuers with very high-cost enrollees from bearing a
disproportionate amount of unpredictable risk. We sought comments on
alternative methods for reimbursing issuers for exceptionally high-cost
enrollees through the high-cost risk pool and improving the calculation
of plan liability in the HHS-operated risk adjustment models for future
benefit years. We also shared suggestions from stakeholders that the
pool be multi-tiered, with multiple thresholds and increased
coinsurance as the thresholds increase to account for the reduced
number of enrollees at higher thresholds where costs to an issuer are
catastrophic.
We are finalizing the high-cost risk pool adjustment parameters for
the 2019 benefit year as proposed.
Comment: Most commenters supported our proposal to maintain the
same high-cost risk pool adjustment parameters as those used for the
2018 benefit year and noted that keeping the parameters the same
provides stability and certainty in the markets. One commenter
questioned why the parameters are not trended for increasing medical
costs. Some commenters noted that the $1 million threshold level may be
too high to have any meaningful impact on premiums or provide stability
in smaller State markets with low claims costs that would have
additional charges assessed, which could cause volatility. A few
commenters did not support the high-cost risk pool adjustment to
transfers, yet one of these commenters supported the removal of these
costs from the risk adjustment model recalibration. One commenter did
not support the proposal based on what appears to be a misunderstanding
that the high-cost risk pool adjustment requires individuals to pay 40
percent of costs above $1 million. Some commenters did not support
tiering the high-cost risk pool adjustment program for the 2019 benefit
year without the first year of experience with this adjustment, noting
it would lead to additional complexity. One commenter supported a
tiered approach in parameters with maximum coinsurance rates of 80 to
90 percent phased in over multiple years, and another commenter
supported a tiered approach if the approach and parameters result in an
equivalent cost and scope as the $1 million threshold and 60 percent
coinsurance rate parameters.
Response: As we noted in the 2018 Payment Notice, removing
extremely high costs improves the risk adjustment model's predictive
ability. Additionally, the high-cost risk pool adjustment to the
transfer formula mitigates issuers' risk selection incentives to avoid
high-cost risk enrollees. Because high-cost enrollees are outliers and
thus, unpredictable, they have the potential to significantly distort
risk in smaller markets. Removing the high-cost risk from the
recalibration model and separately adjusting transfers will allow for
greater stability in risk scores to compensate issuers for predictable
risk and transfers to compensate issuers for unpredictable risk. We
will consider whether a tiered approach would improve model prediction
and better compensate issuers for high-cost enrollees than the current
approach for future benefit years. We are continuing to assess the
market impact of tiered approaches nationally on the model's risk
prediction and issuers' risk differences, and whether such an approach
would meaningfully improve the model in accounting for high-cost
enrollees' risk. We continue to believe a $1 million threshold and 60
percent coinsurance rate for the 2019 benefit year are appropriate to
incentivize issuers to control costs while improving the risk
adjustment model's risk prediction. Additionally, as we noted in the
2018 Payment Notice, if an issuer were to fail the data quality
analysis for a risk adjustment transfer and be assessed a default
charge under Sec. 153.740(b) on that basis, we would perform
additional data quality analysis to determine an issuer's eligibility
for high-cost risk pool adjustments.
We are finalizing our proposal to maintain a $1 million threshold
and 60 percent coinsurance rate for the high-cost risk pool for the
2019 benefit year risk adjustment program.
c. List of Factors To Be Employed in the Risk Adjustment Model (Sec.
153.320)
The final factors resulting from the equally weighted blended
factors from the 2014 and 2015 MarketScan[supreg] data and the 2016
enrollee-level EDGE data separately solved models (with the
incorporation of the partial year enrollment adjustment and
prescription drugs reflected in the adult models only) are shown in
Tables 2, 4, and 5. The adult, child and infant models have been
truncated to account for the high-cost enrollee pool payment parameters
by removing 60 percent of costs above the $1 million threshold as
finalized in this rule. As discussed in the preceding section, we are
finalizing our proposal to keep the 2019 benefit year high-cost
enrollee risk pool payment parameters the same as those finalized for
the 2018 benefit year. The final factors for the adult models also
reflect the removal of the two severity-only RXCs (RXC 11: Ammonia
Detoxicants, and RXC 12: Diuretics, Loop and Select Potassium-Sparing)
discussed above in the preamble section on ``Prescription Drugs.''
Table 2 contains factors for each adult model, including the age-sex,
HCCs, RXCs, HCC-RXC interaction, and enrollment duration coefficients.
As we previously noted,\16\ some interactions of RXCs and HCCs have
negative coefficients; however, this does not mean that an enrollee's
risk score decreases due to the presence of an RXC, an HCC, or both.
---------------------------------------------------------------------------
\16\ 2018 Benefit Year Final HHS Risk Adjustment Model
Coefficients. April 18, 2017. Available at https://www.cms.gov/CCIIO/Programs-and-Initiatives/Premium-Stabilization-Programs/Downloads/2018-Benefit-Year-Final-HHS-Risk-Adjustment-Model-Coefficients.pdf.
---------------------------------------------------------------------------
Table 3 contains the HHS HCCs in the severity illness indicator
variable. Table 4 contains the factors for each child model. Table 5
contains the factors for each infant model. Tables 6 and 7 contain the
HCCs included in the infant model maturity and severity categories,
respectively.
Comment: A few commenters requested for HHS to separately publish
the coefficients solved only from the 2016 enrollee-level EDGE data.
Response: We are not separately publishing the coefficients from
only 1 year of data to avoid any confusion that could be caused from
publishing two sets of coefficients in the final rule. However, we note
that stakeholders interested in coefficients from the 2016 enrollee-
level EDGE data will be able to solve for them based on the proposed
and finalized coefficients. We published the model coefficients using
equally weighted coefficients solved from the
[[Page 16945]]
2014 and 2015 MarketScan[supreg] data in the proposed rule. The
coefficients finalized in Tables 2, 4 and 5 include the coefficients
solved from the 2016 enrollee-level EDGE data without changing the
coefficients solved from the 2014 and 2015 MarketScan[supreg] data
published in the proposed rule, and equally weighted coefficients
solved from the 3 years of data.
Table 2--Final Adult Risk Adjustment Model Factors for 2019 Benefit Year
----------------------------------------------------------------------------------------------------------------
HCC or RXC No. Factor Platinum Gold Silver Bronze Catastrophic
----------------------------------------------------------------------------------------------------------------
Demographic Factors
----------------------------------------------------------------------------------------------------------------
Age 21-24, Male..... 0.167 0.133 0.091 0.051 0.048
Age 25-29, Male..... 0.153 0.119 0.078 0.037 0.034
Age 30-34, Male..... 0.186 0.144 0.093 0.043 0.039
Age 35-39, Male..... 0.236 0.185 0.125 0.063 0.058
Age 40-44, Male..... 0.292 0.233 0.164 0.093 0.088
Age 45-49, Male..... 0.346 0.280 0.202 0.121 0.115
Age 50-54, Male..... 0.455 0.378 0.287 0.192 0.184
Age 55-59, Male..... 0.511 0.424 0.324 0.217 0.209
Age 60-64, Male..... 0.573 0.473 0.359 0.235 0.225
Age 21-24, Female... 0.269 0.218 0.153 0.088 0.083
Age 25-29, Female... 0.304 0.245 0.173 0.098 0.092
Age 30-34, Female... 0.410 0.338 0.253 0.167 0.160
Age 35-39, Female... 0.491 0.410 0.317 0.226 0.219
Age 40-44, Female... 0.545 0.454 0.352 0.249 0.241
Age 45-49, Female... 0.553 0.458 0.350 0.237 0.229
Age 50-54, Female... 0.616 0.516 0.401 0.278 0.268
Age 55-59, Female... 0.601 0.499 0.380 0.252 0.241
Age 60-64, Female... 0.616 0.505 0.379 0.240 0.229
----------------------------------------------------------------------------------------------------------------
Diagnosis Factors
----------------------------------------------------------------------------------------------------------------
HCC001.......................... HIV/AIDS............ 0.626 0.529 0.434 0.359 0.352
HCC002.......................... Septicemia, Sepsis, 8.000 7.812 7.688 7.731 7.737
Systemic
Inflammatory
Response Syndrome/
Shock.
HCC003.......................... Central Nervous 5.750 5.666 5.604 5.625 5.626
System Infections,
Except Viral
Meningitis.
HCC004.......................... Viral or Unspecified 4.396 4.192 4.060 3.989 3.983
Meningitis.
HCC006.......................... Opportunistic 6.143 6.060 6.006 5.972 5.968
Infections.
HCC008.......................... Metastatic Cancer... 21.806 21.372 21.040 21.084 21.087
HCC009.......................... Lung, Brain, and 12.392 12.068 11.825 11.807 11.804
Other Severe
Cancers, Including
Pediatric Acute
Lymphoid Leukemia.
HCC010.......................... Non-Hodgkin`s 5.575 5.356 5.189 5.117 5.110
Lymphomas and Other
Cancers and Tumors.
HCC011.......................... Colorectal, Breast 4.291 4.074 3.905 3.831 3.823
(Age <50), Kidney,
and Other Cancers.
HCC012.......................... Breast (Age 50+) and 2.640 2.482 2.356 2.283 2.276
Prostate Cancer,
Benign/Uncertain
Brain Tumors, and
Other Cancers and
Tumors.
HCC013.......................... Thyroid Cancer, 1.211 1.084 0.976 0.860 0.849
Melanoma,
Neurofibromatosis,
and Other Cancers
and Tumors.
HCC018.......................... Pancreas Transplant 4.439 4.246 4.114 4.122 4.122
Status/
Complications.
HCC019.......................... Diabetes with Acute 0.603 0.531 0.463 0.389 0.381
Complications.
HCC020.......................... Diabetes with 0.603 0.531 0.463 0.389 0.381
Chronic
Complications.
HCC021.......................... Diabetes without 0.603 0.531 0.463 0.389 0.381
Complication.
HCC023.......................... Protein-Calorie 11.438 11.430 11.416 11.494 11.502
Malnutrition.
HCC026.......................... Mucopolysaccharidosi 2.380 2.280 2.200 2.137 2.132
s.
HCC027.......................... Lipidoses and 2.380 2.280 2.200 2.137 2.132
Glycogenosis.
HCC029.......................... Amyloidosis, NA NA NA NA NA
Porphyria, and
Other Metabolic
Disorders.
HCC030.......................... Adrenal, Pituitary, 2.380 2.280 2.200 2.137 2.132
and Other
Significant
Endocrine Disorders.
HCC034.......................... Liver Transplant 2.380 2.280 2.200 2.137 2.132
Status/
Complications.
HCC035.......................... End-Stage Liver 10.515 10.418 10.353 10.334 10.331
Disease.
HCC036.......................... Cirrhosis of Liver.. 5.696 5.491 5.349 5.341 5.339
HCC037_1........................ Chronic Viral 0.707 0.604 0.545 0.509 0.505
Hepatitis C.
HCC037_2........................ Chronic Hepatitis, 0.703 0.584 0.523 0.474 0.469
Other/Unspecified.
HCC038.......................... Acute Liver Failure/ 4.300 4.155 4.055 4.026 4.024
Disease, Including
Neonatal Hepatitis.
HCC041.......................... Intestine Transplant 28.253 28.206 28.169 28.209 28.209
Status/
Complications.
HCC042.......................... Peritonitis/ 9.718 9.488 9.318 9.328 9.329
Gastrointestinal
Perforation/
Necrotizing
Enterocolitis.
HCC045.......................... Intestinal 5.510 5.274 5.115 5.104 5.102
Obstruction.
HCC046.......................... Chronic Pancreatitis 4.439 4.246 4.114 4.122 4.122
HCC047.......................... Acute Pancreatitis/ 2.243 2.085 1.972 1.896 1.888
Other Pancreatic
Disorders and
Intestinal
Malabsorption.
HCC048.......................... Inflammatory Bowel 2.192 2.011 1.868 1.765 1.755
Disease.
HCC054.......................... Necrotizing 5.507 5.332 5.200 5.206 5.207
Fasciitis.
HCC055.......................... Bone/Joint/Muscle 5.507 5.332 5.200 5.206 5.207
Infections/Necrosis.
HCC056.......................... Rheumatoid Arthritis 3.316 3.130 2.980 2.923 2.918
and Specified
Autoimmune
Disorders.
HCC057.......................... Systemic Lupus 0.993 0.878 0.780 0.666 0.654
Erythematosus and
Other Autoimmune
Disorders.
HCC061.......................... Osteogenesis 2.654 2.477 2.337 2.257 2.249
Imperfecta and
Other
Osteodystrophies.
HCC062.......................... Congenital/ 2.654 2.477 2.337 2.257 2.249
Developmental
Skeletal and
Connective Tissue
Disorders.
HCC063.......................... Cleft Lip/Cleft 1.417 1.266 1.155 1.071 1.065
Palate.
HCC066.......................... Hemophilia.......... 53.096 52.795 52.549 52.553 52.553
HCC067.......................... Myelodysplastic 12.454 12.326 12.228 12.227 12.227
Syndromes and
Myelofibrosis.
HCC068.......................... Aplastic Anemia..... 12.454 12.326 12.228 12.227 12.227
HCC069.......................... Acquired Hemolytic 7.864 7.738 7.636 7.604 7.602
Anemia, Including
Hemolytic Disease
of Newborn.
HCC070.......................... Sickle Cell Anemia 7.864 7.738 7.636 7.604 7.602
(Hb-SS).
HCC071.......................... Thalassemia Major... 7.864 7.738 7.636 7.604 7.602
HCC073.......................... Combined and Other 5.198 5.074 4.982 4.979 4.979
Severe
Immunodeficiencies.
HCC074.......................... Disorders of the 5.198 5.074 4.982 4.979 4.979
Immune Mechanism.
HCC075.......................... Coagulation Defects 2.657 2.572 2.503 2.464 2.461
and Other Specified
Hematological
Disorders.
HCC081.......................... Drug Psychosis...... 3.804 3.574 3.401 3.278 3.265
[[Page 16946]]
HCC082.......................... Drug Dependence..... 3.804 3.574 3.401 3.278 3.265
HCC087.......................... Schizophrenia....... 3.057 2.822 2.651 2.559 2.550
HCC088.......................... Major Depressive and 1.624 1.472 1.350 1.231 1.219
Bipolar Disorders.
HCC089.......................... Reactive and 1.624 1.472 1.350 1.231 1.219
Unspecified
Psychosis,
Delusional
Disorders.
HCC090.......................... Personality 1.124 1.010 0.901 0.780 0.769
Disorders.
HCC094.......................... Anorexia/Bulimia 2.549 2.397 2.275 2.201 2.194
Nervosa.
HCC096.......................... Prader-Willi, Patau, 4.019 3.924 3.847 3.789 3.783
Edwards, and
Autosomal Deletion
Syndromes.
HCC097.......................... Down Syndrome, 1.056 0.963 0.880 0.802 0.795
Fragile X, Other
Chromosomal
Anomalies, and
Congenital
Malformation
Syndromes.
HCC102.......................... Autistic Disorder... 1.124 1.010 0.901 0.780 0.769
HCC103.......................... Pervasive 1.124 1.010 0.901 0.780 0.769
Developmental
Disorders, Except
Autistic Disorder.
HCC106.......................... Traumatic Complete 9.989 9.853 9.752 9.735 9.732
Lesion Cervical
Spinal Cord.
HCC107.......................... Quadriplegia........ 9.989 9.853 9.752 9.735 9.732
HCC108.......................... Traumatic Complete 7.568 7.420 7.310 7.278 7.274
Lesion Dorsal
Spinal Cord.
HCC109.......................... Paraplegia.......... 7.568 7.420 7.310 7.278 7.274
HCC110.......................... Spinal Cord 5.212 5.008 4.857 4.816 4.812
Disorders/Injuries.
HCC111.......................... Amyotrophic Lateral 1.965 1.764 1.620 1.534 1.524
Sclerosis and Other
Anterior Horn Cell
Disease.
HCC112.......................... Quadriplegic 0.302 0.192 0.120 0.072 0.071
Cerebral Palsy.
HCC113.......................... Cerebral Palsy, 0.255 0.176 0.120 0.072 0.071
Except Quadriplegic.
HCC114.......................... Spina Bifida and 0.355 0.300 0.265 0.241 0.236
Other Brain/Spinal/
Nervous System
Congenital
Anomalies.
HCC115.......................... Myasthenia Gravis/ 5.262 5.137 5.045 5.027 5.025
Myoneural Disorders
and Guillain-Barre
Syndrome/
Inflammatory and
Toxic Neuropathy.
HCC117.......................... Muscular Dystrophy.. 2.064 1.922 1.819 1.720 1.708
HCC118.......................... Multiple Sclerosis.. 8.436 8.144 7.920 7.895 7.892
HCC119.......................... Parkinson's, 2.064 1.922 1.819 1.720 1.708
Huntington's, and
Spinocerebellar
Disease, and Other
Neurodegenerative
Disorders.
HCC120.......................... Seizure Disorders 1.390 1.248 1.138 1.044 1.035
and Convulsions.
HCC121.......................... Hydrocephalus....... 5.922 5.814 5.724 5.696 5.694
HCC122.......................... Non-Traumatic Coma, 8.310 8.176 8.067 8.059 8.058
and Brain
Compression/Anoxic
Damage.
HCC125.......................... Respirator 26.626 26.590 26.555 26.637 26.644
Dependence/
Tracheostomy Status.
HCC126.......................... Respiratory Arrest.. 8.048 7.900 7.794 7.864 7.872
HCC127.......................... Cardio-Respiratory 8.048 7.900 7.794 7.864 7.872
Failure and Shock,
Including
Respiratory
Distress Syndromes.
HCC128.......................... Heart Assistive 28.421 28.219 28.071 28.120 28.125
Device/Artificial
Heart.
HCC129.......................... Heart Transplant.... 28.421 28.219 28.071 28.120 28.125
HCC130.......................... Congestive Heart 2.800 2.705 2.635 2.624 2.623
Failure.
HCC131.......................... Acute Myocardial 8.077 7.789 7.577 7.664 7.672
Infarction.
HCC132.......................... Unstable Angina and 4.820 4.558 4.388 4.378 4.378
Other Acute
Ischemic Heart
Disease.
HCC135.......................... Heart Infection/ 5.473 5.356 5.268 5.237 5.235
Inflammation,
Except Rheumatic.
HCC142.......................... Specified Heart 2.467 2.335 2.233 2.158 2.150
Arrhythmias.
HCC145.......................... Intracranial 7.621 7.366 7.186 7.162 7.159
Hemorrhage.
HCC146.......................... Ischemic or 2.164 2.012 1.918 1.896 1.894
Unspecified Stroke.
HCC149.......................... Cerebral Aneurysm 3.167 2.994 2.869 2.802 2.796
and Arteriovenous
Malformation.
HCC150.......................... Hemiplegia/ 4.517 4.422 4.355 4.402 4.407
Hemiparesis.
HCC151.......................... Monoplegia, Other 2.734 2.612 2.525 2.486 2.482
Paralytic Syndromes.
HCC153.......................... Atherosclerosis of 9.056 8.976 8.915 9.004 9.013
the Extremities
with Ulceration or
Gangrene.
HCC154.......................... Vascular Disease 6.714 6.556 6.439 6.424 6.422
with Complications.
HCC156.......................... Pulmonary Embolism 3.352 3.207 3.101 3.044 3.038
and Deep Vein
Thrombosis.
HCC158.......................... Lung Transplant 25.564 25.421 25.310 25.384 25.391
Status/
Complications.
HCC159.......................... Cystic Fibrosis..... 14.108 13.825 13.596 13.601 13.601
HCC160.......................... Chronic Obstructive 0.878 0.776 0.686 0.591 0.582
Pulmonary Disease,
Including
Bronchiectasis.
HCC161.......................... Asthma.............. 0.878 0.776 0.686 0.591 0.582
HCC162.......................... Fibrosis of Lung and 1.869 1.767 1.693 1.639 1.633
Other Lung
Disorders.
HCC163.......................... Aspiration and 6.270 6.223 6.188 6.194 6.195
Specified Bacterial
Pneumonias and
Other Severe Lung
Infections.
HCC183.......................... Kidney Transplant 7.462 7.260 7.119 7.070 7.064
Status.
HCC184.......................... End Stage Renal 29.905 29.678 29.495 29.641 29.654
Disease.
HCC187.......................... Chronic Kidney 1.319 1.263 1.224 1.233 1.235
Disease, Stage 5.
HCC188.......................... Chronic Kidney 1.319 1.263 1.224 1.233 1.235
Disease, Stage 4.
HCC203.......................... Ectopic and Molar 1.156 1.011 0.879 0.670 0.648
Pregnancy, Except
with Renal Failure,
Shock, or Embolism.
HCC204.......................... Miscarriage with 1.156 1.011 0.879 0.670 0.648
Complications.
HCC205.......................... Miscarriage with No 1.156 1.011 0.879 0.670 0.648
or Minor
Complications.
HCC207.......................... Completed Pregnancy 3.329 2.913 2.690 2.416 2.386
With Major
Complications.
HCC208.......................... Completed Pregnancy 3.329 2.913 2.690 2.416 2.386
With Complications.
HCC209.......................... Completed Pregnancy 3.329 2.913 2.690 2.416 2.386
with No or Minor
Complications.
HCC217.......................... Chronic Ulcer of 1.988 1.888 1.818 1.798 1.796
Skin, Except
Pressure.
HCC226.......................... Hip Fractures and 8.801 8.587 8.428 8.457 8.460
Pathological
Vertebral or
Humerus Fractures.
HCC227.......................... Pathological 3.874 3.744 3.644 3.579 3.575
Fractures, Except
of Vertebrae, Hip,
or Humerus.
HCC251.......................... Stem Cell, Including 24.334 24.334 24.329 24.357 24.360
Bone Marrow,
Transplant Status/
Complications.
HCC253.......................... Artificial Openings 8.284 8.198 8.131 8.164 8.168
for Feeding or
Elimination.
HCC254.......................... Amputation Status, 3.486 3.371 3.290 3.313 3.316
Lower Limb/
Amputation
Complications.
----------------------------------------------------------------------------------------------------------------
Interaction Factors
----------------------------------------------------------------------------------------------------------------
SEVERE x HCC006................. Severe illness x 7.694 7.897 8.035 8.180 8.193
Opportunistic
Infections.
SEVERE x HCC008................. Severe illness x 7.694 7.897 8.035 8.180 8.193
Metastatic Cancer.
SEVERE x HCC009................. Severe illness x 7.694 7.897 8.035 8.180 8.193
Lung, Brain, and
Other Severe
Cancers, Including
Pediatric Acute
Lymphoid Leukemia.
SEVERE x HCC010................. Severe illness x Non- 7.694 7.897 8.035 8.180 8.193
Hodgkin's Lymphomas
and Other Cancers
and Tumors.
[[Page 16947]]
SEVERE x HCC115................. Severe illness x 7.694 7.897 8.035 8.180 8.193
Myasthenia Gravis/
Myoneural Disorders
and Guillain-Barre
Syndrome/
Inflammatory and
Toxic Neuropathy.
SEVERE x HCC135................. Severe illness x 7.694 7.897 8.035 8.180 8.193
Heart Infection/
Inflammation,
Except Rheumatic.
SEVERE x HCC145................. Severe illness x 7.694 7.897 8.035 8.180 8.193
Intracranial
Hemorrhage.
SEVERE x G06.................... Severe illness x HCC 7.694 7.897 8.035 8.180 8.193
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 HCC 7.694 7.897 8.035 8.180 8.193
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 End- 1.449 1.541 1.596 1.722 1.733
Stage Liver Disease.
SEVERE x HCC038................. Severe illness x 1.449 1.541 1.596 1.722 1.733
Acute Liver Failure/
Disease, Including
Neonatal Hepatitis.
SEVERE x HCC153................. Severe illness x 1.449 1.541 1.596 1.722 1.733
Atherosclerosis of
the Extremities
with Ulceration or
Gangrene.
SEVERE x HCC154................. Severe illness x 1.449 1.541 1.596 1.722 1.733
Vascular Disease
with Complications.
SEVERE x HCC163................. Severe illness x 1.449 1.541 1.596 1.722 1.733
Aspiration and
Specified Bacterial
Pneumonias and
Other Severe Lung
Infections.
SEVERE x HCC253................. Severe illness x 1.449 1.541 1.596 1.722 1.733
Artificial Openings
for Feeding or
Elimination.
SEVERE x G03.................... Severe illness x HCC 1.449 1.541 1.596 1.722 1.733
group G03 (G03 is
HCC Group 3 which
includes the
following HCCs in
the musculoskeletal
disease category:
54, 55).
----------------------------------------------------------------------------------------------------------------
Enrollment Duration Factors
----------------------------------------------------------------------------------------------------------------
1 month of 0.417 0.365 0.325 0.306 0.305
enrollment.
2 months of 0.382 0.333 0.293 0.275 0.273
enrollment.
3 months of 0.327 0.282 0.244 0.227 0.225
enrollment.
4 months of 0.279 0.240 0.206 0.189 0.188
enrollment.
5 months of 0.249 0.216 0.185 0.169 0.168
enrollment.
6 months of 0.207 0.181 0.153 0.138 0.137
enrollment.
7 months of 0.189 0.165 0.141 0.126 0.125
enrollment.
8 months of 0.137 0.120 0.102 0.091 0.091
enrollment.
9 months of 0.097 0.085 0.074 0.067 0.067
enrollment.
10 months of 0.070 0.065 0.060 0.057 0.057
enrollment.
11 months of 0.064 0.060 0.057 0.055 0.055
enrollment.
----------------------------------------------------------------------------------------------------------------
Prescription Drug Factors
----------------------------------------------------------------------------------------------------------------
RXC 01.......................... Anti-HIV Agents..... 7.822 7.257 6.830 6.605 6.580
RXC 02.......................... Anti-Hepatitis C 39.880 39.337 38.905 39.062 39.075
(HCV) Agents.
RXC 03.......................... Antiarrhythmics..... 0.113 0.113 0.113 0.113 0.113
RXC 04.......................... Phosphate Binders... 0.730 0.730 0.730 0.730 0.730
RXC 05.......................... Inflammatory Bowel 2.022 1.842 1.701 1.509 1.487
Disease Agents.
RXC 06.......................... Insulin............. 1.498 1.349 1.185 0.993 0.973
RXC 07.......................... Anti-Diabetic 0.495 0.430 0.361 0.272 0.264
Agents, Except
Insulin and
Metformin Only.
RXC 08.......................... Multiple Sclerosis 21.141 20.350 19.757 19.731 19.721
Agents.
RXC 09.......................... Immune Suppressants 13.273 12.681 12.240 12.270 12.268
and
Immunomodulators.
RXC 10.......................... Cystic Fibrosis 13.045 12.712 12.485 12.565 12.574
Agents.
RXC 01 x HCC001................. Additional effect 2.459 2.560 2.655 3.010 3.046
for enrollees with
RXC 01 (Anti-HIV
Agents) and HCC 001
(HIV/AIDS).
RXC 02 x HCC037_1, 036, 035, 034 Additional effect 2.645 2.838 2.974 3.020 3.025
for enrollees with
RXC 02 (Anti-
Hepatitis C (HCV)
Agents) and (HCC
037_1 (Chronic
Viral Hepatitis C)
or 036 (Cirrhosis
of Liver) or 035
(End-Stage Liver
Disease) or 034
(Liver Transplant
Status/
Complications)).
RXC 03 x HCC142................. Additional effect 0.000 0.000 0.000 0.000 0.000
for enrollees with
RxC 03
(Antiarrhythmics)
and HCC 142
(Specified Heart
Arrhythmias).
RXC 04 x HCC184, 183, 187, 188.. Additional effect 0.000 0.000 0.000 0.000 0.000
for enrollees with
RxC 04 (Phosphate
Binders) and (HCC
184 (End Stage
Renal Disease) or
183 (Kidney
Transplant Status)
or 187 (Chronic
Kidney Disease,
Stage 5) or 188
(Chronic Kidney
Disease, Severe
Stage 4)).
RXC 05 x HCC048, 041............ Additional effect -1.192 -1.096 -0.997 -0.888 -0.878
for enrollees with
RxC 05
(Inflammatory Bowel
Disease Agents) and
(HCC 048
(Inflammatory Bowel
Disease) or 041
(Intestine
Transplant Status/
Complications)).
RXC 06 x HCC018, 019, 020, 021.. Additional effect 0.421 0.395 0.456 0.533 0.538
for enrollees with
RxC 06 (Insulin)
and (HCC 018
(Pancreas
Transplant Status/
Complications) or
019 (Diabetes with
Acute
Complications) or
020 (Diabetes with
Chronic
Complications) or
021 (Diabetes
without
Complication)).
RXC 07 x HCC018, 019, 020, 021.. Additional effect -0.202 -0.184 -0.153 -0.153 -0.155
for enrollees with
RxC 07 (Anti-
Diabetic Agents,
Except Insulin and
Metformin Only) and
(HCC 018 (Pancreas
Transplant Status/
Complications) or
019 (Diabetes with
Acute
Complications) or
020 (Diabetes with
Chronic
Complications) or
021 (Diabetes
without
Complication)).
RXC 08 x HCC118................. Additional effect -5.507 -4.981 -4.597 -4.422 -4.399
for enrollees with
RxC 08 (Multiple
Sclerosis Agents)
and HCC 118
(Multiple
Sclerosis).
RXC 09 x HCC056 or 057 and 048 Additional effect -0.337 -0.352 -0.336 -0.370 -0.375
or 041. for enrollees with
RxC 09 (Immune
Suppressants and
Immunomodulators)
and (HCC 048
(Inflammatory Bowel
Disease) or 041
(Intestine
Transplant Status/
Complications)) and
(HCC 056
(Rheumatoid
Arthritis and
Specified
Autoimmune
Disorders) or 057
(Systemic Lupus
Erythematosus and
Other Autoimmune
Disorders)).
RXC 09 x HCC056................. Additional effect -2.862 -2.632 -2.452 -2.323 -2.307
for enrollees with
RxC 09 (Immune
Suppressants and
Immunomodulators)
and HCC 056
(Rheumatoid
Arthritis and
Specified
Autoimmune
Disorders).
RXC 09 x HCC057................. Additional effect -0.595 -0.444 -0.322 -0.175 -0.161
for enrollees with
RxC 09 (Immune
Suppressants and
Immunomodulators)
and HCC 057
(Systemic Lupus
Erythematosus and
Other Autoimmune
Disorders).
[[Page 16948]]
RXC 09 x HCC048, 041............ Additional effect 1.128 1.392 1.563 1.764 1.788
for enrollees with
RxC 09 (Immune
Suppressants and
Immunomodulators)
and (HCC 048
(Inflammatory Bowel
Disease) or 041
(Intestine
Transplant Status/
Complications)).
RXC 10 x HCC159, 158............ Additional effect 29.170 29.398 29.528 29.588 29.594
for enrollees with
RxC 10 (Cystic
Fibrosis Agents)
and (HCC 159
(Cystic Fibrosis)
or 158 (Lung
Transplant Status/
Complications)).
----------------------------------------------------------------------------------------------------------------
Table 3--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 4--Final Child Risk Adjustment Model Factors for 2019 Benefit Year
----------------------------------------------------------------------------------------------------------------
Factor Platinum Gold Silver Bronze Catastrophic
----------------------------------------------------------------------------------------------------------------
Demographic Factors
----------------------------------------------------------------------------------------------------------------
Age 2-4, Male................... 0.200 0.149 0.092 0.042 0.038
Age 5-9, Male................... 0.138 0.100 0.055 0.018 0.015
Age 10-14, Male................. 0.193 0.152 0.100 0.060 0.058
Age 15-20, Male................. 0.258 0.209 0.151 0.099 0.095
Age 2-4, Female................. 0.153 0.109 0.062 0.025 0.022
Age 5-9, Female................. 0.102 0.068 0.031 0.005 0.003
Age 10-14, Female............... 0.182 0.142 0.095 0.059 0.056
Age 15-20, Female............... 0.281 0.224 0.155 0.091 0.086
----------------------------------------------------------------------------------------------------------------
Diagnosis Factors
----------------------------------------------------------------------------------------------------------------
HIV/AIDS........................ 5.368 4.942 4.622 4.506 4.493
Septicemia, Sepsis, Systemic 13.803 13.633 13.522 13.529 13.530
Inflammatory Response Syndrome/
Shock..........................
Central Nervous System 8.179 8.020 7.905 7.913 7.913
Infections, Except Viral
Meningitis.....................
Viral or Unspecified Meningitis. 3.563 3.358 3.225 3.077 3.063
Opportunistic Infections........ 16.934 16.887 16.848 16.832 16.829
Metastatic Cancer............... 32.479 32.270 32.092 32.101 32.102
Lung, Brain, and Other Severe 10.021 9.785 9.590 9.509 9.501
Cancers, Including Pediatric
Acute Lymphoid Leukemia........
Non-Hodgkin's Lymphomas and 7.835 7.601 7.411 7.304 7.292
Other Cancers and Tumors.......
Colorectal, Breast (Age <50), 3.051 2.879 2.737 2.618 2.605
Kidney, and Other Cancers......
Breast (Age 50+) and Prostate 3.051 2.879 2.737 2.618 2.605
Cancer, Benign/Uncertain Brain
Tumors, and Other Cancers and
Tumors.........................
Thyroid Cancer, Melanoma, 1.188 1.057 0.943 0.818 0.805
Neurofibromatosis, and Other
Cancers and Tumors.............
Pancreas Transplant Status/ 22.337 22.078 21.875 21.901 21.904
Complications..................
Diabetes with Acute 2.550 2.234 2.032 1.749 1.721
Complications..................
Diabetes with Chronic 2.550 2.234 2.032 1.749 1.721
Complications..................
Diabetes without Complication... 2.550 2.234 2.032 1.749 1.721
Protein-Calorie Malnutrition.... 12.783 12.694 12.618 12.658 12.661
Mucopolysaccharidosis........... 7.948 7.723 7.536 7.494 7.489
Lipidoses and Glycogenosis...... 7.948 7.723 7.536 7.494 7.489
Congenital Metabolic Disorders, 7.948 7.723 7.536 7.494 7.489
Not Elsewhere Classified.......
Amyloidosis, Porphyria, and 7.948 7.723 7.536 7.494 7.489
Other Metabolic Disorders......
Adrenal, Pituitary, and Other 7.948 7.723 7.536 7.494 7.489
Significant Endocrine Disorders
Liver Transplant Status/ 22.337 22.078 21.875 21.901 21.904
Complications..................
End-Stage Liver Disease......... 11.834 11.685 11.584 11.580 11.579
Cirrhosis of Liver.............. 5.782 5.646 5.535 5.507 5.507
Chronic Viral Hepatitis C....... 6.269 6.114 5.983 5.966 5.967
Chronic Hepatitis, Other/ 1.200 1.086 0.983 0.923 0.920
Unspecified....................
Acute Liver Failure/Disease, 11.636 11.494 11.390 11.392 11.391
Including Neonatal Hepatitis...
[[Page 16949]]
Intestine Transplant Status/ 22.337 22.078 21.875 21.901 21.904
Complications..................
Peritonitis/Gastrointestinal 11.572 11.283 11.063 11.060 11.061
Perforation/Necrotizing
Enterocolitis..................
Intestinal Obstruction.......... 4.506 4.310 4.154 4.057 4.049
Chronic Pancreatitis............ 10.521 10.314 10.163 10.167 10.167
Acute Pancreatitis/Other 2.265 2.148 2.046 1.948 1.938
Pancreatic Disorders and
Intestinal Malabsorption.......
Inflammatory Bowel Disease...... 7.055 6.685 6.402 6.291 6.279
Necrotizing Fasciitis........... 3.907 3.706 3.544 3.468 3.461
Bone/Joint/Muscle Infections/ 3.907 3.706 3.544 3.468 3.461
Necrosis.......................
Rheumatoid Arthritis and 4.282 4.052 3.856 3.762 3.754
Specified Autoimmune Disorders.
Systemic Lupus Erythematosus and 1.092 0.970 0.854 0.726 0.714
Other Autoimmune Disorders.....
Osteogenesis Imperfecta and 1.402 1.292 1.193 1.110 1.102
Other Osteodystrophies.........
Congenital/Developmental 1.402 1.292 1.193 1.110 1.102
Skeletal and Connective Tissue
Disorders......................
Cleft Lip/Cleft Palate.......... 1.435 1.260 1.121 0.992 0.980
Hemophilia...................... 61.183 60.705 60.325 60.299 60.296
Myelodysplastic Syndromes and 14.718 14.596 14.505 14.474 14.470
Myelofibrosis..................
Aplastic Anemia................. 14.718 14.596 14.505 14.474 14.470
Acquired Hemolytic Anemia, 6.928 6.714 6.544 6.456 6.448
Including Hemolytic Disease of
Newborn........................
Sickle Cell Anemia (Hb-SS)...... 6.928 6.714 6.544 6.456 6.448
Thalassemia Major............... 6.928 6.714 6.544 6.456 6.448
Combined and Other Severe 5.849 5.705 5.592 5.531 5.526
Immunodeficiencies.............
Disorders of the Immune 5.849 5.705 5.592 5.531 5.526
Mechanism......................
Coagulation Defects and Other 4.662 4.542 4.439 4.366 4.359
Specified Hematological
Disorders......................
Drug Psychosis.................. 5.648 5.392 5.211 5.131 5.125
Drug Dependence................. 5.648 5.392 5.211 5.131 5.125
Schizophrenia................... 4.819 4.473 4.217 4.086 4.073
Major Depressive and Bipolar 2.214 2.007 1.833 1.653 1.636
Disorders......................
Reactive and Unspecified 2.129 1.931 1.762 1.584 1.567
Psychosis, Delusional Disorders
Personality Disorders........... 0.622 0.517 0.405 0.257 0.243
Anorexia/Bulimia Nervosa........ 2.657 2.471 2.318 2.238 2.228
Prader-Willi, Patau, Edwards, 2.119 1.961 1.850 1.796 1.790
and Autosomal Deletion
Syndromes......................
Down Syndrome, Fragile X, Other 1.785 1.639 1.526 1.435 1.427
Chromosomal Anomalies, and
Congenital Malformation
Syndromes......................
Autistic Disorder............... 2.017 1.836 1.677 1.511 1.495
Pervasive Developmental 0.686 0.592 0.484 0.349 0.338
Disorders, Except Autistic
Disorder.......................
Traumatic Complete Lesion 11.525 11.463 11.427 11.507 11.514
Cervical Spinal Cord...........
Quadriplegia.................... 11.525 11.463 11.427 11.507 11.514
Traumatic Complete Lesion Dorsal 9.265 9.094 8.948 8.933 8.928
Spinal Cord....................
Paraplegia...................... 9.265 9.094 8.948 8.933 8.928
Spinal Cord Disorders/Injuries.. 3.678 3.487 3.339 3.247 3.239
Amyotrophic Lateral Sclerosis 4.952 4.754 4.592 4.506 4.499
and Other Anterior Horn Cell
Disease........................
Quadriplegic Cerebral Palsy..... 2.968 2.768 2.638 2.642 2.642
Cerebral Palsy, Except 0.496 0.392 0.322 0.263 0.261
Quadriplegic...................
Spina Bifida and Other Brain/ 1.422 1.303 1.209 1.137 1.130
Spinal/Nervous System
Congenital Anomalies...........
Myasthenia Gravis/Myoneural 9.749 9.588 9.461 9.440 9.440
Disorders and Guillain-Barre
Syndrome/Inflammatory and Toxic
Neuropathy.....................
Muscular Dystrophy.............. 2.584 2.410 2.280 2.179 2.168
Multiple Sclerosis.............. 10.447 10.104 9.835 9.801 9.797
Parkinson's, Huntington's, and 2.584 2.410 2.280 2.179 2.168
Spinocerebellar Disease, and
Other Neurodegenerative
Disorders......................
Seizure Disorders and 2.004 1.852 1.714 1.567 1.553
Convulsions....................
Hydrocephalus................... 4.256 4.146 4.063 4.044 4.042
Non-Traumatic Coma, and Brain 5.714 5.590 5.487 5.444 5.440
Compression/Anoxic Damage......
Respirator Dependence/ 31.959 31.852 31.774 31.912 31.924
Tracheostomy Status............
Respiratory Arrest.............. 9.776 9.552 9.401 9.366 9.360
Cardio-Respiratory Failure and 9.776 9.552 9.401 9.366 9.360
Shock, Including Respiratory
Distress Syndromes.............
Heart Assistive Device/ 22.337 22.078 21.875 21.901 21.904
Artificial Heart...............
Heart Transplant................ 22.337 22.078 21.875 21.901 21.904
Congestive Heart Failure........ 5.773 5.674 5.588 5.545 5.540
Acute Myocardial Infarction..... 5.179 5.104 5.062 5.048 5.046
Unstable Angina and Other Acute 3.842 3.765 3.707 3.676 3.675
Ischemic Heart Disease.........
[[Page 16950]]
Heart Infection/Inflammation, 11.892 11.786 11.703 11.684 11.683
Except Rheumatic...............
Hypoplastic Left Heart Syndrome 4.742 4.584 4.427 4.311 4.301
and Other Severe Congenital
Heart Disorders................
Major Congenital Heart/ 1.345 1.248 1.130 1.012 1.002
Circulatory Disorders..........
Atrial and Ventricular Septal 0.876 0.787 0.684 0.591 0.584
Defects, Patent Ductus
Arteriosus, and Other
Congenital Heart/Circulatory
Disorders......................
Specified Heart Arrhythmias..... 3.734 3.576 3.438 3.360 3.353
Intracranial Hemorrhage......... 12.674 12.462 12.308 12.302 12.303
Ischemic or Unspecified Stroke.. 5.445 5.367 5.318 5.328 5.331
Cerebral Aneurysm and 3.374 3.188 3.056 2.980 2.972
Arteriovenous Malformation.....
Hemiplegia/Hemiparesis.......... 4.146 4.041 3.967 3.933 3.927
Monoplegia, Other Paralytic 3.501 3.373 3.284 3.255 3.254
Syndromes......................
Atherosclerosis of the 11.717 11.481 11.305 11.230 11.223
Extremities with Ulceration or
Gangrene.......................
Vascular Disease with 14.161 14.049 13.958 13.980 13.981
Complications..................
Pulmonary Embolism and Deep Vein 13.582 13.475 13.396 13.432 13.436
Thrombosis.....................
Lung Transplant Status/ 22.337 22.078 21.875 21.901 21.904
Complications..................
Cystic Fibrosis................. 22.337 22.078 21.875 21.901 21.904
Chronic Obstructive Pulmonary 0.375 0.310 0.225 0.134 0.126
Disease, Including
Bronchiectasis.................
Asthma.......................... 0.375 0.310 0.225 0.134 0.126
Fibrosis of Lung and Other Lung 3.073 2.971 2.872 2.801 2.795
Disorders......................
Aspiration and Specified 8.178 8.122 8.074 8.105 8.108
Bacterial Pneumonias and Other
Severe Lung Infections.........
Kidney Transplant Status........ 12.436 12.166 11.969 11.943 11.938
End Stage Renal Disease......... 36.073 35.963 35.872 35.976 35.985
Chronic Kidney Disease, Stage 5. 4.148 4.017 3.909 3.812 3.806
Chronic Kidney Disease, Severe 4.148 4.017 3.909 3.812 3.806
(Stage 4)......................
Ectopic and Molar Pregnancy, 1.061 0.906 0.761 0.532 0.507
Except with Renal Failure,
Shock, or Embolism.............
Miscarriage with Complications.. 1.061 0.906 0.761 0.532 0.507
Miscarriage with No or Minor 1.061 0.906 0.761 0.532 0.507
Complications..................
Completed Pregnancy With Major 2.897 2.512 2.294 1.986 1.950
Complications..................
Completed Pregnancy With 2.897 2.512 2.294 1.986 1.950
Complications..................
Completed Pregnancy with No or 2.897 2.512 2.294 1.986 1.950
Minor Complications............
Chronic Ulcer of Skin, Except 2.338 2.247 2.159 2.086 2.079
Pressure.......................
Hip Fractures and Pathological 5.437 5.163 4.942 4.830 4.822
Vertebral or Humerus Fractures.
Pathological Fractures, Except 1.665 1.535 1.404 1.262 1.248
of Vertebrae, Hip, or Humerus..
Stem Cell, Including Bone 22.337 22.078 21.875 21.901 21.904
Marrow, Transplant Status/
Complications..................
Artificial Openings for Feeding 11.371 11.258 11.185 11.294 11.305
or Elimination.................
Amputation Status, Lower Limb/ 6.737 6.497 6.322 6.207 6.195
Amputation Complications.......
----------------------------------------------------------------------------------------------------------------
Table 5--Final Infant Risk Adjustment Model Factors for 2019 Benefit Year
----------------------------------------------------------------------------------------------------------------
Group Platinum Gold Silver Bronze Catastrophic
----------------------------------------------------------------------------------------------------------------
Extremely Immature * Severity 253.927 252.583 251.467 251.462 251.464
Level 5 (Highest)..............
Extremely Immature * Severity 154.510 153.094 151.930 151.820 151.808
Level 4........................
Extremely Immature * Severity 33.920 32.887 32.017 31.768 31.749
Level 3........................
Extremely Immature * Severity 33.920 32.887 32.017 31.768 31.749
Level 2........................
Extremely Immature * Severity 33.920 32.887 32.017 31.768 31.749
Level 1 (Lowest)...............
Immature * Severity Level 5 159.462 158.128 157.021 157.005 157.004
(Highest)......................
Immature * Severity Level 4..... 72.478 71.132 70.018 69.946 69.937
Immature * Severity Level 3..... 32.912 31.777 30.841 30.633 30.613
Immature * Severity Level 2..... 24.333 23.245 22.351 22.082 22.055
Immature * Severity Level 1 24.333 23.245 22.351 22.082 22.055
(Lowest).......................
Premature/Multiples * Severity 115.833 114.548 113.499 113.406 113.398
Level 5 (Highest)..............
Premature/Multiples * Severity 27.460 26.234 25.253 25.043 25.026
Level 4........................
Premature/Multiples * Severity 14.214 13.255 12.482 12.044 12.001
Level 3........................
Premature/Multiples * Severity 7.992 7.259 6.638 6.009 5.940
Level 2........................
Premature/Multiples * Severity 5.323 4.790 4.246 3.652 3.600
Level 1 (Lowest)...............
Term * Severity Level 5 91.593 90.463 89.524 89.335 89.320
(Highest)......................
Term * Severity Level 4......... 14.962 14.042 13.315 12.830 12.788
Term * Severity Level 3......... 5.857 5.300 4.767 4.150 4.092
Term * Severity Level 2......... 3.574 3.148 2.666 1.994 1.935
Term * Severity Level 1 (Lowest) 1.546 1.321 0.916 0.449 0.423
Age1 * Severity Level 5 253.927 252.583 251.467 251.462 251.464
(Highest)......................
[[Page 16951]]
Age1 * Severity Level 4......... 154.510 153.094 151.930 151.820 151.808
Age1 * Severity Level 3......... 33.920 32.887 32.017 31.768 31.749
Age1 * Severity Level 2......... 33.920 32.887 32.017 31.768 31.749
Age1 * Severity Level 1 (Lowest) 33.920 32.887 32.017 31.768 31.749
Age 0 Male...................... 159.462 158.128 157.021 157.005 157.004
Age 1 Male...................... 72.478 71.132 70.018 69.946 69.937
----------------------------------------------------------------------------------------------------------------
Table 6--HHS HCCs Included in Infant Model Maturity Categories
------------------------------------------------------------------------
Maturity category HCC/description
------------------------------------------------------------------------
Extremely Immature..................... Extremely Immature Newborns,
Birth weight <500 Grams.
Extremely Immature..................... Extremely Immature Newborns,
Including Birth weight 500-749
Grams.
Extremely Immature..................... Extremely Immature Newborns,
Including Birth weight 750-999
Grams.
Immature............................... Premature Newborns, Including
Birth weight 1,000-1,499
Grams.
Immature............................... Premature Newborns, Including
Birth weight 1,500-1,999
Grams.
Premature/Multiples.................... Premature Newborns, Including
Birth weight 2,000-2,499
Grams.
Premature/Multiples.................... Other Premature, Low Birth
weight, Malnourished, or
Multiple Birth Newborns.
Term................................... Term or Post-Term Singleton
Newborn, Normal or High Birth
weight.
Age 1.................................. All age 1 infants.
------------------------------------------------------------------------
Table 7--HHS HCCs Included in Infant Model Severity Categories
------------------------------------------------------------------------
Severity category HCC
------------------------------------------------------------------------
Severity Level 5 (Highest)... Metastatic Cancer.
Severity Level 5............. Pancreas Transplant Status/Complications.
Severity Level 5............. Liver Transplant Status/Complications.
Severity Level 5............. End-Stage Liver Disease.
Severity Level 5............. Intestine Transplant Status/
Complications.
Severity Level 5............. Peritonitis/Gastrointestinal Perforation/
Necrotizing Enterocolitis.
Severity Level 5............. Respirator Dependence/Tracheostomy
Status.
Severity Level 5............. Heart Assistive Device/Artificial Heart.
Severity Level 5............. Heart Transplant.
Severity Level 5............. Congestive Heart Failure.
Severity Level 5............. Hypoplastic Left Heart Syndrome and Other
Severe Congenital Heart Disorders.
Severity Level 5............. Lung Transplant Status/Complications.
Severity Level 5............. Kidney Transplant Status.
Severity Level 5............. End Stage Renal Disease.
Severity Level 5............. Stem Cell, Including Bone Marrow,
Transplant Status/Complications.
Severity Level 4............. Septicemia, Sepsis, Systemic Inflammatory
Response Syndrome/Shock.
Severity Level 4............. Lung, Brain, and Other Severe Cancers,
Including Pediatric Acute Lymphoid
Leukemia.
Severity Level 4............. Mucopolysaccharidosis.
Severity Level 4............. Major Congenital Anomalies of Diaphragm,
Abdominal Wall, and Esophagus, Age <2.
Severity Level 4............. Myelodysplastic Syndromes and
Myelofibrosis.
Severity Level 4............. Aplastic Anemia.
Severity Level 4............. Combined and Other Severe
Immunodeficiencies.
Severity Level 4............. Traumatic Complete Lesion Cervical Spinal
Cord.
Severity Level 4............. Quadriplegia.
Severity Level 4............. Amyotrophic Lateral Sclerosis and Other
Anterior Horn Cell Disease.
Severity Level 4............. Quadriplegic Cerebral Palsy.
Severity Level 4............. Myasthenia Gravis/Myoneural Disorders and
Guillain-Barre Syndrome/Inflammatory and
Toxic Neuropathy.
Severity Level 4............. Non-Traumatic Coma, Brain Compression/
Anoxic Damage.
Severity Level 4............. Respiratory Arrest.
Severity Level 4............. Cardio-Respiratory Failure and Shock,
Including Respiratory Distress
Syndromes.
Severity Level 4............. Acute Myocardial Infarction.
Severity Level 4............. Heart Infection/Inflammation, Except
Rheumatic.
Severity Level 4............. Major Congenital Heart/Circulatory
Disorders.
Severity Level 4............. Intracranial Hemorrhage.
Severity Level 4............. Ischemic or Unspecified Stroke.
Severity Level 4............. Vascular Disease with Complications.
Severity Level 4............. Pulmonary Embolism and Deep Vein
Thrombosis.
Severity Level 4............. Aspiration and Specified Bacterial
Pneumonias and Other Severe Lung
Infections.
Severity Level 4............. Chronic Kidney Disease, Stage 5.
Severity Level 4............. Hip Fractures and Pathological Vertebral
or Humerus Fractures.
Severity Level 4............. Artificial Openings for Feeding or
Elimination.
Severity Level 3............. HIV/AIDS.
Severity Level 3............. Central Nervous System Infections, Except
Viral Meningitis.
[[Page 16952]]
Severity Level 3............. Opportunistic Infections.
Severity Level 3............. Non-Hodgkin's Lymphomas and Other Cancers
and Tumors.
Severity Level 3............. Colorectal, Breast (Age <50), Kidney and
Other Cancers.
Severity Level 3............. Breast (Age 50+), Prostate Cancer, Benign/
Uncertain Brain Tumors, and Other
Cancers and Tumors.
Severity Level 3............. Lipidoses and Glycogenosis.
Severity Level 3............. Adrenal, Pituitary, and Other Significant
Endocrine Disorders.
Severity Level 3............. Acute Liver Failure/Disease, Including
Neonatal Hepatitis.
Severity Level 3............. Intestinal Obstruction.
Severity Level 3............. Necrotizing Fasciitis.
Severity Level 3............. Bone/Joint/Muscle Infections/Necrosis.
Severity Level 3............. Osteogenesis Imperfecta and Other
Osteodystrophies.
Severity Level 3............. Cleft Lip/Cleft Palate.
Severity Level 3............. Hemophilia.
Severity Level 3............. Disorders of the Immune Mechanism.
Severity Level 3............. Coagulation Defects and Other Specified
Hematological Disorders.
Severity Level 3............. Prader-Willi, Patau, Edwards, and
Autosomal Deletion Syndromes.
Severity Level 3............. Traumatic Complete Lesion Dorsal Spinal
Cord.
Severity Level 3............. Paraplegia.
Severity Level 3............. Spinal Cord Disorders/Injuries.
Severity Level 3............. Cerebral Palsy, Except Quadriplegic.
Severity Level 3............. Muscular Dystrophy.
Severity Level 3............. Parkinson's, Huntington's, and
Spinocerebellar Disease, and Other
Neurodegenerative Disorders.
Severity Level 3............. Hydrocephalus.
Severity Level 3............. Unstable Angina and Other Acute Ischemic
Heart Disease.
Severity Level 3............. Atrial and Ventricular Septal Defects,
Patent Ductus Arteriosus, and Other
Congenital Heart/Circulatory Disorders.
Severity Level 3............. Specified Heart Arrhythmias.
Severity Level 3............. Cerebral Aneurysm and Arteriovenous
Malformation.
Severity Level 3............. Hemiplegia/Hemiparesis.
Severity Level 3............. Cystic Fibrosis.
Severity Level 3............. Fibrosis of Lung and Other Lung
Disorders.
Severity Level 3............. Pathological Fractures, Except of
Vertebrae, Hip, or Humerus.
Severity Level 2............. Viral or Unspecified Meningitis.
Severity Level 2............. Thyroid, Melanoma, Neurofibromatosis, and
Other Cancers and Tumors.
Severity Level 2............. Diabetes with Acute Complications.
Severity Level 2............. Diabetes with Chronic Complications.
Severity Level 2............. Diabetes without Complication.
Severity Level 2............. Protein-Calorie Malnutrition.
Severity Level 2............. Congenital Metabolic Disorders, Not
Elsewhere Classified.
Severity Level 2............. Amyloidosis, Porphyria, and Other
Metabolic Disorders.
Severity Level 2............. Cirrhosis of Liver.
Severity Level 2............. Chronic Pancreatitis.
Severity Level 2............. Inflammatory Bowel Disease.
Severity Level 2............. Rheumatoid Arthritis and Specified
Autoimmune Disorders.
Severity Level 2............. Systemic Lupus Erythematosus and Other
Autoimmune Disorders.
Severity Level 2............. Congenital/Developmental Skeletal and
Connective Tissue Disorders.
Severity Level 2............. Acquired Hemolytic Anemia, Including
Hemolytic Disease of Newborn.
Severity Level 2............. Sickle Cell Anemia (Hb-SS).
Severity Level 2............. Drug Psychosis.
Severity Level 2............. Drug Dependence.
Severity Level 2............. Down Syndrome, Fragile X, Other
Chromosomal Anomalies, and Congenital
Malformation Syndromes.
Severity Level 2............. Spina Bifida and Other Brain/Spinal/
Nervous System Congenital Anomalies.
Severity Level 2............. Seizure Disorders and Convulsions.
Severity Level 2............. Monoplegia, Other Paralytic Syndromes.
Severity Level 2............. Atherosclerosis of the Extremities with
Ulceration or Gangrene.
Severity Level 2............. Chronic Obstructive Pulmonary Disease,
Including Bronchiectasis.
Severity Level 2............. Chronic Ulcer of Skin, Except Pressure.
Severity Level 1 (Lowest).... Chronic Hepatitis.
Severity Level 1............. Acute Pancreatitis/Other Pancreatic
Disorders and Intestinal Malabsorption.
Severity Level 1............. Thalassemia Major.
Severity Level 1............. Autistic Disorder.
Severity Level 1............. Pervasive Developmental Disorders, Except
Autistic Disorder.
Severity Level 1............. Multiple Sclerosis.
Severity Level 1............. Asthma.
Severity Level 1............. Chronic Kidney Disease, Severe (Stage 4).
Severity Level 1............. Amputation Status, Lower Limb/Amputation
Complications.
Severity Level 1............. No Severity HCCs.
------------------------------------------------------------------------
[[Page 16953]]
d. Cost-Sharing Reductions Adjustments (Sec. 153.320)
We proposed 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 (induced demand) in all
States where HHS operates risk adjustment. The proposed cost-sharing
reductions adjustment factors for the 2019 benefit year were unchanged
from those finalized in the 2018 Payment Notice. These adjustments
would be effective for 2016, 2017, 2018, and 2019 risk adjustment, and
would be multiplied against the sum of the demographic, diagnosis, and
interaction factors, and enrollment and prescription drug utilization
factors (for the adult models). We are finalizing the cost-sharing
reductions adjustment factors as proposed. See Table 8 for the list of
final cost-sharing reductions adjustments for the 2019 benefit year.
Comment: Commenters supported our proposal to use the same cost-
sharing reductions adjustment induced demand factors as prior years,
noting that the use of these factors would promote stability and
certainty in the markets, and supported making updates in 2020 to the
induced demand factors based on EDGE enrollee-level data. One commenter
requested that HHS maintain the induced demand factors of 1.12 for
wrap-around, premium assistance plans for Massachusetts, as established
in the 2014 Payment Notice and used by Massachusetts for the 2014, 2015
and 2016 benefit years.
Response: We are finalizing the cost-sharing reductions adjustment
induced demand factors as proposed. We anticipate proposing adjustments
to the cost-sharing reductions adjustment induced demand factors in the
annual HHS notice of benefit and payment parameters for the 2020
benefit year based on enrollee-level EDGE data. Consistent with the
approach outlined in the final 2017 Payment Notice, we will continue to
use cost-sharing reductions adjustment factors of 1.12 for all
Massachusetts wrap-around plans in the risk adjustment transfers
calculation, as all of Massachusetts' cost-sharing plan variations have
actuarial values above 94 percent.
Table 8--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
------------------------------------------------------------------------
e. Model Performance Statistics (Sec. 153.320)
To evaluate model performance, we examined each model's R-squared
statistic 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 ratios are in the range of published estimates for
concurrent risk adjustment models.\17\ Because we are blending the
coefficients from separately solved models based on 2014 and 2015
MarketScan[supreg] data and 2016 enrollee-level EDGE data, we are
publishing the R-squared statistic for each model and benefit year
separately to verify their statistical validity. The R-squared
statistic for each model is shown in Table 9.
---------------------------------------------------------------------------
\17\ Winkleman, Ross and Syed Mehmud. ``A Comparative Analysis
of Claims-Based Tools for Health Risk Assessment.'' Society of
Actuaries. April 2007.
[[Page 16954]]
Table 9--R-Squared Statistic for Final HHS Risk Adjustment Models
----------------------------------------------------------------------------------------------------------------
R-squared statistic
-------------------------------------------------------
Risk adjustment model 2014 2015 2016 Enroll-
MarketScan[supreg] MarketScan[supreg] level EDGE
----------------------------------------------------------------------------------------------------------------
Platinum Adult.......................................... 0.4221 0.4212 0.4283
Platinum Child.......................................... 0.293 0.3314 0.3099
Platinum Infant......................................... 0.3284 0.3329 0.3239
Gold Adult.............................................. 0.4179 0.4164 0.4228
Gold Child.............................................. 0.2883 0.3269 0.3053
Gold Infant............................................. 0.3264 0.3309 0.3201
Silver Adult............................................ 0.4143 0.4123 0.4181
Silver Child............................................ 0.2841 0.3227 0.3013
Silver Infant........................................... 0.325 0.3295 0.317
Bronze Adult............................................ 0.4117 0.4095 0.4152
Bronze Child............................................ 0.2805 0.3188 0.2978
Bronze Infant........................................... 0.3247 0.3292 0.3154
Catastrophic Adult...................................... 0.4115 0.4094 0.4145
Catastrophic Child...................................... 0.2803 0.3186 0.2971
Catastrophic Infant..................................... 0.3247 0.3292 0.3151
----------------------------------------------------------------------------------------------------------------
f. Overview of the Payment Transfer Formula (Sec. 153.320)
i. Accounting for High-Cost Risk Pool in the Transfer Formula
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 high-cost
risk pool payments and charges) will be calculated after issuers have
completed risk adjustment data reporting. The payment transfer formula
includes a set of cost adjustment terms that require transfers to be
calculated at the geographic rating area level for each plan (that is,
HHS will calculate separate transfer amounts for each rating area in
which a plan operates).
The risk adjustment transfer formula generally calculates the
difference between the revenues required by a plan, based on the health
risk of the plan's enrollees, and the revenues that a plan can generate
for those enrollees. These differences are compared across plans in the
State market risk pool and converted to a dollar amount based on the
Statewide average premium. Thus, each plan in the risk pool receives a
risk adjustment payment or charge designed to compensate for risk for a
plan with average efficiency. Scaling the risk adjustment transfers by
the Statewide average premium, as opposed to, for example, the plan's
own premium, minimizes issuers' ability to manipulate their transfers
by adjusting their own plan premiums, and results in a calculation of
equal payments and charges, ensuring that risk adjustment transfers for
the entire market sum to zero.
In the absence of additional funding, we established, through
notice and comment rulemaking,\18\ risk adjustment as a budget neutral
program in order to provide certainty to issuers regarding risk
adjustment payments and allow them to set rates based on those
expectations. Adopting an approach that would not result in balanced
payments and charges would create considerable uncertainty for issuers
regarding the proportion of risk adjustment payments they could expect
to receive from the Federal government. Additionally, in establishing
the HHS-operated risk adjustment program, HHS could not have relied on
the potential availability of general appropriation funds without
creating uncertainty for issuers in the amount of risk adjustment
payments they could expect, or reducing funding available for other
programs. Relying on each year's budget would have required HHS to
delay setting the parameters for any risk adjustment payment proration
rates well after the plans were in effect for the applicable benefit
year. HHS also would not have been able to rely on any potential State
budget appropriations for States that elected to operate a State-based
risk adjustment program as such funds would not have been available for
purposes of administering the HHS-operated risk adjustment program.
Without the adoption of a budget neutral framework, HHS would have
needed to assess a charge, or otherwise collect additional funds, or
prorate payments based on the charges collected to balance the risk
adjustment transfers. This uncertainty would conflict with the overall
goals of the risk adjustment program: to stabilize premiums and reduce
incentives for issuers to avoid enrolling individuals with higher than
average actuarial risk.
---------------------------------------------------------------------------
\18\ See, for example, Standards Related to Reinsurance, Risk
Corridors and Risk Adjustment. Proposed Rule, 76 FR 41938 (July 15,
2011); Standards Related to Reinsurance, Risk Corridors and Risk
Adjustment. Final Rule, 77 FR 17232 (March 23, 2012); and HHS Notice
of Benefit and Payment Parameters for 2014. Final Rule, 78 FR 15441
(March 11, 2013).
---------------------------------------------------------------------------
The State payment transfer formula in the HHS risk adjustment
methodology is designed to provide a per member per month (PMPM)
transfer amount. The PMPM transfer amount derived from the State
payment transfer formula would be multiplied by each plan's total
billable member months for the benefit year to determine the total
payment due to 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 or payment assessed for an issuer
in a State market risk pool based on plan liability risk scores, in the
2018 Payment Notice, we added to the risk adjustment methodology
additional transfers that would reflect the payments and charges
assessed with respect to the high-cost risk pool. To account for costs
associated with exceptionally high-risk enrollees, we added transfer
terms (a payment term and a charge term) that would be calculated
separately from the State transfer formula in the HHS risk adjustment
methodology. Beginning for the 2018 benefit year, we added one term
that reflects 60 percent of costs above $1 million (HRPi, in the total
plan transfer calculation described below), and another term that
reflects a percent of premium adjustment to fund the high-cost risk
pool and maintain the
[[Page 16955]]
balance of payment and charges within the risk adjustment program. The
percent of premium adjustment factor applied to a plan's total premium
amounts results in the same adjustment as a percent of PMPM premium
adjustment factor applied to a plan's PMPM premium amount and
multiplied by the plan's number of billable member months. For this
calculation, we will use a percent of premium adjustment factor that is
applied to each plan's total premium amounts, rather than the percent
of PMPM premium adjustment factor described in 2018 Payment Notice and
the proposed rule, for simplicity; and, as detailed above, we note that
the mathematical outcome is the same. The percent of premium adjustment
factor (HRPCm) is determined based on the sum of payments for the high-
cost risk pool enrollees divided by the sum of premiums in the
respective high-cost risk pool market (m), nationally--one for the
individual market, including catastrophic, non-catastrophic and merged
market plans, and another for the small group market. The percent of
premium adjustment factor is multiplied by the plan's total premium
(HRPCm [middot] Pi).
For the 2019 benefit year, we are finalizing the proposed policy to
maintain this adjustment to the risk adjustment transfers with the
threshold of $1 million and a coinsurance rate of 60 percent, as
finalized for the 2018 benefit year.
Comment: In addition to the comments discussed above, one commenter
requested that the high-cost risk pool adjustment factors be included
in the risk adjustment formula.
Response: We have included a calculation for the total plan
transfer amount below to illustrate the inclusion of the high-cost risk
pool adjustment terms in the HHS risk adjustment methodology. As noted
above, these terms will be applied within the high-cost risk pool
markets nationally--one for the individual market, including
catastrophic, non-catastrophic and merged market plans, and another for
the small group market. We are finalizing the high-cost risk pool
adjustment parameters for the 2019 benefit year as proposed.
ii. Administrative Cost Reduction to Statewide Average Premium
Additionally, we proposed to continue the policy finalized in the
2018 Payment Notice to reduce the Statewide average premium, the cost
scaling factor in the risk adjustment transfer formula, by 14 percent
to account for the proportion of administrative costs that do not vary
with claims for the 2019 benefit year and future benefit years until
changed in rulemaking. As a note, we have previously defined the cost
scaling factor, or the Statewide average premium term, as the sum of
average premium per member month of plan (Pi) multiplied by plan i's
share of Statewide enrollment in the market in the risk pool (si). For
the 2019 benefit year, the Statewide average premium, which will also
be used for the transfer calculation for the 2018 benefit year, will be
adjusted to remove a portion of the administrative costs as follows:
PS = ([Sigma]i(si [middot] Pi)) * 0.86
Where:
si = plan i's share of Statewide enrollment in the market in the
risk pool;
Pi = average premium per member month of plan i.
We are finalizing the policy to reduce the Statewide average
premium in the risk adjustment formula by 14 percent, as proposed, for
the 2019 benefit year and future benefit years until changed in
rulemaking.
Comment: Most commenters supported our proposal to continue to
remove a portion of the administrative costs from the Statewide average
premium factor of the risk adjustment transfer formula. Other
commenters requested HHS publish the methodology used to create the 14
percent reduction from the MLR data. One commenter suggested HHS
increase the reduction to 16 percent and another commenter requested
HHS set the 14 percent reduction as the floor. Another commenter
suggested HHS should set the factor closer to the market average of
administrative costs, or allow the level to vary with issuers' claims
experience.
Response: As we noted in the 2018 Payment Notice, we analyzed
administrative and other non-claims expenses, including quality
improvement expenses, taxes and fees, and non-claims costs, in the MLR
Annual Reporting Form, and estimated, by category, the extent to which
the expenses varied with claims. We compared those expenses to the
total costs that issuers finance through premiums, including claims,
administrative expenses, and taxes, netting out claims costs financed
through cost-sharing reductions payments. We compared these expenses to
total costs, rather than directly to premiums, to ensure that the
estimated administrative cost percentage was not distorted by under- or
over-pricing during the years for which MLR data are available. Using
this methodology, we determined that the mean administrative cost
percentage that does not vary with claims is 14 percent. We continue to
believe that this percentage represents the mean administrative cost
percentage that does not vary with claims in the individual and small
group markets, and represents a reasonable percentage of administrative
costs on which risk adjustment transfers should not be calculated.
Based on this analysis, we are finalizing the policy as proposed to
reduce the Statewide average premium factor of the risk adjustment
formula by 14 percent. Allowing the factor to vary with claims
experience could lead to gaming and risk selection, as issuers with
lower risk would receive lower charges if their administrative costs
are relatively higher. Therefore, we will continue to reduce the
Statewide average premium factor of the risk adjustment formula by the
same percentage for all issuers.
iii. State Flexibility
The HHS risk adjustment payment transfer formula generally
transfers amounts from issuers with lower than average actuarial risk
to those with higher than average actuarial risk. Risk adjustment is
widely used in health insurance markets, and is recognized as a
critical measure in mitigating the effects of adverse selection,
ensuring financial viability of plans that enroll a higher proportion
of high-risk enrollees, and fostering competitive health insurance
markets. The State transfer formula in the HHS-operated risk adjustment
program is scaled with the Statewide average premium in the applicable
State market. In the 2018 Payment Notice, we noted that compared to
other scaling factors, such as plans' own premiums, our analyses found
that the Statewide average premium proves to be a more appropriate
means of scaling the transfers for differences in relative actuarial
risk, particularly in the context of a budget-neutral system. As noted
in the above section, beginning with the 2018 benefit year, we also
adopted an administrative cost adjustment to the Statewide average
premium to remove a portion of administrative costs that did not vary
based on claims differences from the Statewide average premium and base
the transfers on the portion of the premiums that vary with claims.\19\
We continue to believe the Statewide average premium, as adjusted, is a
reasonable metric to measure the costs of adverse selection. Based on
our experience operating the risk
[[Page 16956]]
adjustment program, HHS has become aware that certain issuers,
including some new, rapidly growing, or smaller issuers, owed
substantial risk adjustment charges that they did not anticipate. HHS
has had a number of discussions with issuers and State regulators on
ways to encourage new participation in the health insurance markets and
mitigate the effects of substantial risk adjustment charge amounts. We
believe that a robust risk adjustment program that addresses concerns
of risk selection is critical to the proper functioning of health
insurance markets. However, we recognize that States are the primary
regulators of their insurance markets. In the May 2016 Interim Final
Rule,\20\ HHS recognized some State regulators' belief that reducing
the magnitude of risk adjustment charge amounts could be beneficial to
the insurance markets in their States. For some States, an adjustment
to risk adjustment transfers calculated under the HHS-operated risk
adjustment program might more precisely account for cost differences
attributable to adverse selection in the respective State market risk
pools. We encouraged States to examine whether any local approaches
under State legal authority are warranted to help ease the transition
for new entrants to the health insurance markets and mitigate the
effects of large risk adjustment charge amounts. In the small group
market, employers select the plans offered to their employees and often
pay a significant portion of employees' premiums to encourage
enrollment. Depending on the participation rules and market dynamics
within a particular State, risk selection can be significantly less in
a State's small group market compared to its individual market. The HHS
methodology calculates relative risk scores between issuers in a State
market, and in the case of the small group market, the differences
between risk scores for issuers within State markets are generally
smaller, leading to a smaller magnitude of risk adjustment transfers in
the small group market as compared to the individual market. Certain
States have opined that the HHS risk adjustment methodology, which is
calibrated on a national dataset and does not take into account the
effect of State-specific laws and rating rules, in some circumstances
may not precisely account for risk differences for their particular
State. We note that States have the statutory authority to operate
their own State risk adjustment program under a Federally certified
alternate risk adjustment methodology and are free to exercise that
authority to develop a risk adjustment program tailored to the markets
in their State. However, we also believe that allowing certain State-
specific adjustments to the HHS risk adjustment methodology can account
for the effect of State-specific rules without the necessity for States
to undertake operation of their own risk adjustment program.
---------------------------------------------------------------------------
\19\ 81 FR 94099, 94100. (December 22, 2016). Available at
https://www.gpo.gov/fdsys/pkg/FR-2016-12-22/pdf/2016-30433.pdf.
\20\ 91 FR 29146, 29152. (May 11, 2016). Available at https://www.gpo.gov/fdsys/pkg/FR-2016-05-11/pdf/2016-11017.pdf.
---------------------------------------------------------------------------
In the case of small group markets, where States can demonstrate
that the differential risk profiles observed in the small group market
plans in that State are attributable to factors other than systematic
risk selection, and adverse selection risk is mitigated by the small
group market dynamics, such as those described above, we proposed to
permit States' primary insurance regulators to request a percentage
reduction in the calculation of the risk adjustment transfer amounts in
the small group market in their State, beginning for the 2019 benefit
year.
We proposed that HHS would require any State that seeks this
flexibility to submit its proposal for an adjustment to the Statewide
average premium in the small group market within 30 calendar days after
publication of the proposed HHS notice of benefit and payment
parameters for the applicable benefit year, in order to permit issuers
to incorporate any such adjustment into their proposed rates. In order
to promote transparency and solicit feedback from consumers and
stakeholders on the proposed reductions to the HHS risk adjustment
transfer formula, we proposed HHS would publish the requested State
reduction percentages for public comment in guidance while it begins
its initial review of the State requests. We proposed that HHS would
then make final determinations on State requests by March 1 of the
benefit year prior to the applicable benefit year, in time for issuers'
initial rate setting deadline. The proposed timing of the State
adjustment request, publication of HHS guidance setting forth the
requested State reduction percentages, public notice and comment period
and HHS approval process would permit plans to incorporate approved
adjustments in their rates for the applicable benefit year.
Under the proposal, HHS would consider requests from State
regulators to reduce the calculation of the Statewide average premium
used in the HHS risk adjustment transfer formula in the small group
market by up to 50 percent for the applicable benefit year. We sought
comment on all aspects of this proposal for the small group market,
including the size of the reduction, the timing of the request
submission, what evidence States should be required to provide, and
what procedural requirements should be established.
We also sought comment on whether we should establish a similar
process through which States could request a reduction to the
calculation of risk adjustment transfers in the individual market.
Although adverse selection in the individual market is not mitigated by
group enrollment or minimum participation requirements as is the
selection in the small group market, we recognized that a State may
believe the HHS risk adjustment methodology, which is calibrated on a
national dataset, may not precisely account for relative actuarial risk
differences in its individual market risk pool. We sought comment on
whether, if a State can demonstrate such a difference in calculated
relative actuarial risk, we should reduce States' administrative burden
in operating its own risk adjustment program by allowing some
flexibility in the HHS risk adjustment methodology to the extent
permissible under the statute. Therefore, we sought comment on what
individual market features would justify such a reduction, and what
additional submissions a State should provide in order to justify such
a departure for that market.
We recognize that it is possible the HHS risk adjustment
methodology, which is calibrated on a national dataset and does not
take into account State-specific rules or market dynamics, may not
precisely account for relative actuarial risk differences in certain
States' individual, small group or merged markets, and those State-
specific rules or other relevant factors could support a reduction to
transfers in that State's individual, small group or merged market. To
accommodate situations where there may be such differences in State
factors compared to the national norm, HHS is finalizing the policy to
provide States the flexibility to request a reduction to the otherwise
applicable risk adjustment transfers in the individual, small group or
merged market by up to 50 percent with some modifications, outlined
below, in response to comments. In States that request a reduction to
transfers, the reduction percentage up to 50 percent, if approved by
HHS, would be applied to the plan PMPM payment or charge transfer
amount (Ti in the State transfer formula below), beginning
with the 2020 benefit year. We are amending Sec. 153.320 to add a new
paragraph (d) to capture this State flexibility to request
[[Page 16957]]
reduction to transfers in the individual, small group or merged market.
States requesting such reductions must submit evidence and analysis to
HHS identifying the State-specific rules or market dynamics that
warrant an adjustment and demonstrating the actuarial risk differences
in plans in the applicable State market are attributable to factors
other than systematic risk selection, as well as substantiating the
amount of the transfer reduction requested. For example, a State could
submit evidence and analysis detailing the effect of a State rating
rule that might lead to a portion of the State average premium that
does not precisely reflect the cost of relative differences in
actuarial risk in the individual, small group or merged market. The
State request must specify in detail the State-specific rules or market
dynamics that warrant an adjustment to the HHS risk adjustment
methodology to more precisely account for the expected cost of relative
risk differences in the State's individual, small group or merged
market. Additionally, the State must submit evidence and analysis
justifying the reduction percentage requested. To justify the amount of
the transfer reduction requested, the State's evidence and analysis
must explain how the requested transfer adjustment was determined by
outlining the set of State-specific factors and the percentage
reduction warranted to account for those factors in the State's market;
or alternatively, it must demonstrate the requested reduction in risk
adjustment payments would be so small for issuers who would receive
risk adjustment payments, that the reduction would have a de minimis
effect on the necessary premium increase to cover the affected issuer's
or issuers' reduced payments. In the latter case, a State must
demonstrate that the reduced risk adjustment payments would result in
less than a 1 percent increase in the affected issuer's or issuers'
premiums. We are adding paragraph (d)(1) to Sec. 153.320 to specify
the submission requirements for the State requests, as outlined above.
We are also adding paragraph (d)(4) to specify that HHS will approve
the State requests if, based on a review of the information submitted
as part of the State request, along with other relevant factors,
including the premium impact of the transfer reduction for the State
market, and relevant public comments, HHS determines that the State-
specific factors warrant an adjustment and the State request includes
support justifying the percentage reduction requested or includes
information demonstrating that the reduction to transfers would have a
de minimis impact as described above. As reflected in paragraph
(d)(4)(ii) to Sec. 153.320, HHS may approve a reduction amount lower
than that requested by the State if the supporting evidence and
analysis do not fully support the percentage reduction requested. In
response to commenters' concerns about market impacts on issuers with
higher than average actuarial risk, HHS will assess other relevant
factors, including the premium impact of the transfer reduction for the
State market.
The approved reductions will be made on the calculated risk
adjustment transfer amounts, rather than the Statewide average premium
as proposed, prior to the application of the high-cost risk pool
adjustments (high-cost risk pool payment and charge amounts). Applying
the reduction is simply a mathematical operation and applying it on the
otherwise calculated transfer amounts will result in the same final
transfer amount mathematically as if the reduction was applied to the
Statewide average premium, but will simplify the process for
submission, review and calculation of the reductions to transfers.
We are finalizing modified timelines and adding paragraphs (d)(2)
and (d)(3) at Sec. 153.320 to capture the timeframe for submission and
publication of State requests to reduce transfers in the individual,
small group and merged markets in response to comments. We are not
finalizing this proposed policy for the 2019 benefit year, in order to
accommodate the evidence and analysis required and to provide more time
for the development and review of such requests. Additionally, we
believe the requests should be published in the relevant benefit year's
proposed HHS notice of benefit and payment parameters to seek comment
from relevant stakeholders. As such, consistent with paragraph (d)(2),
beginning with 2020 and future benefit years, States must submit
requests with the supporting evidence and analysis by August 1st, 2
calendar years prior to the beginning of the applicable benefit year
(for example, August 1, 2018, for the 2020 benefit year) to
[email protected] with the subject ``[Insert applicable
benefit year] State request to reduce risk adjustment transfers.'' This
modified timeline responds to comment received and provides States the
opportunity to review the most recent year of risk adjustment transfers
data in determining the requested percentage reduction to transfers and
when submitting the supporting evidence. As outlined in paragraph
(d)(3), we will publish the 2020 and future benefit year requests in
the respective benefit year's proposed HHS notice of benefit and
payment parameters and make the supporting evidence available to the
public in order to seek public comment, and will publish any approved
State reduction requests or denied State reduction requests in the
respective benefit year's final HHS notice of benefit and payment
parameters.
Comment: A few commenters supported providing States the
flexibility to request transfer reductions in the individual, small
group and merged markets, noting that the risk adjustment program has
been a barrier to entry for issuers in certain States. These commenters
stated such a reduction to transfers could enable issuer participation
in the individual, small group and merged markets. Additionally, these
commenters noted the expense of operating a State-based risk adjustment
program limits States from establishing their own risk adjustment
methodologies. A few State regulators noted their intent to consider
the reduction and potential impacts for future benefit years, and
requested ``off-cycle'' dialogues with HHS to consider such reductions.
Several commenters supported the reduction to transfers only for
the small group market, noting that the adverse selection in the
individual market requires the risk adjustment program to ensure
competitive and stable markets. These commenters noted such a reduction
to transfers would be detrimental to market stability in the individual
market, with one commenter noting that unexpectedly large charges were
a risk for issuers in the early years of the program and the markets
have since stabilized. A few commenters noted that HHS should allow
States to permit reductions in merged markets as well, while others
noted this policy should not be made available in merged markets given
the impact on individual market dynamics in the merged market States.
Yet a few commenters suggested the flexibility be allowed across the
individual, small group and merged markets. One commenter noted that
such a reduction would be appropriate in the individual market as well
to reduce carrier-specific transfers to adjust for administrative
costs, limit distortions due to how many family members are counted
toward premiums, or prevent perverse incentives to avoid care
management or network variations that lower costs.
Other commenters did not support a reduction to the risk adjustment
transfers, stating the reduction to
[[Page 16958]]
transfers would undermine affordability of plans with sicker patients.
Commenters were also concerned that providing such reductions would
encourage risk selection behavior by issuers, encourage risk
segmentation in the markets, reduce effectiveness of the risk
adjustment program, lead to higher premiums for small employers and
consumers where issuers with higher than average risk are not
adequately compensated for their risk, reduce choices for consumers
even further, and destabilize the markets. Commenters stated the
importance of the risk adjustment program in promoting competition in
the individual, small group, and merged markets by mitigating the
issuers' risk of adverse selection. Commenters noted that the risk
adjustment methodology already adjusts for a multitude of State- and
rating area-specific factors as the methodology calculates risk scores
at the individual level, and transfers at the rating area level. A few
commenters also noted that maintaining risk adjustment as is would
become increasingly important, especially if HHS were to move forward
with the EHB flexibilities discussed elsewhere in this rule, as issuers
could enroll differential risk enrollees based on the EHBs offered.
Commenters noted that if HHS finalizes the policy to permit requests
for adjustments in the small group market, issuers would no longer have
an incentive to enroll all types of employers and could target
healthier employers in certain sized employers through marketing and
other strategies. Additionally, commenters noted that if relative risk
for health conditions in an individual State is substantially different
than the national average, it is not clear that a reduction of 50
percent to risk adjustment transfers would be appropriate, and the
State ought to consider developing its own risk adjustment model to
address significant deviations in the State's risk profiles that
deviate from the national average or use the section 1332 of PPACA
waiver process to implement a reinsurance type program. Commenters
agreed with HHS that the smaller magnitude of transfers in the small
group market than in the individual market indicates the lower adverse
selection risk in the small group market, but stated that the HHS risk
adjustment program is properly calibrated for this lower risk of
adverse selection in the small group market. Commenters noted that
while employer contributions, employer choice of benefit plans, and
participation rules mitigate selection in the small group market, the
risk adjustment methodology appropriately accounts for these market
differences because the lower adverse selection is reflected in the
lower risk score differential. Commenters noted that Oliver Wyman,
American Academy of Actuaries, and HHS's studies have all shown the
risk adjustment program is working as intended in mitigating adverse
selection. A few commenters also noted a study by Oliver Wyman \21\
that suggested reducing transfers by up to 50 percent may make the risk
adjustment program less effective in compensating plans with higher
than average risk and would therefore increase issuers' risk selection
incentives. Additionally, one commenter noted that the significant
adjustments to the risk adjustment program being implemented for the
2017 and 2018 benefit years should be evaluated prior to making any
additional changes.
---------------------------------------------------------------------------
\21\ Available at http://health.oliverwyman.com/transform-care/2017/11/risk_adjustment.html.
---------------------------------------------------------------------------
Response: In certain State individual, small group or merged
markets, it is possible that the HHS risk adjustment methodology, which
is calibrated on a national dataset, may not reflect State-specific
factors that could result in relative risk differences in the State's
market(s) compared to the national norm. Such unique State rules or
other relevant factors could support a reduction to the otherwise
applicable risk adjustment transfers to more precisely account for the
differences in relative actuarial risk in the State's individual, small
group or merged market. We agree with commenters that, in such
instances, allowing certain State-specific adjustments to the otherwise
applicable transfers can tailor the HHS-operated risk adjustment
program to the particularities of a State's individual, small group or
merged market without requiring the State to undertake operation of its
own risk adjustment program or pursue a section 1332 waiver to
implement a reinsurance program. In those circumstances, in which
States can provide evidence and analysis showing the State-specific
rules or market dynamics that warrant an adjustment to the HHS risk
adjustment methodology to more precisely account for the relative risk
differences in the State's market, HHS will consider requests to reduce
transfers beginning with the 2020 benefit year. We agree with
commenters that the small group market features, such as employers'
selection of plans, and minimum participation and contribution rules,
that lead to lower risk of adverse selection compared to the individual
market are addressed in the current HHS risk adjustment methodology.
Therefore, a State requesting a reduction of up to 50 percent of
transfers in its small group market must provide supporting evidence
and analysis outlining the State-specific factors that warrant an
adjustment to the HHS risk adjustment methodology to more precisely
account for relative risk differences in that State market compared to
the national norm, rather than demonstrating the factors that are
addressed in the current methodology. States must also justify the
amount requested by outlining how the percentage reduction would more
precisely account for risk differences in the State's individual, small
group or merged market or by demonstrating that the reduction in risk
adjustment payments would have a de minimis effect on the necessary
premium increase to cover the affected issuer or issuers' reduced
payments. HHS will not approve State requests for reduction to
transfers based on factors in the State's individual, small group or
merged market that are addressed by the current HHS risk adjustment
methodology.
We appreciate commenters' concerns about extending the flexibility
to the individual or merged markets. We believe that those enrolled in
the individual or merged markets typically have higher actuarial risk,
risk selection, and risk segmentation in plan selection than those
enrolled in the small group market, and risk adjustment transfers are
particularly required in these markets to mitigate issuers' risk of
adverse selection and incentives to avoid risk. However, we recognize
that, just as with certain States' small group markets, it is possible
that certain factors unique to the States' individual or merged market,
such as State rating requirements, could support a reduction to
transfers in that State market, and therefore are finalizing the State
flexibility to request reduction to otherwise applicable risk
adjustment transfers in the individual and merged markets as well. We
note that guaranteed availability, guaranteed renewability, as well as
the non-discrimination provisions at Sec. Sec. 147.104(e), 147.110 and
156.125(a), provide protections against potential employment of
marketing practices or benefit designs that have the effect of avoiding
less healthy employer groups, discriminating based on health
conditions, or otherwise discouraging enrollment of individuals with
significant health needs. Finally, allowing for the State flexibility
for the 2020 benefit year, will allow us to assess
[[Page 16959]]
the impact of the changes made to the risk adjustment program beginning
for the 2017 and 2018 benefit years, and we intend to monitor the
impact of the changes to the risk adjustment program. States will also
have the opportunity to assess the effects of the risk adjustment model
changes implemented for the 2017 benefit year prior to submitting any
State requests to reduce transfers for the 2020 benefit year.
Comment: A few commenters noted the extent of the reduction seemed
arbitrary or too high, and requested HHS explain how it chose the 50
percent adjustment threshold. Commenters also suggested that HHS should
finalize a smaller percentage reduction if it finalizes the proposal.
One commenter stated that it is equally likely that a State needs to
increase the risk adjustment transfers and HHS ought to allow for this
type of a request as well.
Response: We are clarifying that the adjustment applicable to a
State individual, small group or merged market would not necessarily be
50 percent, but would be the amount, up to 50 percent, justified by the
State request. HHS reviewed transfers, the potential impact of such a
reduction on market premiums and the proportion of the transfers as a
percent of issuers' payments when considering the appropriate
threshold. We believe that an adjustment of up to 50 percent, justified
by State-specific factors, represents a reasonable balance between
adjustment for actuarial risk based on a national methodology and
recognition of unique State-specific factors that suggest that
actuarial risk difference is not precisely accounted for by the
national methodology. In instances where a State believes that an
increase to risk adjustment transfers would be appropriate, State
regulators under their own State authority could take actions outside
of this flexibility to ease the transition for new entrants and/or
mitigate the effects of large risk adjustment transfers. States can
also elect to establish and operate the PPACA risk adjustment program.
Additionally, we do not believe that an increase to the transfers could
be deemed necessary as the current methodology would be sufficient to
calculate the transfers necessary to compensate for the relative
actuarial risk differences scaled to the average cost for the State
market.
Comment: Some commenters noted that States should be required to
submit an actuarially certified report demonstrating the extent to
which the transfers overstate differentials in uncompensated predicted
risk, the method of estimating the requested adjustment factor, an
attestation that the percent reduction requested results in a risk
adjustment methodology that complies with Actuarial Standard of
Practice (ASOP) 12, Risk Classification, and an assessment of adverse
selection effects that may result from the implementation of the
payment transfer reduction. A few commenters also suggested HHS require
States to provide evidence that issuers with large charges in the risk
adjustment program did not have issues related to coding, operational
data submission, incorrect rate setting, or suboptimal provider
contracting and medical expenses that contributed to their risk
adjustment results rather than differences in the State risk pool
compared to the national average.
Response: We agree with commenters that States should be required
to submit evidence and analysis supporting the requests for reductions
to transfers in the individual, small group or merged market, and
therefore, are requiring that States requesting a reduction in risk
adjustment transfers submit supporting evidence and analysis to HHS. We
are requiring States to submit supporting evidence and analysis
demonstrating the State-specific rules or relevant factors that warrant
an adjustment to more precisely account for risk differences in the
State's individual, small group or merged market. Additionally, we are
requiring the States to justify the percentage reduction requested
based on supporting evidence and analysis that demonstrate how the
adjustment would accommodate the State-specific factors and more
precisely account for risk differences in the State's individual, small
group or merged market or how the reduction would have a de minimis
effect on the percent of premium increase necessary to cover the
reduced payments to the affected issuers. We considered but are not
requiring States to submit actuarially certified reports, an
attestation, or simulation of the potential effects of the requested
reduction as part of their requests. We determined that to ensure
issuers are adequately compensated for the actuarial risk of their
enrollees and do not have incentives to avoid higher risk enrollees,
the State regulators need to submit evidence and analysis demonstrating
the State-specific factors that warrant an adjustment to more precisely
account for the differences in actuarial risk in the State's market,
and justifying the percent reduction requested based on the State
factors or a de minimis effect. Additionally, HHS will publish the
requests in the proposed rulemaking for the respective benefit year and
make the supporting evidence publicly available for comment, and
consider the relevant comments in its review. We note that the data
integrity issues flagged by commenters are assessed during the EDGE
server data quality and quantity assessments, as well as through the
risk adjustment data validation program.
Comment: Commenters generally requested additional time for States
to submit requests. Commenters noted that if HHS were to move forward
with this proposal, the agency should consider implementing the policy
in 2020, as this policy will affect small group policies that are
offered starting on and after January 1, 2018, as small group plans are
not offered on a calendar year basis, and quarterly rate filings, which
would already be in effect, would adversely affect these plans. One
commenter suggested HHS set the State request deadline at 30 days after
the June 30, 2018 risk adjustment summary report or request State
submissions for the 2020 benefit year before August 2018. Other
commenters suggested HHS allow States to provide the requests and any
supporting material 60 days or 75 days from the publication of the
proposed rule. Most commenters agreed that HHS should provide an
opportunity for comment for the issuers and other stakeholders in the
States that make such requests before approving or denying the
reduction. One commenter also noted States require additional time to
develop their respective requests and issuers require additional time
to communicate their position with State regulators than that allowed
by the timing in the proposed rule.
Response: We appreciate commenters' suggestions regarding timing,
and are finalizing modified timelines for States to request a reduction
to the risk adjustment transfers in response to these comments. As
discussed above, States will be permitted to request these adjustments
to transfers beginning for the 2020 benefit year. We agree with
commenters that small group market issuers may have already begun
policies that would be affected by a reduction to transfers for the
2019 benefit year, and issuers may need additional time to incorporate
changes and reflect any reduction to transfers in their rates.
Additionally, for the individual, small group and merged markets, we
also considered the amount of time State regulators would require to
assemble the supporting evidence and analysis to justify their requests
and to consider the annual HHS June 30th risk adjustment transfers
calculation results in determining the State reduction request.
[[Page 16960]]
The timeframe we are adopting in response to comments requires States
to submit the request by August 1st, 2 calendar years prior to the
applicable benefit year which will allow States to submit documentation
to satisfy the supporting evidence and analysis requirements in this
rule and incorporate the most recent available year of HHS risk
adjustment transfer results in the State's request. Additionally, we
agree with commenters about the importance of providing issuers and
stakeholders an opportunity to comment on the request and supporting
evidence. As outlined in paragraph (d)(3) of Sec. 153.320, HHS will
publish the requests in the respective benefit year's proposed HHS
notice of benefit and payment parameters and make the supporting
evidence available to the public to seek comment from relevant
stakeholders, and will publish any final approved or denied reduction
amounts in the final HHS notice of benefit and payment parameters for
the respective benefit year. The modified timelines and supporting
evidence requirements finalized in this rule, including the delayed
application of this policy until the 2020 benefit year, are intended to
provide States, issuers and other stakeholders with sufficient
opportunity to develop, submit and comment on these reduction requests
prior to finalization of the HHS-operated risk adjustment methodology
for the applicable benefit year.
Comment: A few commenters noted that New York has already taken
action to reduce transfers under the State's authority, and requested
clarification whether other States could continue to take steps under
existing State authority. One commenter noted that the New York
adjustment could be seen as permitting States to make adjustments
without HHS approval and requested clarification that States making
adjustments to the risk adjustment formula must first obtain approval
from HHS under the risk adjustment program prior to implementing any
State-specific adjustments.
Response: As we noted above, States are the primary regulators of
their insurance markets, and as such, we encourage States to examine
whether any local approaches under State legal authority are warranted
to help ease the transition for new participants to the health
insurance markets. States that take such actions and make adjustments
do not generally need HHS approval as these States are acting under
their own State authority and using State resources. However, the
flexibility finalized in this rule involves a reduction to the risk
adjustment transfers calculated by HHS and will require HHS review as
outlined above.
iv. The Payment Transfer Formula
The finalized State payment transfer formula for the 2019 benefit
year 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. 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. The State payment transfer calculation that is part of
the HHS risk adjustment payment transfer formula is:
[GRAPHIC] [TIFF OMITTED] TR17AP18.000
Where:
PS = Statewide average premium;
PLRSi = plan i's plan liability risk score;
AVi = plan i's metal level AV;
ARFi = allowable rating factor;
IDFi = plan i's induced demand factor;
GCFi = plan i's geographic cost factor;
si = plan i's share of State enrollment;
The denominator is summed across all plans in the risk pool in the
market in the State.
The difference between the two premium estimates in the State
payment transfer calculation determines whether a plan pays a risk
adjustment charge or receives a risk adjustment payment. 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
the risk adjustment transfer calculation, not including the national
high-cost risk pool payments and charges. This resulting PMPM plan
payment or charge is multiplied by the number of billable member months
to determine the plan payment or charge based on plan liability risk
scores for a plan's geographic rating area for the risk pool market
within the State.
Beginning with the 2018 benefit year, the high-cost risk pool
adjustment amount will be added to the plan transfers (payment or
charge) to account for: (1) The payment term, representing the portion
of costs above the threshold reimbursed to the issuer for high-cost
risk pool payments (HRPi), if applicable, and (2) the charge term,
representing a percent of premium adjustment, which is the product of
the high-cost risk pool adjustment factor (HRPCm) for the respective
national high-cost risk pool m (one for the individual market,
including catastrophic, non-catastrophic and merged market plans, and
another for the small group market), and the plan's total premiums
(Pi). As we noted above, the percent of premium adjustment factor
applied to a plan's total premium amounts results in the same
adjustment as a percent of PMPM premium adjustment factor applied to a
plan's PMPM premium amount and multiplied by the plan's number of
billable member months. For this calculation, we will use a percent of
premium adjustment factor that is applied to each plan's total premium
amounts, rather than the percent of PMPM premium adjustment factor for
simplicity; and reiterate that the mathematical outcome is the same.
With the high-cost risk pool adjustment amount, the total plan
transfers would be calculated as the product of the plan PMPM transfer
amount (Ti) multiplied by the plan's billable member months
(Mi), plus the high-cost risk pool adjustments. The total
plan transfer (payment or charge) amounts under the HHS risk adjustment
payment transfer formula would be calculated as follows:
Total transferi = (Ti [middot] Mi) + HRPi - (HRPCm [middot] Pi)
Where:
Ti = Plan i's PMPM transfer amount;
Mi = Plan i's billable member months;
HRPi = Plan i's total high-cost risk pool payment;
HRPCm = High-cost risk pool percent of premium adjustment factor for
the respective national high-cost risk pool m;
Pi = Plan i's total premium amounts.
In States that requested a reduction to transfers in the individual,
small group or merged market, the reduction
[[Page 16961]]
percentage up to 50 percent, if approved by HHS for the applicable
benefit year beginning with the 2020 benefit year, would be applied to
the plan PMPM payment or charge transfer amount (Ti). This
potential reduction to the PMPM transfer amounts is not shown in the
risk adjustment transfer formula above.
g. Risk Adjustment Data Validation Requirements When HHS Operates Risk
Adjustment (Sec. 153.630)
HHS will conduct risk adjustment data validation under Sec.
153.630 in any State where HHS is operating risk adjustment on a
State's behalf.\22\ 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 auditor for data
validation. Set forth below are final amendments and clarifications to
the risk adjustment data validation program in light of experience and
feedback from issuers during the first pilot year.
---------------------------------------------------------------------------
\22\ Starting with the 2017 benefit year, no State has elected
to operate a risk adjustment program. Therefore, HHS operates risk
adjustment in all States.
---------------------------------------------------------------------------
i. Payment Adjustments for Error Rates
Under Sec. 153.350(c), HHS may adjust risk adjustment payments and
charges to all issuers of risk adjustment covered plans based on
adjustments to the average actuarial risk of a risk adjustment plan due
to errors discovered during risk adjustment data validation. Under the
original risk adjustment data validation payment adjustment approach,
all issuers of risk adjustment covered plans would receive an
adjustment to payment transfers in the subsequent benefit year based on
risk adjustment data validation audit results and using the audit-
confirmed, issuer-specific risk score error rate. However, we believe
that some variation and error should be expected in the compilation of
data for risk scores, because providers' documentation of enrollee
health status varies across provider types and groups. Our experiences
with the Medicare Advantage risk adjustment data validation program and
the HHS risk adjustment data validation pilot for the 2015 benefit year
reinforce this belief.
To avoid adjusting all issuers' risk adjustment payments for
expected variation and error, we proposed evaluating material
statistical deviation in error rates beginning with 2017 benefit year
risk adjustment data validation. In the proposed rule, we explained
that we were considering adjusting an issuer's risk score only when the
issuer's error rate materially deviates from a statistically meaningful
value, such as the central tendency (a mean or typical value) of
errors, nationally. When an error rate materially deviates from the
central tendency, we proposed to apply the difference between the mean
error rate or the confidence interval around the population's central
tendency and the calculated error rate instead of the full error rate.
If all error rates in a State risk pool do not materially deviate from
the national central tendency of error rates, we proposed to not apply
any adjustments to issuers' risk scores for that benefit year in the
respective State risk pool.
We also noted that alternatively, HHS could evaluate error rates
within each HCC, or groups of HCCs, and then only apply error rates to
outlier issuers' risk scores within each HCC or group of HCCs. In
evaluating the ``error rate'' of HCCs, or groups of HCCs, we mean the
probability of an assigned HCC being found to be incorrect based on the
risk adjustment data validation audit, or a ``failure rate.'' The
percent of the EDGE risk score that is incorrect due to audit findings
(that is, due to HCCs that could not be validated through audit), we
consider to be the issuer's risk score error rate. For example, an
issuer could have a 50 percent failure rate for an HCC, in that two of
four instances of the HCC on EDGE could not be validated. The impact of
HCC failure rates on an issuer's error rate will then depend on the
magnitude of the missing HCC's coefficient and the incidence of that
HCC in the audit sample.
We believe the implementation of any of the alternative evaluations
and subsequent adjustments we proposed would streamline the risk
adjustment data validation process, improve issuers' ability to predict
risk adjustment transfers, and promote confidence and stability in the
budget-neutral payment transfer methodology, while ensuring the
integrity and quality of data provided by issuers.
We are finalizing the approach described above of using failure
rates specific to HCC groups and subsequently adjusting the issuer's
risk score when the issuer's failure rate for a group of HCCs is
statistically different from the weighted mean failure rate, or total
failure rate, for that group of HCCs for all issuers that submitted
initial validation audits. We are selecting this approach based on
comments received, which generally were more supportive of the HCC or
HCC-grouping methodology for evaluating failure rates than an approach
under which we would calculate a national overall error rate.
Additionally, we believe determining outlier failure rates based on HCC
groups mitigates gaming concerns raised by commenters in using a
national error rate, and mitigates commenters' sample size concerns in
using HCC-specific failure rates. Our simulations of failure rates by
HCC group suggest that such an approach yields a more equitable measure
to evaluate statistically different HCC failure rates affecting an
issuer's error rate than an approach based on an overall failure rate,
which may overly adjust issuers with abnormal distributions of certain
HCCs due to their underlying populations rather than differences due to
errors in diagnoses codes. Illustrations of the methodology we will use
to evaluate failure rate differences by HCC group, calculate error
rates based on failure rates, and apply error rates to risk scores are
provided below.
Using data from the 2017 benefit year risk adjustment data
validation, HHS will first calculate the failure rate for each HCC in
issuers' initial validation audit samples as:
[GRAPHIC] [TIFF OMITTED] TR17AP18.001
Where:
Freq_EDGEh is the frequency of HCC code h occurring on EDGE, which
is the number of sampled enrollees recording HCC code h on EDGE.
Freq_IVAh is the frequency of HCC code h occurring in IVA results,
which is the number of sampled enrollees with HCC code h on in IVA
results.
FRh is the failure rate of HCC code h.
HHS will then create three HCC groups based on the HCC failure
rates derived in the calculation above. These HCC groups will be
determined by first ranking all HCC failure rates and then dividing the
rankings into three groups, weighted by total observations or
frequencies, of that HCC across all issuers' initial validation audit
samples, to assign each unique HCC in the initial validation audit
samples to a high, medium, or low failure rate group with an
approximately even number of observations in each group. That is, each
HCC group may have an unequal number of unique HCCs, but the total
[[Page 16962]]
observations in each group should be approximately equal based on total
observations of HCCs reflected in EDGE data for all issuers' initial
validation audit sample enrollees, to prevent small sample sizes for an
HCC group for any issuer.
HHS will then compare each issuer's failure rate for each HCC group
based on the number of HCCs validated in the initial validation audit,
compared to the number of HCCs recorded on EDGE within that HCC group
for the initial validation audit sample enrollees. The issuer's HCC
group failure rate will be compared to the weighted mean failure rate,
or total failure rate, for that HCC group. We calculate an issuer's HCC
group failure rate as:
[GRAPHIC] [TIFF OMITTED] TR17AP18.002
We will also calculate the weighted mean failure rate and the
standard deviation of each HCC group as:
[GRAPHIC] [TIFF OMITTED] TR17AP18.003
[GRAPHIC] [TIFF OMITTED] TR17AP18.004
If an issuer's failure rate for an HCC group falls outside the
confidence interval for the weighted mean failure rate for the HCC
group, the failure rate for the issuer's HCCs in that group would be
considered an outlier. We will use a 1.96 standard deviation cutoff,
for a 95 percent confidence interval, to identify outliers. To
calculate the thresholds to classify an issuer's group failure rate as
outliers or not, the lower and upper limits are computed as:
LBG = [mu](GFRG) - sigma_cutoff * Sd(GFRG)
UBG = [mu](GFRG) + sigma_cutoff * Sd(GFRG)
Where:
sigma_cutoff is the parameter used to set the threshold for the
outlier detection as the number of standard deviations away from the
mean.
LBG, UBG are the lower and upper thresholds to classify issuers as
outliers or not outliers for group G.
When an issuer's HCC group failure rate is an outlier, we will
reduce (or increase) each of the applicable initial validation audit
sample enrollees' HCC coefficients by the difference between the
outlier issuer's failure rate for the HCC group and the weighted mean
failure rate for the HCC group. Specifically, this will result in the
sample enrollees' applicable HCC risk score components being reduced
(or increased) by a partial value, or percentage, calculated as the
difference between the outlier failure rate for the HCC group and the
weighted mean failure rate for the applicable HCC group. The adjustment
amount for outliers will be the distance between issuer i's Group
Failure Rate GFRiG and the weighted mean [mu](GFRG), calculated as:
[[Page 16963]]
[GRAPHIC] [TIFF OMITTED] TR17AP18.007
The adjustment to an enrollee's total risk score is calculated as
the ratio of the total adjusted risk score for individual HCCs to the
total risk score components for individual HCCs. For example, if an
issuer has one enrollee with the HIV/AIDS HCC and the issuer's HCC
group adjustment rate is 10 percent (the difference between the
issuer's group failure rate and the weighted mean failure rate) for the
HCC group that contains the HIV/AIDS HCC, the enrollee's HIV/AIDS
coefficient would be reduced by 10 percent. We calculate the total
adjustment amount across all HCCs per enrollee as:
[GRAPHIC] [TIFF OMITTED] TR17AP18.005
The adjusted risk score for enrollee e of issuer i is calculated as:
AdjRSi,e = EdgeRSi,e * (1 - Adjustmenti,e)
Where:
EdgeRSi,e is the risk score for EDGE HCCs of enrollee e of issuer i.
AdjRSi,e is the adjusted risk score for sampled enrollee e of issuer
i.
We will then calculate an issuer's error rate using the EDGE risk
score and adjusted risk score for all enrollees in the sample
(excluding enrollees with no HCCs). The weight we in the error rate
calculation formula is obtained by the ratio of an enrollee's stratum
size in the issuer's population to the number of sample enrollees in
the same stratum as the enrollee, to extrapolate the sample adjusted
risk scores and determine the issuer's risk score error rate. The
formula to compute the error rate using the stratum weighted risk score
for issuer i before and after the adjustment is shown as:
[[Page 16964]]
[GRAPHIC] [TIFF OMITTED] TR17AP18.006
The risk score error rate would then be applied to the subsequent
benefit year calculated plan level risk scores, to adjust the issuer's
plan level risk scores before risk adjustment transfers are calculated,
unless the issuer exited the market during or at the end of the benefit
year being audited.\23\
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\23\ See section III.B.2.g.ii. of this rule, for a discussion of
changes being finalized with respect to payment adjustments for
issuers that have exited the market.
---------------------------------------------------------------------------
Comment: Most commenters supported the proposal to only adjust
issuers' risk scores if their failure or error rates materially deviate
from a statistical mean, with some noting that this approach could help
streamline risk adjustment data validation and increase market
stability. A few commenters noted the complexity of the approach and
requested more information on various aspects of the proposed approach,
such as the definitions of material deviation and statistically
meaningful value, the methodology that HHS would use to evaluate
material deviation, the calculation of national or HCC-level error
rates, and the sufficiency of the sample sizes under the HCC or group
of HCCs approach.
Response: As outlined above, for the purposes of risk adjustment
data validation, we will determine that an issuer's failure rate is
statistically different if the issuer's failure rate for a particular
HCC group is more than 1.96 standard deviations away from the weighted
mean failure rate for the high, medium, or low HCC group. Issuers with
outlier failure rates in a particular HCC group will then have their
sample enrollee risk scores adjusted by the difference between the
issuer's failure rate and the mean failure rate for that HCC group for
all applicable HCCs in their sample enrollees' risk scores. We will not
use an overall mean failure rate or error rate to determine outliers
under the approach finalized in this rule. We believe that the HCC
grouping approach described above, which utilizes three large HCC
groupings, will mitigate the risk of an issuer having a small sample
size for a particular HCC group. We also note that we intend to propose
updates to the sampling methodology for the 2018 benefit year HHS-
operated risk adjustment data validation initial validation audit
samples in the 2020 Payment Notice.
Comment: One commenter supported the proposed application of the
difference between the calculated error rate and the statistically
meaningful value, instead of the full error rate, to the issuer's
subsequent year risk score when material deviation occurs. One
commenter opposed the proposal due to concerns that if the average
failure rate is exceedingly high or increasing, it could encourage
issuers to be less accurate over time in their risk adjustment data, as
long as they are not outliers relative to other issuers. Another
commenter expressed concerns that issuers within the calculated
confidence interval would receive no adjustments, while issuers outside
of the confidence interval would receive substantial and punitive
adjustments.
Response: The primary purpose of determining statistically
meaningful differences is to avoid the unwarranted application of risk
score adjustments--that is, risk scores would be adjusted only when the
issuers' failure rates are outside a range of statistically acceptable
errors. We believe that statistically meaningful errors should be
adjusted to the weighted mean failure rate of each HCC group. We are
finalizing an approach under which, when an issuer's failure rate for
its associated HCCs in one of the HCC groupings is statistically
different than the mean for that grouping, HHS will adjust the sample
enrollees' risk score component for that HCC group by the difference
between the issuer's failure rate for the HCCs in that group and the
weighted mean failure rate for the HCC group for all issuers that
submitted initial validation audits. We will continue to evaluate this
approach; however, we expect that as issuers and initial validation
auditors gain additional experience performing risk adjustment data
validation, HCC failure rates should improve and stabilize, rather than
grow.
Comment: Several commenters recommended that HHS provide issuers
with more transparency about the calculation of error rates, as well as
benchmark national and State-level error rate data against which
issuers could evaluate their performance relative to other issuers and
in the context of this proposal. Two commenters suggested that HHS
apply the proposed approach to the 2016 benefit year pilot results to
illustrate how issuers' risk scores and payment transfers might be
affected in future years.
Response: We appreciate the recommendations, and we intend to
publish benchmark failure and error rate data based on the results of
the 2016 benefit year data validation second pilot year. We also intend
to provide additional information to issuers about risk score error
rates based on 2016 benefit year risk adjustment data validation
results, prior to implementation in 2017 benefit year risk adjustment
data validation. In addition, illustrations of the methodology we will
use to evaluate failure rate differences by HCC group, calculate error
rates based on failure rates and apply error rates to risk scores are
provided above.
Comment: Two commenters recommended that HHS continue to study
failure rates by HCCs or groups of HCCs for a longer period of time
before proceeding with this approach, and another commenter opposed the
calculation of failure rates at the HCC or HCC group-level.
Response: We evaluated the HCC group-level and other proposed
approaches using a simulation with underlying Medicare risk adjustment
data validation failure rates, and we agree with commenters that
additional data from HHS-operated risk adjustment data validation
results in a payment adjustment year would be preferable. However,
under the current error rate estimation and application policy for HHS-
operated risk adjustment data
[[Page 16965]]
validation, all issuers' risk scores and payment transfers would be
adjusted, for any identified error, regardless of issuer size or
distribution of HCCs in its enrollee population beginning with the 2017
benefit year data validation. We believe the approach being finalized
in this rule will increase predictability of risk adjustment transfers
for issuers, and improve our ability to identify statistically
meaningful data discrepancies in the data validation process. By
focusing on issuer errors that are statistically meaningful, we can
adjust issuers' risk scores with confidence, as opposed to adjusting
all issuers for any difference, significant or not, from EDGE data. As
such, we believe implementing this approach as soon as possible ensures
the most accurate payment adjustments and promotes stability and
predictability of risk adjustment transfers.
Comment: A few commenters raised concerns that the calculation of a
national average error rate could fail to account for State or regional
variations in provider coding practices, and therefore result in
harmful adjustments that could discourage new entrants in some States.
Response: We agree with commenters and believe the evaluation of
failure rate deviation by groups of HCCs, based on HCC failure rates
outlined above, rather than a single, national average failure rate for
all HCCs, will mitigate the risk of adjustments due to errors or
differences that can be explained by regional variation in provider
documentation of enrollee health status. We will evaluate the impact of
this approach on issuers across regions and States and consider
adjustments in future years if there is evidence of regional bias in
payment adjustments resulting from this policy.
Comment: One commenter requested that HHS conduct another pilot
year prior to implementing payment adjustments, since data validation
is still new for issuers in the commercial market.
Response: While we will continue to educate issuers about the HHS
risk adjustment data validation process, we believe that it is
necessary to use the results of data validation to adjust risk scores
beginning with 2017 benefit year data validation to encourage issuers
to continue to improve the accuracy of data used to compile risk scores
and to preserve confidence in the HHS-operated risk adjustment program.
ii. Payment Adjustments for Issuers That Have Exited the Market
In the 2015 Payment Notice, we established that HHS will use a
prospective approach to adjust risk scores and payment transfers based
on the results of risk adjustment data validation. Specifically, HHS
will apply the error rate calculated through the risk adjustment data
validation process for the applicable benefit year to plan risk scores
in the subsequent benefit year, and then make risk adjustment payment
transfers based on adjusted plan average risk scores in that subsequent
benefit year. However, in some cases, an issuer of a risk adjustment
covered plan may have exited a State market during or at the end of the
benefit year being audited and therefore would not have risk scores or
payment transfers in the subsequent benefit year to which HHS could
make adjustments.
As previously noted, the purpose of risk adjustment data validation
is to promote confidence in the budget-neutral payment transfer
methodology by ensuring the integrity and quality of data provided from
issuers. HHS believes that the prospect of not receiving payment
adjustments based on the results of risk adjustment data validation
results could undermine these goals by eliminating the incentive for an
exiting issuer to carefully and accurately submit risk adjustment data
for its final benefit year in the market. Not only could this type of
inaccuracy result in overpayments to the exiting issuer, it could also
cause the other issuers in the market to be over or undercompensated
for the actual risk of their enrollee populations. Therefore, we
proposed that HHS would use the error rate derived from the risk
adjustment data validation process to adjust the payment transfer for
the issuer's final benefit year in the State market, which would be
concurrent with the benefit year being audited, for issuers that exit a
State market during or at the end of the benefit year being audited.
Because risk adjustment transfers for a given benefit year are
calculated and paid before the risk adjustment data validation process
for that benefit year is completed, this approach would require HHS to
make a retroactive (that is, post-transfer) adjustment to the issuer's
payment transfer for its final benefit year and reallocate the adjusted
transfer amount to the other issuers in the State market in that year.
We sought comment on this proposal to make these adjustments to
payment transfers for issuers that have exited the market based on the
results of risk adjustment data validation for the most recent benefit
year in which they participated in risk adjustment. We are finalizing
this policy as proposed, and we clarify that it will be effective
beginning with the 2017 benefit year risk adjustment data validation.
Therefore, for an issuer that exited a State market during or at the
end of the 2017 benefit year who had a statistically meaningful error
rate under the revised approach to payment adjustments finalized above
in this rule, HHS would apply the risk score error rate to the issuer's
2017 benefit year risk score, and recalculate 2017 benefit year risk
adjustment transfers for the affected State market risk pools. We note
that, under this timeline, issuers that exited a State market during or
at the end of 2017 benefit year have ample opportunity to review and
correct data submitted to their EDGE servers that will be used to
calculate risk scores for the 2017 benefit year.
Comment: The majority of commenters supported using the error rate
derived from data validation for the most recent benefit year in which
an exited issuer participated in risk adjustment to make an adjustment
to exited issuers' risk adjustment transfers for their final benefit
year in the State market, and to reallocate the adjusted amount to the
other issuers in the State market in that year. Commenters agreed that
a post-transfer adjustment, based on results of data validation for the
most recent benefit year for which the issuer participated in risk
adjustment, would reduce the risk of gaming by an issuer leaving a
State market and ensure that other issuers remaining in the State
market are not harmed by an exited issuer's incorrect or incomplete
data. One commenter expressed concern that the adjustments for exited
issuers would complicate payment transfers and requested that HHS
provide additional guidance or create a forum with issuers to discuss
which method would result in the least disruption to the data
validation process over multiple years.
Response: We agree with commenters who supported a post-transfer
adjustment for issuers who exit the market during or at the end of a
given benefit year, and we are finalizing the policy as proposed.
Adjusting an exited issuer's payment transfer will help ensure that an
issuer with inaccurate or incomplete data does not benefit from this
error and that other issuers in the State market are not harmed by it.
We acknowledge that adjustments to final benefit year payment transfers
for issuers that exited a State market could complicate the calculation
of transfers; however, we believe the revised policy for error rate
payment adjustments finalized above will help mitigate the potential
complexity, because only exited issuers with statistically meaningful
failure rates will receive
[[Page 16966]]
post-transfer adjustments. Furthermore, we believe the benefits
associated with applying adjustments to exited issuers' payment
transfers, based on the results of risk adjustment data validation for
the most recent benefit year in which they participated in risk
adjustment, outweigh the complexities. For State market risk pools
where HHS determines that an issuer that exited the market will receive
an adjustment to their risk adjustment transfer for their final benefit
year in the market, we intend to provide all issuers in the affected
prior year risk pool with the adjustments for exited issuers at the
same time as adjustments for any issuers remaining in the market are
made in the subsequent benefit year.
iii. 500 Billable Member Months
Numerous small issuers have expressed concern regarding the
regulatory burden and cost associated with complying with the risk
adjustment data validation program. HHS has previously considered these
concerns and provided relief where possible. In the proposed rule, we
proposed that, beginning with 2017 benefit year risk adjustment data
validation, issuers with 500 billable member months or fewer that elect
to establish and submit data to an EDGE server would not be subject to
the requirement to hire an initial validation auditor or submit initial
validation audit results. We explained that we believe exempting
issuers with 500 billable member months or fewer from the requirement
to hire an initial validation auditor is appropriate because issuers of
this size would have a disproportionately high operational burden for
compliance with risk adjustment data validation. We noted that,
beginning with 2018 benefit year risk adjustment data validation, these
issuers would not be subject to random sampling under the materiality
threshold discussed below, and would continue to not be subject to the
requirement to hire an initial validation auditor or submit initial
validation audit results. We also explained that if the approach for
payment adjustments for error rates outlined in the proposed rule were
finalized, then it would be possible that no adjustment would occur for
issuers below this threshold. We sought comments on the proposal,
including the 500 billable member month threshold.
We are finalizing the exemption for issuers with 500 billable
member months or fewer as proposed. We clarify that, consistent with
the approach in the 2017 Payment Notice for the lower, separate risk
adjustment default charge for small issuers, the determination of
whether an issuer has 500 billable member months or fewer will be
calculated Statewide (that is, combining an issuer's enrollment in a
State's individual and small group markets in a benefit year).
Comment: A commenter agreed with the proposal, but suggested that
issuers with 500 or fewer billable member months be excluded from risk
adjustment data validation entirely. One commenter disagreed with the
proposal stating that all issuers should be subject to audits for
accountability. One commenter agreed with the proposal, but wanted an
option for small issuers to be adjusted by a default error rate based
on the issuer's parent company's aggregate or average error rate.
Response: HHS recognizes that issuers' company-level affiliations
may vary in size considerably, but note that regardless of parent
company size, issuers with 500 or fewer billable member months
Statewide face a relatively large burden in complying with an initial
validation audit where the initial validation audit sample would be the
issuer's entire population. Consistent with the risk adjustment data
validation error rate payment adjustment policy finalized above, we
believe that only issuers with statistically meaningful errors should
receive payment adjustments. We believe that the implementation of this
policy provides similar relief to smaller issuers for whom audits would
have a disproportionately high cost and who, due to small size, are
unlikely to have a significant or material impact on adjustments to
other issuers. We note that the risk adjustment data validation
policies finalized in this rule result in issuers with 500 or fewer
billable member months Statewide effectively being excluded from risk
adjustment data validation, as they do not have to hire an initial
validation auditor, submit initial validation audit results, or be
subject to risk adjustment data validation payment adjustments.
iv. Materiality Threshold for Risk Adjustment Data Validation
In the 2018 Payment Notice, HHS implemented a materiality threshold
for risk adjustment data validation to ease the burden of annual audit
requirements for smaller issuers of risk adjustment covered plans.
Specifically, we stated that issuers with total annual premiums at or
below $15 million (calculated based on the premiums of the benefit year
being validated) would not be subject to annual initial validation
audit requirements, beginning with the 2017 benefit year, but would
still be subject to an initial validation audit approximately every 3
years. HHS based the timeline for enforcement of the materiality
threshold on the expectation that we would begin making payment
adjustments based on the results of the 2016 benefit year risk
adjustment data validation, effectively requiring all issuers of risk
adjustment covered plans to participate in the first benefit year for
which risk adjustment payments are adjusted. However, in light of our
subsequent decision to convert the 2016 benefit year to another pilot
year,\24\ in the proposed rule, we proposed to postpone application of
the materiality threshold to the 2018 benefit year. Therefore, all
issuers of risk adjustment covered plans would be required to conduct
an initial validation audit for the 2017 benefit year risk adjustment
data validation, other than issuers with 500 billable member months or
fewer Statewide as discussed above. Beginning with the 2018 benefit
year risk adjustment data validation, issuers below the $15 million
premium materiality threshold would not be required to conduct an
initial validation audit every year. Under this proposal, HHS would
still conduct random and targeted sampling under which issuers below
the materiality threshold would be subject to an initial validation
audit approximately every 3 years, beginning with 2018 benefit year
risk adjustment data validation.\25\ In addition, we explained that if
the proposed approach for error rate payment adjustments outlined in
the proposed rule were to be finalized, issuers below the $15 million
threshold that are not selected for the random and targeted sampling
might not have their risk adjustment transfers adjusted for a given
benefit year.
---------------------------------------------------------------------------
\24\ ``HHS-Operated Risk Adjustment Data Validation (HHS-RADV)--
2016 Benefit Year Implementation and Enforcement.'' May 3, 2017.
Available at https://www.regtap.info/uploads/library/HRADV_PilotGuidance_5CR_050317.pdf.
\25\ In the 2018 Payment Notice, we stated that we would
consider risk-based metrics such as an issuer's prior year risk
adjustment data validation results and material changes to data
submission, as measured by our quality metrics, in selecting issuers
below the materiality threshold for more frequent initial validation
audits.
---------------------------------------------------------------------------
We are finalizing the postponement of the materiality threshold to
2018 benefit year risk adjustment data validation, as proposed.
Comment: One commenter agreed with the proposal. Another commenter
advocated for having a lower materiality threshold such as 12,000 or
fewer billable member months. Some commenters stated that there should
be no materiality threshold, and that all issuers should be subject to
risk adjustment data validation.
[[Page 16967]]
Response: Although we appreciate the comments, we did not propose
and are not modifying the level at which the materiality threshold is
set in this rule. The proposal addresses the timing for implementation
of the threshold and the applicability of potential adjustments to risk
adjustment transfers for issuers at or below the $15 million threshold.
All issuers of risk adjustment covered plans will be required to
conduct an initial validation audit for the 2017 benefit year risk
adjustment data validation, other than issuers with 500 billable member
months or fewer Statewide as discussed above. Beginning with the 2018
benefit year, issuers at or below the $15 million premium threshold
will not be required to conduct an initial validation audit every year.
HHS will still conduct random and targeted sampling under which issuers
below the materiality threshold would be subject to an initial
validation audit approximately every 3 years, beginning with 2018
benefit year risk adjustment data validation. Under the policy
finalized in this rule with respect to error rate payment adjustments,
issuers below the $15 million materiality threshold that are not
selected for the random and targeted sampling will not have their risk
adjustment transfers adjusted.
v. Data Validation Sampling Methodology
Section 153.350(a) requires that a statistically valid sample of
enrollees from each issuer of risk adjustment covered plans be
validated. In the 2015 Payment Notice, HHS finalized its methodology
for selecting the sample of enrollees for the initial validation audit
for each issuer of a risk adjustment covered plan. We established a
sample size per issuer for each State in which the issuer offers risk
adjustment covered plans.\26\ In the proposed rule, we explained that
HHS would not calculate a risk score, or apply risk adjustment payment
transfers except for high-cost risk pool transfers beginning with the
2018 benefit year, on behalf of a State in a market and risk pool when
there is only one issuer in the market and risk pool. In addition, we
proposed that the issuer would not be required to validate data for its
plans in a risk pool that was not risk adjusted against another issuer
in the State risk pool in the applicable benefit year. Therefore, we
proposed to change the sampling methodology so that, beginning with the
2017 benefit year data validation, the initial data validation audit
sample would only include enrollees from State risk pools in which
there was more than one issuer.\27\ We are finalizing this policy as
proposed.
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\26\ The proposed rule described the sampling methodology
incorrectly by stating that the sample would include 200 enrollees
per issuer for each risk pool in which the issuer participates,
instead of 200 enrollees per issuer across risk pools.
\27\ For the 2018 and future benefit years, HHS would not
require the sole issuer in the State market risk pool to include
high-cost risk pool enrollees in its sample for data validation, as
these payments will be subject to a separate audit process.
---------------------------------------------------------------------------
Comment: One commenter stated that the proposed approach to allow
sole issuers to participate in another market in the State where it is
not the sole issuer has the potential to create market instability, as
non-similar plans are brought into the calculation.
Response: We clarify that, under the finalized policy, HHS would
only sample from the issuer's risk pool where it is not the only issuer
in the risk pool for the initial validation audit. Currently, the
initial validation audit sample pulls from an issuer's population
across a State, irrespective of risk pool. The finalized policy ensures
that only enrollee data for which risk adjustment transfers were
calculated in a risk pool are validated.
Comment: One commenter disagreed with our proposal due to concerns
about accountability of sole issuers.
Response: For issuers that are the sole issuer in a risk pool,
there is no risk adjustment transfer and thus, there is no payment or
accountability to other issuers in that risk pool. As explained above,
HHS will not calculate a risk score or risk adjustment payment
transfers, on behalf of a State in a market and risk pool in which
there is only one issuer, except for high-cost risk pool transfers
beginning with the 2018 benefit year, and data submitted for high-cost
risk pool transfers by all issuers will be subject to a separate audit.
Therefore, we are finalizing the proposal to change the sampling
methodology so that, beginning with 2017 benefit year risk adjustment
data validation, the initial validation audit sample will only include
enrollees from State risk pools in which there was more than one issuer
and where HHS conducted risk adjustment on behalf of the State for the
benefit year being validated.
vi. Mental and Behavioral Health Records
Under Sec. 153.630(b)(6), the issuer of a risk adjustment covered
plan must provide the initial validation auditor and second validation
auditor with all relevant source enrollment documentation, all claims
and encounter data, and medical record documentation from providers of
services to each enrollee in the applicable sample without unreasonable
delay and in a manner that reasonably assures confidentiality and
security in transmission. Issuers have advised HHS that certain States'
medical privacy laws may limit providers' ability to furnish mental and
behavioral health records for risk adjustment data validation purposes.
As we explained in the proposed rule, we believe that section 1343 of
the PPACA and associated regulations require issuers of risk adjustment
covered plans to furnish any records needed for purposes of the risk
adjustment program, including mental and behavioral health records, and
that the HIPAA Privacy Rule at 45 CFR 164.512(a) generally permits
disclosures of protected health information that are required by law
within the meaning of Sec. 164.103. Nevertheless, we recognize that
some State and Federal privacy laws impose requirements for mental and
behavioral health information that are different from, and potentially
more restrictive than, the HIPAA regulations. However, without the
necessary mental and behavioral health information, the diagnosis code
for an applicable enrollee cannot be validated and, therefore, it would
be rejected during risk adjustment data validation.
To address these potential issues, we proposed to amend Sec.
153.630(b)(6) to provide that, if a provider is prohibited from
furnishing a full mental or behavioral health record by State or
Federal privacy laws, the provider instead may furnish a mental or
behavioral health assessment that providers routinely prepare, for
validation of a mental or behavioral health diagnosis. We explained
that, although HHS needs the full content of the mental or behavioral
health record to ensure full validation of the accuracy of diagnosis
codes, we believed that we can still perform some risk adjustment data
validation based on the information contained in mental or behavioral
health assessments in those instances in which State or Federal law
prohibits submission of the full record. For risk adjustment data
validation purposes, we would expect a mental or behavioral health
assessment to be signed by a qualified provider who is licensed by the
State to diagnose mental illness and, to the extent permissible under
governing privacy and confidentiality laws, to contain: (i) The
enrollee's name; (ii) sex; \28\ (iii) date of birth; (iv) current
[[Page 16968]]
status of all mental or behavioral health diagnoses; and (v) dates of
service. We noted that ``psychotherapy notes,'' a subset of mental and
behavioral health information that receives special protections under
the HIPAA Privacy Rule, are not required for the purposes of risk
adjustment data validation.\29\ We also noted that some State and
Federal privacy laws require that providers obtain patient consent
before disclosing mental or behavioral health records, and that these
consent requirements may apply to mental or behavioral health
assessments. We clarified that we do not view a State or Federal law
requiring patient consent as inconsistent with the risk adjustment data
validation requirements to furnish a mental or behavioral health record
or assessment. Additionally, we noted that certain substance use
disorder patient records are subject to the Federal confidentiality law
at 42 U.S.C. 290dd-2 and the regulations issued thereunder in 42 CFR
part 2 and certain State laws, and generally require consent prior to
disclosure. We stated that we believed that this proposal is consistent
with the foregoing Federal and State confidentiality rules, and that
the substance use disorder confidentiality requirements should govern
when applicable. Therefore, issuers or providers may be required to
obtain written patient consent to comply with this proposal.
---------------------------------------------------------------------------
\28\ For purposes of consistency, we made a technical revision
to the name of this data element to ``sex'' in the final rule,
rather than ``gender'' as was specified in the proposed rule. HHS
uses the data element of sex, as biologically determined, to
calculate enrollees' risk scores under the PPACA risk adjustment
program.
\29\ ``Psychotherapy notes'' are notes recorded by a health care
provider who is a mental health professional documenting or
analyzing the contents of conversation during a private counseling
session, or a group, joint, or family counseling session and that
are separated from the rest of the individual's medical record.
Psychotherapy notes do not include medication prescription and
monitoring, counseling session start and stop times, modalities and
frequency of treatment, test results, and summaries of diagnoses,
functional status, treatment plan, symptoms, prognosis, and progress
to date. See Sec. 164.501.
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We noted the proposal would allow issuers an additional avenue to
achieve compliance by permitting abbreviated mental or behavioral
health assessments for risk adjustment data validation in the event
that a provider is subject to State or Federal privacy laws that
prohibit the provider from providing a complete mental or behavioral
health record to HHS. Under the proposal, to submit a mental or
behavioral health assessment instead of the full mental or behavioral
health record, a provider would be required to attest that relevant
State or Federal privacy laws prohibit him or her from providing the
complete mental or behavioral health record. We explained in the
proposed rule that we also believed that the proposal supports the
integrity of the risk adjustment data validation program by ensuring
that an initial validation auditor obtains data that will enable proper
validation of mental or behavioral health HCCs, which are susceptible
to discretionary coding. Furthermore, we noted our belief that the
flexibility to use mental or behavioral health assessments would
minimize the burden on providers of complying with this requirement
because providers may be able to utilize records they routinely prepare
and may already have, as opposed to preparing special summaries solely
for the purpose of risk adjustment data validation.
Based on our review of the comments we received, we are generally
finalizing the amendments to Sec. 153.630(b)(6) to permit providers
that are prohibited by State law from furnishing a full mental or
behavioral health record to submit an assessment instead. We are making
one clarification to convey that this flexibility will not apply to
providers that are prohibited solely by Federal law from furnishing a
full mental or behavioral health record. We recognize that other State
and Federal laws, including the Federal confidentiality law at 42
U.S.C. 290dd-2 and associated regulations that govern certain patient
substance use disorder records potentially apply to mental or
behavioral health assessments, and would require a provider to obtain
enrollee consent before disclosing the assessment if applicable. We
reiterate that the proposal on mental or behavioral health assessments
was not intended to provide an exception to any applicable enrollee
consent requirement under State or Federal law.
Comment: Most commenters supported the proposal. These commenters
stated that the proposal would reduce burden, ensure compliance with
privacy rules, and assist with the chart retrieval process. Others
supported the proposal with certain modifications. For example, one
commenter requested a safe harbor if mental health diagnosis failure,
or error rates, are high due to noncompliance from mental health
providers. Similarly, another commenter requested that HHS avoid
punitive payment adjustments for issuers whose production of records is
constrained by compliance with State law. The commenter also requested
that HHS acknowledge the existence of varying State-specific
limitations on consent for disclosure of mental or behavioral health
records, evaluate the extent to which State-specific rules can be
appropriately incorporated into the data collection, and engage in a
separate solicitation of input from stakeholders on this topic.
Response: Since we only have final results from the first pilot
year of risk adjustment data validation thus far, we do not currently
have adequate experience to be able to determine whether failure rates
for mental health diagnoses are higher than other diagnoses, and
whether those failure rates are consistent by State. The policy for
error rate payment adjustments finalized in this rule mitigates the
potential for punitive payment adjustments, because only issuers with
statistically meaningful failure rates will receive risk score error
rates resulting in payment transfer adjustments.\30\ We will continue
to evaluate whether additional relief is necessary, based on analysis
of risk adjustment data validation results. Our policy to permit the
use of mental or behavioral health assessments by providers that are
prohibited by State law from furnishing a full record is intended to
offer broadly applicable relief and flexibility to account for the
variation in privacy laws in particular States. Therefore, we do not
intend to solicit input on or otherwise engage in an evaluation of
State-specific requirements.
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\30\ Please see the above preamble section on ``Payment
Adjustments for Error Rates'' for more information.
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Comment: Two commenters expressed concern that initial validation
auditors may interpret or utilize mental or behavioral health
assessments differently, and requested that HHS provide guidance or
training to ensure consistent interpretation of the assessments.
Response: We agree that consistent interpretation and utilization
of mental and behavioral health assessments is important, and seek to
encourage it. For purposes of risk adjustment data validation, the
assessment is limited to the five discrete elements specified in Sec.
153.630(b)(6), most of which are straightforward, so HHS does not
anticipate a material risk of disparate interpretation or utilization
of mental or behavioral health assessments by initial validation
auditors. HHS continues to work to leverage existing provider networks
and communication channels to educate providers on the HHS-operated
risk adjustment data validation requirements.
Comment: One commenter requested the extension of flexibility to
the actual submission of documentation regarding treatment for mental
or behavioral health conditions, expressing concern that there may not
be an affected
[[Page 16969]]
underlying record to identify in the first instance. The commenter also
requested additional information regarding who bears responsibility for
preparation of the mental or behavioral health assessment and how it
differs from a full record.
Response: The provider is responsible for preparing the mental or
behavioral health assessment, and the assessment is limited to the five
elements specified in Sec. 153.630(b)(6). When being used for risk
adjustment data validation purposes, it should be accompanied by the
provider's signature and an attestation that State privacy laws
prohibit the provider from furnishing a complete medical record. This
policy provides flexibility in cases where the State law prevents
submission of the full record, but that flexibility does not extend to
the provision of any documentation regarding mental or behavioral
health conditions. HCCs without adequate documentation, whether through
a full record or a mental or behavioral health assessment, would result
in an error.
Comment: Several commenters did not support the proposal. For
example, one commenter indicated that this policy of permitting mental
or behavioral health assessments would not significantly reduce burden,
and generally objected to the other State or Federal laws that may
require the provider to obtain patient consent, indicating that doing
so may not be possible. One commenter stated that requiring provider
attestation or patient consent will add burden and reduce the
likelihood of mental or behavioral health records being furnished by
issuers in risk adjustment data validation. The commenter also
expressed concern that there will likely be higher error rates for HCCs
related to mental health or substance use disorders.
Response: HHS believes that the finalized policy to permit the use
of existing mental or behavioral health assessments affords flexibility
to providers to use an alternative source for the documentation that
otherwise would be necessary under risk adjustment data validation to
maintain the integrity of the risk adjustment program while complying
with State and Federal privacy requirements. As discussed previously in
this section and in the proposed rule, State and Federal privacy
requirements may independently require a provider to obtain patient
consent in order to furnish a mental or behavioral health assessment.
In providing the flexibility to submit assessments for risk adjustment
data validation purposes, HHS does not intend to limit or otherwise
affect the application of any such consent requirements under State or
Federal law, which provide important protections to enrollees.
HHS recognizes, however, that our policy to allow providers to
furnish a mental or behavioral health assessment may impose a slight
increase in the burden of compliance with risk adjustment data
validation requirements because the assessment must be accompanied by
an attestation from the provider. Attestations are necessary to
demonstrate that the provider is prohibited from furnishing the
complete medical record by State privacy laws, but we do not expect
compliance with the attestation requirement to be difficult.
As noted above, HHS does not intend to exempt providers from any
other applicable consent requirements under State or Federal law, and
we do not yet have adequate experience as to whether failure rates will
be higher for mental health conditions or substance use disorders. We
reiterate that only issuers with statistically meaningful failure rates
will receive risk score error rates and subsequent payment transfer
adjustments pursuant to the policy finalized in this rule.\31\ We will
analyze risk adjustment data validation results to evaluate the impact
of this policy on error rates, and will consider whether further
refinements are appropriate.
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\31\ Please see the above preamble section on ``Payment
Adjustments for Error Rates'' for more information.
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Comment: Commenters expressed concern that enrollees could be
waiving their HIPAA rights if their providers furnish medical records
that include enrollees' diagnoses for risk adjustment data validation.
The commenter suggested that if a diagnosis can be imputed by the
presence of a prescription drug, HHS should include treatments for
mental illness as a drug class in the risk adjustment models, to impute
diagnoses for which a medical record cannot easily be obtained.
Response: As noted above and in the proposed rule, we believe that
section 1343 of the PPACA and associated regulations require issuers of
risk adjustment covered plans to furnish any records needed for
purposes of the risk adjustment program, including mental and
behavioral health records. The HIPAA Privacy Rule generally permits
disclosures that are required by law (see 45 CFR 164.512(a)). We
recognize that some State and Federal privacy laws impose requirements
for mental and behavioral health information that are different from,
and potentially more restrictive than, the HIPAA regulations, and may
require that providers obtain patient consent before disclosing mental
or behavioral health records or assessments. We do not view the risk
adjustment data validation requirements to furnish a mental or
behavioral health record or assessment as inconsistent with these
consent requirements or involving any ``waiver'' of enrollee privacy
rights.
As discussed in the 2018 Payment Notice, in specific instances,
risk adjustment permits the use of prescription drugs to impute
diagnoses. As noted elsewhere in this rule, HHS will continue to
evaluate the inclusion of additional prescription drug classes in the
risk adjustment model, including mental or behavioral health
treatments, to potentially impute missing diagnoses for future benefit
years.
Comment: One commenter requested that HHS provide issuers
flexibility to develop standard language requiring the provider's
signature to ease the administrative burden of creating mental or
behavioral health assessments.
Response: The approach being finalized in this rule does not
prevent an issuer from developing standard language for the provider
attestation if the issuer believes it will help providers furnish
mental or behavioral health assessments and other required
documentation for risk adjustment data validation purposes.
Comment: Some commenters expressed concerns about the Federal rules
governing confidentiality of substance use disorder patient records
under 42 CFR part 2, or their alignment with the HIPAA Privacy Rule.
Response: The comments on the Federal rules governing
confidentiality of substance use disorder patient records under 42 CFR
part 2 and the HIPAA Privacy Rule concern regulations that are
implemented and enforced by other agencies within HHS, the Substance
Abuse and Mental Health Services Administration and the Office for
Civil Rights, respectively. Although we appreciate these comments, we
are not able to address them in this rulemaking.
vii. Inter-Rater Reliability Rates
Under Sec. 153.630(b)(8), the initial validation auditor must
measure and report to the issuer and HHS, in a manner and timeframe
specified by HHS, its inter-rater reliability rates among its
reviewers. An initial validation auditor must achieve a consistency
measure of at least 95 percent for his or her review outcomes, except
for the initial benefit years of risk
[[Page 16970]]
adjustment data validation, for which the initial validation auditor
may meet an inter-rater reliability standard of 85 percent. Consistent
with our decision to make the 2016 benefit year another pilot year as
referenced above, we proposed to amend Sec. 153.630(b)(8) to add the
2016 benefit year as an initial year of risk adjustment data validation
for which the initial validation auditor may meet the lower inter-rater
reliability standard of 85 percent. We are finalizing the amendment to
Sec. 153.630(b)(8) as proposed.
Comment: All commenters supported the addition of the 2016 benefit
year as an initial year of risk adjustment data validation for which
the initial validation auditor may meet an inter-rater reliability
standard of 85 percent. One commenter noted that permitting the 85
percent standard for another year would allow issuers to gain an
additional year of experience and process improvement before the
standard is increased.
Response: We agree with commenters and are finalizing the amendment
to Sec. 153.630(b)(8) as proposed.
viii. Civil Money Penalties
An effective risk adjustment data validation program is essential
to the proper functioning of the HHS-operated risk adjustment program.
In order to enforce risk adjustment data validation standards when
operating risk adjustment data validation on behalf of a State, we
proposed to clarify and amend the bases upon which HHS may impose CMPs
for violations of risk adjustment data validation requirements.
To give HHS additional flexibility for ensuring compliance with the
risk adjustment data validation requirements and in light of our
experience in the first pilot year of the risk adjustment data
validation program, HHS proposed to amend Sec. 153.630(b)(9) to give
HHS the authority to impose a CMP on an issuer of a risk adjustment
covered plan in the event of misconduct or substantial non-compliance
with the risk adjustment data validation standards and requirements.
Specifically, we proposed to amend Sec. 153.630(b)(9) to state that,
if an issuer of a risk adjustment covered plan (1) fails to engage an
initial validation auditor; (2) fails to submit the results of an
initial validation audit to HHS; (3) engages in misconduct or
substantial non-compliance with the risk adjustment data validation
standards and requirements applicable to issuers of risk adjustment
covered plans; or (4) intentionally or recklessly misrepresents or
falsifies information that it furnishes to HHS, HHS may impose CMPs in
accordance with the procedures set forth in Sec. 156.805(b) through
(e). We note that Sec. 153.630(b)(9) already addresses the possible
imposition of CMPs for (1) and (2) above, and provides a cross-
reference to Sec. 156.805, which contains the bases and procedures for
imposing CMPs for (3) and (4) above. Section 153.630(b)(9) provides the
authority to assess CMPs on all issuers of risk adjustment covered
plans, not just issuers on an FFE as does Sec. 156.805.\32\ We
clarified that the proposal to impose CMPs for (3) and (4) would apply
to all issuers of risk adjustment covered plans, not just those issuers
on an FFE. We noted that the CMP authority would be in addition to
HHS's ability to adjust an issuer's transfers under Sec. 153.350(c).
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\32\ Pursuant to Sec. 153.20, risk adjustment covered plan
means, for the purpose of the risk adjustment program, any health
insurance coverage offered in the individual or small group market
with the exception of grandfathered health plans, group health
insurance coverage described in 45 CFR 146.145(c), individual health
insurance coverage described in 45 CFR 148.220, and any plan
determined not to be a risk adjustment covered plan in the
applicable Federally certified risk adjustment methodology.
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As previously noted in the Second 2013 Program Integrity Rule, and
in the 2015 Payment Notice, we proposed that HHS's possible application
of CMPs would continue to take into account the totality of the
issuer's circumstances, including such factors as an issuer's previous
record of non-compliance (if any), the frequency and level of the
violation, and any aggravating or mitigating circumstances.
Additionally, we would continue to impose any CMPs so that the level of
the enforcement action is proportional to the level of the violation.
While we reserved the right to impose penalties up to the maximum
amounts set forth in Sec. 156.805(c), as a general principle, we
explained that we intend to work collaboratively with issuers to
address any problems in conducting the risk adjustment data validation
process.
We believe this additional CMP authority will improve program
integrity and fairness by permitting HHS the authority to assess CMPs
on issuers that engage in misconduct in risk adjustment data
validation. Although Sec. 153.630(e) permits HHS to adjust payments
and charges for issuers that do not comply with audit requirements and
standards, this provision only makes the markets whole in the event of
a violation of the risk adjustment data validation standards or
misconduct. We do not believe this provision provides a sufficient
deterrent effect to ensure program integrity of the risk adjustment
data validation program. Additionally, we believe this additional
authority is necessary in light of the policies finalized in the 2018
Payment Notice, specifically, the concerns HHS highlighted around
gaming and the inclusion of prescription drug data in the risk
adjustment model. We are finalizing as proposed the amendments to Sec.
153.630(b)(9) to clarify and strengthen HHS's CMP authority. We also
clarify that HHS would not impose a CMP under Sec. 153.630(b)(9) for a
benefit year on an issuer that is not required to submit an initial
validation audit for risk adjustment data validation for that benefit
year.
Comment: Most of the comments received supported the proposal. One
commenter requested definitions for misconduct, substantial
noncompliance, and reckless misrepresentation, along with examples for
each case under which an issuer could receive a CMP.
Response: The terms misconduct, substantial noncompliance, and
reckless misrepresentation are incorporated from Sec. 156.805(a)(1)
and (5). Examples of issuer misconduct that could warrant imposition of
a CMP under the amended Sec. 153.630(b)(9) include knowingly hiring an
initial validation auditor who has conflicts of interest, or failing to
ensure confidentiality and security of data transmitted to the initial
validation auditor or second validation auditors. Examples of
substantial noncompliance include unreasonable delays in providing
complete enrollment documentation, claims and encounter data, or
medical records documentation to an auditor, or failing to properly
oversee an initial validation auditor. However, the determination of
whether conduct rises to the level of any of these terms in any
specific case is highly fact sensitive, involving consideration of any
mitigating or aggravating factors.
ix. Adjustment of Risk Adjustment Transfers Due to Submission of
Incorrect Data
On September 2, 2015, HHS released the Adjustment of Risk
Adjustment Transfers Due to Submission of Incorrect Data guidance,\33\
describing the process by which HHS addresses instances of materially
incorrect EDGE server data submissions. We reiterated this guidance on
November 3, 2017, through the release of Evaluation of EDGE Data
Submissions for the 2017 Benefit Year.\34\ We proposed to include risk
adjustment data validation as a
[[Page 16971]]
method of discovering materially incorrect EDGE server data submissions
and making adjustments pursuant to Sec. 153.630(e), as described in
the September 2, 2015 guidance.\35\ We proposed that demographic or
enrollment errors discovered during risk adjustment data validation
would be the basis for an adjustment to the applicable benefit year
transfer amount, rather than the subsequent benefit year risk score.
The elements being validated are related to the transfer formula and
demographic variables in the risk adjustment models. We explained that
we believe the process of identifying demographic and enrollment errors
is substantially similar to a discrepancy in the transfer formula,
which is addressed in the current benefit year as part of the EDGE data
discrepancy process under Sec. 153.710, as opposed to a discrepancy in
underlying enrollee diagnoses contributing to risk scores, which is
addressed through subsequent year risk score adjustments as part of
risk adjustment data validation.
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\33\ Available at https://www.cms.gov/CCIIO/Resources/Regulations-and-Guidance/Downloads/RA-Adjustment-Guidance-9-2-15.pdf.
\34\ Available at https://www.cms.gov/CCIIO/Resources/Regulations-and-Guidance/Downloads/EDGE-Submissions-2017.pdf.
\35\ This guidance is also included in the Evaluation of EDGE
Data Submissions for the 2017 Benefit Year, released on November 3,
2017, available at https://www.cms.gov/CCIIO/Resources/Regulations-and-Guidance/Downloads/EDGE-Submissions-2017.pdf.
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An overstatement or understatement of premium data may affect
issuers differently, because it will lead to an increase or decrease in
the absolute value of the magnitude of the risk adjustment transfers
(and will affect the calculation of the geographic rating area
factors). Therefore, an issuer's submission of incorrect EDGE server
premium data may have the effect of increasing or decreasing the
magnitude of risk adjustment transfers to other issuers in the market,
depending on the direction of the premium error, holding constant the
other elements of the payment transfer formula. In cases where there is
a material impact on risk adjustment transfers for that particular
market as a result of incorrect EDGE server premium data, HHS would
calculate the dollar value of differences in risk adjustment transfers,
and, where the difference is detrimental to one or more issuers in the
market, adjust the other issuers' risk adjustment transfer amount by
that calculation, and increase the risk adjustment charge (or decrease
the risk adjustment payment) to the issuer that made the data error, in
order to balance the market.\36\ We explained that we believe this
approach would allow HHS to operate the risk adjustment program
efficiently, while ensuring that issuers do not profit from their data
submission errors or harm their competitors in the relevant market. We
sought comment on this proposal.
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\36\ Calculation of the dollar value will include adjustment to
the Statewide premium average and, to the extent possible,
adjustment to the geographic cost factor.
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We are finalizing this policy as proposed.
Comment: Commenters supported the proposal, or agreed with it but
requested additional clarification. For example, one commenter
requested examples of materially incorrect data submissions. Another
commenter sought clarification on certain technical issues related to
the proposal, including the definition of demographic and enrollment
data errors, whether these errors will impact elements of the transfer
formula, the error rate, or both, and the timing of any adjustments
that HHS would make with respect to current year risk adjustment
transfer amounts and related data transfer element errors. One
commenter supported HHS's current approach of taking a subsample of 50
enrollees to verify demographic and enrollment information, but
stressed that the subsample results should not be the sole basis for
applying current year transfer adjustments. Rather, if errors are
identified from the subsample, HHS should then investigate the issuer's
data further to assess if there were materially incorrect EDGE data
submissions.
Response: We clarify that significant errors found in the risk
adjustment data validation demographic and enrollment subsample review
will result in communications from HHS to the issuer regarding the
issuer's underlying data before the potential application of any
adjustments to risk adjustment transfers. The demographic and
enrollment data elements collected for purposes of risk adjustment are
date of birth, sex, plan identifier, enrollment start and end dates,
premium amount, and rating area. In addition to the issues described
above regarding incorrect premium, certain demographic or enrollment
errors could indicate the presence of larger issues such as assignment
of enrollees to the incorrect model or metal level, which would lead to
incorrect risk scores and a miscalculation of the AVs and induced
demand factors (IDF) in the transfer formula, or incorrect age factors.
If this occurs, we would initiate a separate process outside of risk
adjustment data validation to further evaluate the impact of the
incorrect data submission, determine whether the market needs to be
made whole due to the errors, and then make the necessary adjustments
to affected issuers. Therefore, HHS will not be relying solely on
subsample results as the basis for applying current year transfer
adjustments. Whether an error has an effect on the transfer formula,
error rate, or both amounts will depend on the specifics of the error.
For example, if an error affects premiums alone, only the Statewide
average premium would need to be adjusted. HHS intends to be in
communication with affected issuers throughout the second validation
audit process, and to resolve potential discrepancies in a manner
similar to the EDGE data submission discrepancy process.
h. Risk Adjustment User Fee for the 2019 Benefit Year (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 its behalf. In 2019, HHS will be operating a risk
adjustment program in every State. As described in the 2014 Payment
Notice, HHS's operation of risk adjustment on behalf of States is
funded through a risk adjustment user fee. Section 153.610(f)(2)
provides that an issuer of a risk adjustment covered plan must remit a
user fee to HHS equal to the product of its monthly billable member
enrollment in the plan and the per member per month risk adjustment
user fee specified in the annual HHS notice of benefit and payment
parameters for the applicable benefit year.
OMB Circular No. A-25R established Federal policy regarding user
fees, and specified 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 mitigates the financial instability associated with
potential adverse risk selection. The risk adjustment program also
contributes to consumer confidence in the health insurance industry by
helping to stabilize premiums across the individual and small group
markets.
In the 2018 Payment Notice, we calculated the Federal
administrative expenses of operating the risk adjustment program for
the 2018 benefit year to result in a risk adjustment user fee rate of
$1.68 per billable member per year or $0.14 PMPM, based on our
estimated contract costs for risk adjustment operations and estimates
of billable member months for individuals enrolled in a risk adjustment
covered plan. For the 2019 benefit year, we proposed to use the same
methodology to estimate our administrative expenses to operate the
program. These contract costs cover development of the model
[[Page 16972]]
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 divided 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 in HHS-operated risk adjustment States for the
benefit year.
We previously estimated that the total cost for HHS to operate the
risk adjustment program on behalf of States for 2019 will be
approximately $38 million, and the risk adjustment user fee would be
$1.68 per billable member per year, or $0.14 PMPM. However, we now
estimate the cost for HHS to operate the risk adjustment program on
behalf of States for the 2019 benefit year to be approximately $40
million, and are finalizing a risk adjustment user fee of $1.80 per
billable member per year, or $0.15 PMPM, to take account of eligible
administrative and personnel costs related to the operation of the HHS-
operated risk adjustment program that were previously excluded from the
estimate.
C. Part 154--Health Insurance Issuer Rate Increases: Disclosure and
Review Requirements
1. Applicability (Sec. 154.103)
Since July 18, 2011, issuers have been required to submit rate
filing justifications for rate increases for non-grandfathered plans in
the individual and small group markets. This requirement was
established, in part, to carry out the Secretary's responsibility, in
conjunction with States, under section 2794(b)(2)(A) of the PHS Act to
monitor premium increases of health insurance coverage offered through
an Exchange and outside of an Exchange. Student health insurance
coverage is considered by HHS to be a type of individual market
coverage and is generally subject to the PHS Act individual market
requirements, which has included rate review. We proposed to modify
Sec. 154.103(b) to exempt student health insurance coverage from the
Federal rate review requirements, effective for plan or policy years
beginning on or after January 1, 2019. As we discussed in the proposed
rule, and as commenters noted, student health insurance coverage is
generally rated and administered differently from other forms of
individual health insurance coverage.\37\
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\37\ See preamble discussion in the final rule, ``Health
Insurance Market Rules; Rate Review'' 78 FR 13406, 13424 (February
27, 2013).
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States have allowed rating practices for student health insurance
coverage to be more in line with large group pricing, in which
experience rating and other factors can be used to determine rates.
Because student health insurance coverage is typically experience
rated, and is typically only available to students and their dependents
with an open enrollment period coinciding with the start of the
academic year, it is exempt from single risk pool rating requirements
and not guaranteed to be available or renewable to individuals who are
not students or dependents of students in an institution of higher
education. We are finalizing the exemption as proposed, except that we
are modifying the applicability date to align with the timing of when
student health insurance coverage typically begins, such that the
exemption will be effective for student health rate filings for the
next plan year. This change, effective for student health insurance
coverage effective on or after July 1, 2018, will reduce the regulatory
burden on States and issuers of student health insurance plans.
Comment: Most commenters supported the proposal to exempt student
health insurance coverage from Federal rate review requirements.
Commenters suggested that the exemption should apply to coverage
effective on or after July 1, 2018, to coincide with the traditional
school year. Some commenters expressed concern that exempting student
health insurance coverage would result in minimal oversight and
decreased affordability.
Response: We are finalizing the exemption and it will apply to
student health insurance coverage, as defined in Sec. 147.145, with an
effective date on or after July 1, 2018. We note that States maintain
the flexibility to review rate increases of any size and any other
aspects of student health insurance coverage. In States that do not
have an Effective Rate Review Program, we will continue to monitor the
compliance of student health insurance coverage with applicable market
rating reforms based on complaints and as part of targeted market
conduct examinations. In States where we are enforcing market reforms,
we will continue to review form filings for student health insurance
coverage for compliance with applicable PHS Act individual market
requirements.
2. Rate Increases Subject to Review (Sec. 154.200)
Section 2794(a)(1) of the PHS Act requires the Secretary, in
conjunction with States, to establish a process for the annual review
of unreasonable premium increases for health insurance coverage.
Section 2794(a)(2) of the PHS Act requires health insurance issuers to
submit to the Secretary and relevant State a justification for an
unreasonable premium increase prior to implementation. States may
establish a more robust review process, and many have.
Section 154.200(a)(1) currently provides that a rate increase for
single risk pool coverage beginning on or after January 1, 2017 is
subject to a reasonableness review if: (1) The average increase,
including premium rating factors described in Sec. 147.102, for all
enrollees, weighted by premium volume for any plan within the product,
meets or exceeds 10 percent; or (2) the increase exceeds a State-
specific threshold approved by the Secretary. We proposed to amend this
provision to establish a 15 percent default threshold for
reasonableness review, in recognition of significant rate increases in
the past number of years, rather than the current 10 percent default
threshold.\38\
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\38\ The 10 percent threshold was established in the ``Rate
Increase Disclosure and Review'' Final rule (76 FR 29963, May 23,
2011) based upon three indices. These indices are: (1) The medical
component of the Consumer Price Index (CPI); (2) the National Health
Expenditure data (NHE); and (3) the Standard and Poor's Healthcare
Economic Commercial Index. The threshold was finalized at 10 percent
based on the analysis of the trend in health care costs and rate
increases provided in the preamble to the proposed rule.
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Section 154.200(a)(2) currently requires States to submit a
proposal to the Secretary for approval of any State-specific threshold.
We proposed to amend Sec. 154.200(a)(2) to require submission of a
proposal only if the State-specific threshold is higher than the
Federal default threshold. We proposed this change to reduce burden and
promote State flexibility.
We also proposed to delete paragraph (b) in its entirety. That
paragraph currently requires that the Secretary publish a notice each
year indicating which threshold applies to each State. For States that
request a State-specific threshold above what is set by CMS, CMS noted
it would continue to post information on its website beginning with
requests submitted on or after January 1, 2019.
We proposed to redesignate paragraph (c) as paragraph (b) and
revise that paragraph to delete the language related
[[Page 16973]]
to rates filed for coverage beginning before January 1, 2017, currently
captured in paragraph (c)(1) as this provision is no longer
necessary.\39\ We proposed to redesignate paragraph (d) as paragraph
(c). Finally, we proposed conforming changes to update the cross
references in Sec. 154.200 to align with the changes described above.
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\39\ This standard (that is, the average increase for all
enrollees weighted by premium volume meets or exceeds the applicable
threshold), however, continues to apply to rates filed for coverage
beginning before January 1, 2017, including with respect to
compliance reviews and enforcement actions.
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We are finalizing these changes as proposed with one modification,
described below. These changes will apply to single risk pool rate
filings submitted by issuers for plan or policy years beginning on or
after January 1, 2019.
Comment: Some commenters supported a threshold increase, noting
that raising the threshold to 15 percent would allow regulators to
focus their attention on higher rate increases and reduce the
regulatory burden for both States and issuers. Other commenters
supported raising the threshold, but did not specify an alternative to
10 percent. Many commenters opposed changing the reasonableness review
threshold to 15 percent, concerned that the change may normalize
excessive increases. Other commenters opposed the change because it
would negatively affect transparency of rate setting, noting that the
Consumer Justification Narrative (Part II of the Rate Filing
Justification) is only required for increases that meet or exceed the
review threshold. Some commenters suggested a 6 percent threshold would
be appropriate because that would be in line with health expenditures
and still above the general rate of inflation. A few commenters
suggested there should be a 15 percent threshold at the product level
and 20 percent threshold at the plan level.
Response: We note that the threshold set by HHS constitutes a
minimum standard. By increasing the threshold trigger to 15 percent, we
are providing an opportunity for States to reduce their review burden,
although most States currently employ stricter rate review standards
and may continue to do so. Additionally, increasing the Federal default
threshold for review will reduce burden for issuers. After an analysis
of all rates subject to review that were determined to be
``unreasonable'' since the inception of the review threshold, only one
filing with this determination has fallen between the 10 to 15 percent
range. For these reasons, we do not believe this change will normalize
excessive increases.
We are not lowering the threshold to 6 percent, as doing so may
increase the burden on issuers and States. We are not establishing two
thresholds (one at the product level and one at the plan level). When
determining whether an increase is subject to review, rate increases
are calculated at the plan level. That ensures that a plan that
experiences a significant rate increase does not avoid review simply
because the average increase for the product did not meet or exceed the
applicable threshold. Because consumers are affected by rate increases
at the plan level, we believe that increases for the plan, not the
product, should continue to be the trigger for determining whether an
increase is subject to review.
We expect the change to have a minimal impact on transparency. All
issuers must continue to submit a Uniform Rate Review Template (URRT)
(Part I of the Rate Filing Justification) for all single risk pool plan
submissions. Issuers offering a QHP or any single risk pool submission
containing a rate increase of any size must continue to submit an
actuarial memorandum (Part III of the Rate Filing Justification). We
are finalizing the proposal to change the Federal default review
threshold to 15 percent beginning with single risk pool rate filings
submitted by issuers for plan or policy years beginning on or after
January 1, 2019.
Comment: Some commenters opposed CMS requiring submission of a
proposal (and posting of that proposal) only if the State-specific
threshold is higher than the Federal default threshold.
Response: The Federal review threshold is a minimum standard.
States are able to apply a stricter standard, and many already do.
Because States that apply a lower threshold meet the Federal minimum
standard, we do not believe it is necessary or appropriate to require
those States to submit a proposal to CMS. Therefore, we are finalizing
the proposed changes to Sec. 154.200(a)(2) with the following
modification: We added language to clarify that these State proposals
must be submitted in the form and manner specified by the Secretary.
CMS will only require a proposal from States requesting a higher
threshold. States that impose stricter standards will communicate those
standards to their issuers as they currently do with many other aspects
of State-specific requirements. CMS will post information from States
that request a threshold higher than 15 percent and will issue further
guidance on the process for submission and review of such State
requests.
3. Submission of Rate Filing Justification (Sec. 154.215)
Section 154.215(h)(2) includes a reference to 45 CFR 5.65, which
defined trade secret and confidential commercial or financial
information under HHS regulations implementing the Freedom of
Information Act, 5 U.S.C. 552. HHS revised 45 CFR part 5 in a final
rule issued on October 28, 2016, effective on November 28, 2016 (81 FR
74930). We proposed to make a technical correction to Sec.
154.215(h)(2) to refer to 45 CFR 5.31(d) because 45 CFR 5.65 no longer
exists and Sec. 5.31(d) now lists the reasons a record may be
withheld. We are finalizing the change as proposed.
Comment: Some commenters opposed CMS's use of the Freedom of
Information Act and requested issuer information be provided without
any redaction.
Response: We proposed and are finalizing a technical correction to
the regulatory reference. We did not propose any change to our
interpretation of a trade secret and confidential commercial or
financial information. The issuer may submit a redacted actuarial
memorandum, but CMS does not make any redaction beyond what is
submitted in the rate filing.
4. Timing of Providing the Rate Filing Justification (Sec. 154.220)
Section 154.220(b) provides that a health insurance issuer must
submit applicable sections of the Rate Filing Justification for all
single risk pool coverage in the individual or small group market by
the earlier of (1) the date by which the State requires submission of a
rate filing; or (2) the date specified in guidance by the Secretary. We
have interpreted that section to require submission of all rate
filings, for both QHPs and non-QHPs, at a uniform time.\40\ We proposed
to allow a State to set a later submission deadline for issuers who
offer non-QHPs only, starting with the 2019 plan year. We are
finalizing the change as proposed.
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\40\ 80 FR 10782.
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Comment: Some commenters expressed concern that the proposal
provides an advantage to issuers offering only non-QHPs and may provide
an opportunity for competitors to shadow price. Many commenters
supported the proposal, in order to reduce State burden.
Response: We are finalizing the proposal. We remind issuers that
offer both QHPs and non-QHPs in a market in a given State to submit its
rate filing
[[Page 16974]]
in accordance with the deadlines established for QHPs to support
regulatory review of compliance with the single risk pool requirement.
Establishing a later submission deadline for issuers that offer only
non-QHPs is a State option, not a requirement. We believe it will
reduce burden while empowering States to pick the timeframe that works
best for their markets, and also accounts for market differences
between States. We also remind States and issuers that even if the
submission deadlines differ; all information must be submitted to CMS
by the earlier of the State deadline or the Federal deadline. We also
remind States and issuers that only submission deadlines may vary;
uniform posting will still be required, as discussed below, to help
mitigate the potential for shadow pricing and other anti-competitive
behaviors.
5. Determinations of Effective Rate Review Programs (Sec. 154.301)
a. State Posting of Rate Increases
We proposed to modify Sec. 154.301(b)(2), by reducing the advance
notification required, so that a State with an Effective Rate Review
Program must notify us in writing, no later than 5 business days prior
to the date it intends to make any proposed or final rate filing
information public if the State will be posting prior to the date
specified by the Secretary. We are finalizing this change as proposed.
Comment: The majority of commenters supported this proposal. Some
commenters requested that CMS require States to inform issuers prior to
posting. Some commenters requested that CMS require States to post rate
filing information on State websites even if the information is also
posted on CMS's website. Two commenters opposed the proposal because
they interpreted the proposal as a reduction to the public's
opportunity to review and comment.
Response: We appreciate the importance of State communication with
issuers, and we expect States to maintain satisfactory communication
regarding posting deadlines to issuers, but decline to propose
requirements related to such. We also did not propose and are not
making changes to the requirements regarding States posting on their
own website. States are permitted to use CMS's website because we are
mindful of the burden and cost associated with such posting, but we
encourage States to consider posting rate filing information directly
on their respective websites, while also providing a link to the CMS
website. We are finalizing the proposal. This change will reduce the
amount of time prior to posting that the State must notify CMS, but
does not reduce the public comment period.
b. Posting of Rate Increases
Section 154.301(b)(3) provides that a State with an Effective Rate
Review Program must ensure that information regarding rate increases is
made available to the public at a uniform time for all proposed and
final rate increases, as applicable, in the relevant market segment and
without regard to whether coverage is offered on or off of an Exchange.
That provision was codified in order to set a level playing field, to
prevent issuers that submit rate filings later from having an advantage
over their competitors that submitted rate filings earlier.
We proposed to eliminate the requirement for uniform posting so
that States that have an Effective Rate Review Program would have the
option to post proposed and final rate filing information on a rolling
basis. We are not finalizing this proposal.
Comment: A few commenters supported the proposal, but the majority
of commenters opposed the proposal, noting that uniform posting
protects issuers from shadow pricing and ensures a level playing field
in a fair competitive market. Those commenters were also concerned that
posting on a rolling basis may promote manipulation by some market
competitors, and could inadvertently contribute to market
destabilization.
Response: We proposed to give States the option to post rate
increase information on a rolling basis in order to accommodate a few
States that have laws requiring immediate posting upon receipt. We did
not receive overwhelming support for that change, as only two States
supported it; the majority of commenters opposed the change. We agree
with commenters' concerns that removing the requirement for uniform
posting could have unintended, negative effects on competition in the
markets. Some commenters also feared that posting on a rolling basis
could cause confusion among consumers, and eliminate the likelihood of
consumers easily comparing a rate increase across all products. We do
not want to provide unfair advantages to issuers that file later in the
filing season, or contribute to consumer confusion. Therefore, we are
not finalizing the proposal. We are retaining Sec. 154.301(b)(3) as it
exists in our current regulations to require that a State with an
Effective Rate Review Program ensure that the information in Sec.
154.301(b)(1)(i) and (ii) is made available to the public at a uniform
time for all proposed and final rate increases, as applicable, in the
relevant market segment and without regard to whether coverage is
offered on or off of an Exchange.
D. Part 155--Exchange Establishment Standards and Other Related
Standards Under the Affordable Care Act
1. Standardized Options (Sec. 155.20)
In the 2017 Payment Notice, HHS introduced standardized options
(also now referred to as Simple Choice plans). A standardized option is
a QHP offered for sale through an individual market Exchange that
either has a standardized cost-sharing structure specified by HHS in
rulemaking or has a standardized cost-sharing structure specified by
HHS in rulemaking that is modified only to the extent necessary to
align with the high deductible health plan (HDHP) requirements under
section 223 of the Code or the applicable annual limitation on cost
sharing and HHS actuarial value requirements. For the 2017 and 2018
benefit years, HHS specified standardized options in rulemaking,
encouraged issuers to offer such plans, and provided differential
display of these plans on HealthCare.gov.
As noted in the proposed rule, we seek to encourage free market
principles in the individual market, and to maximize innovation by
issuers in designing and offering a wide range of plans to consumers.
We noted concerns that providing differential display for these plans
may limit enrollment in coverage with plan designs that do not match
the standardized options, removing incentives for issuers to offer
coverage with innovative plan designs. We believe that encouraging
innovation is especially important now, given the stresses faced by the
individual market. Therefore, we are finalizing our proposal to not
specify any standardized options for the 2019 benefit year, and not to
provide differential display for standardized options on
HealthCare.gov. Agents, brokers, and issuers that assist consumers with
QHP selection and enrollment as described in Sec. 155.220(c)(3) and
Sec. 156.265(b), respectively, are also not required to provide
differential display for standardized options on those third-party
websites. We are finalizing the policies on standardized options as
proposed.
Comment: Many commenters supported the proposed policy to
discontinue standardized options for the 2019 plan year. Commenters
noted that they believed standardized options
[[Page 16975]]
stifled issuers' ability to develop innovative plan designs. Commenters
also noted that because of the differential display, issuers may have
offered and consumers may have purchased HHS-designed plans that did
not best meet consumers' needs. Other commenters noted that consumers
may have mistakenly thought that standardized options were superior to
other plans; and that other tools, such as AV, EHB, and other
HealthCare.gov plan filters were sufficient in assisting consumers in
selecting and comparing plans. Other commenters questioned the benefits
of standardized options.
Many other commenters supported HHS continuing to specify
standardized options, noting that they are a useful consumer-support
tool that aids in plan comparisons and selection and that withdrawing
the standardized options could create confusion for consumers,
especially those with low health literacy or certain health conditions.
Others noted that removing the standardized option designation could
make plan selection more difficult resulting in fewer people enrolling
in QHPs.
Some commenters noted that the standardized cost sharing encourages
issuers to innovate on other plan features and encourages issuers to
compete on networks and formularies. Other commenters noted that the
standardized plan designs ensure offerings had certain desirable
features, such as fewer specialty drug tiers and first dollar coverage.
Commenters noted that standardized options were voluntary and therefore
could not stifle innovation. Another commenter noted that removing
standardized options could result in issuers designing plans
specifically for a healthy population. Another commenter supported
making standardized options mandatory and expanding to include SADPs.
Response: As we noted in the proposed rule, we believe that not
specifying standardized options for the 2019 plan year will remove
disincentives for issuers to offer coverage with innovative plan
designs. We agree that issuers are in the best position to design and
offer innovative plan designs. We are similarly finalizing the removal
of the differential display of standardized options.
As we noted in the 2017 Payment Notice final rule,\41\ we designed
the standardized options to be as similar as possible to the most
popular (weighted by enrollment) QHPs in the FFEs in order to minimize
market disruption and impact on premiums. Consequently, we believe that
the plan design features, such as annual limitations on cost sharing
and deductibles, previously specified as part of standardized options
are mostly available to consumers in FFEs. Therefore, we do not believe
it is necessary to mandate or otherwise further provide an incentive
for issuers to offer plans that meet the characteristics of
standardized options.
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\41\ 81 FR at 12289 (March 8, 2016).
---------------------------------------------------------------------------
We agree with commenters that HealthCare.gov plan filters for other
tools are sufficient to enable most consumers to make plan selections.
However, we continue to explore strategies to make shopping on
HealthCare.gov as easy as possible, and to better support consumers in
choosing coverage that is best for them. Consumers are able to select a
QHP based on metal level, and are generally offered coverage of a
similar set of essential health benefits. We agree with commenters that
certain populations with specific health conditions may not purchase a
QHP that best meets their needs if they merely select based on a
standardized option designation. Standardized options offer simple plan
comparisons at a high level to assess comparability on cost sharing of
certain services. However, consumers with specific health conditions
may be better served by a different QHP that provides benefits better
suited for their individual needs. By removing standardized options, we
are mitigating the risk that consumers with special coverage needs
choose a standardized option plan that may not provide the optimal mix
of cost-sharing protections, benefits, and networks for their
situation. We believe these benefits outweigh any potential additional
difficulty in selecting a QHP that could result from the elimination of
the standardized option designation.
For these reasons we are finalizing the policy as proposed.
Comment: One commenter requested clarification that if the proposal
is finalized as proposed standardized options would not appear on
HealthCare.gov or be designated in public use files. Another commenter
requested that HHS release data related to standardized options
offerings and enrollment publicly prior to making a decision about
ceasing to specify standardized options.
Response: The proposal is being finalized as proposed. Therefore
standardized options will not display as ``Simple Choice Plans'' on
HealthCare.gov, nor will information be collected and reported in
public use files for the 2019 benefit year. We have previously released
data regarding standardized options offerings in public use files. We
believe releasing data regarding recent enrollment in standardized
options could cause competitive harm to issuers, but intend to continue
to release historical enrollment data for all QHPs, including
standardized options, in the future.
Commenter: A commenter noted that standardized options assist
States in Federal and State review, certification, and oversight.
Response: States have previously been able to complete QHP
certification, review, and oversight for issuers that are not offering
standardized options, and therefore, we believe that they will be able
to continue doing so without relying on standardized options.
2. General Standards Related to the Establishment of an Exchange
a. Flexibility for State Exchanges and State Exchanges on the Federal
Platform (Sec. 155.106 and Sec. 155.200)
While the PPACA allowed each State to operate its own State
Exchange, currently 11 States and the District of Columbia operate
their own Exchanges, five States utilize the SBE-FP model, and FFEs
operate in the remaining 34 States. We seek to support innovation by
States operating State Exchanges by providing opportunities for
increased program flexibilities to help support the retention and
financial self-sustainability of States that adopted the SBE model. In
particular, we sought comment on how HHS can best support State
Exchange efforts to utilize commercial platform services, including
what type of technical support would be useful and what, if any,
specific regulatory changes would facilitate the use of these services.
We also proposed to explore strategies to make the SBE-FP model
more appealing and viable to States with FFEs, as well as to support
retention of existing SBE-FPs. As codified in the 2017 Payment Notice,
the SBE-FP model allows States to establish the legal status of their
Exchanges as State Exchanges while leveraging the economies of scale
available through the Federal eligibility and enrollment platform and
information technology infrastructure. The SBE-FP model offers States
opportunities to retain more control over their Exchanges than if an
FFE operated in the State, as it allows them to control plan management
and consumer assistance activities, without the additional
responsibility of building the infrastructure required to operate an
information technology eligibility and enrollment platform.
Accordingly, we seek to explore options for streamlining current
requirements and leveraging private sector and Federal platform
[[Page 16976]]
technologies and advances to increase opportunities for those States
interested in remaining or becoming SBE-FPs. We also intend to continue
to explore areas where current authority, technology, and operational
capacities would permit HHS to provide additional options in
operational functions to SBE-FPs and provide SBE-FPs with a greater
role in decision-making. We sought comment on ways to strengthen and
enhance the SBE-FP model.
Comment: Several commenters supported further actions by HHS to
allow SBE-FPs greater access to enrollment data and consumer assistance
tools, and supported efforts to customize the Federal platform to meet
SBE-FP needs. Other commenters encouraged HHS to lower or eliminate the
SBE-FP user fee, increase predictability of the user fee, or to tailor
the user fee to an Exchange based on use of certain Federal platform
options. One commenter proposed HHS consider new Federal grant funding
for State Exchanges to purchase commercial technology platforms, while
others requested HHS reduce market uncertainty and further streamline
eligibility verification requirements to support the success of SBEs.
Another commenter requested that HHS promote regional State Exchanges
to mitigate financial sustainability challenges faced by smaller
States. Several commenters encouraged the use of direct enrollment and
enhanced direct enrollment capabilities and private and Federal
platform technologies by State Exchanges and SBE-FPs. One commenter
suggested State Exchanges consolidate into a single entity utilizing
Federal platform technology while enabling private partnerships and
non-profit entities to perform consumer facing functions. Two
commenters suggested the Federal platform include functionality to
support independent enrollment in dental plans in SBE-FPs.
Other commenters supported the concepts of innovation and increased
customization of the Federal platform, but suggested HHS prioritize
improvements to the overall HealthCare.gov system infrastructure before
focusing on State-specific enhancements to HealthCare.gov. Some
commenters emphasized the need for guardrails to protect patients and
consumers as HHS explores flexibilities and innovations in Exchange
models. One commenter expressed concern that HHS's support for
expanding the SBE-FP model signaled an intent to reduce Federal support
for small population States and requested assurance the FFE would
continue to be available for small States.
Response: We appreciate the comments, and will consider them as we
continue to explore incentives and program flexibilities for the SBE
and SBE-FP models. The SBE-FP model was intended to improve States'
ability to operate efficient Exchanges by providing the option for
State Exchanges to agree to rely on the Federal eligibility and
enrollment platform and information technology infrastructure to carry
out certain functions in order for the State to fulfill requirements as
a State Exchange. We continue to explore ways to make this a more
appealing option to States that currently have FFEs. In 2017, at the
request of the SBE-FPs, we shared new data with the SBE-FPs to enhance
their consumer outreach functions, customer relationships, and fiscal
planning activities. HHS intends to continue to enhance these data-
sharing efforts with SBE-FPs to support their ability to fulfill their
responsibilities. However, at this time, HHS is unable to offer a menu
of Federal platform functionalities to an SBE-FP. Likewise, at this
time, HHS is unable to offer State-specific customization of the
Federal platform agreement, but will continue engaging with SBE-FPs to
refine the agreement. We also note that Sec. 155.140 permits States to
participate in regional Exchanges spanning two or more States. This
allows States interested in operating State Exchanges to partner with
each other and leverage economies of scale by sharing a common
information technology infrastructure or platform, and HHS encourages
States to explore this as an option. States that are interested in this
option would need to obtain HHS approval to operate as a regional
Exchange, fulfill the requirements under Sec. 155.140, and meet the
functional requirements in 45 CFR part 155 that are applicable to
States who wish to operate their own SBE. We also note that HHS has
provided the authority and flexibility for SBEs to utilize the direct
enrollment pathway as an alternative option for enrolling consumers
into SBEs. HHS continues to encourage SBEs and SBE-FPs to explore this
option in the context of evaluating options that best suit the needs of
their Exchange, State, and consumers.
b. Election To Operate an Exchange After 2014 (Sec. 155.106)
Section 155.106 describes the process for a State electing to
operate a State Exchange, terminating its State Exchange and
transitioning to an FFE, or seeking to operate an SBE-FP. This section
applies to both individual market and SHOP Exchanges. Currently, under
Sec. 155.106(c), as finalized in the 2017 Payment Notice, States can
elect to operate an individual market SBE-FP, an SBE-FP for SHOP, or
both. If a State operates an SBE-FP for SHOP, the SBE-FP utilizes the
Federal platform for enrollment, eligibility, and premium aggregation
functions.
As discussed more fully in section III.D.9 of this final rule, we
proposed changes to required SHOP functionality, effective on the
effective date of this rule, for plan years beginning on or after
January 1, 2018, under which qualified employers and employees could
enroll in SHOP plans by working with a QHP issuer or SHOP-registered
agent or broker. As a result of the finalization of these proposals,
many Federal platform functions currently available to a State
operating an SBE-FP for SHOP will no longer exist, including employee
eligibility, enrollment, and premium aggregation functions. Therefore,
States operating an SBE-FP for SHOP will no longer be able to utilize
the Federal platform for those functions.
We proposed to amend Sec. 155.106(c) to remove the option for
States to seek approval to operate an SBE-FP for SHOP after the
effective date of this rule, and are finalizing the policy as proposed.
Nonetheless, States that are currently operating an SBE-FP for SHOP,
which include Kentucky and Nevada, can choose to maintain their
existing SBE-FPs for SHOP, using the Federal platform functionality
that would remain, subject to the applicable requirements in Sec.
155.200(f)(4), which we are amending to align with the changes to SHOP
functionality requirements. Issuers in these SBE-FPs for SHOP will
continue to be subject to Sec. 156.350, which we are amending to align
with the changes to SHOP functionality requirements. For those issuers
that offer SHOP QHPs in SBE-FPs for SHOP beginning on or after January
1, 2018, the expected burden (as well as expected reduction in burden)
should be similar to that of issuers in the FF-SHOPs.
Comment: One commenter suggested HHS should consider continuing to
permit States to elect to operate as an SBE-FP for SHOP, to increase
the type of Exchange models available to States. Otherwise, we did not
receive substantive comments regarding the proposed changes to Sec.
155.106.
Response: As described above, as a result of the finalization of
the SHOP proposals described in this rule, the SHOP Federal platform
currently available to a State operating an SBE-FP for SHOP will
essentially no longer exist, including the Federal platform functions
of employee eligibility, enrollment, and premium aggregation
[[Page 16977]]
on which SBE-FPs for SHOP currently rely. Therefore, States operating
an SBE-FP for SHOP will no longer have an option to rely on the Federal
platform for those functions. We are finalizing the policy as proposed,
with a minor, non-substantive change to the regulatory text.
c. Additional Required Benefits (Sec. 155.170)
Section 1311(d)(3)(B) of the PPACA permits a State, at its option,
to require QHPs to cover benefits in addition to the EHB, but requires
a State to make payments, either to the individual enrollee or to the
issuer on behalf of the enrollee, to defray the cost of these
additional State-required benefits. In previous rulemaking, we directed
States to identify additional State-required benefits that are subject
to defrayal and provided direction on how QHP issuers in a State must
calculate the cost of those benefits.\42\
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\42\ See 155.170(b) and (c). Also see the EHB Rule, available at
https://www.gpo.gov/fdsys/pkg/FR-2013-02-25/pdf/2013-04084.pdf, the
2016 Payment Notice Final Rule, available at https://www.gpo.gov/fdsys/pkg/FR-2015-02-27/pdf/2015-03751.pdf, and the 2017 Payment
Notice Final Rule, available at https://www.gpo.gov/fdsys/pkg/FR-2016-03-08/pdf/2016-04439.pdf.
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We made a number of proposals at Sec. 156.111 related to State
changes to EHB-benchmark plans beginning for the 2019 plan year. In
light of those proposed changes, we stated that we were not proposing
any changes to the policies governing State-required benefits at Sec.
155.170. That is, whether a benefit mandated by State action could be
considered EHB would continue to depend on when the State enacted the
mandate (unless the benefit mandated was for the purposes of compliance
with Federal requirements). Under any of the proposed methods for a
State to select a new EHB-benchmark plan, benefits mandated by a State
action prior to or on December 31, 2011 would be considered EHB in that
State according to the continuing policy described above and would not
require State defrayal. However, State-required benefits mandated by
State action taking place after December 31, 2011, other than for
purposes of compliance with Federal requirements, would continue to be
considered in addition to EHB even if embedded in the State's newly
selected EHB-benchmark plan under the proposals at Sec. 156.111.
Therefore, their costs would be required to be defrayed by the State.
As discussed more fully in the preamble for Sec. 156.111, we
proposed that Sec. 155.170 would continue to apply in the same manner
as it currently applies to Sec. 156.110, and that the proposed Sec.
156.111, which offers States the flexibility to select a new EHB-
benchmark plan, would not remove the obligations required with regard
to maximum allowed generosity for a State's EHB-benchmark plan. For
further discussion of how the State mandate policy at Sec. 155.170
would apply to EHB under the proposals at Sec. 156.111 providing
States with options to select a new EHB-benchmark plan for plan years
beginning in 2020 and later, see the preamble to Sec. 156.111.
We sought comments on this approach. Specifically, we were
interested in comments on different applications of the State mandate
policy to the proposed policy for EHB-benchmark plan selections at
Sec. 156.111 that would increase State flexibility while also being
cost effective for States, consumers, and the Federal government, such
as an approach that would allow States the flexibility to update
benefits mandated by State action prior to or on December 31, 2011,
that are considered EHB, so long as the State can prove that the update
to the State mandate is budget neutral.
In this final rule, we are finalizing the approach described above
of not making changes to the policy under Sec. 155.170.
Comment: Many commenters requested changes to the policies
governing State-required benefits at Sec. 155.170 in light of new EHB-
benchmark plan selection options established at Sec. 156.111. Some of
these commenters were concerned about States selecting a more generous
benchmark plan under the proposed options at Sec. 156.111(a) that
could reduce affordability by allowing the selecting State to include
another State's mandates in its benchmark plan and thereby allow the
selecting State to indirectly adopt another State's mandates without
defrayal. These commenters recommended that States be required to
defray the costs of any additional required benefits that result from
the selection of a new EHB-benchmark plan if those benefits are more
generous than the State's previous EHB-benchmark plan, regardless of
whether the additional benefits were put in place by the newly-selected
EHB-benchmark plan or were the result of benefits mandated by State
action in the selecting State. Other commenters were concerned that the
current policy of requiring States to defray the costs of State-
required benefits mandated after December 31, 2011, other than for
purposes of compliance with Federal requirements, would prevent States
from updating benefits in response to medical advances and their
population's changing needs. These commenters requested that HHS create
a public process for States to consider new State-required benefits as
EHB without additional cost to the State. Other commenters opposed
requiring States to defray mandated benefits at all, because the policy
discourages States from ensuring access to key health care services for
consumers--such as autism and opioid dependency disorder services.
Several commenters supported the proposal to maintain the policies at
Sec. 155.170, noting that section 1302(b)(4)(H) of the PPACA grants
the Secretary flexibility to update EHB benefit categories as it
becomes necessary to do so. Other commenters believed that a stricter
standard regarding defrayal is needed to ensure that States comply with
the current defrayal requirement at Sec. 155.170, and to ensure that a
sufficient defrayal requirement is in place based on new State EHB-
benchmark plan selection options at Sec. 156.111.
Response: We understand the importance of benefit mandates to
States under the policies described above. With the finalization of the
State's new EHB-benchmark plan options at Sec. 156.111, States will
continue to have the authority to implement benefit mandates as part of
EHB, in accordance with Sec. 155.170.
Specifically, if a State selects a new EHB-benchmark plan under any
of the options finalized in this rule at Sec. 156.111, the benefits
mandated by the selecting State's action prior to or on December 31,
2011 will continue to be considered EHB and will not be subject to
defrayal, in accordance with Sec. 155.170. If the State is selecting
from another State's EHB-benchmark plan under the first or second
option, as discussed in preamble to Sec. 156.111, and the selected
EHB-benchmark plan (or category of services) includes benefits mandated
by the State from which the plan originated that are EHB, those
benefits will also be incorporated into the selecting State's EHB-
benchmark plan without a requirement that the selecting State defray
their related costs, unless the selecting State has its own mandates
regarding these same benefits and those mandates meet the requirements
for defrayal in Sec. 155.170.
Relatedly, our decision to maintain the policies governing State-
required benefits at Sec. 155.170 is motivated by our goal to provide
States with more flexibility and reduce administrative burden for
selecting a new EHB-benchmark plan under Option 1 or 2 described in
Sec. 156.111. Specifically, we believe that many benefits that are
State mandates are likely already embedded
[[Page 16978]]
in States' existing 2017 EHB-benchmark plans, and removing them would
be complicated for a selecting State. In particular, we are concerned
that this additional level of effort would create a barrier to States
trying to select another State's 2017 EHB-benchmark plan under Options
1 or 2 being finalized at Sec. 156.111(a)(1) and (2), particularly
when several types of benefits mandated by State action overlap with
one of the ten EHB categories. More specifically, because benefits
mandated by State action are generally EHB if the mandates were enacted
on or before December 31, 2011, and the 2017 EHB-benchmark plans that
are used for the options under Sec. 156.111 are based on base-
benchmark plans that were available in 2014, we believe that the
majority of benefits mandated by State action that are EHB in
accordance with Sec. 155.170 are already embedded in the originating
State's EHB-benchmark plan documents.
We also note that we are finalizing that all options for a State to
select a new EHB-benchmark plan described in Sec. 156.111 are limited
by a generosity standard. This generosity standard will limit the
State's ability to increase the overall scope of benefits in its EHB-
benchmark plan beyond the generosity of a set of comparison plans that
includes a State's 2017 EHB-benchmark plan and any of the State's base-
benchmark plan options for the 2017 plan year described in Sec.
156.100(a)(1), supplemented as necessary under Sec. 156.110. In
practice, this requirement limits States' overall ability to select a
new EHB-benchmark plan that transfers benefits that were previously
only applied to the State's large group market, or that were mandated
by other States' actions prior to 2012, into its new EHB-benchmark
plan. As a result, we believe that this approach balances our goal to
promote State flexibility with the need to preserve coverage
affordability. For additional discussion on considerations related to
Sec. 155.170 for States that select a new EHB-benchmark plan using an
option described at Sec. 156.111, see the preamble to section Sec.
156.111.
3. General Functions of an Exchange
a. Functions of an Exchange (Sec. 155.200)
The 2017 Payment Notice finalized requirements at Sec.
155.200(f)(2) for SBE-FPs to establish and oversee certain requirements
for their QHPs and QHP issuers that are no less strict than the
requirements that apply to QHPs and QHP issuers on an FFE. Due to the
operational complexities in implementing these requirements from both
the State and Federal perspective, and to promote the goal of returning
regulatory authority over the insurance markets to States, we proposed
to eliminate requirements for SBE-FPs to enforce FFE standards for
network adequacy at Sec. 155.200(f)(2)(ii) and essential community
providers at Sec. 155.200(f)(2)(iii). Instead, we proposed that the
SBE-FPs, like other State Exchanges, would have the flexibility to
determine how to implement the network adequacy and essential community
provider (ECP) standards with which issuers offering QHPs through the
SBE-FP must comply. We believe SBE-FPs are best positioned to determine
these standards for the QHP certification process in their States, and
that the removal of the requirement that SBE-FPs establish and oversee
requirements for their issuers that are no less strict than the manner
in which these regulatory requirements are applied to FFE issuers would
streamline certain aspects of the QHP certification process, and return
traditional insurance market regulatory authority to the States.
Additionally, HHS proposed that, for 2019 plan years and later, the
FFEs would rely on State reviews of network adequacy standards where
the States have been determined to have an adequate review process.
Accordingly, we believe similar deference should be granted to States
with SBE-FPs. We believe these changes will further empower SBE-FPs to
use their QHP certification authority to encourage issuers to stay in
the Exchange, enter the Exchange for the first time, or expand into
additional service areas. We are finalizing these changes as proposed.
We also proposed to remove the requirement at Sec.
155.200(f)(2)(iv) that QHP issuers in SBE-FPs comply with the Federal
meaningful difference standard to reflect the removal of Sec. 156.298
described elsewhere in this rule. We are finalizing this change as
proposed.
Comment: Several commenters opposed eliminating requirements for
SBE-FPs to enforce FFE standards for network adequacy at Sec.
155.200(f)(2)(ii) and ECPs at Sec. 155.200(f)(2)(iii) for the 2019
benefit year and beyond. They urged HHS to continue requiring SBE-FPs
to enforce these FFE standards, stating that some State Exchanges that
do not currently use the Federal platform have adopted less robust
network adequacy and ECP standards, which are critical to providing
access to providers that serve vulnerable populations. Other commenters
supported this proposal if the States have an adequate review process,
and encouraged HHS to monitor State oversight of networks to ensure
that the States in fact have the capacity to ensure health plan
compliance. Other commenters supported this proposal, stating that they
believe networks are best developed and regulated at the State level to
allow for variations in State geography, demographics, and market
conditions.
Response: We are finalizing the proposal to remove the requirement
that SBE-FPs establish and oversee requirements for their issuers that
are no less strict than the manner in which these regulatory
requirements are applied to FFE issuers. We believe SBE-FPs are best
positioned to determine these standards for the QHP certification
process in their States, and elimination of this requirement would
streamline certain aspects of the QHP certification process by reducing
oversight burden on SBE-FPs.
Section 155.200(f)(4) describes requirements for States that
operate an SBE-FP for SHOP. As discussed earlier in this preamble,
although we proposed that States can no longer elect to operate SBE-FPs
for SHOP after the effective date of this rule, which we are finalizing
as proposed, Kentucky and Nevada are already approved to operate SBE-
FPs for SHOP, and thus the requirements in Sec. 155.200(f)(4) remain
relevant for those SBE-FPs for SHOP. Therefore, we proposed to amend
Sec. 155.200(f)(4) to reflect the proposed amendments (described in
section III.D.9 of this final rule) under which the functionality of
the FF-SHOPs' platform would be reduced for plan years beginning on or
after January 1, 2018. Specifically, we proposed to amend the
introductory text to Sec. 155.200(f)(4) to describe the requirement
applicable, effective on the effective date of this rule for plan years
beginning on January 1, 2018 and beyond, and to make the requirements
in paragraphs (f)(4)(i) through (vii), effective on the effective date
of this rule applicable for only plan years beginning prior to January
1, 2018.
Specifically the requirements in (f)(4)(i) and (iv), which require
SBE-FPs for SHOP to align their premium payment and employer
contribution calculation methodologies with those used by the Federal
platform, would not apply for plan years beginning on or after January
1, 2018, effective on the effective date of this rule. Because under
our amendments to Sec. 155.705 and newly finalized Sec. 155.706, for
plan years beginning on or after January 1, 2018, the Federal platform
for SHOP will no longer calculate premium rates or employer
contributions, and will no longer aggregate premium payments (as of the
effective date of the final rule),
[[Page 16979]]
there will be no further need for such alignment for plan years
beginning on or after January 1, 2018.
Because under the approach we are finalizing, the Federal platform
will continue to include plan display with premium amounts, we did not
propose changes to the requirement that States operating an SBE-FP must
require its QHP issuers to make any changes to rates in accordance with
the timeline applicable in a Federally-facilitated SHOP under current
Sec. 155.705(b)(6)(i)(A), which regulation is mirrored in our proposed
introduction of Sec. 155.706(b)(6)(i)(A). However, we proposed to
specify that this requirement applies in the introductory text to
(f)(4), to reflect the proposed change to make the requirements in
(f)(4)(i) through (vii) applicable for only plan years beginning prior
to January 1, 2018, effective on the effective date of this rule.
Additionally, because under the approach we are finalizing, for
plan years beginning on or after January 1, 2018, the Federal platform
will, effective on the effective date of this rule no longer calculate
whether a qualified employer has met the applicable minimum
participation rate, there will no longer be any need for States
operating an SBE-FP for SHOP to align their minimum participation rate
requirements and calculation methodologies with those applicable in the
FF-SHOPs for plan years beginning on or after January 1, 2018.
Therefore, we proposed that this requirement would only apply for plan
years beginning prior to January 1, 2018, effective on the effective
date of this rule.
To align with our amendments at Sec. 155.725 and newly finalized
Sec. 155.726, under which the FF-SHOPs, effective on the effective
date of this rule, for plan years beginning on or after January 1,
2018, will no longer establish annual employee open enrollment periods,
or establish effective dates of coverage for an initial group
enrollment or group renewal, we also proposed that the requirements in
Sec. 155.200(f)(4)(v) and (vi) would only apply for plan years
beginning prior to January 1, 2018, effective on the effective date of
this rule. Finally, to align with our amendments at Sec. 155.735,
under which the FF-SHOP, effective on the effective date of this rule
for plan years beginning on or after January 1, 2018, will no longer
determine the timing, form, and manner in which coverage or enrollment
in a SHOP QHP may be terminated, we proposed that the requirement in
Sec. 155.200(f)(4)(vii) would only apply for plan years beginning
prior to January 1, 2018, effective on the effective date of this rule.
We are finalizing as proposed the changes to Sec. 155.200.
Substantive comments related to SHOP proposals are summarized in
section III.D.9 of this final rule.
b. Navigator Program Standards (Sec. 155.210)
Each Exchange is required under section 1311(d)(4)(K) and 1311(i)
of the PPACA to establish a Navigator program under which it awards
grants to entities that, among other things: Conduct public education
activities to raise awareness of the availability of QHPs, distribute
fair and impartial information concerning enrollment in QHPs and the
availability of PTCs and CSRs, and facilitate enrollment in QHPs. Under
section 1311(i)(2)(B) of the PPACA, these entities may include trade,
industry, and professional associations; commercial fishing industry
organizations; ranching and farming organizations; community and
consumer-focused nonprofit groups; chambers of commerce; unions;
resource partners of the Small Business Administration; other licensed
insurance agents and brokers; and other entities that meet the
statutory requirements at section 1311(i)(3), (4), and (5) of the
PPACA.
Currently, Sec. 155.210(c)(2) specifies that each Exchange must
include among its Navigator grantees both a community and consumer-
focused nonprofit group and at least one other entity that is from one
of the other categories listed at Sec. 155.210(c)(2), including other
public or private entities or individuals that meet the requirements of
Sec. 155.210. Section 155.210(c)(2)(viii) specifies that these other
entities may include Indian tribes, tribal organizations, urban Indian
organizations, and State or local human service agencies.
To maximize the flexibility and efficiency of the Navigator
program, we proposed to amend Sec. 155.210(c)(2) to remove the
requirements that each Exchange must have at least two Navigator
entities and that one of these entities must be a community and
consumer-focused nonprofit group. As discussed further below, we are
finalizing this amendment as proposed. We believe removing these
requirements will provide Exchanges with improved flexibility to award
funding to the number and type of entities that will be most effective
for the specific Exchange. We believe that eliminating the requirement
to have at least two Navigator entities will allow each Exchange to
optimally use the funding amounts available to direct investments to
effective and efficient Navigators, which may include selecting a
single, high performing grantee in an Exchange.
The requirement that one Navigator grantee in each Exchange must be
a community and consumer-focused nonprofit group may unnecessarily
limit an Exchange's ability to award grants to the strongest
applicants, particularly in an Exchange that opts under this final rule
to have only one Navigator grantee and where the strongest applicant is
not a community and consumer-focused nonprofit group. Keeping this
requirement would effectively exclude any other type of statutorily
eligible entities from becoming Navigators in an Exchange that opts to
have only one Navigator grantee. Eliminating this requirement will
provide Exchanges with the flexibility to target grants to the highest
scoring and performing entities, regardless of organization type.
Removing these requirements at Sec. 155.210(c)(2) will also
promote Exchange flexibility and autonomy to structure Navigator
programs tailored to each Exchange. An Exchange could award a grant to
a single Navigator entity from any of the permitted types.
Alternatively, Exchanges could elect to continue awarding two or more
grants, as they have been doing thus far, and include a community and
consumer-focused nonprofit group among those grantees.
Section 155.210(e)(7) requires each Navigator entity to maintain a
physical presence in the Exchange service area, so that face-to-face
assistance can be provided to applicants and enrollees. We proposed to
remove this requirement to provide more flexibility to each Exchange to
structure its Navigator program to best serve the Exchange service
area, and as discussed further below, are finalizing this amendment as
proposed. Under section 1311(i)(2)(A) of the PPACA and Sec.
155.210(c)(1)(ii), entities seeking to become Navigator grantees must
demonstrate to the Exchange that they have existing relationships, or
could readily establish relationships, with employers and employees,
consumers (including uninsured and underinsured consumers), or self-
employed individuals likely to be eligible for enrollment in a QHP.
Consistent with those provisions, Navigator grant applicants in the
FFEs are scored on their ability to make this demonstration. Based on
HHS's experience with Navigator programs in FFEs and other public
programs, we believe entities with strong relationships in their FFE
service areas tend to deliver the most effective outreach and
enrollment
[[Page 16980]]
results. However, we believe that each Exchange is best suited to
determine the weight to give a physical presence in the Exchange
service area when selecting Navigator entities, as long as the
Exchange's Navigator grantee selection process is consistent with
section 1311(i)(2)(A) of the PPACA and Sec. 155.210(c)(1)(ii).
For reasons similar to those motivating our proposed changes to
Sec. 155.210(e)(7), as well as to promote consistency across programs,
we proposed to remove the corresponding requirement at Sec. 155.215(h)
that requires maintenance of a physical presence in the Exchange
service area by all non-Navigator entities subject to Sec. 155.215. We
are also finalizing this amendment as proposed.
In addition to the requirement to maintain a physical presence in
the Exchange service area, Sec. Sec. 155.210(e)(7) and 155.215(h)
currently provide that, in an FFE, no individual or entity is
ineligible to operate as a Navigator or non-Navigator assistance
personnel solely because its principal place of business is outside of
the Exchange service area. We did not propose to amend or remove that
language, and it will remain in effect.
In addition to seeking comment on the proposed amendments described
above, we also sought comment on statutorily acceptable alternative
types of entities that could serve as Navigators and on possible new
ways in which Navigators could carry out their duties.
Comment: We received comments in support of removing the
requirement that each Exchange must have at least two Navigator
entities. Several commenters believed that adopting this change could
assist HHS with ensuring that Navigator grants are expended efficiently
and effectively. Many commenters, however, expressed concern about
reducing the number of required Navigator entities per Exchange,
conveying that removing this requirement could potentially negatively
affect consumer access to in-person assistance, and therefore make it
harder for consumers to understand their coverage options and enroll in
health coverage. Several commenters suggested that having two Navigator
entities per Exchange ensures that an Exchange can have a general
entity and one more tailored to specific needs within an Exchange, such
as a focus on young adults, limited English proficient individuals, or
other targeted populations.
Response: We agree with commenters who stated that removing these
requirements will provide Exchanges with improved flexibility to award
funding to the number and type of entities that would be most effective
for each specific Exchange. We appreciate the importance of consumer
access to experienced, in-person assistance, and believe this change
will allow each Exchange to optimally use available funding amounts,
such as by selecting a single, high-performing grantee in an Exchange.
In this way, we do not believe this change will have a detrimental
effect on the availability of professional, unbiased, in-person
consumer assistance. Additionally, the proposal does not require an
Exchange to have only one Navigator. It simply provides Exchanges with
that option. We are finalizing this change as proposed.
Comment: We received comments in support of removing the
requirement that each Exchange must have one Navigator entity that is a
community and consumer-focused nonprofit. Several of these commenters
supported HHS's promotion of Exchange flexibility with this change.
However, many commenters expressed concern about removing this
requirement, conveying that Navigators, and in particular independent,
nonprofit Navigators, have proven to be a critical resource for helping
consumers enroll in coverage that is appropriate for their needs in
previous enrollment periods. Many commenters stated that nonprofit
Navigator entities are unique among other types of Navigator groups
because they typically have expertise with one or more hard-to-reach
populations within their communities, such as veterans, limited English
proficiency individuals, or other targeted populations, and have the
trust of many community members. In addition, commenters suggested that
this requirement was initially added to address concerns about fraud,
abuse, and the difficulty that Exchanges faced overseeing other types
of Navigator entities.
Response: We agree with commenters who emphasized the importance of
funding nonprofit Navigator entities, and also agree that nonprofit
Navigator entities often have expertise with one or more hard-to-reach
populations within their communities. Nothing in this rule prevents an
Exchange from selecting and funding a nonprofit Navigator entity if it
determines that such an entity best meets the needs of the community
served by the Exchange. However, we also recognize that there are
circumstances in which another type of entity may be the strongest
applicant. In these cases, an Exchange that chooses to have only one
Navigator grantee (as permitted by the change finalized in this rule),
would be unable to select its strongest applicant absent a change to
the requirement that one Navigator grantee in each Exchange must be a
community and consumer-focused nonprofit group. We also agree with
commenters that removing this requirement will support Exchange
flexibility and autonomy to structure Navigator programs tailored to
each Exchange and target grants to the highest scoring and performing
entities, regardless of organization type. We believe that Exchanges
are well-situated to determine the proper use of the funding amounts
available and are able to determine the type of entity or entities that
will serve their Exchange service areas best. We are finalizing this
change as proposed.
Comment: We received comments in support of removing the standard
requiring Navigators to maintain a physical presence in the Exchange
service area. Several commenters believed that removing this
requirement will provide Exchanges with greater flexibility and enable
them to expand options for consumer support. On the other hand, many
commenters believed that entities not physically present in an Exchange
service area may not be able to provide a full spectrum of local
outreach, education, and assistance to support enrollment and post-
enrollment activities. Many commenters suggested that removing this
requirement would negatively affect hard-to-reach populations, as the
in-person assistance provided by Navigator entities is often the only
known resource and form of support for some low-income and other at-
risk populations. In addition, some commenters believe that web or
phone-based assistance is a poor substitute for in-person assistance
delivered by a known and trusted community-based organization, and that
this is particularly true for those living with significant health
needs for whom remote assistance may prove inadequate and frustrating.
Response: We agree with commenters who emphasized the importance of
providing more flexibility to each Exchange to structure its Navigator
program to best serve the Exchange's service area. As we stated in the
proposed rule, we believe that entities with a physical presence and
strong relationships in their FFE service areas tend to deliver the
most effective outreach and enrollment results. Nothing in this final
rule prevents an Exchange from selecting grantees that are physically
present and available to provide a spectrum of in-person, local
outreach, education, and assistance, including directing these services
[[Page 16981]]
towards vulnerable and hard-to-reach populations, if the Exchange
elects to weight its selection process in that way and its selection
process is consistent with section 1311(i)(2)(A) of PPACA and Sec.
155.210(c)(1)(ii). Furthermore, we believe that there are various
organizations that might prove to be promising partners in the delivery
of both local and remote consumer assistance with regard to health
coverage enrollment and education. While in-person assistance may be
more helpful than remote services in some situations, we believe that
determining which entities are well-situated to serve consumers within
a particular Exchange is best left up to each Exchange. By allowing
Exchanges greater flexibility, each Exchange will be better able to
ensure that its service area can be assisted by the entity or entities
that best fits the needs of its population. We are finalizing this
change as proposed.
Comment: We received comments about the potential use of other
entities to provide enrollment assistance or remote services to
consumers, beyond Navigator entities. Some commenters conveyed that
other types of organizations are well-situated to provide enrollment
assistance, such as local agents and brokers and direct enrollment
partners. Some commenters believe that an approach to consumer
assistance that leverages experts from different types of organizations
that have strong ties to the community is a comprehensive way to
provide consumers with the best available expertise.
Response: We agree that local collaboration and leveraging
community partnerships can help in reaching marginalized communities.
For FFEs, we will take these comments into consideration when drafting
Navigator selection criteria for Navigator funding opportunity
announcements in future years. While agents, brokers, and direct
enrollment partners might in many cases not be eligible to become
Navigators due to statutory limitations on Navigator eligibility at
section 1311(i)(4) of PPACA, we also agree that agents, brokers, and
direct enrollment partners can be well situated to provide enrollment
assistance or remote services to consumers, and we intend to continue
to work with these stakeholders to ensure consumers in FFEs have access
to a range of enrollment assistance, including Navigators.
c. Standards Applicable to Navigators and Non-Navigator Assistance
Personnel Carrying Out Consumer Assistance Functions Under Sec. Sec.
155.205(d) and (e) and 155.210 in a Federally-Facilitated Exchange and
to Non-Navigator Assistance Personnel Funded Through an Exchange
Establishment Grant (Sec. 155.215)
For a discussion of the provisions of this final rule related to
standards applicable to non-Navigator Assistance Personnel subject to
Sec. 155.215, please see the preamble to Sec. 155.210.
d. Standards for Third-Party Entities To Perform Audits of Agents,
Brokers, and Issuers Participating in Direct Enrollment (Sec. 155.221)
HHS proposed new standards in the proposed rule to replace the
standards set forth in the 2018 Payment Notice for Sec. 155.221 for
third-party onboarding operational readiness reviews and audits for
direct enrollment partners. HHS also proposed to expand the
applicability of this section to require issuers, in addition to agents
and brokers, participating in direct enrollment to engage third-party
entities to conduct the required operational readiness reviews. We
proposed a conforming edit to Sec. 156.1230(b)(2) to reflect this
proposal.
HHS proposed to implement an approach wherein agents, brokers, and
issuers that participate in direct enrollment and use their own
internet website for QHP selection or to complete the Exchange
eligibility application would select their own third-party entities for
conducting audits, rather than requiring HHS to initially review and
approve these entities. As detailed in the proposed rule, HHS
anticipates this approach would reduce the regulatory burden for
agents, brokers, and issuers, and reduce duplicative HHS oversight.
This approach will also reduce the burden on third-party entity
reviewers.
Beginning with the open enrollment period for the 2019 benefit
year, we proposed that an agent, broker, or issuer must engage a third-
party entity that meets the standards outlined in the new Sec.
155.221(b) to conduct an annual operational readiness review prior to
participating in direct enrollment. Consistent with Sec.
155.220(c)(3)(i)(K) and Sec. 156.1230(b)(2), the operational readiness
review would be performed using the third parties' own audit processes
and methods subject to HHS-defined specifications and requirements. The
third-party entity's review would verify compliance by the agent,
broker, or issuer with the applicable requirements in Sec. Sec.
155.220, 155.260, 156.265, and 156.1230, and would need to be completed
prior to the use of the agent, broker, or issuer internet website for
submission of an Exchange application or completion of QHP selection.
HHS would publish technical guidance outlining the review standards and
other operational details, as well as provide other resources to assist
the third-party entities in conducting the reviews at a later date. As
outlined in the last sentence of the new Sec. 155.221(a), the third-
party entity would be a downstream or delegated entity of the agent,
broker, or issuer that participates or wishes to participate in direct
enrollment. Therefore, these third-party entities would be subject to
HHS oversight as delegated or downstream entities of an agent, broker,
or issuer, and the agent, broker, or issuer will remain responsible for
compliance with all applicable direct enrollment requirements.
We also proposed revisions to Sec. 155.221(b), which establishes
standards that third-party entities must satisfy to perform the reviews
to demonstrate operational readiness under Sec. 155.220(c)(3)(i)(K)
and Sec. 156.1230(b)(2), beginning with the open enrollment period for
the 2019 benefit year. The proposed new introductory language at Sec.
155.221(b) aligns with the new approach where the agent, broker, or
issuer selects the third-party entity to perform the audit under
paragraph (a). As proposed, new Sec. 155.221(b)(1) would require the
entity to have experience conducting audits or similar services,
including specific experience with relevant privacy and security
standards due to the operational requirements of the current direct
enrollment processes and any potential future enhancements. This would
include demonstrated experience with current National Institute of
Standards and Technology (NIST) SP 800-53 or the HIPAA Security Rule
standards, and the review of compliance with those standards. We
proposed that auditors must also be capable of performing penetration
testing on all interfaces that collect personally identifiable
information or connect with HHS. We proposed to modify Sec.
155.221(b)(2) to include issuers participating in direct enrollment and
to expand the scope of the audit to also include review of compliance
with other applicable program requirements (for example, website
design, or consumer disclosures). Under proposed Sec. 155.221(b)(3),
auditors would be required to collect, store, and share with HHS all
data related to its audits of
[[Page 16982]]
agents, brokers, and issuers under paragraph (a) in a manner, format,
and frequency specified by HHS until 10 years from the date of
creation, and would be required to comply with the privacy and security
standards HHS adopts for agents, brokers, and issuers as required in
accordance with Sec. 155.260.
The proposed revisions to paragraph (b)(4) would implement a
conflict of interest standard that requires disclosure of financial
relationships between a third-party entity conducting a direct
enrollment operational readiness review and the agent, broker, or
issuer. In addition, the third-party entity would be required, under
Sec. 155.221(b)(5), to comply with all applicable Federal and State
requirements; under Sec. 155.221(b)(6), to ensure, on an annual basis,
that appropriate staff successfully complete operational readiness
review training as established by HHS prior to conducting audits under
paragraph (a) of this section; and, under Sec. 155.221(b)(7), to
permit access by the Secretary and the Office of the Inspector General
(OIG), or their designees, in connection with their right to evaluate
through audit, inspection, or other means, to the third-party entity's
books, contracts, computers, or other electronic systems, relating to
the third-party entity's audits of agents, broker's, or issuer's
obligations in accordance with Federal standards under paragraph (a) of
this section until 10 years from the date of creation. Finally, to
provide flexibility, under Sec. 155.221(c) an agent, broker, or issuer
would be permitted to engage multiple third-party entities to perform
the audits under paragraph (a) and each such third-party entity would
need to separately comply with the standards under paragraph (b). We
are finalizing these amendments as proposed, with a minor, non-
substantive change described below.
Comment: Most commenters were concerned that enrollment through a
non-governmental site would occur without proper oversight and
controls. They expressed concern about the potential for fraud, or the
possibility that agents, brokers, and issuers would unfairly direct
consumers to QHPs with which the agent, broker, or issuer, had an
existing relationship. Additionally, a number of commenters were
concerned about the potential for conflicts of interest arising from
relationships between the agents, brokers, and issuers and the third-
party auditors they select to conduct their audits.
Response: We are finalizing the modifications to Sec. 155.221 as
proposed, with a minor non-substantive edit to paragraph (b)(7) to
remove the acronym ``OIG''. We have put in place guidelines and
processes to oversee the activities of agents, brokers, and issuers
participating in direct enrollment, and anticipate continuing to
monitor enrollments through the direct enrollment pathway for evidence
of fraud or abuse. While we acknowledge the potential for conflicts of
interest, we believe the required disclosures, continuous monitoring
and oversight, and standards established for third-party auditors will
sufficiently mitigate these concerns. Furthermore, we believe the
requirements being finalized in this rule will ensure that quality
operational readiness reviews are conducted. Lastly, we agree that it
is important that consumers enrolling using direct enrollment be able
to make informed decisions about coverage. We believe Sec. 155.220,
which establishes standards that apply when Exchange consumers select
an individual market QHP through an agent's or broker's website,
including a requirement that agents and brokers engaged in direct
enrollment display all QHP data provided by the Exchange, will help
promote informed consumer choice about all available QHPs, not just
those with which the agent or broker has an existing relationship.
4. Exchange Functions in the Individual Market: Eligibility
Determinations for Exchange Participation and Insurance Affordability
Programs
a. Eligibility Standards (Sec. 155.305)
Section 155.305(f)(4)(i) prohibits an Exchange from determining a
consumer eligible for APTC if APTC payments were made on behalf of the
tax filer for the consumer's household (or either spouse, if the tax
filer is married) for a previous year for which tax data would be used
for verification of household income and family size, and the tax filer
or his or her spouse did not comply with the requirement to file an
income tax return and reconcile APTC paid on their behalf that year.
Under the current regulation at paragraph (f)(4)(ii), Exchanges cannot
discontinue APTC due to a failure to file and reconcile (FTR)
associated APTC unless direct notification is first sent to the tax
filer that his or her eligibility will be discontinued as a result of
the tax filer's failure to comply with the requirement specified under
paragraph (f)(4)(i) of Sec. 155.305.
We proposed to amend Sec. 155.305(f)(4) by removing the direct
notification requirement in paragraph (f)(4)(ii) and revising the
remaining paragraph (f)(4) to move the content in paragraph (f)(4)(i)
into paragraph (f)(4).
We are finalizing this policy as proposed.
Comment: Nearly all commenters on this issue expressed concern that
relying on a notice that is not explicit to inform consumers that APTC
eligibility may be discontinued--without giving consumers the specific
reason and clearly instructing them how to correct the issue--is
insufficient to ensure those wishing to continue their eligibility have
the necessary information to do so. A few commenters stated that FFE
\43\ notices are often difficult for consumers to understand, and
consumers often bring their notices to assisters for help understanding
them. One commenter stated that this confusion can be compounded for
non-English or non-Spanish speakers, who often are unable to understand
notices because they are unable to read them and may not take the
notices to an enrollment assister or otherwise have the notice
translated in time to take the appropriate action. One commenter
recommended Exchanges send multiple notices regarding failure to file
and reconcile to affected consumers and tax filers.
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\43\ All Exchanges using the Federal eligibility and enrollment
platform, including SBE-FPs, take the same approach to handling FTR
associated APTC. Therefore, in this section, the term ``FFE''
describes all Exchanges using the Federal eligibility and enrollment
platform.
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Response: We recognize that describing complex information about
eligibility for APTC to consumers involves a complicated balance
between providing complete and accurate information, and being clear
and concise enough that the consumer is likely to read and understand
the information. Understanding this information can be especially
challenging for non-English speakers. Exchanges must notify consumers
when they make eligibility determinations based on FTR, but rules on
the disclosure of Federal tax information (FTI) present significant
challenges in communicating with this population. Historically, all
communications regarding FFE applicants and enrollees are addressed to
the household contact, who in most cases is the tax filer for the
applicants on the relevant application. Internal Revenue Service (IRS)
rules generally prohibit the disclosure of FTI to anyone other than the
tax filer, and FTI includes all information from a tax return,
including information as to whether a tax return has been filed with
IRS. Also considered FTI is any list that is generated based only on
information that is FTI itself. For example, a list of consumers who
have not filed a tax return is considered FTI. The FFE's current
noticing infrastructure does not
[[Page 16983]]
have FTI privacy safeguards built into its system to send notices to
tax filers (as distinct from the household contact), to store notices
in a manner compliant with required protections for FTI, or to
establish user permissions for approved Exchange and Exchange
contractor personnel only to access these notices for operationally
necessary purposes, such as Call Center support, casework, or appeals.
To avoid unauthorized disclosure of FTI to individuals who are not
the relevant tax filer, the FFE sends notices to FTR and non-FTR
consumers that contain language regarding FTR, but also language that
is broad enough to apply to all consumers who receive them; these
notices are referred to as ``combined notices.'' For example, the FFE
sends the same Marketplace Open Enrollment Notice to three groups of
consumers at risk for APTC discontinuation in the upcoming coverage
year: Those flagged as FTR, those for whom the FFE has received updated
income information that suggests the consumers may have income too high
to qualify for APTC, and those who did not permit the Exchange to check
IRS data. Because the combined notices apply and are sent to some
consumers who are currently unaffected by FTR, and not exclusively to
individuals who are affected by FTR, these notices are not considered
FTI under IRS rules and are able to be sent using the standard FFE
notice functionality.
To supplement the combined notice, in November 2017, the FFE also
mailed warning notices that complied with FTI rules to tax filers on
whose behalf APTC was being paid but for whom the FFE had information
the tax filer had not met the requirement to file and reconcile. These
notices, which we refer to as ``direct notices,'' urged the tax filers
to file and reconcile to avoid losing APTC starting in January 2018. To
comply with FTI requirements, the direct notices were not generated by
the FFE itself; rather, data was securely sent to an FTI-compliant
print contractor for printing and mailing. In order to be FTI-
compliant--including being accessible only to the tax filer--direct
notices are not available through the online Exchange account for the
application.
We intend for the FFE to continue sending two notices in advance of
open enrollment where the Exchange has information that the tax filer
on whose behalf APTC is being paid has failed to meet the requirement
to file and reconcile: (1) A combined notice provided according to the
communication preference set for the household contact (electronic or
via U.S. mail) that will be available in consumers' online accounts and
to the Exchange call center; and (2) a direct notice sent via U.S. mail
to the tax filer that is not available electronically in the
household's online account or to the Exchange call center, in order to
protect FTI. The direct notice serves to unambiguously explain that the
tax filer has been identified as having failed to meet the requirement
to file and reconcile and must come into compliance to avoid
termination of APTC. In 2018, the FFE will also send a combined notice
and a direct notice in connection with its periodic check of tax data
described in Sec. 155.330(e)(2)(iii)(B). As commenters noted, we
believe sending more than one notice may increase the likelihood that
consumers identify and read the notices and ultimately take action.
Comment: Many commenters disagreed with our suggestion that a
success rate of 60 percent of FFE household tax filers taking
appropriate action to file and reconcile in response to the combined
notices was sufficient and stated that 40 percent of households failing
to take appropriate action demonstrates the lack of clarity the
combined noticing approach creates among consumers.
Response: We agree that there is room for improvement on a success
rate of 60 percent. We foresee this success rate rising as the
Exchanges mature and consumers become more familiar with the
requirement to file and reconcile, and as the FFE continues pairing the
combined notices with direct notices to tax filers that more explicitly
address the requirement to file and reconcile.
Comment: Many commenters were concerned that our proposal to remove
Sec. 155.305(f)(4)(ii) does not comply with constitutional due process
rights--stating that when determining a tax filer ineligible to
continue receiving APTC, Exchanges must issue a direct individual
notice that contains a statement of the intended action, reasons for
the action, specific legal support for the action, an explanation of
the individual's hearing rights, and rights to representation and to
continued benefits. They expressed concerns about consumer confusion
given that neither the FFE's combined (non-FTI) notices nor follow-up
through the call center can give consumers definitive guidance on their
household tax filer's current tax filing status, whether they will be
redetermined ineligible for APTC for the upcoming benefit year (and
why), how to correct the problem, or how to challenge a redetermination
of eligibility for APTC.
Response: We recognize there are limitations with the combined
notices, which are unable to be explicit; however, this approach may be
the only option available to many State Exchanges whose systems
(including notice functionality) were not built for FTI compliance, and
for which costly and time-consuming infrastructure upgrades are
infeasible in the short term. As described previously, the FFE has
begun mailing FTI-compliant direct notices to tax filers that contain a
statement of the intended action, reasons for the action including
regulatory support for the action, and an explanation of the
individual's appeal rights if APTC is discontinued. While the FFE has
been able to develop this workaround to provide FTI-compliant notices
directly to tax filers, SBEs may have fewer options available to them.
While some SBEs may be able to contract with the FFE's print contractor
or another FTI-compliant contractor, we have heard that some are
required to use only in-State contractors, which can create a
significant barrier if there are no FTI-compliant contractors in the
State.
We agree with commenters that it is important for all Exchanges to
protect consumers' due process rights. Even in the case of an Exchange
that cannot arrange to send direct notices that explicitly address FTR
to the tax filer and that is limited to the combined notice approach,
we believe there are adequate protections for due process. First, the
tax filer still has an opportunity before the Exchange redetermines
eligibility to file a tax return (or an amended tax return, as
applicable) and reconcile APTC paid for the relevant benefit and tax
year. We expect Exchanges to send appropriate notices to households
affected by FTR that alert the tax filer that FTR may be the reason
enrollees' eligibility for APTC is at risk. Second, for enrollees whose
eligibility for APTC is terminated as a result of FTR, the enrollee
will receive an updated eligibility determination notice that contains
a full explanation of appeal rights. Enrollees who appeal may request
to continue receiving financial assistance during the appeal,
consistent with Sec. 155.525. We believe these measures, including the
option to maintain eligibility during an appeal, are consistent with
due process.
Comment: Some commenters stated that tax filers have a property
interest in the continued receipt of APTC for which they are eligible,
and challenged our belief that the financial and operational burden for
the Exchange of establishing a mechanism to notify tax filers without
making an unauthorized disclosure of protected FTI would be
[[Page 16984]]
out of proportion with the limited need for FTI handling in Exchange
operations, including generating notices. Some referenced a Federal
judicial decision \44\ stating that the ``public interest in assuring
that health benefits will not be erroneously terminated or denied
outweighs the State's competing fiscal and administrative concerns. Any
inconvenience the State might suffer is out-balanced by the State's and
the recipient's interest in providing health benefits to those who
cannot otherwise afford them.''
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\44\ Rodriguez by and through Corella v. Chen, 985 F.Supp. 1189
(D. Ariz. 1996).
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One SBE supported the proposal to remove the direct notification
provision in Sec. 155.305(f)(4)(ii), citing significant implementation
challenges to communicate with consumers without violating IRS's FTI
security protections. It stated that current FTR processes and
notifications being implemented by most Exchanges provide adequate
notice to consumers.
Response: HHS is committed to ensuring consumers eligible for APTC
maintain that important benefit; however, we also believe that ensuring
consumers are not receiving APTC improperly is necessary for program
integrity. Additionally, it is important to reduce burden on Exchanges,
which have varying capacities. Establishing a mechanism through which
to notify tax filers without making an unauthorized disclosure of
protected FTI is a heavy undertaking for an Exchange if its
notification system was not originally designed with that capability in
mind. For the FFE, it would involve not only changes to its notice
generation and storage infrastructure, including enhancements to
segregate and secure FTI data, but also substantial modification to its
entire account creation framework.\45\ For a number of SBEs, upgrading
their systems to be FTI compliant represents an undertaking that may be
infeasible to implement in the short term. SBEs may also be unable to
take the FFE's dual noticing approach because of limited print
contracting options, as discussed above. The FFE plans to continue
sending direct notices to tax filers to supplement the combined
notices; we encourage SBEs to take a similar noticing approach, where
feasible. We are available to provide technical assistance, as needed.
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\45\ The FFE's current workaround of sending print-only FTI
notices directly to tax filers is being performed outside of the
FFE's standard notice processes, which allow household contacts to
be notified according to their communication preferences (U.S. mail
or electronic) and provides availability of all notices in
consumers' online accounts. At a minimum, enhancements to the FFE's
identity proofing requirements for all FFE accounts would be
required in order to prevent disclosure of FTI information to anyone
except the tax filer. Further, the call center's identity proofing
practices and data systems would need to be enhanced to safeguard
the information to an FTI standard, in order to continue assisting
consumers with the application and enrollment process.
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Comment: A few commenters recommended more research be done prior
to the rule change. One commenter suggested we learn more about why
taxes are not being filed in a timely way, suggesting there may be many
reasons for non-compliance, and that this additional understanding
could inform appropriate Exchange and IRS policies. Other commenters
recommended we retain the current rule until we understand the impact
of the new direct notice mailed in November 2017 to FFE enrollee tax
filers affected by FTR. They suggested that, following the open
enrollment period for 2018, we should assess whether there was an
increase in the proportion of tax filers who took the necessary action
to file their tax return and reconcile APTC, and a decrease in consumer
confusion (for example, evidenced by the number of FTR-related call
center questions), and consider whether any change is due to the
cumulative impact of the two notices before finalizing any regulatory
changes related to FTR procedures.
Response: We agree that gathering data on the effectiveness of FTR
notices is a worthwhile endeavor, and we look forward to analyzing the
numbers as suggested by the commenter, now that the open enrollment
period for 2018 coverage is closed, to determine if recent messaging
increased compliance and reduced the discontinuation of APTC as a
result of FTR. However, we believe this regulatory change must be
implemented in the short term in the interest of program integrity and
to reduce burden on Exchanges.
Comment: A few commenters discussed the limitations when the
household tax filer (to whom the FFE sent the direct notice in November
2017) does not reside with the household contact on the application (to
whom the FFE sent the combined Marketplace Open Enrollment Notice in
October 2017), which could hinder the affected individual's ability to
understand the totality of the circumstances, and disagreed with our
assumption that the household contact is likely to share the combined
notice with the tax filer, since not all household contacts and tax
filers on an application can readily and easily communicate with one
another, including during medical or other emergency situations, death,
separation or divorce, domestic abuse, or spousal abandonment. One
commenter suggested that the combined notice sent to the household
contact explain that the specific reason for the potential
discontinuation of APTC will be contained in the direct notice to the
tax filer. This commenter further suggested that the mailing addresses
be verified against the United States Postal Service National Change of
Address Database to help ensure deliverability, and that the envelopes
be conspicuous to signify their importance (for example, red in color).
Response: We recognize there are household circumstances in which
the tax filer and the household contact on the application do not live
together. However, our data show that for 2017 and 2018 applications
for which any amount of APTC was paid, 99.8 percent of household
contacts listed on the application were also the tax filer. We agree
that adding language to the combined notice pointing to the direct
notice for additional specifics may help increase the likelihood that
the tax filer fully understands the risk to continued APTC eligibility
for enrollees in the household, and we may explore this approach
through discussions with IRS regarding any potential FTI concerns. The
FTI-compliant print contractor used by the FFE in November 2017 does
verify addresses against the USPS National Change of Address Database,
and we acknowledge that making envelopes more conspicuous could help
ensure FTR notices are opened and read by consumers.
When consumers submit an FFE application, the filer of the
application must agree to a statement that he or she has obtained
consent for all people listed on the application for their information
to be used for eligibility determination purposes, including verifying
this information using the Exchange's trusted electronic data sources.
In addition, following application submission and when selecting a plan
and choosing the amount of APTC to apply to the monthly premium, the
tax filer is required to agree to a statement that he or she must file
a tax return for the year during which APTC is paid on his or her
behalf (or on behalf of his or her spouse) and to reconcile those
payments with IRS. The filer of the application specifies the contact
person for Exchange communications (the household contact), as well as
the method of communication they prefer--either electronic or via U.S.
mail to the address they enter on the application. Because this
household contact is designated as the point of contact for the
enrollee(s) on the application, we
[[Page 16985]]
believe it is reasonable to assume he or she intends to receive
communications about enrollees' eligibility for and enrollment in
health coverage through the Exchange. Further, as this designated point
of contact for Exchange enrollees, we believe this household contact
would likely read these communications, and if their content discussed
risk for financial assistance loss, share with the tax filer in the
rare case that he or she is not the tax filer. We further believe it is
reasonable to assume that the tax filer--if not the household contact--
would be in contact with the Exchange enrollees for whom he or she is
responsible with respect to tax filing, managing communications related
to health coverage through the Exchange, or both.
We are finalizing these provisions as proposed, but remain
committed to improving the clarity and effectiveness of the FTR
notification process in circumstances where the Exchange has
information that the tax filer has failed to file and reconcile.
b. Verification Process Related to Eligibility for Insurance
Affordability Programs (Sec. 155.320)
i. Income Inconsistencies (Sec. 155.320(c))
Section Sec. 155.320(c)(3)(iii) sets forth the verification
process for increases in household income. Generally, if income data
from our electronic data sources indicate a tax filer's attested
projected annual income is more than the income amount represented by
income data returned by the IRS and the SSA and current income data
sources, Sec. 155.320(c)(3)(iii) requires the Exchange to accept the
attestation without further verification. Currently, Exchanges
generally are not permitted to create inconsistencies (data matching
issues) for consumers when the consumer's attested income is greater
than the amount represented by income data returned by IRS and the SSA
and current income data sources.
We proposed to revise Sec. 155.320(c)(3)(iii) to specify that the
Exchange will generate annual income inconsistencies in certain
circumstances when a tax filer's attested projected annual income is
greater than the income amount represented by income data returned by
IRS and the SSA and current income data sources. Current regulations
generally require the Exchange to accept a consumer's attestation to
projected annual household income when the attestation reflects a
higher income than what is indicated in data from the IRS and Social
Security Administration. This approach makes sense from a program
integrity perspective when both the attestation and data from trusted
data sources are over 100 percent Federal poverty level (FPL), since an
attestation that is higher than data from trusted data sources in that
situation would reflect a lower APTC than would be provided if the
information from trusted data were used instead.
However, where electronic data sources reflect income under 100
percent FPL and a consumer attests to income between 100 percent FPL
and 400 percent FPL, where the attested income exceeds the income
reflected in trusted data sources by more than some reasonable
threshold, we believe it would be reasonable to request additional
documentation to protect against overpayment of APTC, since the
consumer's attested income could make him or her eligible for APTC that
would not be available using income data from electronic data sources.
Accordingly, we proposed to add new paragraphs (c)(3)(iii)(D) and (E),
and to modify paragraphs (c)(3)(vi)(C), (D), (F), and (G), to specify
that the Exchange will follow the procedures in Sec. 155.315(f)(1)
through (4) to create an annual income data matching issue for
consumers if: (1) The consumer attested to projected annual income
between 100 percent and 400 percent of the FPL; (2) the Exchange has
data from IRS and SSA that indicates income is below 100 percent FPL;
(3) the Exchange has not assessed or determined the consumer to have
income within the Medicaid or CHIP eligibility standard; and (4) the
consumer's attested projected annual income exceeds the income
reflected in the data available from electronic data sources by a
reasonable threshold established by the Exchange and approved by HHS.
We proposed that a reasonable threshold must not be less than 10
percent, and can also include a threshold dollar amount. In accordance
with the existing process in Sec. 155.315(f)(1) through (4), if the
applicant fails to provide documentation verifying their income
attestation, the Exchange would redetermine the applicant's eligibility
for APTC and CSRs based on available IRS and SSA data, which under this
proposal would typically result in discontinuing APTC and CSR as
required in paragraph (c)(3)(vi)(G). The adjustment and notification
process would work in a manner consistent with other inconsistency
adjustments laid out in paragraph (c)(3)(vi)(F).
We proposed to allow the Exchange to set the threshold for setting
a data matching issue similar to Sec. 155.320(c)(3)(vi). We proposed
that a reasonable threshold should take into account that consumers
with incomes near 100 percent FPL have a smaller margin for error in
dollar terms. Therefore, a reasonable threshold might also include a
fixed dollar amount in addition to a percentage threshold.
We are finalizing this policy as proposed, with two changes. First,
after considering the intended purpose of this new program integrity
measure, we have decided to add additional regulatory language to Sec.
155.320(c)(3)(iii)(D) that exempts from this additional verification
check non-citizen applicants who are lawfully present and ineligible
for Medicaid by reason of immigration status.\46\ These applicants do
not have the same incentive to inflate their reported household income
to qualify for APTC, since they are also able to qualify for APTC with
a household income under 100 percent FPL. Additionally, if these
applicants inflate their income, they will receive less APTC than they
are eligible for, and, therefore, performing the additional
verification check is not necessary to prevent overpayment of APTC.
Second, we also removed the proposed regulatory language that clarified
that non-citizens who attested to projected income under 100 percent
FPL are not subject to this verification, because the policy only
applies to consumers who attested to projected annual income between
100 percent and 400 percent of the FPL, and therefore would not apply
to any applicant (either citizen or lawfully present non-citizen),
making this clarifying language unnecessary.
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\46\ FFEs generally verify citizenship/immigration status prior
to verifying income. If an applicant's immigration status has not
been verified when the income verification would occur, they would
not be exempted from this additional verification check.
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At Sec. 155.320(c)(3)(vi)(D), we proposed to make changes to
provide consistency with changes finalized in the 2017 Payment Notice
regarding the threshold for the generation of annual income data
matching issues for decreases in annual household income. This proposed
change would specify that the 10 percent threshold standard no longer
applies to cases when a tax filer's attested projected income is less
than all data sources, or when no electronic data sources are
available. Instead, an Exchange would use the reasonable threshold
established in accordance with Sec. 155.320(c)(3)(vi). We are
finalizing this change as proposed.
In the proposed rule, we also noted our interest in providing
further guidance on the appropriate thresholds for the generation of
data matching issues generally. We intend to reconsider and provide
further guidance
[[Page 16986]]
on these thresholds in the near future, and in anticipation of that
effort, we sought comment on the appropriate thresholds to use at
various income levels and in various circumstances. In particular, we
welcomed data and evidence on this issue.
We intend to address this issue as part of broader rulemaking and
guidance on a number of related program integrity issues, including
further examination of our processes for denying eligibility for
subsidies for individuals who have failed to reconcile APTC on their
Federal income tax return, Exchange processes for matching enrollment
data with Medicare and Medicaid in order to address consumers who may
be enrolled in duplicative coverage, and our rules around recalculation
of eligibility for APTC following a mid-year change in eligibility. In
anticipation of these actions, we sought comment generally on these and
other program integrity topics.
Comment: Several SBEs expressed concerns over the cost and time
needed to implement the change in their IT systems to accommodate the
proposed new verification process. They also stated that State
Exchanges should have the flexibility to not conduct this verification.
One commented that there is no incentive for applicants to inflate
their income in a State that expanded Medicaid.
Response: HHS understands that Exchanges may need additional time
to implement this proposal in order to update their information
technology systems to incorporate new logic. However, we believe this
is a critical program integrity measure. This process is primarily
intended as a program integrity safeguard with respect to States that
did not expand Medicaid. However the verification check could also help
identify some applicants who inaccurately attested to too high an
income amount and were therefore inaccurately determined or assessed
not to be eligible for Medicaid. This check could help applicants
identify potential eligibility through their State Medicaid program and
encourage them to disenroll from their Exchange plan.
Comment: Many commenters were concerned that this new verification
process would disadvantage households with lower household incomes,
since these households often have income amounts that fluctuate more
regularly and by a larger percentage margin than higher income
households. Additionally, many commenters expressed concern that low-
income consumers have difficulty in providing documentation to resolve
their annual income data matching issues and that this proposal would
exacerbate that problem. Commenters also suggested that HHS should more
strongly consider providing notice to applicants that they should
update their application with any income changes, rather than creating
annual income data matching issues for this population.
Response: We recognize that households with lower income might
experience higher relative levels of variance in their income from
year-to-year. This policy recognizes the need to have a reasonable
threshold for income discrepancies to allow for normal variations in
income, which may include a dollar threshold amount. HHS believes that
the alternate verification process has improved significantly since the
program has launched. The calculator used by HHS to calculate income
submitted by applicants has been specifically modified to handle
instances where income fluctuates, or is seasonal in nature. We
released a consumer guide to households to help them provide the
correct documentation to verify their income in the event of an
inconsistency. We also released a worksheet for households to help them
verify their attested income amount. HHS supports encouraging
applicants to continue to update their income throughout the year, as
needed, through notices and other appropriate consumer outreach and
educational materials. We are also exploring strategies to promote more
timely and accurate reporting of changes in circumstances by consumers.
Comment: Several commenters expressed concern that HHS did not
provide evidence or data that this issue was sufficiently problematic
to require a change in the regulation.
Response: HHS acknowledges that it does not have firm data on the
number of applicants that might be inflating their income to gain APTC,
but believes that it is reasonable to design an appropriate program
integrity check, particularly when incentives may exist for applicants
to do so.
Comment: Commenters also suggested that instead of generating
annual income data matching issues for this population, HHS should
instead closely assess the eligibility for loss of MEC special
enrollment periods involving the loss of Medicaid.
Response: HHS currently monitors and verifies eligibility for
special enrollment periods due to loss of MEC, including the loss of
eligibility for Medicaid/CHIP.
Comment: Several commenters expressed concern that applicants who
could not successfully verify their income in States that have not
expanded Medicaid would be left with no practical ability to purchase
health insurance.
Response: HHS understands the concern regarding these consumers and
believes the alternate verification process will be able to verify
income information for applicants who accurately reported their income
information. Applicants who inflate their income to gain access to APTC
would not be able to produce documentation required to verify their
income attestation, which would properly result in the inconsistency
process under the proposed policy determining these applicants
ineligible for APTC. This proposal is designed to provide a program
integrity check that helps protect taxpayers from the overpayment of
APTC.
Comment: One commenter stated that the proposal would not result in
the Treasury recouping excess APTC paid for applicants who inflated
their income to gain access to APTC because applicants with household
income under 100 percent FPL are exempted from repaying APTC through
the reconciliation process at tax time under current regulations.
Response: We view this policy as a critical program integrity
measure, notwithstanding any liability that the tax filer may have when
filing income taxes and reconciling APTC paid during the inconsistency
period. As observed by the U.S. Government Accountability Office,
without proper procedures for verifying incomes and family sizes, the
risk of providing APTC on behalf of individuals who do not meet the
minimum income eligibility requirements--including those who may
purposefully misstate their incomes in order to gain access for APTC--
is increased.\47\ Particularly to the extent funds paid for APTC cannot
be recouped through the tax reconciliation process, it is important to
ensure these funds are not paid out inappropriately in the first
instance.
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\47\ U.S. Government Accountability Office, Improper Payments:
Improvements Needed in CMS and IRS Controls over Health Insurance
Premium Tax Credit (July 2017), available at https://www.gao.gov/assets/690/685777.pdf. See, also Office of Inspector General, U.S.
Department of Health and Human Services, Not All of the Federally
Facilitated Marketplace's Internal Controls Were Effective in
Ensuring That Individuals Were Properly Determined Eligible for
Qualified Health Plans and Insurance Affordability Programs (August
2015), available at https://oig.hhs.gov/oas/reports/region9/91401011.pdf (concluding that HHS should improve its processes for
verifying income eligibility for insurance affordability programs).
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Comment: One commenter suggested that the proposed policy could
result in increased churn between Medicaid and coverage through the
Exchange for
[[Page 16987]]
consumers whose household income fluctuates near the 100 percent FPL
level if they are unable to verify their income for APTC eligibility.
The commenter was concerned that in States that expanded Medicaid, the
applicants that lost their APTC would not necessarily know that their
income may make them eligible for Medicaid.
Response: HHS acknowledges this concern and will explore ways to
provide helpful information in any notice provided to these applicants
that lose APTC because of their inability to verify their income and
may be eligible for Medicaid.
We are finalizing the changes as proposed.
ii. Verification of Eligibility for Employer Sponsored Coverage (Sec.
155.320(d))
An employee, or a member of the employee's family, who is eligible
to enroll in qualifying coverage in an eligible employer-sponsored plan
is not eligible for the PTC unless the plan's coverage for the employee
is either unaffordable, as defined in section 36B(c)(2)(C)(i)(II) of
the Code, or does not provide minimum value, as defined in section
36B(c)(2)(C)(ii) of the Code. An employee (or member of the employee's
family) also is not eligible if he or she actually enrolls in the
employer-sponsored plan, even if the plan is not affordable or fails to
provide minimum value.
When an individual submits a request for an eligibility
determination for insurance affordability programs, including as part
of the eligibility verification process for APTC and CSRs, Sec.
155.320(d) requires the Exchange to verify whether the applicant
reasonably expects to be enrolled in an eligible employer-sponsored
plan or is eligible for qualifying coverage in an eligible employer-
sponsored plan for the benefit year for which coverage is requested.
Paragraph (d)(2) of Sec. 155.320 describes the data sources an
Exchange must use to perform verification. Paragraph (d)(2)(i) requires
an Exchange to obtain data from any electronic data sources that are
available to the Exchange and which have been approved by HHS based on
evidence showing that such data sources are sufficiently current,
accurate, and minimize administrative burden. Paragraph (d)(2)(ii)
requires that the Exchange also obtain available data based on Federal
employment through HHS, and paragraph (d)(2)(iii) requires the Exchange
to obtain available data from the SHOP that corresponds to the State in
which the Exchange is operating. Under Sec. 155.320(d)(4), if an
Exchange is unable to fulfill the requirement to connect to the data
sources set forth in (d)(2), the Exchange is required to conduct
sampling as described under paragraph (d)(4)(i), or--for benefit years
2016 and 2017--it may conduct an HHS-approved alternative process
instead of sampling, as provided under paragraph (d)(4)(ii).
We proposed to amend Sec. 155.320(d)(4) to allow an Exchange to
conduct an HHS-approved alternative process instead of sampling, as
provided under paragraph (d)(4)(ii), for benefit years through 2019.
When we introduced this option for benefit years 2016 and 2017, we
received comments that encouraged us to make this option permanent.
However, at the time we stated that we believed the alternative process
should be used as an interim measure to gather information about the
verification process as Exchanges improve their long-term verification
programs.\48\ When we first introduced this option, we also stated that
we believed the temporary option would provide Exchanges with needed
flexibility as verification processes are refined and employer
databases compiled, to improve long-term verification programs. We
noted in the proposed rule that while Exchanges have since gained
greater access to data and explored approaches to sampling, challenges
remain. To reduce regulatory burdens on Exchanges while they address
remaining hurdles to developing a long-term approach to verification,
we stated we believe the option to use an alternative process instead
of sampling should be extended through plan year 2019.
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\48\ 81 FR 12203, 12269 (March 8, 2016).
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After the option to use an alternate process for benefit years 2016
or 2017 was finalized, HHS investigated the feasibility of connecting
to a comprehensive database of information on employer-sponsored
coverage that could be used by all Exchanges to fulfill verification
requirements under Sec. 155.320(d)(2)(i). Such a database would be
most useful and cost-effective if it contained information on employer-
sponsored coverage from as many non-Federal and non-SHOP employers as
possible. We found that a comprehensive database does not currently
exist and building such a database would be a resource-intensive
endeavor. In addition, employers are not required to provide
information to Exchanges or HHS regarding the coverage they offer,
potentially limiting the completeness of such a database.
Because of the current challenges associated with building an HHS-
approved database that is sufficiently complete and accurate to satisfy
requirements under paragraph (d)(2)(i), we stated we anticipate many
Exchanges will fulfill verification requirements using an alternate
process, as described under paragraph (d)(4). In recognition of the
challenges that Exchanges may encounter with conducting sampling, as
explained below, we proposed to extend the option for Exchanges to
conduct an alternative process to sampling through benefit year 2019.
Our hope is that Exchanges can continue to compile databases sufficient
to meet verification requirements under paragraph (d)(2) and to
continue to refine their approaches to sampling to meet verification
requirements under paragraph (d)(4)(i).
In accordance with the requirement at paragraph (d)(4) to pursue an
alternate process, the FFE conducted a pilot study that incorporated
many components of sampling. The pilot was intended to assess
sampling's value protecting the integrity of the attestation process
regarding applicant access to and enrollment in employer-sponsored
coverage. As part of this sampling pilot, employers for a small sample
of enrollees receiving APTC through the FFEs were contacted by
telephone, based on the employer contact information applicants
provided on their Exchange applications, and asked whether specified
employees were also enrolled in a qualifying employer-sponsored plan or
were offered qualifying coverage in an employer-sponsored plan. Since
the FFE does not have access to relevant data from employers across the
38 States for which the FFE operates Exchanges, this effort provided an
attempt to collect information on each sampled employee by contacting
employers' human resources personnel. The FFE found that this approach
was not a cost-effective way for the FFE to fulfill verification
requirements using an alternate process.
We acknowledged that sampling may be a more cost-effective option
for SBEs compared to FFEs. For example, the FFE operates Exchanges for
38 States, and the volume of employers that the FFE encompasses may
inherently present challenges in relying on sampling results that
States may not face. Some States may collect and have access to data
from employers that make verifying consumers' attestations more
efficient and reliable, or may have existing channels through which
they can communicate with in-State employers. Therefore, we proposed to
maintain the option to use sampling as an alternate method of
verification under paragraph (d)(4) to allow SBEs maximum
[[Page 16988]]
flexibility. We stated that we expect that the proposed change to
paragraph (d)(4) to allow Exchanges to continue to use an HHS-approved
alternative process to sampling through plan year 2019 will provide
Exchanges with important flexibility to conduct the most efficient,
reliable alternate method of verification as Exchanges refine their
approaches to conducting sampling over time, and until data sources
exist that provide an effective way to verify consumers' enrollment in
or access to qualifying employer-sponsored coverage. If SBEs use an
alternative process to sampling to conduct verification under paragraph
(d)(4)(ii), the process must be approved by HHS. To be approved by HHS,
we expect an Exchange to develop an alternate process that provides
insight into whether employees provide accurate information or the
Exchange effectively verifies information about enrollment in and
eligibility for qualifying coverage in an eligible employer-sponsored
plan.\49\ This requires Exchanges to conduct reliable and sufficient
verification, while giving them the flexibility to find the most
efficient ways of doing so for their Exchange.
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\49\ 81 FR 94058, 94125 (December 22, 2016).
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We noted that to the extent an Exchange believes an alternate
process to verification through data sources or methods other than
those described under paragraph (d) may result in a more efficient or
comprehensive verification procedure, the Exchange may also, in
accordance with Sec. Sec. 155.315(h) and 155.320(a)(2), request HHS
approval for use of an alternate process for verifying enrollment in
and access to employer-sponsored coverage. We noted that HHS received
support for providing flexibility for the use of alternate data sources
by Exchanges in comments to the Request for Information. For example,
we received comments indicating that, for some Exchanges, due to the
limited number of Federal employees in their State, connecting to the
database containing data on Federal employment provides little utility
in Exchange verification of applicants' eligibility for employer-
sponsored coverage. One commenter encouraged HHS to consider removing
the regulatory requirement to connect to this database for purposes of
employer-sponsored coverage verification. We have also received
feedback from some Exchanges noting challenges and limitations
connecting to a SHOP database. These Exchanges noted that, given the
limited enrollment in SHOP in many States and that many States do not
have a SHOP database with which to connect, requiring verification
through SHOP imposes a technical and financial challenge for States
that may not be the most efficient and cost-effective way to perform
verification.
Additionally, we sought information and suggestions on ways to
improve verification of whether an applicant reasonably expects to be
enrolled in an eligible employer-sponsored plan or is eligible for
qualifying coverage in an eligible employer-sponsored plan for the
benefit year for which coverage is requested.
We are finalizing this policy as proposed.
Comment: All commenters supported the proposal to amend Sec.
155.320(d)(4) to allow an Exchange to conduct an HHS-approved
alternative process instead of sampling, as provided under paragraph
(d)(4)(ii), for benefit years through 2019. Most commenters noted the
continued need to perform verification through an alternate process
under paragraph (d)(4), and supported the flexibility to perform
alternative methods of verification to sampling under paragraph
(d)(4)(ii).
Response: We acknowledge the continuing need Exchanges may have to
use an alternate verification process and the flexibility to perform an
alternative verification procedure to sampling. We are finalizing this
provision as proposed.
Comment: Most commenters indicated that challenges remain in
performing verification through some or all of the databases described
under paragraph (d)(2). One commenter questioned the value of verifying
based on Federal employment data and through data based on the State's
SHOP Exchange due to the low number of applicants offered eligible
coverage from those sources in the relevant State. Several commenters
supported the flexibility provided under Sec. 155.315(h) for Exchanges
to request HHS approval to perform verification through data sources or
methods other than those specified in paragraph (d) where an Exchange
believes alternate data sources or methods may result in a more
efficient verification procedure for that Exchange.
Response: We agree that challenges remain to performing
verification through databases described under paragraph (d)(2), and
that an Exchange may believe verification through alternate data
sources would be a more appropriate method of verification for their
Exchange. While we believe that verification through databases
described under paragraph (d)(2) remains a viable option for some
Exchanges, we continue to provide Exchanges the flexibility afforded
under Sec. 155.315(h), and support Exchanges in considering this
option for verification.
c. Eligibility Redetermination During a Benefit Year (Sec. 155.330)
We sought comment on ways to better encourage enrollees to report
changes in circumstance occurring during the benefit year that may
affect their eligibility for Exchange coverage or for APTC or CSRs. The
FFEs currently conduct proactive outreach to enrollees through a
variety of means, including emails, phone calls, and paper mail, to
encourage them to return to the Exchange to update their information
throughout the benefit year and during key Exchange operational
efforts, such as open enrollment. The FFEs also periodically provide
general information and reminders to enrollees. However, many changes
in circumstance, such as changes in household income or size, remain
unknown by the Exchanges until reported by the enrollee.
We are interested in hearing from stakeholders about ways to
increase enrollee reporting of individual changes in circumstance
within 30 days of the change in order to ensure compliance with Sec.
155.330(b). Increasing such reporting would benefit enrollees by
ensuring that they continue to be enrolled based on their current
eligibility for financial assistance, and would improve program
integrity.
Comment: Commenters supported finding ways to better encourage
Exchange enrollees to report changes in circumstance during the benefit
year so that they receive updated eligibility determinations, including
with respect to any APTC they are receiving. Commenters acknowledged
the benefit of timely updates to an enrollee's household income or
family size as a way to help minimize any large APTC reconciliation
payments due to the Federal government upon filing a Federal income tax
return. Commenters also acknowledged the benefit to the program
integrity of the Exchanges, so that they may continue to have updated
and accurate enrollee information, as well as the benefit to the
Federal government to minimize the amount of financial assistance being
paid on behalf of enrollees who are not eligible (or are eligible for a
lesser amount).
Commenters recommended increasing Exchange outreach efforts,
through mail, email, and social media networks, to periodically remind
consumers to report any life changes that may have occurred. One
commenter recommended that Exchanges use more distinct envelopes when
an enrollee action is required to improve the rate at
[[Page 16989]]
which these mailings are recognized, read, and acted upon. Commenters
acknowledged the benefit of personal interactions as a way to encourage
consumer behavior and recommended that Exchanges engage Navigators who
have personal relationships with many Exchange enrollees to keep in
contact with the enrollees throughout the year and remind them that
they should timely report changes in circumstance to the Exchange.
Commenters recommended that Exchanges make it easier for enrollees
to report changes in circumstance online. One State Exchange stated
they have information about reporting changes in circumstance on the
main page of their Exchange website outside of open enrollment, and
that enrollees are asked about whether they need to report a change
either over the phone if they call the Exchange call center, or online
upon logging into their Exchange accounts.
Response: We appreciate comments received on this topic and will
take them into consideration for FFE operations and possibly in future
rulemaking.
d. Annual Eligibility Redetermination (Sec. 155.335)
We are considering the possibility of amending the length of time
that individuals may authorize the Exchanges to obtain the updated tax
return information for enrollees as described in Sec. 155.335(k)(2).
Currently, the Exchanges may obtain updated tax return information for
a period of no more than 5 years based on a single authorization.
We sought comment on whether 5 years is an appropriate duration for
this type of an authorization, or whether a shorter time period should
be considered. In particular, we are contemplating whether shortening
this authorization period would improve Exchange program integrity by
helping to ensure that the enrollee's application at the time of re-
enrollment accurately reflects his or her data collection preferences,
that all sources of income that may affect his or her eligibility for
APTC and cost-sharing reductions are listed on the application, and
that individuals update their applications on a more regular basis to
reflect other changes in circumstances that affect eligibility (such as
changes in employment or marital status).
Comment: Many commenters opposed changing the length of time that
individuals may authorize Exchanges to obtain their updated tax
information. Many commenters agreed that 5 years is the appropriate
length of time for this type of authorization, and that this period
accurately balances the Exchanges' need for updated information with
the consumer burden of actively authorizing Exchanges to access this
information. One commenter recommended that we consider extending the
authorization period past 5 years, and another recommended that
Exchanges be able to access this information indefinitely. In addition,
several commenters questioned how shortening this authorization window
would improve Exchange program integrity.
Response: We appreciate the comments and will take them into
consideration in future rulemaking.
5. Exchange Functions in the Individual Market: Enrollment in Qualified
Health Plans
a. Special Enrollment Periods (Sec. 155.420)
i. Plan Options Under Select Special Enrollment Periods
For many special enrollment periods, a dependent of an Exchange
enrollee may newly enroll in Exchange coverage or switch Exchange plans
when the dependent or another qualified individual on the Exchange
application qualifies for a special enrollment period. Even though
dependents may access special enrollment periods based on different
qualifying events, when they qualify for a special enrollment period to
newly enroll in Exchange coverage, regardless of whether it is a
special enrollment period due to gaining or becoming a dependent or due
to a loss of minimum essential coverage, we believe that they should be
treated alike. Section 155.420(a)(4) defines the coverage changes
Exchange enrollees may make when they or their dependents qualify for
special enrollment periods. We proposed to modify how paragraph
(a)(4)(iii) treats dependents to align more closely with paragraph
(a)(4)(i) which addresses when an existing enrollee gains a new
dependent. To do this, we proposed to modify paragraph (a)(4)(iii) to
establish a distinction between how the rule treats existing enrollees
who qualify for one of the relevant special enrollment periods
themselves or when existing Exchange enrollees themselves and their
dependent(s) qualify for one of the relevant special enrollment
periods; and when only new dependents qualify for one of the relevant
special enrollment periods and are enrolling in coverage with an
existing Exchange enrollee. We proposed to establish this distinction
by separating these situations into new paragraphs (a)(4)(iii)(A) and
(a)(4)(iii)(B). We believe the latter situation is akin to when an
enrollee adds a new dependent to their coverage, even though in this
situation the dependent is qualifying for a different special
enrollment period.
Proposed new paragraph (a)(4)(iii)(A) would address the coverage
options available to current enrollees and dependents who qualify for a
special enrollment period. As is current policy under paragraph
(a)(4)(iii), paragraph (a)(4)(iii)(A) would continue to allow enrollees
and their dependents who qualify for the special enrollment periods
specified in paragraphs (d), other than those described in paragraphs
(d)(2)(i), (d)(4), (d)(6)(i) or (ii) for becoming newly eligible for
CSRs, (d)(8), (d)(9), and (d)(10) of this section, to use their special
enrollment period to change to another QHP within the same level of
coverage or one metal level higher or lower, if no such QHP is
available, as outlined in Sec. 156.140(b) of this subchapter.
Proposed new paragraph (a)(4)(iii)(B) would address the coverage
options available when only a dependent who is not currently enrolled
in Exchange coverage qualifies for a special enrollment period. We
proposed to revise the policy for these qualified individuals to align
with paragraph (a)(4)(i) of this section. We proposed that, if a new
dependent qualifies for one of the special enrollment periods specified
in paragraphs (d)(1), (d)(3), (d)(6)(iii), (d)(6)(iv), (d)(7), (d)(11),
and (d)(13) of this section and an enrollee would like to add the
dependent to his or her QHP at that time, the Exchange must allow the
enrollee to add the dependent to his or her current QHP; or, if the
plan's business rules do not allow the dependent to enroll, the
Exchange must allow the enrollee and dependent to change to another QHP
within the same level of coverage; or, if no such QHP is available,
allow them to switch to a QHP one metal level lower or higher, as
outlined in Sec. 156.140(b) of this subchapter. Alternatively, the
enrollee may enroll the dependent in a separate QHP at any metal level.
We believe that these modifications are needed in order to align
the flexibilities available to enrollees and dependents when a
dependent is newly enrolling in Exchange coverage during the benefit
year due to qualifying for a special enrollment period. With this
proposed change, regardless of the special enrollment period for which
a dependent qualifies, an enrollee may either add the dependent to his
or her existing QHP, as long as he or she continues to qualify for it,
or enroll the new dependent in a separate QHP at any metal level.
[[Page 16990]]
In the event that both the enrollee and the new dependent qualify
for special enrollment periods referenced in proposed paragraphs
(a)(4)(iii)(A) and (a)(4)(iii)(B), respectively, and the enrollee wants
to add this new dependent to his or her QHP, the Exchange would allow
both the enrollee and dependent to switch to a new QHP at the same
metal level, if available, as described in proposed paragraph
(a)(4)(iii)(A).
We are finalizing this policy as proposed.
Comment: The majority of commenters supported the proposal to align
plan options for a dependent of an Exchange enrollee who qualifies for
a special enrollment period to newly enroll in Exchange coverage along
with the existing Exchange enrollee, regardless of the special
enrollment period the dependent qualifies for, thereby aligning the
dependent policies in paragraphs (a)(4)(i) and (a)(4)(iii)(B).
Commenters appreciated the simplification of plan option rules for
enrollees who seek to newly enroll a dependent in Exchange coverage
after that dependent has qualified for a special enrollment period, and
stated that this simplification will benefit Exchange enrollees, as
well as those providing enrollment assistance, such as Navigators,
agents, and brokers, by making it easier for them to understand and
explain the enrollee's enrollment options. In addition, some commenters
supported aligning the plan option rules out of fairness, to ensure
that all similarly situated dependents who are newly enrolling in
Exchange coverage should have the same enrollment options available to
them.
A few commenters supported this proposal, but also requested that
changes to the plan option restrictions in paragraph (a)(4) be amended
to give affected enrollees and dependents the option to enroll in a QHP
at a lower level of coverage, alongside the option to enroll in either
the same QHP or another QHP at the same level of coverage, as
applicable. Commenters stated that this increased flexibility is
especially necessary for situations where enrollees are gaining or
become a new dependent, in accordance with paragraph (d)(2)(i) of this
section, because changes in household composition, especially the
addition of a new infant or child to a household, likely change a
household's health care needs and what level of coverage is best suited
to meet those needs. Other special enrollment periods included in
paragraph (a)(4)(iii)(B), such as the special enrollment periods for
loss of minimum essential coverage in paragraph (d)(1) of this section
and for being determined ineligible for Medicaid or the Children's
Health Insurance Program, may similarly change a household's health
care needs if, for example, dependents had been previously enrolled in
Medicaid or CHIP and are losing that coverage for the first time.
Several commenters expressed concern about the technical impact the
proposed changes would have on State Exchanges, especially those States
that had already been working toward implementing the plan option
restrictions as finalized in the 2017 Market Stabilization Rule. States
cautioned that finalizing this proposal would delay their ability to
implement this policy and several States requested State flexibility
with respect to this proposal.
Other commenters expressed opposition to this proposed change
because it would further restrict plan options available to enrollees
and dependents newly enrolling in QHP coverage. These commenters stated
that imposing restrictions of individuals' choice of QHPs to enroll in
after he or she qualifies for a special enrollment period contradicts
the intent of special enrollment periods. One commenter stated that
limiting plan options for enrollees or dependents upon qualifying for a
special enrollment period is prohibited by the guaranteed issue
provision of the PPACA statute. The guaranteed issue provision requires
that issuers accept every individual in the State who applies for such
coverage and, while issuers may restrict enrollment periods, they
stated, restrictions on the type of plan the individual enrolls in is
not permitted.
Response: We agree that there is a benefit to aligning the plan
options available to enrollees who are adding a dependent newly
enrolling in Exchange coverage through a special enrollment period. We
appreciate commenters' concerns about the impact household changes may
have on a family's health coverage needs, but believe that maintaining
these restrictions is necessary in order to continue to avoid adverse
selection. We continue to encourage enrollees to explore all available
QHPs during open enrollment, and to change plans if another QHP better
meets their or their family's needs.
We understand that the proposed changes may delay State Exchanges'
ability to implement the plan option restrictions, especially in those
States where this proposal will require a change to Exchange system
functionality, and, therefore, we believe it is appropriate for States
to take additional time, as needed, in order to comply with this
change.
Lastly, as we noted in the 2017 Market Stabilization Rule, we
considered the concerns regarding conflicts of this policy with the
statute, but believe that limiting enrollees' ability to change QHPs or
metal levels is consistent with the requirements in section
1311(c)(6)(C) of the PPACA directing the Secretary to require Exchanges
to establish special enrollment periods as specified in section 9801 of
the Code and under circumstances similar to such periods under Part D
of title XVIII of the Act, as well as the Secretary's authority under
section 2702(b)(3) of the PHS Act to promulgate regulations for the
individual market with respect to special enrollment periods for
qualifying events under section 603 of the Employee Retirement Income
Security Act of 1974. Given that the PPACA itself called for one annual
open enrollment period and additional enrollment opportunities only in
the case of special circumstances, we believe it is reasonable to
interpret the special enrollment period and guaranteed issue provisions
of the PPACA in this manner.
We proposed to exclude the special enrollment period in paragraph
(d)(12) for material plan or benefit display errors from paragraph
(a)(4)(iii). This is because we understand that certain material plan
or benefit display errors may impact an enrollees' decision to enroll
in a level of coverage, in addition to his or her decision to enroll in
a specific QHP. Therefore, we believe that, if an enrollee qualifies
for the special enrollment period because of a material plan or benefit
display error, he or she should be allowed to switch to a different QHP
at any metal level that better meets his or her needs.
We are finalizing the policy as proposed.
Comment: Commenters supported the proposal to exempt from the plan
option restrictions in paragraph (a)(4)(iii) the special enrollment
period in paragraph (d)(12) for when a qualified individual, 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 through the Exchange. Such a material plan error may
have impacted not only the specific QHP an individual enrolled in, but
also the level of coverage the individual decided to purchase. One
commenter requested that we provide additional guidance regarding the
types
[[Page 16991]]
of errors that we would consider material for purposes of being
excluded from the plan option restrictions in paragraph (a)(4)(iii).
Response: We are finalizing this policy as proposed. We also
clarify that, while we are finalizing an amendment to exempt this
special enrollment period from the plan option restrictions in
paragraph (a)(4)(iii), we are not amending the criteria for qualifying
for the special enrollment period in paragraph (d)(12), which is
intended for when an enrollee 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 through the Exchange and refer the commenter to the
preamble discussion of the 2018 Payment Notice where we discuss this
special enrollment period.
ii. Exception to Prior Coverage Requirement for Qualified Individuals
Who Have Lived in Service Areas Where No QHP Is Offered Through an
Exchange
HHS recently added a prior coverage requirement to the special
enrollment period for gaining access to new QHPs as a result of a
permanent move, described in Sec. 155.420(d)(7), and the special
enrollment period for gaining or becoming a dependent through marriage,
described in Sec. 155.420(d)(2)(i). Section 155.420(a)(5) specifies
how a qualified individual can satisfy the prior coverage requirement.
Qualified individuals can demonstrate that they had minimum essential
coverage as described in 26 CFR 1.5000A-1(b) for 1 or more days during
the 60 days preceding the date of the qualifying event; lived in a
foreign country or in a United States territory for 1 or more days
during the 60 days preceding the date of the qualifying event; or are
an Indian, as defined by section 4 of the Indian Health Care
Improvement Act. This prior coverage requirement encourages individuals
to maintain coverage throughout the year.
However, we recognize that individuals living in a service area
where no Exchange QHPs are offered may not be able to obtain affordable
coverage. We believe that individuals in this situation should not
later be prevented from enrolling in coverage through a special
enrollment period that requires prior coverage when they were
previously unable to enroll in Exchange coverage because it was
unavailable or inaccessible. Therefore, we proposed to amend paragraph
(a)(5) to exempt qualified individuals from the prior coverage
requirement if, for at least 1 of the 60 days prior to the date of
their qualifying event, they lived in a service area where there were
no QHPs offered through an Exchange. Absent this change, qualified
individuals who have lived for part of the benefit year in a location
where no QHPs were offered through an Exchange, and, therefore, may
have been unable to enroll in minimum essential coverage, would be
prevented from subsequently qualifying for a special enrollment period
due to a permanent move or marriage.
Additionally, we noted that the proposed amendment to paragraph
(a)(5) would apply, along with the rest of the paragraph, to the
individual market outside of the Exchange through the cross-reference
to Sec. 155.420(d) in Sec. 147.104(b)(2). In this context, health
insurance issuers offering coverage outside an Exchange would not be
able to require qualified individuals to demonstrate prior coverage if
they lived for at least 1 of the 60 days prior to their qualifying
event in a service area where there were no QHPs offered through an
Exchange.
We are finalizing the policy as proposed, except that we are
amending the regulatory text to ensure the exception applies to
individuals who lived in a service area where no QHPs were offered
through an Exchange during their most recent Exchange enrollment
period, regardless of whether that enrollment period was an Exchange
open enrollment period or a special enrollment period. This change will
address situations where no QHPs were available to an individual during
their enrollment window, but later became available in the individual's
service area prior to his or her marriage or move.
Comment: Commenters supported the proposal to exempt qualified
individuals from the prior coverage requirement if, for at least 1 of
the 60 days prior to the date of their qualifying event, they lived in
a service area where there were no QHPs offered through an Exchange.
Several commenters added that HHS should continue to implement
procedures currently in place to verify other aspects of the applicable
special enrollment period qualifying event, such as a move, within the
required 60-day window. Commenters also requested, if this exception to
the prior coverage requirement becomes necessary, that HHS publish a
list of service areas in which no QHPs are offered through an Exchange,
in part to ensure that issuers can apply the exception accurately in
the off-Exchange individual market.
One commenter raised the concern that our proposed criteria for the
exception, in particular that a person only have lived for 1 of the 60
days prior to their qualifying event in a service area where there were
no QHPs offered through an Exchange, was not stringent enough. This
commenter suggested that such a brief residency requirement could lead
individuals to move to an affected service area on a transitional basis
in order to avoid the prior coverage requirement. To reduce the
likelihood that individuals who did not qualify would be able to take
advantage of this exception, the commenter recommended that we require
individuals to have been residents in a service area without QHPs for
the entire 60 day period prior to their qualifying event.
Response: We will consider publishing a list of service areas in
which no QHPs are offered by the Exchange, so that this exception can
be applied consistently and accurately off-Exchange. In addition, we
may release additional guidance if a service area is left without QHP
coverage and it becomes necessary to implement this exception.
We understand concerns that individuals may seek to fraudulently
claim this exception in order to avoid the prior coverage requirement,
and we remain committed to promoting continuity of coverage and
ensuring that only eligible consumers may access coverage through
special enrollment periods. However, we believe that this exception for
individuals who have lived in a service area where no QHPs are offered
by the Exchange for at least 1 of the 60 days before a qualifying event
or during their most recent preceding enrollment period is important,
because it takes into account the potential for a service area to
temporarily be without a QHP, such as in the case of a temporary QHP
suppression or mid-year QHP decertification, and the need to protect
individuals who may be affected by this lack of availability.
Additionally, we note the need to ensure that individuals are not
prevented from accessing coverage through a special enrollment period
mid-year because of having lived in a service area where no QHPs were
offered through the Exchange during their most recent enrollment period
(open enrollment or special enrollment period) when they could have
otherwise enrolled in affordable coverage, even if during the 60 days
before a subsequent qualifying event a QHP is available in their
service area. Therefore, we are finalizing this exception to the prior
coverage requirement that currently applies to certain special
enrollment periods to include consumers who lived
[[Page 16992]]
in a service area where no QHP was available through the Exchange
during their most recent preceding enrollment period.
We also note that concerns that individuals will fraudulently claim
eligibility for an exception to the prior coverage requirement are
addressed in part because the FFE will continue to require document-
based verification of the individual's eligibility for the special
enrollment period and, in order to qualify for the special enrollment
period due to a permanent move, individuals will continue to be
required to meet the residency requirements for their new and former
addresses, in accordance with Sec. 155.305(a)(3) and as explained in
the January 2016 FAQs on the Marketplace Residency Requirement and the
Special Enrollment Period due to a Permanent Move.\50\ Finally, we
anticipate that this exception will be granted extremely rarely, which
minimizes the risk that it will be used inappropriately.
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\50\ Available at https://www.regtap.info/uploads/library/ENR_FAQ_ResidencyPermanentMove_SEP_5CR_011916.pdf.
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iii. Effective Date Options for Special Enrollment Periods Relating To
Gaining or Becoming a Dependent
Paragraph (b)(2)(i) of Sec. 155.420 requires Exchanges to provide
individuals who qualify for a special enrollment period due to gaining
or becoming a dependent through birth, adoption, placement for
adoption, or placement in foster care, as described in paragraph
(d)(2)(i), with a retroactive coverage effective date back to the date
of the qualifying event. It also gives Exchanges the option to allow
these consumers to elect an effective date of the first of the month
following the date of the event or following regular coverage effective
dates, in accordance with paragraph (b)(1) of this section. Paragraph
(b)(2)(v) addresses coverage effective date options for special
enrollment periods related to gaining or becoming a dependent due to a
child support or other court order, as also described in paragraph
(d)(2)(i). It requires Exchanges to ensure that coverage takes effect
on the date of the court order, and it permits Exchanges to allow
qualified individuals to elect an effective date based on paragraph
(b)(1). However, it does not provide Exchanges with the option to allow
qualified individuals to elect that their coverage begin the first of
the month following the date of the event.
We proposed to remove paragraph (b)(2)(v) of this section and to
revise paragraph (b)(2)(i) to include the special enrollment period for
a court order and redesignate current paragraph (b)(2)(vi) as paragraph
(b)(2)(v). These revisions would align the coverage effective dates for
all special enrollment periods based on gaining or becoming a
dependent, with the exception of gaining or becoming a dependent
through marriage. Aligning coverage effective date options ensures that
Exchanges provide qualified individuals in similar situations with the
same flexibility with regard to coverage effective dates.
We also proposed to modify paragraph (b)(2)(i) so that, in addition
to requiring an Exchange to ensure that coverage is effective
retroactive to the date of the qualifying event, it may permit the
qualified individual or enrollee to elect a coverage effective date of
the first of the month following plan selection, rather than the first
of the month following the qualifying event, as currently written, or
following regular coverage effective dates, in accordance with
paragraph (b)(1) of this section. This amendment would streamline
Exchange operations and align this coverage effective date option with
the accelerated prospective coverage effective date rule as it applies
to other special enrollment periods, including the special enrollment
period for gaining or becoming a dependent through marriage, as
described in (b)(2)(ii) of this section.
Therefore, individuals who qualify for a special enrollment period
due to gaining or becoming a dependent through birth, adoption,
placement for adoption, or placement in foster care, or through a child
support or other court order, will be able to elect from the same
alternate coverage effective date options, if offered by their
Exchange.
We are finalizing this policy as proposed.
Comment: Commenters supported the proposal to align the coverage
effective date options for those who gain or become a dependent through
birth, adoption, or foster care placement with those who gain or become
a dependent through a child support or other court order. Commenters
agreed that aligning special enrollment period coverage effective date
options for most situations where individuals are gaining or becoming a
dependent would result in a simpler rule and more intuitive operational
processes, both reducing administrative burden on issuers and on agents
and brokers and helping individuals better understand their coverage
effective date options. One commenter opposed this proposal due to
concerns that it would reduce State flexibility, could increase burden
on Exchanges due to costs associated with updating their systems to
reflect new effective date options in States that offer this optional
alternate coverage effective date option to consumers, and limit
individuals' access to retroactive coverage options.
Response: We agree that these changes will promote the goals of
providing the same alternate coverage effective date options to
consumers who qualify for a special enrollment period due to gaining or
becoming a dependent through a birth, adoption, foster care placement,
or court order, and of streamlining Exchange operations by revising the
``first of the month'' coverage effective date option so that it can be
operationalized in the same way for all special enrollment periods for
which it is an option. We note that this proposal does not remove or
alter the requirement at Sec. 155.420(b)(2) that Exchanges ensure that
coverage is effective retroactive to the date of the qualifying event
for consumers who qualify for a special enrollment period due to
gaining or becoming a dependent through a birth, adoption, foster care
placement, or court order.
We acknowledge that allowing Exchanges to permit individuals to
elect that their coverage take effect on the first of the month
following plan selection instead of on the first of the month after the
date of their qualifying event will mean that consumers only have one
option for their coverage to take effect retroactively--back to the
date of their qualifying event--whereas prior to the change, they could
request that coverage take effect retroactive to the first of the month
after their qualifying event if their Exchange allowed this option.
However, we also note that the proposed change adds an accelerated
prospective option that is not currently available to these consumers.
Additionally, we believe that, while some Exchanges may need to
make system updates based on this change, they will have the
flexibility that they need in order to manage the potential impact
because Exchanges are not required to offer these alternate coverage
effective date options and may delay implementation if necessary.
Finally, the alignment of this effective date option with the ``first
of the month'' effective date that also applies to other types of
special enrollment periods (in particular the special enrollment period
due to gaining or becoming a dependent through a marriage), will also
likely generate efficiencies for Exchanges in the long term.
[[Page 16993]]
iv. Loss of Coverage Special Enrollment Period (Sec.
155.420(d)(1)(iii))
Section 155.420(d)(1) establishes a special enrollment period for
qualified individuals who lose certain types of coverage, including
minimum essential coverage. As described in paragraph (d)(1)(iii),
qualified individuals who lose certain types of Medicaid pregnancy-
related coverage not considered minimum essential coverage may also
qualify for this special enrollment period. This is to ensure that
women losing eligibility for coverage of pregnancy-related services
that often meet their primary and specialty health care needs are not
left without the option to enroll in a QHP through an Exchange after
they lose access to those services.
We proposed to revise paragraph (d)(1)(iii) to include women who
lose access to health care services that they were receiving through
CHIP coverage for their unborn child. While CHIP coverage for unborn
children, provided based on the definition of a child described in 42
CFR 457.10, is considered minimum essential coverage for the unborn
child, it is not considered minimum essential coverage for the pregnant
woman. Nonetheless, these pregnant women may receive a set of health
services comparable to those available to women enrolled in Medicaid
pregnancy-related coverage. For this reason, pregnant women who have
received prenatal care as part of CHIP coverage for their unborn child
may apply and be determined eligible for a hardship exemption from the
FFEs so that they are not required to also maintain minimum essential
coverage during that time.
The proposed revision to paragraph (d)(1)(iii) would provide a
pathway to coverage for new mothers who lose access to health care
services provided through unborn child CHIP coverage following the
birth of their child, and who are otherwise eligible to enroll in a QHP
through the Exchange. Under paragraph (c)(2) of this section, these
qualified individuals would have up to 60 days before or after the loss
of access to CHIP unborn child coverage to qualify for the loss of
coverage special enrollment period and enroll in a QHP. If they select
a plan prior to their loss of CHIP unborn child coverage, their
Exchange coverage would begin as soon as the first day of the month
following the loss of coverage. If they select a plan after the loss of
CHIP unborn child coverage, their Exchange coverage would begin either
the first of the following month or following regular, prospective
coverage effective dates at the option of the Exchange, as provided
under paragraph (b)(2)(iv). We believe that this revision is needed to
ensure a pathway to coverage for women in the 17 States that offer
unborn child CHIP coverage, so that they may maintain access to
continuous coverage after the birth of their child.
We are finalizing this policy as proposed.
Comment: We received overwhelming support for this proposal;
commenters did not raise any concerns, and noted that it would help
streamline Exchange operations and ensure that women losing access to
CHIP coverage for their unborn child are able to maintain continuous
coverage.
Response: We are finalizing this provision as proposed.
iv. Technical Amendment (Sec. 155.420(d)(10)(i))
We proposed to make a technical amendment to update the cross
reference to 26 CFR 1.36B-2T in Sec. 155.420(d)(10)(i), regarding the
special enrollment period for victims of domestic abuse or spousal
abandonment. The temporary regulation under section 36B of the Code
originally cited has now been finalized without change to the
definition cited in this special enrollment period. This technical
correction would not alter the parameters of this special enrollment
period.
Commenters supported this proposal; we are finalizing this change
as proposed.
b. Effective Dates for Terminations (Sec. 155.430)
Section 155.430 specifies the termination dates for Exchange
enrollees. Paragraph (d)(1)(i) of Sec. 155.430 defines ``reasonable
notice'' as at least 14 days before the requested effective date of
termination. Paragraph (d)(2) sets forth three possible effective dates
for enrollee-initiated terminations made in accordance with paragraph
(b)(1): (1) The termination date specified by the enrollee, if the
enrollee provides reasonable notice; (2) 14 days after the termination
is requested by the enrollee, if the enrollee does not provide
reasonable notice; or (3) on a date on or after the date on which the
termination is requested by the enrollee, if the enrollee's QHP issuer
agrees to effectuate termination in fewer than 14 days, and the
enrollee requests an earlier termination effective date. Further,
current paragraph (d)(2)(iv) sets the QHP termination effective date
for enrollees newly eligible for Medicaid, CHIP, or the Basic Health
Program (BHP) as the day before the individual is determined eligible
for Medicaid, CHIP, or BHP.
We proposed to remove paragraphs (d)(1)(i) and (d)(2)(i) through
(d)(2)(iii) to align the effective dates for all enrollee-initiated
terminations on the date on which the termination is requested by the
enrollee or on another prospective date selected by the enrollee. We
also proposed removing existing paragraph (d)(2)(iv), which states that
the QHP termination date for an enrollee newly determined eligible for
Medicaid, CHIP or a BHP is the date before the Medicaid, CHIP, or BHP
eligibility determination. We invited comment from Exchanges, issuers,
and other stakeholders on any burdens these rule changes may impose, as
well as whether we should make the changes at the option of the
Exchange or the issuer.
We are not finalizing this policy as proposed. Rather, we are
restructuring paragraph (d)(2) to improve its readability, and, in
response to comments from Exchanges responding to our solicitation of
comments, providing additional flexibility to allow Exchanges to retain
the current policy or operate under the proposed policy.
Comment: Supporters of our proposal to eliminate the ``reasonable
notice'' requirement referenced the more streamlined and
straightforward approach to terminations for consumers and its ability
to reduce duplicate or overlapping coverage when enrollees obtain other
coverage. Many supporters cited challenges consumers face transitioning
into Medicare and stated that being able to choose the date of their
QHP termination would alleviate the need to reach out to the Exchange
multiple times to ensure the proper termination date to avoid having
dual coverage.
Response: We agree that allowing enrollees to terminate their
coverage immediately or on a future date of their choosing will provide
consumers with greater control over ending their QHP coverage and will
help minimize or eliminate overlaps in coverage, for example, when
aging into Medicare. Such flexibility will also allow Exchanges to send
termination transactions to issuers that do not need subsequent
adjustment, reducing the need for casework or direct consumer contact
with issuers to request termination dates to effectuate in less than 14
days.
Comment: Some commenters requested that we provide flexibility in
the implementation of this rule, citing technical and operational
challenges with premium proration, in addition to the common consumer
desire to terminate plans at the end of the month.
[[Page 16994]]
Response: We acknowledge that not all Exchanges have the same
system capabilities, and are providing Exchanges flexibility to
implement this change at their discretion.
Comment: Several commenters opposed the rule, stating that 14 days
is a reasonable industry practice for issuers, while others expressed
concerns that same-day terminations are not feasible for issuer
processing, due to the timing of Exchange-sent 834 transactions. Some
urged HHS to work with issuers to determine a more realistic
timeframe--ranging from next-day to 5 days--and implement a default
end-of-month termination effective date. One commenter discussed the
importance of coordination between issuers and Exchanges to synchronize
enrollment and termination effective dates to reduce adverse downstream
effects on payment reconciliation processes.
Response: Issuers already process a significant number of same-day
terminations when removing less than the whole enrollment group from
QHP coverage, and they have reported no difficulties in doing so. While
we expect the vast majority of enrollees will want their coverage to
end at the end of month, this option for a more precise termination
date is necessary for consumers because retroactive terminations are
only available in very limited circumstances.
Comment: One commenter urged us to allow issuers to transmit 834
files to the Exchange with consumer-initiated terminations, stating
that most consumers notify their issuers first when terminating
coverage.
Response: We recognize that many enrollees reach out to their
issuers to initiate terminations. However, terminations must be
triggered through the Exchange so enrollees remaining on the
application can receive an updated eligibility determination.
Comment: Supporters of the proposal to remove the current Medicaid/
CHIP/BHP termination rule--which allows for retroactive QHP
terminations based on new Medicaid/CHIP/BHP eligibility
determinations--described the current rule as a source of confusion for
issuers, States, Exchanges and consumers, and noted challenges
coordinating with State Medicaid agencies, as well as the volume of
complex casework the rule currently triggers. One commenter recommended
that HHS permit retroactive QHP terminations if the Medicaid, CHIP or
BHP determination was less than 30 days in the past because it is more
difficult for plans to reverse claims after 30 days.
A few commenters encouraged flexibility to maintain existing policy
and business operations, and others encouraged HHS to allow States to
determine how the change would impact their populations, given their
Medicaid eligibility processing times, as well as their ability to
reach and inform consumers about their need to take action.
Response: We agree that the current Medicaid/CHIP/BHP rule causes
unnecessary confusion, given that we do not provide QHP termination
dates according to eligibility for other forms of coverage, such as
Medicare or employer-sponsored coverage. We also recognize that
eligibility determinations conducted through the State Medicaid agency,
instead of the Exchange, can result in challenges coordinating
effective dates through the State agency, the Exchange, and its
issuers; and can result in consumer complaints and subsequent casework.
We recognize issuer challenges with retroactive terminations and
appreciate willingness to process limited retroactive terminations.
However, because we recognize that Exchanges' coordination with their
Medicaid and CHIP programs varies, we are providing Exchanges
flexibility to implement this change at their discretion.
Comment: Most commenters who opposed the proposal to remove the
Medicaid/CHIP/BHP rule cited adverse consumer impact, and were
primarily concerned about placing the burden to terminate QHP coverage
on the Medicaid/CHIP/BHP enrollee who may not understand the need to
terminate. One commenter stated it was important for QHP enrollees to
continue to be able to recoup premium payments made when in fact
eligible for Medicaid due to Medicaid's 90-day retroactive eligibility
rules. Others stated that the QHP should terminate automatically with
Medicaid eligibility.
Response: We recognize there may be some consumer impacts with the
implementation of this rule. We also recognize that the removal of this
rule may limit enrollees' ability to retroactively terminate QHP
coverage when it overlaps with Medicaid/CHIP/BHP coverage, which could
result in consumers being unable to recoup premiums paid for periods
when the enrollee was enrolled in QHP coverage through the Exchange and
gains retroactive eligibility for Medicaid/CHIP/BHP. However, these
types of retroactive terminations can lead to major challenges for
consumers as Medicaid/CHIP/BHP providers may not cover claims reversed
by the QHP--leading to unexpected out-of-pocket costs for consumers.
Finally, we agree that automatic transition from QHP coverage to
Medicaid/CHIP/BHP coverage without consumer intervention is a worthy
goal, but we recognize that many Exchanges do not have real-time
coordination with their Medicaid/CHIP/BHP agencies in order to do so.
Comment: A few commenters expressed concerns about possible
downstream effects on eligibility for future QHP coverage from putting
the full responsibility for QHP termination on the Medicaid/CHIP/BHP
consumer. For example, if a consumer fails to terminate QHP coverage
for which APTC are paid, he may stop paying premiums because he is
enrolled in Medicaid and the issuer will terminate his coverage for
nonpayment. At the end of the grace period, he will still owe premium
for one month of coverage after the Medicaid determination.\51\ Under
certain circumstances set forth in the Market Stabilization final
rule,\52\ the QHP issuer could then attribute payments made toward
subsequent enrollments to the premium amount owed, and deny enrollment
in the new coverage for failure to pay the binder payment. In regions
with only one issuer, this could leave consumers who rise above the
Medicaid income threshold without access to coverage options.
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\51\ This grace period only applies to APTC recipients.
Termination rules for non-payment of premium default to State law
for non-financial assistance enrollees, for whom the last day of
coverage is generally the last day of the month in good standing.
\52\ 82 FR 18349-18353.
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Response: We acknowledge there may be downstream effects on
eligibility for future QHP coverage due to non-payment of premiums for
those who do not terminate their coverage timely and enter a grace
period. The FFEs continue to make IT improvements and enhance consumer
education and outreach with the purpose of making it easier and clearer
for an individual to terminate QHP coverage in a timely manner.
6. Definitions (Sec. 155.500)
This section defines terms that are relevant to this subpart. We
proposed to amend the definitions of ``Appeal request'' and ``Appeals
entity'' by adding a cross reference to proposed section Sec.
155.716(e)'' to align with other proposals discussed throughout the
proposed rule, and finalized in this rule, regarding SHOP. We did not
receive substantive comments specific to this proposal, and are
finalizing as proposed.
[[Page 16995]]
7. Eligibility Standards for Exemptions (Sec. 155.605)
a. Hardship Exemptions (Sec. 155.605(d))
Section 1311(d)(4)(H) of the PPACA and section 5000A(e)(5) of the
Code allow individuals to seek an exemption from the individual shared
responsibility provision due to a lack of affordable coverage based on
an individual's projected income. Although tax reform legislation
enacted in December 2017 reduces to $0 the individual shared
responsibility payment for months beginning after December 31, 2018,
individuals may still have a need to seek a hardship exemption for 2019
and future years due to a lack of affordable coverage based on
projected income. For example, individuals may continue to seek a
hardship exemption after 2018 to be eligible for catastrophic coverage.
Section 155.605(d)(2) establishes the circumstances under which an
Exchange must determine an applicant eligible for an exemption due to
lack of affordable coverage based on projected income. For determining
whether affordable coverage is available, paragraph (d)(2) states that
the Exchange should use the standards specified in section 5000A(e)(1)
of the Code that, among other things, specify that the Exchange should
use, for individuals not eligible for employer-sponsored coverage, the
annual premium for the lowest-cost bronze plan available in the
individual market through the Exchange in the State in the county in
which the individual resides.
However, market instability has resulted in limited offerings of
plans on the Exchanges in many regions, and there may be individuals
who live in a county without a bronze plan. Under the current
regulation, the Exchange would not be able to make a determination as
to whether an individual not eligible for employer-sponsored coverage
who lives in a rating area without a bronze plan is eligible for the
exemption due to lack of affordable coverage based on projected income.
We proposed to amend paragraph Sec. 155.605(d)(2)(iv), to allow an
Exchange to make a determination of lack of affordable coverage based
on projected income for individuals not eligible for employer-sponsored
coverage using the annual premium for the lowest cost Exchange metal
level plan, excluding catastrophic plans, available in the individual
market through the Exchange in the State in the county in which the
individual resides if there is no bronze level plan sold through the
Exchange in that county. Absent this proposed change, individuals may
lack access to affordable coverage, but be unable to qualify for an
exemption determination from the Exchange due to the Exchange's
inability to calculate whether coverage is unaffordable due to the
absence of a bronze plan in that county. Under the proposed amendment
to Sec. 155.605(d)(2), Exchanges would use the amount of the lowest
cost Exchange metal level plan available to the individual when no
bronze level plan is available.
Comment: All commenters supported the proposed change to use the
lowest cost metal level plan when calculating whether a plan is
affordable in the instances when no bronze plan is available.
Commenters suggested that the regulatory text clarify that the
determination of the lowest[hyphen]cost plan is made at the county
level rather than the rating area level, and that the determination of
the ``lowest[hyphen]cost Exchange plan'' on which to base eligibility
for an exemption should be made without consideration of catastrophic
plans. Some commenters supported the proposal, but asked that the
exemption not be interpreted broadly so that the exemption would weaken
the risk pool. One commenter recommended that HHS bring forward the
effective date of the rule to plan year 2018.
Response: We are finalizing this policy, and are clarifying that
eligibility for an exemption should be made at the county level and
without consideration of catastrophic plans. We appreciate the concerns
about the risk pool, but believe that this change is targeted
specifically to handle the issue of when no bronze plans are available
to the individual. This change will be effective on the effective date
of this rule, which occurs during the 2018 plan year.
b. Required Contribution Percentage (Sec. 155.605(e)(3))
Under section 5000A of the Code, an individual must have minimum
essential coverage for each month, qualify for an exemption, or make an
individual shared responsibility payment. 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. Although tax reform legislation enacted in December 2017
reduces to $0 the individual shared responsibility payment for months
beginning after December 31, 2018, individuals may continue to seek a
hardship exemption based on the required contribution amount after 2018
to obtain catastrophic coverage. Further, 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) of the
Code and the required contribution percentage in section 36B(c)(2)(C)
of the Code. As such, we are continuing to finalize the excess of the
rate of premium growth over the rate of income growth and the required
contribution percentage for the 2019 benefit year below.
Section 5000A of the Code 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 stated
that 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.\53\
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\53\ 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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[[Page 16996]]
As the measure of premium growth for a calendar year, we
established in the 2015 Market Standards Rule that we would use the
premium adjustment percentage. The premium adjustment percentage is
based on projections of average per enrollee employer-sponsored
insurance premiums from the National Health Expenditure Accounts
(NHEA), which are calculated by the CMS Office of the Actuary.\54\ (As
discussed elsewhere in this preamble, we are finalizing the proposed
2019 premium adjustment percentage of 1.2516634051, (or an increase of
about 25 percent over the period from 2013 to 2018). This reflects an
increase of about 7.7 percent over the 2018 premium adjustment
percentage (1.2516634051/1.1617303196).)
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\54\ 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 preceding
year exceeds the most recent NHEA estimate 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 2019 is the
percentage (if any) by which the most recent projection of per capita
PI for the preceding calendar year ($53,729 for 2018) exceeds per
capita PI for 2013 ($44,555), carried out to ten significant digits.
The ratio of per capita PI for 2018 over the per capita PI for 2013 is
estimated to be 1.2059028167 (that is, per capita income growth of
about 20.6 percent). This reflects an increase of about 4.5 percent
relative to the increase for 2013 to 2017 (1.2059028167/1.1540603665)
used in the 2019 Payment Notice final rule.
Thus, using the 2019 premium adjustment percentage finalized in
this rule, the excess of the rate of premium growth over the rate of
income growth for 2013 to 2018 is 1.2516634051/1.2059028167, or
1.0379471610. This results in a required contribution percentage for
2019 of 8.00 * 1.0379471610 or 8.30 percent, when rounded to the
nearest one-hundredth of one percent, an increase of 0.25 percentage
point from 2018 (8.30358-8.05317).
We sought comment on whether there are other measures of premium
growth or income growth that we could use to calculate the required
contribution percentage.
Comment: We received no comments on other measures of premium
growth or income growth that we could use to calculate the required
contribution percentage. One commenter supported the current
methodology, saying it provides consistency and stability, given highly
volatile premiums.
Response: We are finalizing the required contribution percentage as
proposed.
8. Eligibility Process for Exemptions
Section 155.610(h)(2) describes the timeframe during which the
Exchange will accept an individual's application for a hardship
exemption. We proposed to make a technical correction to Sec.
155.610(h)(2) to reflect the prior redesignation of paragraph Sec.
155.605(g)(1), which describes the criteria for a hardship exemption,
to Sec. 155.605(d)(1) in the 2017 Payment Notice.\55\
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\55\ 81 FR 12346 (March 8, 2016).
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Commenters did not oppose this correction, and we are finalizing as
proposed.
9. Exchange Functions: Small Business Health Options Program
We previously interpreted the PPACA's provisions regarding the
SHOPs to require that all SHOPs provide for employer eligibility,
employee eligibility, and certain enrollment functions, including
premium aggregation functions.
As we have stated in previously released guidance,\56\ the FF-SHOPs
and the SBE-FPs for SHOPs have seen lower than expected enrollment, to
date. As of January 1, 2017, approximately 7,554 employer groups were
enrolled in the FF-SHOPs, covering 38,749 lives. Further, we recognize
that many SHOPs, including FF-SHOPs, continue to face challenges and,
to accommodate those challenges and to provide SHOPs with more
flexibility in operating their programs, we proposed to allow SHOPs to
operate in a leaner fashion beginning for plan years beginning on or
after January 1, 2018. We are generally finalizing the policies as
proposed, and describe changes to certain of the regulations later in
this section of the preamble. These changes will be effective as of the
effective date of this rule. In the 2018 Payment Notice, HHS finalized
the removal of a participation provision that had required certain QHP
issuers to participate in an FF-SHOP in order to participate in an FFE.
As a result, HHS expected a significant decrease in the number of
issuers in the FF-SHOPs in the 2018 plan year and fewer enrollments in
the FF-SHOPs and SBE-FPs for SHOP. With the significant decreases in
SHOP QHP issuer participation and enrollment for plan year 2018, and,
due to lower than expected enrollment in the FF-SHOPs and SBE-FPs for
SHOP to date, it is not cost effective for the Federal government to
continue to maintain certain FF-SHOP functionalities, collect
significantly reduced user fees on a monthly basis, maintain the
technologies required to maintain an FF-SHOP website and payment
platform, generate enrollment and payment transaction files, and
perform enrollment reconciliation.
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\56\ https://www.cms.gov/CCIIO/Resources/Regulations-and-Guidance/Downloads/The-Future-of-the-SHOP-CMS-Intends-to-Allow-Small-Businesses-in-SHOPs-Using-HealthCaregov-More-Flexibility-when-Enrolling-in-Healthcare-Coverage.pdf.
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We proposed to remove regulatory burden on SHOPs by removing
several of the existing requirements imposed upon the SHOPs, focusing
on removing requirements to provide certain functionality that is not
expressly required by the PPACA, while still ensuring appropriate
implementation of statutorily required functions of the SHOP. Under the
proposals, employer groups that are currently enrolled in a SHOP QHP
for plan years that began prior to January 1, 2018, would not be
affected by the proposed changes to enrollment through a SHOP. We are
generally finalizing this rule as proposed, and describe changes to
certain of the regulations later in this section of the preamble. The
changes will take effect for plan years beginning on or after January
1, 2018, as of the effective date of this rule.
Under the approach we proposed and are finalizing, SHOPs will no
longer be required to provide employee eligibility, premium
aggregation, and online enrollment functionality for plan years
beginning on or after January 1, 2018, effective on the effective date
of this rule. The FF-SHOPs, and SBE-FP for SHOPs, will take advantage
of these flexibilities. Despite the removal of several regulations on
SHOPs, State Exchanges will continue to have the flexibility to operate
their SHOPs as they choose, in accordance with applicable Federal and
State law. Notably, we received comments to the Request for Information
that provided support for this proposed enrollment approach. Moreover,
a few State Exchanges currently utilize a similar enrollment approach
as is being finalized as a transitional measure that was expected to
extend through plan years beginning in 2018. These SBEs have already
inquired about continuing to permit enrollment of their SHOP
[[Page 16997]]
consumers through a participating QHP SHOP issuer, or a SHOP-registered
agent or broker, for plan years beginning in 2019 and beyond.\57\
Additionally, these SBEs have each indicated that this enrollment
method has contributed to reduced SHOP Exchange programmatic expenses,
which is critical for SBEs to maintain financial sustainability as
required by section 1311(d)(5)(A) of the PPACA.
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\57\ Extension of State-based SHOP Direct Enrollment Transition
(April 18, 2016), available at https://www.cms.gov/CCIIO/Resources/Regulations-and-Guidance/Downloads/1332-and-SHOP-Guidance-508-FINAL.pdf.
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We are finalizing the modifications throughout the requirements
applicable in the SHOPs for plan years beginning on or after January 1,
2018, effective on the effective date of this rule. However, because
some groups' plan years that begin prior to the effective date of this
final rule will continue beyond the effective date of this rule, both
the existing requirements applicable to plans beginning before January
1, 2018, and the new requirements applicable to plans beginning after
January 1, 2018 will need to be in place simultaneously. For this
reason, we are finalizing our proposal to make many of the existing
regulatory sections regarding SHOP applicable for plan years beginning
prior to January 1, 2018 only, and new regulatory sections applicable
for plan years beginning on or after January 1, 2018. After the
effective date of this rule, the new regulatory sections will be
effective for all 2018 plans, regardless of whether the plans started
prior to the effective date of the rule. Except as described in this
rule, we proposed and now finalize that these new regulatory sections
will mirror the existing regulatory sections.
Specifically, we proposed to amend Sec. Sec. 155.705, 155.715,
155.720, 155.725, 155.730, 155.735, 155.740, 156.285 and 157.205 to
make each section applicable only to plan years beginning prior to
January 1, 2018. Additionally, we proposed to introduce mirroring new
sections, applicable for plan years beginning on or after January 1,
2018, at Sec. Sec. 155.706, 155.716, 155.721, 155.726, 155.731,
155.741, 156.286 and 157.206. We did not propose a new section
mirroring current Sec. 155.735, as further explained later in this
preamble. We also proposed minor changes to Sec. 155.700. These are
described in the sections that follow. We also proposed additional
changes related to the proposed new approach to SHOP in Sec. Sec.
155.106, 155.200, and 156.350, to define the streamlined enrollment
approach that groups enrolling in a SHOP QHP in an SBE-FP for SHOP will
take when this rule becomes effective. In light of the substantial
changes, we have made conforming amendments and updated applicable
cross references in these and other regulations, including Sec. Sec.
147.102, 147.104, 155.500, 156.200, and 156.340.
We are finalizing the following policies as proposed. SHOPs that
opt to operate in a leaner fashion, such as the FF-SHOPs, will still
assist qualified employers who are small employers in facilitating the
enrollment of their employees in QHPs offered in the small group market
in the State, consistent with section 1311(b)(1)(B) of the PPACA,
because the basic functionalities of an Exchange will still be
provided. SHOPs will continue to be required to certify plans for sale
through a SHOP, and the following features will still be available: An
internet website that displays and provides QHP information, a premium
calculator that generates estimated prices of the available QHPs, and a
call center to answer questions related to the SHOP. Further, small
employers will continue to obtain an eligibility determination from the
SHOP website but will enroll in a SHOP QHP by working with a SHOP-
registered agent or broker, or with a QHP issuer participating in a
SHOP to complete the enrollment process.
An enrollment completed by working with a SHOP-registered agent or
broker, or with a QHP issuer participating in a SHOP in the SHOPs that
decide to operate in a leaner fashion, like the FF-SHOPs, will be
considered to be an enrollment through a SHOP, and an employer will be
considered to have offered its employees coverage through a SHOP for
purposes of section 45R of the Code (the Small Business Health Care Tax
Credit), if the employer: (1) Obtains from the SHOP a favorable
determination of eligibility to participate in the SHOP; (2) enrolls in
a SHOP QHP offered by an issuer; and (3) chooses to have the enrollment
identified as being through the SHOP. If an enrollment meets this
definition, the QHP issuer will be required to conduct enrollment with
all applicable SHOP rules and policies.
Because SHOPs will be required to determine employer eligibility to
participate in a SHOP only, and will not be required to determine
employer group members' eligibility to enroll, SHOPs will only be
required to handle appeals as they relate to an employer's eligibility
in a SHOP, as currently described in Sec. 155.740. If, under the
flexibilities described here, employer group members enrolled in a SHOP
QHP needed to file an appeal related to their SHOP coverage, they
generally will file the appeal directly with the insurance company, or
could take advantage of other appeals mechanisms under applicable State
and Federal law. If an employer group member enrolled in coverage
though a SHOP operating under the flexibilities outlined in this rule
and believes that he or she were entitled to a SHOP special enrollment
period, but was denied that special enrollment period, the employer
group member could file a complaint with the SHOP and the SHOP will
investigate. SHOP special enrollment periods will continue to be
available to enrollees who experience specified qualifying events.
SHOPs that use the new flexibilities, such as the FF-SHOPs, will no
longer have the information required to determine employer group
members' eligibility for special enrollment periods. Therefore, issuers
wishing to participate in such a SHOP will be required to administer
special enrollment periods.
SHOPs opting to operate in a leaner fashion, like the FF-SHOPs,
will continue to provide employers with the option to offer a choice of
plans, consistent with section 1312(a)(2) of the PPACA, by continuing
to allow employers to offer their employees a choice of plans, either
by coverage level, or, in some States, by participating QHP issuer.
Employers will be able to see the SHOP plans available, by coverage
level and issuers, in their area using the plan comparison tool
available on a SHOP website. Employers who choose to offer a choice of
plans to employees would contact the participating QHP issuers whose
plans they would like to offer to their employees to obtain the
application information necessary in order to enroll in coverage.
Once the necessary information required to enroll is obtained from
the QHP issuer or issuers or from the SHOP-registered agent or broker,
the employer could disseminate the application information to its
employees. The employer could later collect the information from its
employees and send it to the applicable QHP issuer or issuers or the
SHOP-registered agent or broker. Employers generally will also be
responsible for collecting monthly premium payments from employees and
sending them to the appropriate issuers. While initially offered to
support employers' option to offer a choice of plans across issuers,
premium aggregation functions are not a function mandated by the PPACA
and therefore may be altered or removed, as previously proposed and now
finalized with this rule. SHOP-registered agents and brokers will be
able to assist employers in performing these tasks, if
[[Page 16998]]
the employer chooses to work with a SHOP-registered agent or broker.
Additionally, to further support employers' option to offer a
choice of plans across issuers, under the proposals we are finalizing,
an employer's minimum participation rate will continue to be calculated
at the employer level, though the SHOPs will not be required to
calculate it, and the FF-SHOPs will no longer calculate it. No changes
were proposed to the way in which an employer's minimum participation
rate is calculated or to the 70 percent minimum participation rate
default in FF-SHOPs. Participating QHP issuers will not be permitted to
deny enrollment on the basis of failure to meet minimum participation
requirements to employers who have been determined eligible to
participate in the SHOP, and who have met the applicable minimum
participation rate, as specified by the SHOP, even if only one employee
in a group wishes to enroll with a particular issuer.
Under the approach we proposed and are finalizing, SHOPs will also
still be able to administer the provision at section 1304(b)(4)(D) of
the PPACA that guarantees continuing eligibility for growing small
employers by limiting the validity of an employer's eligibility
determination such that it terminates when the employer makes a change
that could end its eligibility under Sec. 155.710(b), by requiring the
employer to submit a new single employer application to the SHOP if the
employer makes a change that could end its eligibility under Sec.
155.710, and by requiring issuers to be able to distinguish SHOP
enrollments from non-SHOP enrollments. Under the flexibilities being
finalized, issuers will be expected to rely on the determination of
eligibility to reflect the employer's ongoing eligibility to
participate in the SHOP, and the IRS will have the option to follow up
with an employer for additional information if necessary.
HHS understands that the changes outlined in this final rule will
allow SHOPs to adopt changes (and that the FF-SHOPs will adopt such
changes) that result in a substantial departure from current operations
for participating SHOP QHP issuers, employers, and enrollees. It is
important to note that employer groups enrolled in a SHOP plan that
began in 2017 in a SHOP that will opt to operate in a leaner fashion,
like the FF-SHOPs, will not be affected until their plan year ends, as
the current regulations will be in effect for the entirety of a plan
that began in 2017. We recognize that some employers have already
completed an enrollment that took effect on or after January 1, 2018.
The current regulations will also be in place for the beginning of plan
year 2018 for those plans that start before the effective date of this
rule. But, after the effective date of this rule, the finalized
regulations pertaining to plan year 2018 will be effective for all
plans that begin or began in 2018, regardless of whether the enrollment
occurred prior to the effective date. HHS acknowledged that this
transition would create challenges and was concerned about employers
enrolling between when rates become available for plan years beginning
in 2018 and when the flexibilities in this rule will go into effect. We
sought comment on how to best ease this transition and did not receive
any comments on this point. In addition, we released guidance on this
issue in conjunction with the release of the proposed rule.\58\
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\58\ CMS to Allow Small Businesses and Issuers New Flexibilities
in the Small Business Health Options Program (SHOP) For Plan Year
2018 (October 27, 2017), available at https://www.cms.gov/CCIIO/Resources/Regulations-and-Guidance/Downloads/New-Flexibilities-SHOP-2018.pdf.
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Because many comments focused on the general approach we had
proposed for SHOPs, we have summarized comments related to SHOP
proposals here, with a few exceptions, rather than after summarizing
the proposed amendments to each section.
Comment: Many commenters supported our proposal to remove many of
the regulatory requirements imposed upon SHOPs. Some commenters
expressed concern over our proposal to remove the regulatory burden on
SHOPs, stating that removing such requirements does not address the
reasons the SHOP Exchanges have been unattractive to small employers.
We received a comment specifically noting that SHOPs saw low enrollment
for reasons other than a poor enrollment system. Some commenters
requested that HHS should require that State Exchanges either operate
entirely under the SHOP regulations prior to them being amended or
otherwise identically to how the FF-SHOP will operate. We also received
a comment stating that removing many of the requirements on SHOPs will
also do away with a centralized system for free and impartial
information for small employers looking for coverage. One commenter
noted that the proposals would impose an additional burden on agents,
brokers, and issuers without providing additional compensation.
Response: We are finalizing the policies as proposed, with minor,
mostly non-substantive adjustments further described in the following
sections of the preamble. The primary purpose of these regulatory
changes was not to increase the attractiveness of SHOPs to small
employers, but to remove the regulatory burden on SHOPs to give
Exchanges the flexibility to operate their SHOPs in a cost-effective
way that best meets the needs of their State's small group market. We
believe this rule achieves that primary purpose. Nonetheless, under
this rule, SHOPs will continue to offer a centralized system that will
provide certain free and impartial information to small employers
looking for coverage. For example, all SHOPs, including FF-SHOPs, will
still be required to make a premium calculator available. This
calculator will provide small employers seeking SHOP coverage with free
and impartial information about the SHOP QHP and stand-alone dental
plan QHP options available in their area. With regard to any burden on
agents, brokers, and issuers, we believe that the proposed changes will
reduce, rather than increase, the burden for agents, brokers and
issuers. For example, in SHOPs that use the finalized flexibilities,
issuers will no longer be required to maintain the infrastructure to
connect with SHOPs, and agents and brokers who assist small groups in
enrolling in SHOP coverage will use the issuer enrollment channels they
are most familiar with, not a SHOP website. As previously noted, given
the reduction in issuer participation in the SHOPs, HHS believes the
impact of removing the requirement to maintain premium aggregation
functions, which the FF-SHOPs and SBE-FPs for SHOP will no longer have,
will be minimal. HHS also notes that State Exchanges are encouraged to
continue to operate their SHOPs as they do today, or design a SHOP
within the bounds of the flexibilities being finalized within this
final rule.
Comment: We received comments seeking clarification on the
applicability of other Exchange requirements to SHOPs where we did not
explicitly propose changes. Specifically, we received comments
requesting clarification on whether HHS will collect SHOP enrollment
data under Sec. 155.1200(b)(2) from either States or issuers, in
States where the Exchange pursues the flexibilities outlined herein,
such as the FF-SHOP States. We also received a comment seeking
clarification on whether States that operate under the flexibilities
described herein would be required to perform enrollee satisfaction
surveys, as described under Sec. 155.200(d).
Response: HHS recognizes that Exchanges that operate under these
[[Page 16999]]
SHOP flexibilities may not have records of SHOP enrollments, and as
such, does not expect these Exchanges to submit SHOP enrollment data to
HHS under Sec. 155.1200(b)(2). QHP issuers are required to contract
with an HHS-approved enrollee satisfaction survey vendor to administer
the enrollee satisfaction survey of QHPs' enrollees, and Exchanges,
including SHOPs, are merely required to continue overseeing
implementation of the enrollee satisfaction surveys, as described at
Sec. 155.200(d).
a. Standards for the Establishment of a SHOP (Sec. 155.700)
Section 155.700 outlines the general requirements to establish a
SHOP and defines certain terms specific to SHOPs. We proposed to amend
Sec. 155.700(a) by adding paragraph (a)(1) to make the current
requirements applicable for only plan years beginning prior to January
1, 2018. We proposed to add paragraph (a)(2) to describe the general
requirements applicable for plan years beginning on or after January 1,
2018. Proposed paragraph (a)(2) more closely aligns with the statutory
language in section 1311(b)(1)(B) of the PPACA than existing paragraph
(a), and will specify that SHOPs must assist qualified employers in
facilitating the enrollment of their employees in small group market
QHPs. We believe that the PPACA does not have to be interpreted to
require SHOPs to process the enrollment of qualified employees into
QHPs, as is required by the current regulation. Instead, we believe it
can also be interpreted in a less burdensome way, to require SHOPs to
assist qualified employers in facilitating employees' enrollment into
QHPs, which will still be provided for under our proposals. We sought
comment on this proposal.
We are finalizing as proposed; these changes will be effective as
of the effective date of this rule. Comments related to the proposed
approach for SHOP are discussed at the beginning of section III.D.9 of
this rule.
b. Functions of a SHOP (Sec. 155.705) for Plan Years Beginning Prior
to January 1, 2018 (Sec. 155.705)
As discussed in the following section, we proposed to modify the
regulatory requirements regarding functions of a SHOP for plan years
beginning on or after January 1, 2018, and to introduce those
requirements in a new Sec. 155.706. To reflect the proposal that the
requirements currently in Sec. 155.705 will apply only for plan years
beginning before January 1, 2018, we proposed to amend the heading of
Sec. 155.705 and add paragraph (f), to state that the section would
apply only for plan years that begin prior to January 1, 2018. We
discuss new Sec. 155.706 below.
We are finalizing this policy as proposed. Comments related to the
proposed approach for SHOP are discussed at the beginning of section
III.D.9 of this rule.
c. Functions of a SHOP for Plan Years Beginning on or After January 1,
2018 (Sec. 155.706)
Section 155.705 describes required Exchange functions that are
specific to SHOPs. To permit SHOPs to operate in a leaner fashion for
plan years beginning on or after January 1, 2018, we proposed several
changes to the required functions of a SHOP to become effective as of
the effective date of this rule. Under these proposals, which we
proposed to introduce in new Sec. 155.706, certain functions that are
currently required would become optional for SHOPs for plan years
beginning on or after January 1, 2018, and the FF-SHOPs would not
provide them. With the exception of the proposed changes to the
functions described here, the functions would remain the same as in
Sec. 155.705. We proposed only to include the paragraphs in current
paragraph (b)(3) of Sec. 155.705, that would be applicable to plan
years beginning on or after January 1, 2018, maintaining the currently
applicable policy requiring SHOPs to allow employers to select a level
of coverage and to offer a choice of QHPs across that level of
coverage, and permitting SHOPs to allow employers to offer a choice of
all QHPs from a single issuer, or another method of providing employer
choice. To provide additional flexibility, we also proposed to codify
that State Exchanges may, as the FF-SHOPs have, offer employers a
choice of SADPs in their SHOPs. To reflect the proposals described in
Sec. 156.150(b) of this document, we proposed that State Exchanges
could, and FF-SHOPs would, allow employers to offer a choice of SADPs
in their SHOP. If no SADP coverage levels are available, employers
would be able to offer a choice of all SADPs offered in an area. We
also proposed conforming amendments to the structure of this paragraph.
Because, as discussed earlier in this preamble, premium aggregation
functions are not mandated by the PPACA and to maximize the
flexibilities associated with operating a SHOP, we proposed to remove
required functions related to premium aggregation. Specifically, we
proposed that the only premium aggregation function from Sec.
155.705(b)(4) that would be applicable in plan years beginning on or
after January 1, 2018, would be an amended version of the function in
Sec. 155.705(b)(4)(ii)(A), relating to the continuation of coverage.
State Exchanges would be permitted to continue providing remaining
premium aggregation functions in their SHOPs currently described at
Sec. 155.705(b)(4) if they choose to do so. SHOPs electing not to
provide premium aggregation functions, like the FF-SHOPs, would still
be required to provide an opportunity for employers to offer employees
a choice of plans. In SHOPs not offering premium aggregation functions,
we stated that we expected that employers generally would receive
premium bills from each of the plans or issuers with which an employee
enrolls and will pay premiums to each such plan or issuer. Section
155.705(b)(4)(ii)(A) (which we proposed to include in a revised form in
Sec. 155.706) describes the process through which the SHOP may enter
into an agreement with a qualified employer related to the
administration of continuation coverage. Under the approach for
enrollment in a SHOP QHP for plan years beginning on or after January
1, 2018, the FF-SHOPs would no longer facilitate the collection of
premiums. Therefore, we proposed that Sec. 155.706(b)(4) would mirror
Sec. 155.705(b)(4)(ii)(A), but would not include the provision that
permits the FF-SHOPs to limit the service to the collection of premiums
related to the requirements under 29 U.S.C. 1161, et seq.
Paragraph (b)(7) of Sec. 155.705 describes the SHOP function
related to QHP availability in merged markets and paragraph (b)(8)
describes the function related to QHP availability in unmerged markets.
We proposed to include these functions in Sec. 155.706(b)(7) and
(b)(8).
However, under the proposal to streamline SHOP enrollment for plan
years beginning on or after January 1, 2018, we proposed to change the
references to a ``qualified employee'' to an ``employer group'' in both
paragraphs, as the SHOP would no longer be required to process employee
enrollments.
Paragraph (b)(10) of Sec. 155.705 establishes requirements related
to minimum participation rates and SHOP coverage; we proposed to
include these requirements in Sec. 155.706(b)(10), with certain
modifications. In order to facilitate employers' ability to offer
employees a choice of plans through a SHOP, as is required under
section 1312(a)(2) of the PPACA, Sec. 155.705(b)(10) requires that any
[[Page 17000]]
minimum participation rate applicable in a SHOP be calculated based on
the rate of employee participation in the SHOP, rather than on the rate
of participation in any particular QHP or QHPs of any particular
issuer. In the FF-SHOPs, this requirement has been implemented through
the requirements currently outlined at Sec. 155.705(b)(10)(i)-(iii).
Currently, the FF-SHOPs calculate a group's minimum participation rate
based on the information provided by the employer and the employees
during online enrollment. Under the approach we proposed, SHOPs would
not be required to collect the enrollment information needed to
calculate a group's minimum participation rate. Issuers would be
permitted to use their established practices allowed under State law
for groups enrolling in their certified SHOP plans for plan years
beginning on or after January 1, 2018, so long as they comply with
Sec. 147.104, and so long as the minimum participation rate is
calculated based on the level of participation in the SHOP instead of
on the level of participation in any one QHP or with any one issuer
(that is, so long as SHOP participation is measured at the employer
group level). We did not propose to make any changes to the way in
which the minimum participation rate in SHOPs is calculated or the
default 70 percent minimum participation rate used in the FF-SHOPs
unless otherwise determined by a State. Issuers participating in the
FF-SHOPs would be required to adhere to the level of participation as
would continue to be specified in Sec. 155.706(b)(10), and issuers
offering QHPs in State Exchanges would be subject to any minimum
participation rate established by the SHOP, consistent with this
provision. We also proposed that Sec. 155.706(b)(10) would not include
the language in Sec. 155.705(b)(10)(i) because it applies to plan
years beginning before January 1, 2016, and would therefore not be
applicable for the period covered in Sec. 155.706. We also proposed to
clarify that, under the proposed approach, the reference in proposed
Sec. 155.706(b)(10) to the time the employer submits the SHOP group
enrollment would be interpreted to mean the time when the employer
submits a complete group enrollment or renewal to the QHP issuer or
SHOP-registered agent or broker, if applicable.
Section 155.705(b)(11) specifies the requirements related to an
online premium calculator. For plan years beginning on or after January
1, 2018, we proposed to modify these requirements and include the
modified requirements in Sec. 155.706(b)(11). Specifically, Sec.
155.706 (b)(11) would specify that the premium calculator described in
Sec. 155.205(b)(6) must facilitate the comparison of available QHPs.
This would reflect that SHOPs would no longer be required to maintain
enrollment and premium payment information or administer premium
billing, and therefore, would no longer necessarily have employer
contribution information. SHOPs would be required to maintain a
calculator that facilitates the comparison of available QHPs and would
generate premium estimates, but would no longer be required to reflect
any employer contribution. Therefore, we proposed to not include the
requirements in Sec. 155.705(b)(11)(i) or (ii) in Sec.
155.706(b)(11), since these reflect methods SHOPs would use for
determining employer contributions. In the FF-SHOPs, this premium
calculator would be where an employer or SHOP-registered agent or
broker could go to see a complete listing of all the QHPs available in
a given area. The tool has served and would continue to serve as a
resource for employers and SHOP-registered agents and brokers. Because
we believe the premium calculator requirement at section 1311(d)(4)(G)
of the PPACA could be interpreted to apply to only individual market
Exchanges based on its reference to APTCs and CSRs, which are not
available through SHOPs, we believe that this proposal is consistent
with the statute.
Section 155.705(c) generally requires a SHOP to provide data
related to eligibility and enrollment of a qualified employee to the
applicable individual market Exchange. For plan years beginning on or
after January 1, 2018, we proposed that this requirement would apply
only in SHOPs that collect employee enrollment data related to
eligibility and enrollment of a qualified employee, unless the SHOP is
operated pursuant to Sec. 155.100(a)(2).
Finally, we proposed in paragraph (e) that the provisions of the
section would be applicable for plan years beginning on or after
January 1, 2018.
We are finalizing these policies as proposed, except that we are
finalizing minor changes to reflect the changes to the actuarial value
requirements for SADP QHPs in Sec. 156.150 of this rule, and small,
nonsubstantive changes to the regulatory text for clarity and
consistency; these policies will be effective as of the effective date
of this rule.
Comment: We received a few comments regarding the minimum
participation rate in SHOPs. One commenter requested that we maintain
the 70 percent minimum participation rate in FF-SHOPs, and another
requested that the 70 percent minimum participation rate be lowered. We
also received a comment disagreeing with the intent of the proposals
within this section. A commenter noted that groups that do not meet the
minimum participation rate should not be permitted to enroll in
coverage. Finally, a commenter requested that HHS continue to promote
the annual 1-month window in which the minimum participation rate does
not apply.
Response: In our proposed changes to SHOPs, we did not propose to
change the applicable minimum participation rate, or the way in which
the minimum participation rate is calculated. The FF-SHOPs will
continue to maintain a minimum participation rate of 70 percent unless
otherwise specified by the State. This percentage is consistent with
industry standards. The annual 1-month window from November 15-December
15, when employers can enroll in a SHOP QHP without meeting any minimum
participation rate for their State, will remain in place. This window
aligns with the guaranteed availability standards outlined in the
PPACA.
Comment: We received a comment in support of our proposal to codify
an employer's ability to offer a choice of SADPs and our proposal to
allow employers to offer a choice of all SADPs offered through a SHOP,
in accordance with the proposals made elsewhere in this rule to remove
actuarial values for SADPs.
Response: We are finalizing this policy as proposed, with revisions
to the regulation text to reflect the changes to the actuarial value
requirements for SADP QHPs, as noted in the proposed rule, and to
clarify that the third option refers to all SADPs offered in an area by
a single issuer. We also added a title for paragraph (b)(4) that was
inadvertently omitted in the proposed rule.
Comment: We received a comment requesting that the option for
States to submit an annual letter opting out of the third method of
employee choice, a choice of all plans offered by a single issuer, be
removed.
Response: We did not propose to remove this option in the proposed
rule, and are finalizing this section as described earlier in the
preamble for this section. We continue to believe it is important for
States to have a choice regarding whether employee choice of all QHPs
offered by a single issuer applies in their markets.
Comment: One commenter noted that without premium aggregation, it
is difficult or impossible for small businesses to offer a choice of
multiple
[[Page 17001]]
insurers and plans to their employees. The commenter recommended that
HHS provide data on the number of employers currently offering employee
choice in the FF-SHOPs and provide annual updates on that data, so that
HHS, stakeholders, and policymakers can monitor the impact of this
change on employee choice in SHOP.
Response: As discussed throughout this preamble, HHS believes that
the PPACA does not have to be interpreted to require SHOPs to provide
premium aggregation functions and thus is finalizing the proposals to
allow SHOPs to not provide premium aggregation functions other than
those related to continuation of coverage under finalized Sec.
155.706(b)(4). State SHOPs are permitted to continue offering premium
aggregation functionality. While we recognize that the elimination of
premium aggregation in the FF-SHOPs could increase the administrative
burden on employers, we believe that potential increased burden is
outweighed by the other benefits to the SHOPs and, ultimately, to the
employers described throughout this preamble regarding the changes to
the SHOPs. Under the proposals being finalized in this rule, SHOPs will
not be required to have access to ongoing enrollment information, and
the FF-SHOPs will not require issuers to report SHOP employee choice
enrollment information to HHS.
d. Eligibility Determination Process for SHOP for Plan Years Beginning
Prior to January 1, 2018 (Sec. 155.715)
As discussed in the following section, we proposed to modify the
regulatory requirements regarding the eligibility determination process
for SHOP for plan years beginning on or after January 1, 2018,
effective on the effective date of this rule, and to introduce those
requirements in a new Sec. 155.716. To reflect that the requirements
currently in Sec. 155.715 will apply only for plan years beginning
before January 1, 2018, we proposed to amend the heading of Sec.
155.715 and add paragraph (h), to state that the section applies only
for plan years that begin prior to January 1, 2018.
We are finalizing this section as proposed. Comments related to the
proposed approach for SHOP are discussed at the beginning of section
III.D.9 of this rule.
e. Eligibility Determination Process for SHOP for Plan Years Beginning
on or After January 1, 2018 (Sec. 155.716)
Section 155.715 describes the SHOP eligibility determination
process for employers and employees. We proposed to add new Sec.
155.716 to describe the eligibility determination process for SHOPs for
plan years beginning on or after January 1, 2018. With the exception of
the changes to the process described here, the process will remain the
same as in Sec. 155.715. However, this new section will modify and
remove some of the requirements in Sec. 155.715. The proposals
described in this section will be effective on the effective date of
this rule.
Section 155.715(a) requires that before permitting the purchase of
coverage in a QHP, a SHOP must determine that the employer or
individual who requests coverage is eligible. This requirement means
that employers and employees must complete an application to
participate in a SHOP. Accordingly, the FF-SHOPs have established
certain operational requirements related to submitting an application
through the FF-SHOP website, including providing information on the
business (including location, Employer Identification Number, and
number of employees), and identity verification.
To reduce the barriers on employers to obtain SHOP coverage, we
proposed in Sec. 155.716 that SHOPs must determine that the employer
who requests coverage is eligible, but that SHOPs generally would not
always need to do so before the issuer permits the purchase of coverage
in a QHP through a SHOP, for plan years beginning on or after January
1, 2018. This would generally permit an employer to purchase a QHP
before obtaining a determination of SHOP eligibility and confirming
with the issuer the status of the enrollment as being through the SHOP.
As further explained in the preamble to Sec. 156.286, issuers would be
expected to establish processes to ensure that they can accurately
identify which enrollments are considered SHOP enrollments and which
are not. We encouraged employers to obtain an eligibility determination
from a SHOP as close to the date in which they purchase a SHOP QHP as
possible. We considered establishing a limit on how long an employer
can wait between purchasing the QHP and obtaining the determination of
eligibility for that QHP to be considered purchased through the SHOP.
We solicited comments on whether to establish such a limit, and how
long it should be. Ultimately, we are finalizing this policy as
proposed, and are not establishing a timeline under which employers
must obtain an eligibility determination from a SHOP for their
enrollments to be considered through the SHOP.
As a condition of claiming the Small Business Health Care Tax
Credit, small employers must be prepared to provide sufficient proof
that they meet applicable criteria. Part of the employer's
responsibility in providing evidence that it is a small employer
eligible for the Small Business Health Care Tax Credit includes the
ability to verify not only the purchase of a SHOP QHP, but the ability
to produce a favorable eligibility determination from a SHOP.
Therefore, employers applying for the Small Business Health Care Tax
Credit are also encouraged to obtain an eligibility determination from
the SHOP in the taxable year in which they intend to apply for the
credit.
Section 155.715(b) requires the SHOP to accept SHOP applications
from both employers and employees, and Sec. 155.715(c) provides for
the verification of both employer and employee eligibility. For plan
years beginning on or after January 1, 2018, we proposed to provide
SHOPs flexibility to forgo providing for employee eligibility
determinations and related functionality and obligations (and the FF-
SHOPs will pursue this flexibility). We proposed that SHOPs would not
be required to accept applications by employees or determine
eligibility of employees because, under the proposed approach to
enrollment in a SHOP, SHOPs will not be required to interact with
employees. Proposed paragraphs (b) and (c) of Sec. 155.716 would still
require SHOPs to accept a SHOP single employer application form from
employers, and to verify employer eligibility subject to provisions
like those currently in Sec. 155.715(c)(2) through (4). We have
updated and made available a single employer application that SHOPs can
use to determine employer eligibility to participate in the SHOP to
reflect the new rule at Sec. 155.731, described elsewhere in this
preamble. Currently, employee information is primarily collected for
purposes of enrollment, and therefore will not be necessary for SHOPs
to collect under the approach we are finalizing, allowing SHOPs to
operate in a leaner fashion. State Exchanges that intend to maintain
more robust SHOP functionalities, in lieu of the flexibilities adopted
in this rule, will be permitted to continue to determine employee
eligibility. We believe this proposal is consistent with the statute
because, as noted above, the PPACA does not have to be interpreted to
require SHOPs to provide for employee enrollment functionality, and
does not define qualified employees.
Paragraph (d) of Sec. 155.715 describes the eligibility adjustment
period. We proposed to include in Sec. 155.716(d) these requirements
as they relate to eligibility for employers. However,
[[Page 17002]]
because SHOPs will not be required to accept applications from
employees, we proposed not to include the requirements in Sec.
155.715(d)(2), relating to eligibility for employees, in new Sec.
155.716. We also proposed to add language to reflect that SHOPs also
must address inconsistencies in employer eligibility information
received from sources other than those used in the employer eligibility
process described in Sec. 155.715(c).
To reflect our proposed changes to the employer eligibility
verification process, as further described in this section and in the
preamble to Sec. 157.205, and our proposal not to include a section
mirroring Sec. 155.735 regarding terminations, we are adding a
requirement in the paragraphs mirroring paragraphs (d)(3)(i) and (e) of
Sec. 155.715 to require the SHOP to notify employers not only of a
denial of the employer's eligibility to participate in the SHOP, but
also of a termination of the employer's eligibility to participate in
the SHOP.
Paragraph (f) of Sec. 155.715 specifies the requirement that the
SHOP notify an employee of his or her eligibility to enroll in a SHOP.
Because we will not be requiring SHOPs to determine employee
eligibility for plan years beginning on or after January 1, 2018, we
proposed not to include this requirement in Sec. 155.716. SHOPs that
continue to provide employee eligibility functionality should continue
notifying employees of their eligibility. In the SHOPs that operate in
a leaner fashion, like the FF-SHOPs, we anticipate that the
participating QHP issuer or employer will determine the method of
employee enrollment and notification, consistent with otherwise
applicable Federal or State law.
Paragraph (g) of Sec. 155.715 describes the requirements
surrounding communication between the SHOP and QHP issuers in the event
of an employer withdrawing from the SHOP and the notification of
qualified employees of an employer's withdrawal from SHOP. Under the
proposed approach for SHOPs beginning for plan years that begin on or
after January 1, 2018, the enrollment and disenrollment processes would
be addressed between the employer and the issuer or the agent or
broker. Therefore, we proposed not including these requirements in
Sec. 155.716.
We further proposed in paragraph (f) of Sec. 155.716 that an
employer's determination of eligibility to participate in the SHOP
obtained under paragraph (a) remains valid until the employer makes a
change that could end its eligibility under Sec. 155.710(b). This
could include terminating offers of coverage to employees maintaining
full-time status, growing to be a large employer without having
maintained continuous SHOP coverage, or moving its principal business
address or eligible employee worksites out of the SHOP service area.
The employer will be required under new regulations being finalized in
part 157 to take further action upon termination of the validity of the
determination of eligibility to participate in a SHOP to submit a new
application for determination of eligibility or to withdraw from
participation in the SHOP. We considered requiring SHOPs to acknowledge
an employer's withdrawal from participation in the SHOP within a
reasonable time. Alternatively, we considered requiring that employers
reapply to determine their SHOP eligibility on an annual basis. We
sought comment on these proposals, and ultimately are moving to
finalize our proposal without requiring employers to reapply to
determine their SHOP eligibility on an annual basis or requiring SHOPs
to acknowledge such a withdrawal.
We proposed to specify in paragraph (g) that the provisions in
Sec. 155.716 will be applicable for plan years beginning on or after
January 1, 2018.
We are finalizing these policies as proposed. These changes will
become effective as of the effective date of this rule.
Comment: We received several comments urging us not to establish a
30-day timeline on employers to obtain an eligibility determination
because the timeframe would be burdensome on employers. We received
comments from State Exchanges also recommending that no timeline should
be established for SHOP. These State Exchanges do not impose such a
timeline in their SHOPs and have found success with the model.
Response: We are finalizing this section as proposed, and no
timeline will be imposed on employers to obtain an eligibility
determination from a SHOP. We note that issuers may require employers
to obtain an eligibility determination from the SHOP as a condition of
enrollment when there is a legal basis for restricting enrollment to
enrollment through the SHOP. Further, the IRS may request to see an
employer's eligibility determination from the SHOP if the employer
chooses to apply for the Small Business Health Care Tax Credit.
Comment: We received one comment regarding whether employers should
be required to notify a SHOP of their intent to withdraw from a SHOP,
and if a SHOP should acknowledge an employer's withdrawal. The
commenter recommended that we not require employers to notify the SHOP
of their intent to withdraw their participation from a SHOP and,
therefore not require SHOPs to acknowledge an employer's withdrawal.
Response: Although we appreciate the commenter's suggestion as
another way to ease burden on employers, for SHOPs to be able to
determine which employers remain eligible to participate, the rules
must impose some obligation on employers to notify the SHOP when their
eligibility ends. As such, as further described in the preamble to
Sec. 157.206, we are finalizing our proposal that requires employers
to submit a new single employer application to the SHOP or withdraw
from participating in the SHOP if the employer makes a change that
could end its eligibility under Sec. 155.710 of this subchapter. As
noted above, SHOPs will not be required to acknowledge an employer's
withdrawal.
f. Enrollment of Employees Into QHPs Under SHOP for Plan Years
Beginning Prior to January 1, 2018 (Sec. 155.720)
Section 155.720 contains requirements related to the enrollment of
employees into QHPs under SHOP. To reflect that our proposed approach
would no longer require SHOPs to provide functionality related to
enrollment of employees for plan years beginning on or after January 1,
2018, we proposed to amend the heading of Sec. 155.720 and add
paragraph (j), to state that the section will apply only for plan years
that begin prior to January 1, 2018.
Specifically, we proposed that the requirement in paragraph (b) of
Sec. 155.720 that SHOPs establish a timeline and process for QHP
issuers and employers to follow regarding purchasing coverage and
processing of enrollment would not be applicable for plan years that
begin on or after January 1, 2018. State Exchanges that choose to
maintain their current operations may continue establishing enrollment
timelines, as State law and SHOP technology permit. We also proposed
that the requirements to transmit enrollment information on behalf of
qualified employers and employees to QHP issuers as described in
current paragraph (c), and to process payments as described in current
paragraph (d) would not apply after plan year 2017, since SHOPs may not
have enrollment or payment information to transmit. We proposed that
the requirement in paragraph (e) that SHOPs ensure a QHP issuer
notifies a qualified employee enrolled in a QHP of the effective date
of his or her coverage would not apply
[[Page 17003]]
for plan years beginning on or after January 1, 2018 because SHOPs may
not have the enrollment information necessary to enforce this
requirement. We anticipated QHP issuers will notify employees in
accordance with applicable State law. Additionally, after plan year
2017 plans have ended, we proposed not to require SHOPs to reconcile
enrollment information as described in paragraph (g), as SHOPs may not
have enrollment files to reconcile with issuers. We also proposed that
the requirements described in current paragraph (h), which requires a
SHOP to notify a qualified employee's employer in the event the
qualified employee terminates his or her SHOP coverage, would no longer
apply for plan years beginning on or after January 1, 2018. Under the
proposed approach, SHOPs may not have that information to communicate
to the qualified employee's employer.
We are finalizing these policies as proposed. These changes will
become effective as of the effective date of the final rule. Comments
related to the proposed approach for SHOP are discussed at the
beginning of section III.D.9 of this rule.
g. Record Retention and IRS Reporting for Plan Years Beginning on or
After January 1, 2018 (Sec. 155.721)
The approach we are finalizing will not require SHOPs to provide
functionality related to enrollment of employees for plan years
beginning on or after January 1, 2018, and therefore, we proposed that
Sec. 155.720 be inapplicable for those plan years, effective on the
effective date of this rule. However, there are requirements in that
section related to record retention and IRS reporting that will
continue to be applicable with some modifications. We proposed to
include modified versions of these requirements in a new Sec. 155.721,
titled ``Record retention and IRS Reporting for plan years beginning on
or after January 1, 2018.''
We proposed that all SHOPs still be required to maintain records of
employer eligibility for 10 years, as described in paragraph (f).
Because SHOPs utilizing the proposed flexibilities, like the FF-SHOPs,
would not have information on employees, we did not propose to continue
requiring that SHOPs maintain information on employees.
Section 155.720(i) describes the information a SHOP is currently
required to communicate to the IRS for purposes of the Small Business
Health Care Tax Credit. We proposed to modify the reporting requirement
for SHOPs such that for plan years beginning on or after January 1,
2018, effective on the effective date of this final rule, SHOPs would
be required to send the IRS information about the employers determined
eligible to purchase a SHOP QHP only upon the request of the IRS. We
stated that we believe providing the IRS with a list of employers
determined eligible to participate in a SHOP, at the IRS's request,
fulfills HHS's reporting responsibility. As mentioned earlier in this
document, employers in all States must be able to provide sufficient
evidence to the IRS that they meet all the necessary eligibility
requirements for the Small Business Health Care Tax Credit, if they
intend to apply for it. The IRS may ask employers to produce the
aforementioned evidence and employers have a responsibility to produce
it. Further, we stated that employers may work with their issuer to
verify their contribution information, employee enrollment information,
and any other applicable information required to apply for the Small
Business Health Care Tax Credit through their tax filings.
We are finalizing these policies as proposed.
Comment: Commenters were generally supportive of these proposals.
One commenter disagreed with the premise of this section, citing their
lack of support for the overall proposed approach to allow SHOPs to
operate in a leaner fashion. We also received a comment supporting the
proposals to require SHOPs to only report information to the IRS as
requested. This commenter sought clarification on whether HHS will
continue to collect SHOP enrollment data per Sec. 155.1200, which was
addressed earlier in this rule at the beginning of section III.D.9.
Finally, one commenter expressed concern about an employer's access to
claim the Small Business Health Care Tax Credit if an employer is in a
county where no SHOP plans are available. The commenter noted that in
the past, the IRS has granted flexibility to employers in counties that
had no SHOP plans available and allowed employers to still claim the
Small Business Health Care Tax Credit, if otherwise applicable.
Response: We are finalizing this section as proposed. As noted
above, we believe that the information being collected under our
proposals and communicating that information only as requested by the
IRS is sufficient for the purposes of their administration of the Small
Business Health Care Tax Credit. The Treasury Department and the IRS
have jurisdiction over the Small Business Health Care Tax Credit.
h. Enrollment Periods Under SHOP for Plan Years Beginning Prior to
January 1, 2018 (Sec. 155.725)
As discussed in the following section, we proposed to modify the
regulatory requirements regarding enrollment periods under a SHOP for
plan years beginning on or after January 1, 2018, and to introduce
those requirements in a new Sec. 155.726. To reflect the proposal that
the requirements currently in Sec. 155.725 would apply only for plan
years beginning before January 1, 2018, we proposed to amend the
heading of Sec. 155.725 and add paragraph (l), to state that the
section would only apply for plan years that begin prior to January 1,
2018. These changes would become effective as of the effective date of
the final rule. We discuss the proposed new Sec. 155.726 below.
We are finalizing these policies as proposed. Comments related to
the proposed approach for SHOP are discussed at the beginning of
section III.D.9 of this rule.
i. Enrollment Periods Under SHOP for Plan Years Beginning on or After
January 1, 2018 (Sec. 155.726)
Section 155.725 describes enrollment periods under SHOP, including
the timeline under which employer groups must enroll in SHOP coverage,
and the notices the SHOP is required to send related to enrollment
periods. We proposed to introduce a new Sec. 155.726, which would
retain the rolling enrollment and minimum participation rate provisions
of Sec. 155.725(b) and (k), but would remove the requirements
applicable to enrollment periods under SHOP other than those related to
special enrollment periods for plan years beginning on or after January
1, 2018, to reflect the increased flexibility we proposed. The policies
described in this section were proposed to be effective on the
effective date of this rule.
Section Sec. 155.725(a) requires that SHOPs ensure that enrollment
transactions are sent to QHP issuers and that issuers adhere to
coverage effective dates in accordance with this section. We proposed
that many previously required enrollment and election periods would no
longer apply for plan years beginning on or after January 1, 2018.
State Exchanges that continue to provide online enrollment
functionality for their SHOP will be able to continue to adhere to
these requirements. However, under the proposed approach, some SHOPs
(including the FF-SHOPs) may not have enrollment information to
communicate to the issuers and may not want to continue setting and
enforcing coverage effective dates under the
[[Page 17004]]
previously specified requirements. In SHOPs that pursue the full extent
of the proposed approach, like the FF-SHOPs, we anticipated that most
enrollment timelines, deadlines, and coverage effective dates in SHOPs
would be set by employers and issuers consistent with applicable State
law and otherwise applicable Federal law. We stated that we did,
however, believe that, under the proposed approach, the SHOP should be
responsible for ensuring that QHP issuers adhere to the remaining
required enrollment periods and their corresponding coverage effective
dates. Therefore, we proposed to include this requirement in Sec.
155.726(a).
Paragraph (c) of Sec. 155.725 states that the SHOP must provide
qualified employers with an annual election period prior to completion
of the employer's plan year and paragraph (d) of Sec. 155.725 requires
the SHOP to provide notice of that period in advance. Given that, under
the proposed approach for SHOPs for plan years beginning on or after
January 1, 2018, SHOPs would not be required to process enrollments, we
proposed that these requirements would not apply for plan years
beginning on or after January 1, 2018. We anticipated that
participating QHP issuers in SHOPs pursuing the proposed approach, like
in the FF-SHOPs, would be responsible for setting any requirements
around renewals, annual employer election periods, and annual employee
open enrollment periods, based on their current practices, and subject
to applicable State law and otherwise applicable Federal law, including
Sec. Sec. 147.104 and 147.106. For similar reasons, we proposed that
the requirements in Sec. 155.725(e), which requires the SHOP to set a
standard open enrollment period for qualified employees, and Sec.
155.725(f), which requires the SHOP to send a notice to the employee
about the open enrollment period, would not apply for plan years
beginning on or after January 1, 2018.
Section 155.725(g) requires SHOPs to establish and maintain
enrollment and coverage effective dates, including waiting periods, for
newly qualified employees. However, the amendments we proposed at Sec.
155.716 would remove the requirement for SHOPs to perform employee
eligibility determinations, accept and process single employee SHOP
application forms, as well as verify employee eligibility for plan
years beginning on or after January 1,2018. Furthermore, our proposed
amendments not to include paragraphs (c) and (d) of Sec. 155.725 in
Sec. 155.726 would remove the requirement for SHOPs to maintain
enrollment records for plan years beginning on or after January 1,
2018. SHOPs that utilize these proposed flexibilities, like the FF-
SHOPs, may be unable to satisfy the requirements in Sec. 155.725(g).
To align with these proposed amendments, we proposed that the
requirements in Sec. 155.725(g) would not apply for plan years
beginning on or after January 1, 2018. Instead, we anticipated that
enrollment timelines, deadlines, and coverage effective dates for newly
qualified employees in SHOPs that pursue the proposed approach would be
set by employers and issuers consistent with applicable State law and
otherwise applicable Federal law, including Sec. 147.116. Further, as
noted above, issuers offering plans in SHOPs would still be required to
adhere to the guaranteed availability requirements set in Sec.
147.104(b)(1)(i) and the special enrollment period requirements in
proposed Sec. 155.726(c).
We also proposed that the requirement in Sec. 155.725(h)(1) that a
SHOP establish the effective dates of coverage for initial and annual
group enrollments would not apply for plan years beginning on or after
January 1, 2018. Because SHOPs utilizing the proposed flexibilities,
like the FF-SHOPs, would no longer be involved in processing group
enrollments, and would therefore not be able to hold issuers
accountable to these enrollment deadlines, we stated that we believed
it was more appropriate to permit QHP issuers in SHOPs to set their own
enrollment timelines. However, State Exchanges would be permitted to
continue establishing these effective dates for their SHOPs. We also
proposed to remove paragraph (h)(2) for plan years beginning on or
after January 1, 2018, which establishes the effective dates for
initial and annual group enrollments in FF-SHOPs, because the FF-SHOPs
would utilize the proposed flexibilities. We anticipated that issuers
in SHOPs that pursue this approach, like in FF-SHOPs, would set
enrollment timelines for employer groups participating in these SHOPs,
based on their current practices, and consistent with the market rules
set forth in Sec. Sec. 147.104 and 147.106, and otherwise applicable
State law.
We proposed that the special enrollment periods specified in Sec.
155.725(j) would continue to be applicable in the SHOPs for plan years
beginning on or after January 1, 2018, and proposed to include these in
Sec. 155.726(c). We also proposed that the requirements regarding
special enrollment periods in Sec. 155.725(j)(3) would apply for plan
years beginning on or after January 1, 2018. However, we proposed to
modify the SHOPs' responsibilities with respect to special enrollment
periods. As stated earlier in this preamble, under the new
flexibilities for SHOPs beginning in plan years starting on or after
January 1, 2018, SHOPs would no longer be required to provide
functionality related to enrollment of employees. For SHOPs that pursue
this flexibility, like the FF-SHOPs, issuers will preliminarily be
responsible for completing enrollments, and so we expected issuers
would implement enrollment periods. Therefore, we proposed to modify
the requirements to reflect that the SHOP's revised role would not be
to provide special enrollment periods, but to ensure that QHP issuers
offering coverage through the SHOP provide the special enrollment
periods set forth in regulation.
We are finalizing these policies as proposed, with one minor non-
substantive change to correct the placement of numbering in the
regulation text.
Comment: Some commenters requested clarification on our proposals
at Sec. 155.726(c), and recommended that the proposals better align
with Sec. 155.420, while another recommended that issuers be permitted
to provide the same special enrollment periods as they provide outside
the SHOP.
Response: Special enrollment periods offered through a SHOP are
aligned with the special enrollment periods available in the individual
market FFEs unless the special enrollment periods offered in the FFEs
do not practically apply in the SHOP. We did not propose any changes to
special enrollment periods in SHOPs and finalize this section as
proposed.
j. Application Standards for SHOP for Plan Years Beginning Prior to
January 1, 2018 (Sec. 155.730)
As discussed in the following section, we proposed to modify the
regulatory requirements regarding application standards of a SHOP for
plan years beginning on or after January 1, 2018 and to introduce those
requirements in a new Sec. 155.731. To reflect the proposal that the
requirements currently in Sec. 155.730 would apply only for plan years
beginning before January 1, 2018, we proposed to amend the heading of
Sec. 155.730 and add paragraph (h), to state that the section would
apply for only plan years that begin prior to January 1, 2018.
We are finalizing these policies as proposed; the policies will be
effective on the effective date of the final rule. Comments related to
the proposed approach for SHOP are discussed at the beginning of
section III.D.9 of this rule.
[[Page 17005]]
k. Application Standards for SHOP for Plan Years Beginning on or After
January 1, 2018. (Sec. 155.731)
Section 155.730 describes the requirements for employer and
employee applications in the SHOPs. We proposed to modify these
requirements for plan years beginning on or after January 1, 2018, and
to introduce these modified requirements in Sec. 155.731. With the
exception of the proposed changes to the requirements described here,
the requirements would remain the same as in Sec. 155.730.
In accordance with our approach allowing SHOPs to operate in a
leaner fashion for plan years beginning on or after January 1, 2018,
effective as of the effective date of this rule, QHP issuers would
complete the process of enrolling qualified employees into coverage in
SHOPs that will operate in a leaner fashion, like the FF-SHOPs. In
those SHOPs it would not be necessary for a SHOP to collect information
necessary for purchasing coverage. Therefore, we proposed to modify the
information collection requirements related to the single employer
application to require SHOPs to collect only information that would be
necessary for SHOPs to determine employer eligibility to participate in
the SHOP under Sec. 155.710(b). To more closely align the description
of the data elements collected with those standards for eligibility to
participate, we proposed to require the SHOP to collect the employer
name and address of the employer's locations; information sufficient to
confirm that the employer is a small employer; the Employer
Identification Number; and information sufficient to confirm that the
employer is offering, at a minimum, all full-time employees' coverage
in a QHP through a SHOP. SHOPs could collect other information, at
their option subject to the limitations in Sec. 155.716(c)(2) and
Sec. 155.731(f).
Paragraph (c) of Sec. 155.730 requires the use of a single
employee application. We proposed that this requirement would not apply
for SHOP beginning for plan years starting on or after January 1, 2018,
as the information collected in this application would no longer be
necessary, since the SHOP would no longer be required to process
employees' enrollment.
Section 155.730(d) permits a SHOP to use a model single employer
application and model single employee application provided by HHS, and
Sec. 155.730(e) permits the use of HHS-approved alternatives to these
model applications. We also proposed to maintain these options, but for
consistency with the new approach to SHOP, we proposed not to reference
a model single employee application. The model single employer
application with the elements described in proposed Sec. 155.731(b)
has been updated to reflect these changes.\59\
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\59\ Available at https://www.cms.gov/CCIIO/Programs-and-Initiatives/Health-Insurance-Marketplaces/Downloads/SHOP-Eligibility-Determination-Form.pdf.
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Paragraph (g) of Sec. 155.730 describes additional application
safeguards for SHOP employer and employee applications, which we
proposed to maintain in Sec. 155.731(f) with minor amendments to
reflect the proposal to eliminate the requirement to collect a single
employee application. We also proposed in new paragraph (g) to state
that Sec. 155.731 would only be applicable for plan years beginning on
or after January 1, 2018.
We are finalizing these policies as proposed. These changes will
become effective as of the effective date of this rule.
Comment: One commenter expressed concern that our proposals to
approve alternative applications will be burdensome, since applications
are reviewed by the State.
Response: Section 155.731(b) discusses the application an employer
submits to the SHOP for the purposes of determining eligibility to
participate in a SHOP. No State review is required under Sec.
155.731(b) (although a State Exchange could perform such a review, at
its option, for its SHOP). The information that SHOPs are required to
collect under these rules is minimal. HHS does not believe that
additional information to determine an employer's eligibility to
participate in a SHOP is necessary, and therefore maintains the ability
to review any alternate application a SHOP may use to determine an
employer's eligibility to participate in a SHOP. This section is being
finalized as proposed.
Comment: We received one comment requesting clarification that
State Exchanges can meet Sec. 155.731(e)(2) by making an application
available for download on a website as opposed to implementing an
interactive web application portal.
Response: Section 155.730(e)(2) does not currently distinguish
whether an employer application be available for download on an
internet website as opposed to through an interactive web application
portal on an internet website, so long as the tools to file an
application be available on an internet website. We did not make any
changes to this language in Sec. 155.731(e)(2).
l. Termination of SHOP Enrollment or Coverage (Sec. 155.735)
Section 155.735 outlines requirements related to terminations of
SHOP coverage or enrollment. Under our proposed approach, described in
detail in the preamble to earlier sections of this final rule, the
process of completing enrollments, as well as terminating coverage,
could be completed by issuers, and would not be required to be
completed by SHOPs operating in a leaner fashion under the
flexibilities provided for in this rule, like the FF-SHOPs. Issuers
would be expected to comply with otherwise applicable State and Federal
law regarding terminating coverage, the timelines and effective dates
for termination, and any notice requirements, including those at
Sec. Sec. 147.106 and 156.285. Accordingly, we proposed that this
section would be applicable for only plan years beginning prior to
January 1, 2018, as described in the proposed amendment to the heading
and new paragraph (h), effective on the effective date of this rule.
SHOPs maintaining current enrollment functions were encouraged to set
termination guidelines and distribute notices for terminations based on
nonpayment of premiums or loss of employee eligibility, unless State
law requires QHP issuers to send the notices. Because SHOPs, such as
the FF-SHOPs, would no longer be required to enroll groups into a SHOP
QHP, they would no longer be required to maintain the ability to
terminate coverage. We believe new Sec. Sec. 155.716 and 157.206
sufficiently address terminations of eligibility for participation in a
SHOP.
We are finalizing these policies as proposed. Comments related to
the proposed approach for SHOP are discussed at the beginning of
section III.D.9 of this rule.
m. SHOP Employer and Employee Eligibility Appeals Requirements for Plan
Years Beginning Prior to January 1, 2018 (Sec. 155.740)
As discussed in the following section, we proposed to modify the
regulatory requirements regarding employer and employee eligibility
appeals in SHOP for plan years beginning on or after January 1, 2018,
and to introduce those modified requirements in a new Sec. 155.741. To
reflect the proposal that the requirements currently in Sec. 155.740
would apply only for plan years beginning before January 1, 2018,
effective on the effective date of this rule, we proposed to amend the
heading of Sec. 155.740 and add paragraph (p), to state that the
section would apply only
[[Page 17006]]
for plan years that begin prior to January 1, 2018.
We are finalizing these policies as proposed. Comments related to
the proposed approach for SHOP are discussed at the beginning of
section III.D.9 of this rule.
n. SHOP Employer and Employee Eligibility Appeals Requirements for Plan
Years Beginning on or After January 1, 2018 (Sec. 155.741)
Section 155.740 describes the SHOP eligibility appeals process for
employers and employees. These provisions describe the applicable
definitions, the general requirements to provide for appeals, and
employers' and employees' rights to appeal an eligibility determination
from the SHOP.
To continue to provide for employer eligibility appeals, we
proposed to add new Sec. 155.741, mirroring Sec. 155.740, with the
following exceptions. Because we proposed elsewhere that the
requirement to provide employees with eligibility determinations and
the requirement in Sec. 155.715(f) regarding notification of employee
eligibility would no longer apply in plan years beginning on or after
January 1, 2018, we proposed not to include a paragraph mirroring Sec.
155.740(d), which describes employees' rights to appeal. We also
proposed to omit other references to employee appeal rights, to add
references to provide for appeals of terminations of eligibility to
participate in a SHOP, and to update cross-references as applicable.
We proposed in paragraph (o) that the provisions of Sec. 155.741
would only be applicable to plan years beginning on or after January 1,
2018, effective on the effective date of this rule.
We are finalizing these policies as proposed. Comments related to
the proposed approach for SHOP are discussed at the beginning of
section III.D.9 of this rule.
E. Part 156--Health Insurance Issuer Standards Under the Affordable
Care Act, Including Standards Related to Exchanges
1. FFE and SBE-FP User Fee Rates for the 2019 Benefit Year (Sec.
156.50)
Section 1311(d)(5)(A) of the PPACA 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 PPACA directs HHS to operate an Exchange within the State.
Accordingly, in Sec. 156.50(c), we specified that a participating
issuer offering a plan through an FFE or SBE-FP 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 and SBE-FPs 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 or SBE-FP.
OMB Circular No. A-25R establishes Federal policy regarding user
fees; it specifies that a user fee 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 through 2018, issuers seeking to participate in an FFE in
the 2019 benefit year 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 for the 2019 benefit year 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; and
Certification processes for QHPs (including ongoing
compliance verification, recertification and decertification).
OMB Circular No. A-25R further states that user fee charges should
generally be set at a level that is 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). Activities performed by the Federal government that
do not provide issuers participating in an FFE with a special benefit
are not covered by this user fee.
Based on estimated contract costs, enrollment and premiums for the
2019 benefit year, we proposed to maintain the 2019 benefit year user
fee rate for all participating FFE issuers at 3.5 percent of total
monthly premiums. We sought comment on this proposal.
State Exchanges on the Federal platform enter into an agreement
with HHS to leverage the systems established for the FFEs to perform
certain Exchange functions, and to enhance efficiency and coordination
between State and Federal programs. Accordingly, in Sec. 156.50(c)(2),
we specified 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 monthly user fee rate specified in the
annual HHS notice of benefit and payment parameters for SBE-FPs for the
applicable benefit year, unless the SBE-FP and HHS agree on an
alternative mechanism to collect the funds from the SBE-FP or State
instead of direct collection from the SBE-FP issuers. The benefits
provided to issuers in SBE-FPs by the Federal government will include
use of 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 PPACA, and enrollment in QHPs
under Sec. 155.400. As previously discussed, OMB Circular No. A-25R
established Federal policy regarding user fees, and specified 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
infrastructure, and eligibility and enrollment functions, and
allocating a share of those costs to issuers in the relevant SBE-FPs. A
significant portion of expenditures for FFE functions 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
PPACA, and personnel who perform the functions set forth in Sec.
155.400 to facilitate enrollment in QHPs. Based on this methodology, we
proposed 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 plans offered through an SBE-FP. This fee would
support FFE operations associated with providing the functions
described above. We sought comment on this proposal.
We are finalizing the FFE and SBE-FP user fees rates at 3.5 and 3.0
percent
[[Page 17007]]
of monthly premiums, respectively, as proposed.
As we describe elsewhere in this rule, for plan years beginning on
or after January 1, 2018, effective on the effective date of this rule,
we are removing employee eligibility, premium aggregation, and online
enrollment functionality through the FF-SHOPs for FFE and SBE-FP SHOP
issuers. Given the changes to the functionality for the FF-SHOPs, HHS
will not provide these special benefits through the FF-SHOPs or SBE-FP
SHOPs after the effective date of the rule. Therefore, we proposed that
HHS would not assess a user fee on issuers offering QHPs through FF-
SHOPs or SBE-FP SHOPs because these user fees are only charged to
issuers who receive special benefits from enrolling individuals through
the Federal platform. In instances where enrollment did occur through
the Federal platform, for example, for plan years beginning prior to
the effective date of the final rule, HHS will continue charging SHOP
issuers monthly FFE or SBE-FP user fees, as applicable. We are
finalizing this policy as proposed.
Comment: Commenters noted the FFE user fee rate should decrease
over time, particularly given the reduction in outreach and education
activities that HHS conducts. Additionally, commenters noted that the
collection and allocation of the user fees should be made more
transparent. Other commenters also noted that HHS should allocate a
greater portion of the user fees to outreach and education programs.
Response: The FFE and SBE-FP user fee rates for the 2019 benefit
year are based on expected total costs to offer the special benefits to
issuers offering plans on FFEs or SBE-FPs and evaluation of expected
enrollment and premiums for the 2019 benefit year. These estimates
yielded an FFE user fee rate of 3.5 percent of premiums and an SBE-FP
user fee rate of 3.0 percent of premiums. We reiterate that under OMB
Circular No. A-25R, collections are only spent on user fee eligible
activities. We will continue to examine cost estimates for the special
benefits provided to issuers offering QHPs on the FFEs and SBE-FPs for
future benefit years. Additionally, outreach and education efforts will
be evaluated annually and funded at the appropriate level.
Comment: Some commenters did not support the proposed SBE-FP user
fee rate, stating the proportion of FFE costs allocated to SBE-FP
functions do not represent market value, the fee is overstated
particularly in context of reduced outreach and education functions by
the Federal platform, and increased premiums due to cost-sharing
reductions amounts loaded to silver premiums ought to also reduce the
user fee rate. Some of these commenters also stated that HHS has not
provided SBE-FPs with enrollment data or access to HealthCare.gov back-
end customer tools that the SBE-FPs could use to improve outreach and
enrollment activities at the State level. Commenters suggested that HHS
maintain the 2018 benefit year SBE-FP user fee rate of 2 percent given
the impact of user fee rates on market premiums.
Response: The final SBE-FP user fee rate for the 2019 benefit year
of 3.0 percent of premiums is based on HHS's calculation of the percent
of contract costs of the total FFE functions utilized by SBE-FPs--the
costs associated with the information technology, call center
infrastructure, and eligibility determinations for enrollment in QHPs
and other applicable State health subsidy programs. We have calculated
the total costs allocated to SBE-FP functions and enrollment and
premium estimates to yield a user fee rate of 3.0 percent for SBE-FP
issuers benefiting from functions provided by the Federal platform. We
believe issuers offering QHPs through the Federal platform, either the
FFEs or SBE-FPs, ought to be charged proportionally for the special
benefits provided by the Federal platform. HHS has provided SBE-FPs 2
years to transition to the full rate. Additionally, although HHS
reduced its outreach and education costs, we do not charge SBE-FPs for
these costs as outreach and education activities are SBE-FPs'
responsibility, and therefore the proportion of Federal platform costs
associated with SBE-FP functions increased slightly compared to prior
years. We also continuously collaborate with our SBE-FP partners to
share data within our information disclosure agreements, and welcome
continued conversations with SBE-FPs on their data needs.
Comment: Commenters also noted that HHS setting the SBE-FP user fee
rate at 3 percent requires State entities to operate a referral
hotline, consumer assistance, QHP rate review and certification, legal
and finance operations, auditing and other functions with collections
based on a State user fee rate of 0.5 percent of premiums, which would
not be feasible, or require SBE-FPs to increase assessments on
carriers. Commenters noted keeping a lower user fee rate for the SBE-FP
model would likely increase States' take-up of these models and
enrollment due to the resulting slightly lower increase in premiums.
Response: As we have previously stated, we are not requiring SBE-
FPs to allocate a certain share of the State's assessments on various
functions, and we are not requiring the SBE-FPs to set the State
assessment at any specific rate. If SBE-FP States require more than 0.5
percent of premiums to carry out State functions for the 2019 benefit
year, one option for the SBE-FP States could be to assess a higher
State charge on issuers, and another option is for the SBE-FP States to
assess a charge more broadly on issuers rather than just on issuers
offering QHPs on the respective SBE-FPs. We are setting the 2019 SBE-FP
user fee rate at 3.0 percent of premiums charged on participating
issuers in SBE-FPs to recover the proportion of costs to the Federal
government for the benefits associated with SBE-FPs, as required under
OMB Circular No. A-25R. We continue to encourage and support States in
pursuing the SBE-FP model, in assessing charges on participating
issuers, or otherwise, to recover the costs associated with the State's
functions and most effectively carry out those functions. We do not
believe the total Federal charge assessed on FFE issuers are
appropriately compared to the total State and Federal charge assessed
on SBE-FP issuers because SBE-FPs provide the benefit of more
proximately engaging issuers and consumers.
2. Essential Health Benefits Package
Section 2707(a) of the PHS Act, as added by the PPACA, directs
health insurance issuers that offer non-grandfathered health insurance
coverage in the individual or small group market to ensure that such
coverage includes the EHB package, which is defined under section
1302(a) of the PPACA to include coverage that provides for the EHB
defined by the Secretary under section 1302(b) of the PPACA; limits
cost sharing in accordance with section 1302(c) of the PPACA; and
provides either the bronze, silver, gold, or platinum level of
coverage, or is a catastrophic plan under sections 1302(d) and (e) of
the PPACA. Section 1302(b) of the PPACA states that the Secretary is to
define EHB, except that EHB must include at least the following general
categories and the items and services covered within the categories:
(1) Ambulatory patient services; (2) emergency services; (3)
hospitalization; (4) maternity and newborn care; (5) mental health and
substance use disorder services including behavioral health treatment;
(6) prescription drugs; (7) rehabilitative and habilitative services
and devices; (8) laboratory services; (9) preventive and wellness
services and chronic disease
[[Page 17008]]
management; and (10) pediatric services, including oral and vision
care. Additionally, section 1302(b)(2) of the PPACA states that the
Secretary must ensure that the scope of EHB for the 10 EHB categories
be equal to the scope of benefits provided under a typical employer
plan, as determined by the Secretary. Furthermore, section 1302(b)(2)
of the PPACA states, in defining and revising EHB, that the Secretary
is to submit a report to the appropriate committees of Congress
containing a certification from the CMS Chief Actuary that such EHB are
equal in scope to the benefits provided under a typical employer plan.
In defining and revising the 10 EHB categories, the Secretary must also
provide notice and an opportunity for public comment. Additionally,
section 1302(b)(4)(G) and (H) of the PPACA require the Secretary to
periodically review and update the definition of EHB and provide a
report to Congress and the public that contains assessments related to
the need to update the definition of EHB.
Section 1302(b)(4) of the PPACA requires the Secretary, in defining
the EHB, to: (1) Ensure that such EHB reflect an appropriate balance
among the categories so that benefits are not unduly weighted toward
any category; (2) not make coverage decisions, determine reimbursement
rates, establish incentive programs, or design benefits in ways that
discriminate against individuals because of their age, disability, or
expected length of life; (3) take into account the health care needs of
diverse segments of the population, including women, children, persons
with disabilities, and other groups; (4) ensure the health benefits
established as essential not be subject to denial to individuals
against their wishes on the basis of the individuals' age or expected
length of life or of the individuals' present or predicted disability,
degree of medical dependency, or quality of life; and (5) provide that
a QHP shall not be treated as providing coverage for EHB unless it
meets certain requirements for coverage of emergency services.
To implement section 1302(b) of the PPACA, HHS defined EHB based on
a benchmark plan approach, which provided at Sec. 156.100 for the
States' selection from one of 10 base-benchmark plans, including the
largest health plan by enrollment in any of the three largest small
group insurance products by enrollment, any of the largest three
employee health benefit plan options by enrollment offered and
generally available to State employees in the State, any of the largest
three national Federal Employees Health Benefits Program (FEHBP) plan
options by aggregate enrollment that is offered to all health-benefits-
eligible Federal employees under 5 U.S.C. 8903, or the coverage plan
with the largest insured commercial non-Medicaid enrollment offered by
a health maintenance organization operating in the State. States were
required at Sec. 156.110 to supplement their base-benchmark plan from
Sec. 156.100 to ensure the 10 EHB categories were being covered to
establish the State's EHB-benchmark plan. Section 156.110 also ensures
that the EHB-benchmark plan meets the standards of nondiscrimination
and balance of benefits, and allows habilitative services to be
determined by the State.
We believe that States should have additional choices with respect
to benefits and affordable coverage. As such, we proposed to provide
States with additional flexibility in their selection of an EHB-
benchmark plan for plan year 2019 and later plan years. In addition to
granting States more flexibility regulating their markets, we believed
these changes would permit States to modify EHB to increase
affordability of health insurance in the individual and small group
markets beginning in 2019. We proposed that the current EHB-benchmark
plan selection would continue to apply for any year for which a State
does not select a new EHB-benchmark plan under this proposal.
In the preamble of the proposed rule, we stated that we were
considering establishing a Federal default definition of EHB for plan
years further in the future that would allow States continued
flexibility to adopt their own EHB-benchmark plans, provided they
defray costs that exceed the Federal default. We understood that in
developing this type of default definition there are trade-offs in
adjusting benefits and services. We gave an example of establishing a
national benchmark plan standard for prescription drugs that could
balance these tradeoffs and provide a consistent prescription drug
default standard across States. We solicited initial comments on this
type of long-term approach and the trade-offs in adjusting benefits
from the current EHBs with a plan to solicit further comments in the
future.
Comment: Many commenters requested more detail on a Federal default
definition of EHB, with some commenters suggesting the publication of a
white paper to discuss such a policy in more detail.
Most commenters opposed a Federal default definition of EHB. Many
commenters were concerned that a Federal default definition of EHB
would be implemented in the pursuit of seeking arbitrary benefit
limits, even at the cost of inferior health outcomes.
Some commenters expressed concern over diminishing the State's
flexibility in defining their own EHB, especially since other proposals
with regard to EHB concentrated on giving additional flexibility to the
States. These commenters also expressed concern over requiring States
to defray the costs of benefits in excess of a Federal standard.
Many commenters expressed support for a Federal default EHB
definition if such a standard represented a minimum level of benefits
required in an EHB-benchmark plan, rather than a maximum level of
benefits. Commenters noted that plans should include a wide array of
benefits to account for the diverse needs of the population at large.
Other commenters supported a Federal default EHB definition to the
extent that certain benefits would be included in such a definition.
Most commenters opposed a Federal default definition of EHB as it
pertains to a national prescription drug benefit, noting that States
and issuers are best positioned to evaluate and respond to prescription
drug needs. Many of these commenters expressed concerns similar to
those raised regarding a general Federal default EHB definition:
Concerns that such a standard would, in the pursuit of arbitrary
benefit limits, have a negative impact on health outcomes by inhibiting
the availability of needed drugs; establish a maximum level of benefits
for EHB-benchmark plans; diminish the States' flexibility to define
EHB; and increase the defrayals required by States.
Some commenters noted that a national prescription drug benefit
standard would require continuous and frequent updating to account for
changes in clinical guidelines and drug innovation. These commenters
supported a national prescription drug benefit standard that uses a
qualitative approach reliant upon Pharmacy & Therapeutics Committees to
respond to such rapid changes, rather than a standard based on
providing a minimum number of drugs per category or class.
A few commenters supported a national prescription drug benefit,
noting that multi-State issuers face complexity dealing with minimum
drug counts which vary widely across EHB-benchmark plans, with no
rational medical justification for the variation.
Some commenters expressed concern about the impact of a Federal
prescription drug benefit on the ability
[[Page 17009]]
of entities to negotiate drug prices. One commenter noted that a
Federal default EHB definition for prescription drugs would stifle
innovation due to uncertainty over whether a new drug would be covered.
Response: Our intention is to better align medical risk in
insurance products by balancing costs to the scope of benefits. We will
take these comments under consideration as we consider this policy. In
order to avoid market instability and inefficiencies for States that
have used the expanded flexibilities regarding EHB that we are
finalizing in this rule and issuers in those States, it is our intent
that any Federal default standard would not require a State to make
immediate changes to its EHB-benchmark plan within 3 years following a
State change.
a. State Selection of Benchmark Plan for Plan Years Beginning Prior to
January 1, 2020 (Sec. 156.100)
To reflect the proposed options in Sec. 156.111 for States to
adopt new EHB-benchmark plans for plan years 2019 and later, we
proposed to make conforming changes to Sec. 156.100 to explicitly
state that the selection process in Sec. 156.100 applies only through
plan years beginning in 2018, and Sec. 156.111 applies for plan years
beginning after 2018. Because we are finalizing Sec. 156.111 to apply
for plan years 2020 and later, we are not finalizing these conforming
changes as proposed, but are instead making changes to Sec. 156.100 to
state that the selection process in Sec. 156.100 applies only through
plan years beginning in 2019, and Sec. 156.111 applies for plan years
beginning on or after January 1, 2020.
Comment: A few commenters commented on the proposal to make
conforming changes to Sec. 156.100 as a result of our proposed changes
to Sec. 156.111. These commenters generally did not support the
proposed policy of Sec. 156.111 and supported retaining the current
benchmark plan options at Sec. 156.100 that provided benchmark plan
options at the State level.
Response: Since we are finalizing the new options for a State's
EHB-benchmark plan at Sec. 156.111 starting for plan year 2020, we are
finalizing conforming changes to Sec. 156.100, to reflect Sec.
156.111.
b. State Selection of EHB-Benchmark Plan for Plan Years Beginning on or
After January 1, 2020 (Sec. 156.111)
i. States' EHB-Benchmark Plan Options (Sec. 156.111(a))
We proposed to add new Sec. 156.111, which would provide States
with the flexibility to update their EHB-benchmark plans more
frequently and to select among more options. Specifically, we proposed
that a State may change its EHB-benchmark plan by: (1) Selecting the
EHB-benchmark plan that another State used for the 2017 plan year \60\
under Sec. 156.100 and Sec. 156.110; (2) replacing one or more EHB
categories of benefits under Sec. 156.110(a) in its EHB-benchmark plan
used for the 2017 plan year with the same categories of benefits from
another State's EHB-benchmark plan used for the 2017 plan year under
Sec. 156.100 and Sec. 156.110; or (3) otherwise selecting a set of
benefits that would become the State's EHB-benchmark plan, provided
that the EHB-benchmark plan does not exceed the generosity of the most
generous plan among a set of comparison plans. Under this third option,
the comparison plans would be the State's EHB-benchmark plan used for
the 2017 plan year and the plans described in Sec. 156.100(a)(1) for
the 2017 plan year, supplemented as necessary under Sec. 156.110.
These plans would include the largest health plan by enrollment in each
of the three largest small group insurance products by enrollment from
the State's 2017 base-benchmark plan options.\61\ Under any of the
available three options, we proposed that a State could change its EHB-
benchmark plan in any given year, not only in the years that HHS
specified. At the same time, this proposed policy would also allow
States that prefer to maintain their current EHB-benchmark plans to do
so without action.
---------------------------------------------------------------------------
\60\ The States' EHB-benchmark plans used for the 2017 plan year
are based on plans from the 2014 plan year, but we occasionally
refer to them as 2017 plans because these plans are applicable as
the States' EHB-benchmark plans for plan years beginning in 2017.
\61\ The Essential Health Benefits: List of the Largest Three
Small Group Products by State for 2017 is available at https://www.cms.gov/CCIIO/Resources/Regulations-and-Guidance/Downloads/Top3ListFinal-5-19-2015.pdf. States' EHB-benchmark plans used for
the 2017 plan year are able at https://www.cms.gov/CCIIO/Resources/Data-Resources/Downloads/Final-List-of-BMPs_4816.pdf.
---------------------------------------------------------------------------
Option 1: Select Another State's EHB-Benchmark Plan
Under the first option, we proposed that a State be permitted to
select one of the EHB-benchmark plans used for the 2017 plan year by
another State. We did not propose to change the State mandate policy at
Sec. 155.170 under this option. Under this proposed policy, we
proposed that benefits mandated by State action prior to or on December
31, 2011 could continue to be considered EHB under Sec. 155.170, and
would not require the State to defray the costs. Conversely, if a State
selects an EHB-benchmark plan from another State using this option, the
selecting State would still be required to defray the cost of any
benefits included in that State's EHB-benchmark plan that are benefits
mandated by the selecting State after December 31, 2011, and that are
subject to defrayal under the current regulations.\62\ For example, if
State A selects the EHB-benchmark plan of State B, State A would be
required to defray the cost of any benefits included in State B's EHB-
benchmark plan that are required to be provided by State A's action
after December 31, 2011, and that are subject to defrayal under current
regulations. We solicited comments on this proposal, including on the
application of the State mandate policy under this proposal and on
whether other flexibilities are needed by States under this proposed
option.
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\62\ Under Sec. 155.170, the State must make payments to defray
the cost of additional required benefits either to an enrollee, as
defined in Sec. 155.20, or directly to the QHP issuer on behalf of
the enrollee.
---------------------------------------------------------------------------
Option 2: Replace Category or Categories From Another State's EHB-
Benchmark Plan
Under the second option, we proposed that a State be allowed to
partially replace its current EHB-benchmark plan, using EHB-benchmark
plans used by other States for the 2017 plan year. Under this option,
we proposed that a State may replace any EHB category or categories of
benefits in its EHB-benchmark plan from the 10 required EHB categories
with the same category or categories of benefits from another State's
EHB-benchmark plan used for the 2017 plan year. For example, a State
may select the prescription drug coverage from another State's EHB-
benchmark plan (which might include a different formulary drug count)
and a third State's EHB-benchmark plan hospitalization category.
Similar to the first option, we proposed that benefits mandated by
State action prior to or on December 31, 2011, could continue to be
considered EHB under this proposal in accordance with Sec. 155.170,
and would not require the State to defray their costs. However, if a
State uses this option to replace one or more categories of its EHB-
benchmark plan used for the 2017 plan year with a category or
categories of benefits from another State's EHB-benchmark plan used for
the 2017 plan year, the selecting State would be required to defray the
cost of any benefits included in the categories of benefits from the
other State's EHB-benchmark plan that are mandated by the selecting
State's action after
[[Page 17010]]
December 31, 2011 and that are subject to defrayal under current
regulations. For example, if State A replaces a category of benefits in
its EHB-benchmark plan with a category of benefits from State B's EHB-
benchmark plan, State A must defray the cost of any benefits in that
category mandated by State A after December 31, 2011 that are included
in the replacement category of benefits and that are subject to
defrayal under current regulations.
Option 3: Select a Set of Benefits To Become the State's EHB-Benchmark
Plan
Lastly, under the third option, we proposed that a State be
permitted to select a set of benefits that would become its EHB-
benchmark plan using a different process, so long as the new EHB-
benchmark plan does not exceed the generosity of the most generous
among a set of comparison plans. Under this option, the set of
comparison plans would be the State's EHB-benchmark plan used for the
2017 plan year and the plans described in Sec. 156.100(a)(1) that were
available as base-benchmark plan options for the 2017 plan year,
supplemented as necessary under Sec. 156.110. These plans would
include the largest health plan by enrollment in each of the three
largest small group insurance products by enrollment from the State's
base-benchmark options for the 2017 plan year. We proposed that the
State would determine if its proposed EHB-benchmark plan does not
exceed the generosity of the most generous of a set of comparison plans
using an actuarial certification, developed by an actuary who is a
member of American Academy of Actuaries, in accordance with generally
accepted actuarial principles and methodologies. For this actuarial
certification, we proposed that the State could determine generosity in
the same manner as we would use to measure whether the plan provides
benefits that are equal in scope of benefits provided under a typical
employer plan, described later in this section.
We also recognized that the increased flexibility offered to States
under this proposed option to define an EHB-benchmark plan could allow
a State to embed any desired benefit mandate into the EHB-benchmark
plan, without any requirement to defray the obligation. For this
reason, we proposed to apply the benefit mandate defrayal policy under
Sec. 155.170 to this option. Specifically, we proposed that benefits
mandated by State action prior to or on December 31, 2011 could
continue to be considered EHB under this proposal according to Sec.
155.170, and would not require State defrayal. However, if a State
selects its EHB-benchmark plan using this option, the State must
continue to defray the cost of any benefits mandated by State action
after December 31, 2011 that are subject to defrayal under current
regulations. For example, if the State selects a set of benefits to
become its EHB-benchmark plan under paragraph (a)(3), any benefits
mandated by that State after December 31, 2011 that are subject to
defrayal under current regulations would not be considered EHB, and the
State would be required to defray the cost of any such benefits
included in the State's EHB-benchmark plan under this proposed option.
We solicited comments on all of the proposals, including on whether
to allow a State to select its EHB-benchmark plan from any of the 10
previous base-benchmark plan options available to the State or other
States under Sec. 156.100, supplemented as necessary under Sec.
156.110, on whether a different approach is needed to defray the cost
of any benefits mandated by State action, on whether other
flexibilities are needed by States under the proposed options, on our
proposed approach to limit a State's new EHB-benchmark plan under
Option 3, such that it does not exceed the generosity of the comparison
plans, and on whether other options should be provided to States to
select their EHB-benchmark plans beyond the three proposed options. We
are finalizing these new EHB-benchmark plan options as proposed, with
one amendment. As further discussed in the comments and responses
below, we are extending the proposed requirements at Sec.
156.111(a)(3)(i) and (ii) that ensure that the State's new EHB-
benchmark plan does not exceed the generosity of the most generous
among a set of comparison plans to all of the State's options to select
a new EHB-benchmark plan at Sec. 156.111(a). We are finalizing these
requirements at Sec. 156.111(b)(2)(ii).
Comment: Some commenters supported the proposed EHB-benchmark plan
options for States because they offer increased State flexibility
through additional options for States. Many commenters did not support
the proposed EHB-benchmark plan policy or supported retaining the
current policy, and noted that it already allows State flexibility.
Many of these commenters were concerned that States would decrease EHB
benefits as a result of the proposed policy, or that issuers would not
cover benefits that are not EHB. Some commenters were concerned that
the options would create a patchwork of benefit designs that could
diminish care, increase or shift costs or affect issuer competition.
Other commenters believed that the proposed policy was inconsistent
with the statutory requirements that the Secretary define EHB and that
the Secretary ensure other EHB consumer protections under section
1302(b)(2), (3), and (4) of the PPACA are incorporated into the
definition of EHB. These commenters believed that the Secretary has no
authority to delegate defining EHB or its parameters to States or
issuers. Commenters also believed that the proposed options allowed
States to select an EHB-benchmark plan from among an endless set of
options, whereas the prior policy allowed a preset list of 10 plan
options per State, with most options being from the State in which the
plan was applying. Some commenters also believed that the proposed
policy was inconsistent with the statutory requirement that the
Secretary update EHB based on gaps in coverage or changes in the
evidence identified in the Secretary's report to Congress as
established at section 1302(b)(4)(H) of PPACA. Some of these commenters
also noted that this report has not been completed.
Response: As described in the EHB Final Rule, we originally
established the benchmark plan policy to ensure that EHB is equal to
the scope of benefits provided under a typical employer plan and in
recognition that the typical employer plans differ by State.
Specifically, the Secretary balanced these directives, and minimized
market disruption, by directing plans to offer the 10 statutory EHB
categories while allowing the State to select the specific details of
their EHB coverage from a set of reference plans. Accordingly, States
maintained their traditional role in defining the scope of insurance
benefits and exercised that authority by selecting a plan that reflects
the benefit priorities of that State, within the bounds of the
definition of EHB set by the Secretary.\63\ This deference to States
within the definition established by the Secretary continues under the
policies finalized in this rule.
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\63\ EHB Rule, 78 FR at 12843. February 23, 2013.
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We believe that States should have additional choices with respect
to benefits, which may foster innovation in plan design and greater
access to coverage, and provide States with a mechanism for affecting
affordability. This approach may balance these considerations in
manners different from the balance achieved under the previous
benchmark plans. The Secretary is defining an expanded set of options
from which the State can select
[[Page 17011]]
its EHB-benchmark plan, allowing the State to select the specific
details of that plan. This policy recognizes the need for increased
State flexibility beyond that which the original policy allowed.
For this reason, we are finalizing the new options for a State's
EHB-benchmark plan, along with additional requirements for the State's
selection as detailed later in this preamble. We believe these
requirements, when taken together, provide States with significant
flexibility while appropriately limiting the range of choices, thereby
fulfilling the Secretary's obligation to define EHB. Specifically, the
requirement that a State's EHB-benchmark plan provide a scope of
benefits that is equal to, or greater than, to the extent any
supplementation is required to provide coverage within each EHB
category at Sec. 156.110(a), the scope of benefits provided under a
typical employer plan, as defined at Sec. 156.111(b)(2), establishes a
minimum scope of benefits that is required to be covered as EHB.
Furthermore, the requirement that the EHB-benchmark plan cannot exceed
the generosity of the most generous among a set of comparison plans,
which are those group market plans that comprise the basis for the
scope of benefits under the current definition of EHB, further limits
the range of benefits that can be considered EHB. Together with the
other requirements specified at Sec. 156.111(b)(2), these requirements
provide States with flexibility to adjust their States' EHB-benchmark
plan within a limited range.
At the same time, this policy also allows a State to retain its
current EHB-benchmark plan. This flexibility was not afforded under the
previous policy. In fact, the previous default option, which was the
largest plan by enrollment in the largest product by enrollment in the
State's small group market, could vary between benchmark plan selection
years, creating unnecessary disruption for States that were unable to
select a benchmark plan. Under the new policy, these States, as well as
States that do not wish to make changes, will not be required to do so,
and will not need to take action to prevent the disruption caused by a
change to the State's EHB-benchmark plan.
We are not completing the report to Congress and the public on the
periodic review of EHB under section 1302(b)(4)(G) of the PPACA at this
time. We do not believe that a report on EHB at this time will provide
conclusive results on the assessments required under section
1302(b)(4)(G) of the PPACA, as a large portion of plans required to
comply with EHB are QHPs offered both on and off of the Exchanges.
These QHP markets have seen significant changes from year to year since
their inception, with the number of issuers offering plans in each
market changing on an annual basis and the number of enrollees in these
plans fluctuating. Furthermore, the frequent modifications to EHB
policies and other related Federal benefit policies, such as guidance
on complying with the Paul Wellstone and Pete Domenici Mental Health
Parity and Addiction Equity Act of 2008 (MHPAEA) and preventive
services regulations, have not allowed these plans' benefit structures
to stabilize enough for conclusive analysis. Since the PPACA only
requires this report to Congress to be conducted periodically, and we
do not believe that conducting this report at this time will establish
meaningful conclusions, this report will not be completed at this time.
We intend to conduct this report once the market has stabilized, which
we believe will be furthered by the policy we are finalizing in this
rule.
Comment: Many commenters were concerned that the proposed EHB-
benchmark plan options would create a race to the bottom among States'
scope of benefits for their EHB-benchmark plans. These commenters were
especially concerned that these benefit designs would not meet the
needs of vulnerable populations, would increase costs to consumers, and
would reduce the value of coverage. Some commenters were concerned that
benchmark plans selected under one of the first two options would not
reflect plans in the State or meet the needs of beneficiaries in that
State. Some commenters were concerned that these proposed options
discourage States from selecting more generous coverage, with some
commenters stating that if the true goal of the policy was to increase
State flexibility, the State should also have the option to increase
benefits.
Other commenters were concerned that the first two options allow
States to pick more generous plans, and some commenters recommended
preventing States from being able to select an option without being
responsible for the costs of the additional benefits. In general, these
commenters were concerned that the proposed policy would allow States
to select benchmark plans with more generous State mandates. Other
commenters were concerned that there is significant variation in
benchmark plan coverage of particular services, and some commenters
stated that the goal of allowing State flexibility should be secondary
to ensuring comprehensiveness of the benefit package.
Other commenters noted that the second option allows the State to
define EHB by selecting the least generous benefits for each category,
thus creating a standard that does not resemble any existing plan in
the market today. Commenters were similarly concerned that the third
option could allow a State to greatly reduce the generosity of
coverage, even though the definition would still require the coverage
of the 10 EHB categories. Some commenters were concerned that the third
option was too broad and did not ensure consumer protections to ensure
the comprehensive scope of benefits.
Response: We are not persuaded that the new options will create a
race for States to establish the least generous plan possible because
all States' EHB-benchmark plans will be required to include coverage
for all 10 EHB categories of benefits, and the State will be required
to confirm its EHB-benchmark plan includes coverage for each EHB
category in accordance with Sec. 156.111(e)(1). Section 156.111(e)(1)
also requires States to confirm that its new EHB-benchmark plan meets
the applicable requirements of Sec. 156.111(b) on scope of benefits,
including that the State's EHB-benchmark plan provide a scope of
benefits that is equal to, or greater than, to the extent any
supplementation is required to provide coverage within each EHB
category at Sec. 156.110(a), the scope of benefits provided under a
typical employer plan in accordance with Sec. 156.111(e)(2).\64\
Through those requirements, the options at Sec. 156.111(a) do not
allow a State to substantially reduce the level of coverage, and
instead allow a State the option to adjust its EHB-benchmark
[[Page 17012]]
plan to use benefit structures that have worked well in other States or
other parts of the employer markets, or otherwise innovate benefits
within the range of plans in the employer market. Because each State
has different market conditions and demographic distributions, a plan
that may be the least generous plan in one State may not be the least
generous plan in another State, and for that reason, we are not
concerned that this policy is going to create a race to establish the
least generous plan.
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\64\ We are also retaining the current issuer requirements
related to EHB at Sec. Sec. [thinsp]156.115, 156.122, and 156.125
and those requirements would continue to apply to all plans subject
to the EHB requirements. This includes 45 CFR 156.122(a)(1) that
establishes that, generally, a health plan does not provide EHB
unless it covers at least the greater of: (1) One drug in every USP
category and class; or (2) the same number of prescription drugs in
each category and class as the EHB-benchmark plan. Under the current
version of the USP Medicare Model Guidelines (MMG) drug
classification system used for the EHB drug count at Sec.
[thinsp]156.122(a)(1), this proposal means that all plans required
to comply with EHB will continue to have to cover at least one drug
in the Anti-Addiction/Substance Abuse Treatment Agents (Opioid
Reversal Agent) class. Naloxone is currently the only active
ingredient in the Opioid Reversal Agent class, and as a result all
plans required to comply with EHB would be required to continue to
cover at least one form of naloxone under this proposed policy. This
was previously addressed in the 2018 Letter to Issuers in the
Federally-facilitated Marketplaces available at https://www.cms.gov/CCIIO/Resources/Regulations-and-Guidance/Downloads/Final-2018-Letter-to-Issuers-in-the-Federally-facilitated-Marketplaces-and-February-17-Addendum.pdf.
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In short, this flexibility established under Sec. 156.111(a) is
not intended to reduce benefits, but to allow for more innovative
benefits within the current benefit requirements. This means that a
State's EHB-benchmark plan may not have the exact same benefits and
limits as the typical employer plan the State identifies under this
policy, but this policy will still result in the State's EHB-benchmark
plan providing a scope of benefits equal to, or greater than, to the
extent any supplementation is required to provide coverage within each
EHB category at Sec. 156.110(a), the scope of benefits provided under
a typical employer plan, satisfying the Secretary's obligations at
section 1302(b) of the PPACA. Furthermore, as described later in this
rule, we are finalizing a definition of a typical employer plan that
requires the plan have enrollment and be sold in the State. This
definition ensures that regardless of the benchmark plan option
selected by the State under this rule, that benchmark plan will be at
least equal to the scope of benefits to a popular employer plan that
was previously offered in the State's employer plan market.
Furthermore, we encourage States to select EHB-benchmark plans that
foster innovation in plan design that would provide greater access to
coverage that would ultimately improve affordability. As discussed in
the proposed rule, in addition to granting States more flexibility in
regulating their markets, one of the goals with this policy was to
permit States to modify EHB to increase affordability of health
insurance in the individual and small group markets.\65\ As we also
note in our discussion of benefits mandated by State action at Sec.
155.170, we want to ensure that States do not select EHB in a manner
that decreases affordability of coverage. Therefore, in response to
commenters' concerns about ensuring that the options under Sec.
156.111(a) do not undermine the goal of affordability, we are
incorporating into the regulation protections to ensure that a State's
EHB-benchmark plan selections take into account affordability of
coverage, by applying the generosity test proposed in connection with
the third option to all three EHB-benchmark plan selection options for
States. Accordingly, Sec. 156.111(b)(2)(ii) provides that a State may
not select a new EHB-benchmark plan that exceeds the most generous
among a set of comparison plans, no matter the option used to generate
the EHB-benchmark plan. These comparison plans include the State's EHB-
benchmark plan used for the 2017 plan year and the plans described in
Sec. 156.100(a)(1) for the 2017 plan year, supplemented as necessary
under Sec. 156.110.\66\ We recognize that it may be possible for a
State's EHB-benchmark plan to provide a scope of benefits that is equal
to (or greater than, to the extent any supplementation is required to
provide coverage within each EHB category at Sec. 156.110(a)) the
scope of benefits provided under a typical employer plan at Sec.
156.111(b)(2)(i), and not meet the generosity standard at Sec.
156.111(b)(2)(ii) (for example, a proposed EHB-benchmark plan could
satisfy the typical employer plan requirement but exceed the generosity
standard because of the way supplementation was performed). However, we
believe that by extending this generosity limit to all selection
options, we are minimizing the opportunity for a State to select EHB in
a manner that would make coverage unaffordable for patients and
increase Federal costs, while still helping to ensure that States are
ensuring that benefits are equal to the scope of benefits provided
under a typical employer plan.
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\65\ 82 FR at 51102.
\66\ The actual number of comparison plans for each State
depends on the State's EHB-benchmark plan for 2017. Most States will
only have three comparison plans as the State's EHB-benchmark plan
for 2017 is a plan within the options at Sec. 156.100(a)(1).
However, a few States will have four comparison plans as the State's
EHB-benchmark plan for 2017 is not a plan within the options at
Sec. 156.100(a)(1). The list of plan options at Sec. 156.100(a)(1)
for each State for 2017 is available at https://www.cms.gov/CCIIO/Resources/Regulations-and-Guidance/Downloads/Top3ListFinal-5-19-2015.pdf. Also, the States' EHB-benchmark plans used for the 2017
plan year are available at https://www.cms.gov/CCIIO/Resources/Data-Resources/Downloads/Final-List-of-BMPs_4816.pdf.
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Comment: Some commenters were concerned that a State would have
difficulty knowing what another State's EHB-benchmark plan was
covering, because the benefits or benchmark plan documentation were not
broken into separate EHB categories. Some commenters were generally
concerned about using the 2017 EHB-benchmark plans. These commenters
noted that States are only supplementing categories of benefits in
those plans when those categories are missing and are not considering
the scope of benefits within the category, leading to inadequate
coverage. Other commenters wanted to understand how supplementation
would work under the options.
Response: Additional supplementation of the EHB-benchmark plans
generally should not be required under the three State EHB-benchmark
plan selection options being finalized at Sec. 156.111(a). For the
first option at Sec. 156.111(a)(1), the selecting State would be
selecting another State's EHB-benchmark plan, which already would be
supplemented, as necessary.\67\ For the second option at Sec.
156.111(a)(2), the State would replace a category or categories of
benefit from its current EHB-benchmark plan with another State's EHB-
benchmark plan's category or categories of benefits, which already
would have been supplemented, if necessary, by that other State.
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\67\ Information on whether the State supplemented its EHB-
benchmark plan for 2017 is available at https://www.cms.gov/CCIIO/Resources/Data-Resources/Downloads/Final-List-of-BMPs_4816.pdf.
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A State using the third option will need to ensure that its EHB-
benchmark plan satisfies the requirements being finalized at Sec.
156.111(b), such as the requirements to cover items and services in
each of the ten statutory categories of EHB; to not have benefits
unduly weighted towards any of those categories of benefits; and to
provide a scope of benefits equal to (or greater than, to the extent
any supplementation is required to provide coverage within each EHB
category at Sec. 156.110(a)), the scope of benefits provided under a
typical employer plan. Since States have been supplementing their EHB-
benchmark plans since the inception of the EHB policy, we expect States
to be familiar with categorizing benefits.
Comment: Various commenters supported coverage of specific services
within an EHB category, with some commenters noting that many of the
services that might be considered for reduction are only a small
portion of spending. They stated that not covering these services would
not meaningfully reduce premiums and would increase or shift costs for
the services for the consumers who need them. Other commenters noted
that all of the options are linked in part to the 2017 EHB-benchmark
plans (including the generosity standard under Option 3), and that
these are in fact 2014 plans. Certain commenters were concerned
[[Page 17013]]
that these 2014 plans do not comply with new requirements, such as the
applicability of requirements under MHPAEA or noted that using 2014
plans in the long term means that EHB would still be linked to 2014
plans. Comments varied on whether States that are selecting an EHB-
benchmark plan should be allowed to select from any States' previous
EHB-benchmark plans for options Sec. 156.111(a)(1) or (2). A few
commenters recommended that HHS give States additional technical
assistance. For example, one commenter sought clarification on which
State entity would be authorized to select the State's EHB-benchmark
plan. Certain commenters also had concerns about provider
discrimination under the proposed policy.
Response: Because Sec. 156.111 continues to define EHB based on a
``benchmark plan'' approach, we are continuing the policy of not
requiring that a State's EHB-benchmark plan cover a specific service or
services or use particular providers. We are limiting the policy to the
2017 EHB-benchmark plans under Options 1 and 2 at Sec. 156.111(a)(1)
and (2) to ensure that the set of plans available for States to select
from under Option 1 and 2 are clearly defined and reflect an EHB-
benchmark plan that was used by another State. We believe that this
policy balances providing flexibility to States to select from more
options for their EHB-benchmark plans while at the same time providing
simplification of choice within a defined set of plan options.
Furthermore, this policy will not overly limit State flexibility, as
the third option would permit a State to select from any of the other
10 previous base-benchmark plan options. While the 2017 EHB-benchmark
plans and the benchmark plans selected by States under Sec.
156.111(a)(3) may not comply with all of the market reforms and
consumer protections applicable to plans offered in the individual and
small group markets, this is not a departure from the benchmarks that
have been used to date. We reiterate the policy that non-grandfathered
insurance plans in the individual and small group markets that are
required to comply with EHB must not only provide benefits that are
substantially equal to the EHB-benchmark plan, but must also comply
with all Federal requirements applicable to plans offered in those
markets, such as those benefit requirements at Sec. Sec. 156.115,
156.122, 156.125, and 156.130(g).
We also recognize that States have different processes for
selecting a benchmark plan and as a result, the State needs discretion
in determining what entity has the authority to select the State's EHB-
benchmark plan. We therefore will not dictate which State entity must
act to select a State's EHB-benchmark plan, but we may consider
providing States with additional technical assistance to aid in their
selection under the policy finalized in this rule.
Comment: Many commenters were concerned about the impact of the
proposed policy on the determination of which benefits are subject to
the prohibition of annual and lifetime dollar limits in section 2711 of
the PHS Act, as added by the PPACA, and the annual limitation on cost
sharing at section 1302(c) of the PPACA (which is incorporated into
section 2707(b) of the PHS Act). Some commenters were particularly
concerned about the impact of this policy on markets beyond the
Exchanges, particularly the large group market and self-insured group
health plans. These plans are not required to provide coverage of EHB
but must use a definition of EHB to determine which benefits apply to
the prohibition of annual and lifetime dollar limits and the annual
limitation on cost sharing. These commenters were generally concerned
about increased or shifting costs to consumers for benefits that are no
longer EHB, particularly for vulnerable populations. Some commenters
were concerned that since large group market and self-insured group
health plans could use any State's definition of EHB for purposes of
the annual and lifetime dollar limit prohibition and the annual
limitation on cost sharing, any State's definition could have the
potential to impact plans nationwide. Other commenters wanted
additional information and evaluation of the impact on how the change
in definition would be implemented.
Response: As discussed in more detail earlier in this section, the
flexibility established under Sec. 156.111(a) is not intended to
reduce benefits, but to allow for more innovative benefits within the
current benefit requirements. This means that a State's EHB-benchmark
plan may not have the exact same benefits and limits as the typical
employer plan the State identifies under this policy, but this policy
will still result in the State's EHB-benchmark plan providing a scope
of benefits that is equal to, or greater than, the scope of benefits
provided under a typical employer plan in accordance with Sec.
156.111(b)(2)(i), satisfying the Secretary's obligations at section
1302(b) of the PPACA. Accordingly, we do not expect that there will be
a substantial change to the scope of the protections afforded under the
annual and lifetime dollar limit prohibition or the annual limitation
on cost sharing.
ii. The Requirements for States' EHB-Benchmark Plans (Sec. 156.111(b)
Through (d))
Under the proposed options for States to select a new EHB-benchmark
plan, we proposed that a State's EHB-benchmark plan must meet certain
requirements established under the PPACA with regard to EHB coverage,
scope of benefits, and notice and opportunity for public comment.
First, under paragraph (b)(1), we proposed to require that the State's
EHB-benchmark plan provide an appropriate balance of coverage for the
10 EHB categories of benefits as established at Sec. 156.110(a) and
under section 1302(b)(1) of the PPACA. Second, we proposed at paragraph
(b)(2) to define requirements regarding the scope of benefits that must
be provided by a State's EHB-benchmark plan. Specifically, we proposed
at paragraph (b)(2)(i) that the State's EHB-benchmark plan must be
equal in scope of benefits to what is provided under a typical employer
plan. This proposed requirement reflects section 1302(b)(2) of the
PPACA, which requires the Secretary to ensure that the scope of the EHB
is equal to the scope of benefits provided under a typical employer
plan, as determined by the Secretary. We proposed to define a typical
employer plan as an employer plan within a product (as these terms are
defined in Sec. 144.103 of this subchapter) with substantial
enrollment in the product of at least 5,000 enrollees sold in the small
group or large group market, in one or more States, or a self-insured
group health plan with substantial enrollment of at least 5,000
enrollees in one or more States. We sought comment on many parts of
this definition, including:
Whether the definition of a typical employer plan should
reflect in substantial part a plan that would be typical in the State
in question;
Whether an appropriate way to measure typicality in that
case would be to provide that the typical employer plan be defined to
also have at least 100 enrollees enrolled in that plan or product in
the applicable State;
Whether typicality should be defined in other ways,
including whether it should be based upon the State's 10 base-benchmark
plan options for plan year 2017, supplemented as required to become the
State's EHB-benchmark plan under Sec. 156.110;
Whether the definition of a typical employer plan for this
purpose should be limited to plans that already cover all 10 EHB
categories;
[[Page 17014]]
Whether the proposed typical employer plan definition
should exclude self-insured plans, since States may not have the
ability to obtain the required information on those plans; and
Whether we should provide additional guidance or
requirements for the definition of a typical employer plan, such as
requiring that the plan selected as a typical employer plan be from a
recent year after December 31, 2013, requiring that the plan provide
minimum value, or requiring that the plan selected as a typical
employer plan not be an indemnity plan or an account-based plan like a
health reimbursement arrangement.
Given that the proposed definition of a typical employer plan was a
plan with enrollment of at least 5,000 enrollees in one or more States,
we believed that the State's option to select another State's EHB-
benchmark plan at proposed Sec. 156.111(a)(1) would automatically meet
the typical employer plan requirement because each of the available
options is an employer plan that had substantial enrollment.
We also solicited comment on whether actuaries could develop a
standard of practice for a benefit comparison calculation to determine
that a plan is equal to the scope of benefits provided under a typical
employer plan that could also apply to determine that a State's EHB-
benchmark plan does not exceed the generosity of the most generous plan
in accordance with the third option under proposed Sec. 156.111(a)(3).
We specifically sought comment on our draft example of an acceptable
methodology for comparing benefits of a State's EHB-benchmark plan
selection to the benefits of a typical employer plan.\68\
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\68\ The Draft Example of an Acceptable Methodology for
Comparing Benefits of a State's EHB-benchmark Plan Selection to
Benefits of a Typical Employer Plan As Proposed under the HHS Notice
of Benefit and Payment Parameters for 2019 (CMS-9930-F) is available
at https://www.cms.gov/CCIIO/Resources/Regulations-and-Guidance/Downloads/Example-Acceptable-Methodology-States-EHB.pdf.
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In addition to meeting the typical employer plan requirements, we
proposed at paragraph (b)(2)(ii) that the State's EHB-benchmark plan
must also not have benefits unduly weighted towards any of the
categories of benefits at Sec. 156.110(a) as established under section
1302(b)(4)(A) of the PPACA. Furthermore, we proposed at paragraph
(b)(2)(iii) that the State's EHB-benchmark plan must provide benefits
for diverse segments of the population, including women, children,
persons with disabilities, and other groups as established under
section 1302(b)(4)(C) of the PPACA.
At paragraph (c), we proposed that the State must provide
reasonable public notice and an opportunity for public comment on the
State's selection of an EHB-benchmark plan. We proposed that this
process would apply whenever a State changes its EHB-benchmark plan in
accordance with proposed Sec. 156.111(a).
Lastly, we proposed at paragraph (d) that a State must notify HHS
of the selection of a new EHB-benchmark plan by a date to be determined
by HHS for each applicable plan year. We also proposed that if the
State does not make a selection by the annual selection date, the
State's EHB-benchmark plan for the applicable plan year would be that
State's EHB-benchmark plan applicable for the prior plan year. Taken
together, these proposed requirements were intended to align with
statutory requirements. We affirmed that Sec. Sec. 156.115, 156.122,
and 156.125 would continue to apply to all plans subject to the EHB
requirements.
We are finalizing the requirements for a State's EHB-benchmark plan
with certain amendments to: (1) Clarify that the State's EHB-benchmark
must provide coverage of items and services for at least the 10 EHB
categories; (2) add a codification of the currently applicable
requirement at Sec. 156.110(d) that the State's EHB-benchmark plans
must not include discriminatory benefit designs that contravene the
non-discrimination standards defined in Sec. 156.125; (3) modify the
definition of a typical employer plan; (4) add a requirement that the
State must post a notice of its opportunity for public comment with
associated information on a relevant State website; (5) provide that
any State EHB-benchmark plan may be no more generous than the most
generous among a set of comparison plans, as described above; and (6)
codify in regulation text the proposed standard in the preamble of the
proposed rule that if a State's benchmark plan selection does not meet
the requirements of this section and section 1302 of the PPACA, the
State's EHB-benchmark plan will be the State's EHB-benchmark plan
applicable for the prior year, as further described under the data
collection section below. To reflect the application of the generosity
standard to all three options under this regulation, we moved that
provision from Sec. 156.111(a)(3) to Sec. 156.111(b)(2), and have
renumbered parts of Sec. 156.111(b)(2) for clarity.
Comment: Many commenters stated that the definition of EHB provides
important protection to consumers, particularly with regard to various
populations. Some commenters appreciated the codification of certain
EHB protections under section 1302(b) of the PPACA into the regulation
text, with some requesting the non-discrimination provisions from
section 1302(b) of the PPACA be included, too. Some commenters wanted
strong Federal enforcement of EHB requirements, such as non-
discrimination. Some commenters believed that the standards were too
vague or wanted additional guardrails on States' EHB-benchmark plans. A
few commenters wanted certain clarifications to Sec. 156.111(b)(1),
such as the inclusion of items and services or on requiring coverage of
the 10 EHB categories.
Response: In the proposed rule, we did not propose to eliminate the
EHB-benchmark plan standards under Sec. 156.110. However, we recognize
based on comments that the applicability of that section to benchmark
plans selected under the proposed Sec. 156.111 was not as clear as it
could have been. Therefore, in response to commenters, we are
finalizing Sec. 156.111(b) with certain amendments that align with the
statute and that clarify the applicability of EHB-benchmark plan
standards. We are amending Sec. 156.111(b)(1) to more explicitly state
that the EHB-benchmark plan must not only provide an appropriate
balance of coverage of the 10 statutory categories of EHB, but also
cover items and services in all 10 categories.
We are also adding a new Sec. 156.111(b)(2)(v) to codify the
continuing applicability of the currently applicable benchmark plan
non-discrimination provisions under Sec. 156.110(d) to the EHB-
benchmark plan selection options under Sec. 156.111(a). Specifically,
a State's EHB-benchmark plan may not violate the non-discrimination
standards defined in Sec. 156.125, which reflects the non-
discrimination provisions of section 1302(b)(4) of the PPACA.
Comment: Many commenters opposed allowing States to annually update
their EHB-benchmark plans. These commenters had a variety of concerns
about annual updates to the benchmark plans, such as annual updating
would be administratively and financially burdensome to issuers,
confusing for consumers, lack predictability, or would create
instability that would not allow issuers to assess the effectiveness of
previous changes before new changes are implemented. Some commenters
recommended limiting the changes to every few years, with some
supporting every 3 years, which aligns with the
[[Page 17015]]
frequency with which the benchmark plans have previously been updated.
Some commenters recommended timeframes for the State's annual
submission process, such as requiring the EHB-benchmark plans to be
finalized 18 months prior to the benefit year, to help ensure that
issuers have sufficient time to design products in advance of the
filing deadlines for the upcoming benefit year.
Response: As discussed in the proposed rule, we recognize the
burden on States and issuers of making changes to a State's EHB-
benchmark plan. Specifically, we anticipated most States would need to
invest resources to analyze the three new EHB-benchmark plan selection
options to make an informed selection, even if a State defaults. We
also anticipated that issuers offering plans that provide EHB would
incur additional administrative costs associated with designing plans
compliant with the State's newly selected EHB-benchmark plan.\69\
Because of the level of effort needed by the State and its issuers to
make changes to a State's EHB-benchmark plan, we believe that in only
very limited cases will a State choose to make EHB-benchmark plan
changes on an annual basis. We believe that if a State does decide to
make changes annually, there may be a specific reason for needing an
annual change such as for a medical innovation where such benefits
would outweigh any potential for consumer confusion. We also do not
believe that such changes would rise to the level of creating market
instability. The purpose of this policy is to allow for State
flexibility in selecting an EHB-benchmark plan, and we believe it is
important for States to retain the flexibility to choose when the State
wants to make changes to its EHB-benchmark plan. Therefore, we are
finalizing the policy as proposed.
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\69\ 82 FR at 51131.
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As described in the next section, we are finalizing the 2020
deadline for submission of a State's EHB-benchmark plan under Sec.
156.111(a). For plan years after 2020, we intend to announce the annual
EHB-benchmark plan selection deadline to States in the annual notice of
benefits and payment parameters. Because we expect that the number of
submissions for each plan year will vary, we will not be providing a
specific date as to when the State's EHB-benchmark plans for a given
plan year will be finalized.
Comment: Many commenters opposed allowing the definition of typical
employer plan to include self-insured plans, as these plans can have
unique benefit designs, and are not directly regulated by States, and
because it would be difficult to obtain plan information for such
plans. Some commenters stated that the lack of specificity in the
definition of a typical employer plan could allow rare, outlier plans
with extremely limited coverage to become the typical employer plan, or
they requested that there be additional requirements on the typical
employer plan to prevent outlier plans from being the typical employer
plan. Commenters were concerned that the definition could jeopardize
adequate coverage of the 10 EHB categories, lowering the threshold for
minimum coverage, or allowing insurers to offer plans with less
generous benefits, weakening the PPACA protections for individuals with
disabilities and complex medical needs.
Some commenters were particularly concerned that the policy in the
proposed rule generally focused on using the definition of EHB to
create a ceiling for the scope of benefits. They expressed concern that
the generosity standard limits the scope of benefits to certain
previous benchmark plan options, instead of providing the floor for the
scope of benefits, as they stated PPACA intended the definition of EHB
to be. These commenters were concerned that decreased benefits would
result in high costs for consumers to access those services.
Some commenters wanted more specificity in the definition of
typical employer plan, such as wanting the plan to be specific to the
State to ensure compatibility in the State or meet State requirements,
be required to cover all 10 EHB categories or minimum benefit
standards, be from a recent plan year, constitute MEC, provide minimum
value (or some other actuarial value standard), not be an account-based
plan, not be a preventive-services-only plan or an excepted benefit
plan or not be an indemnity plan. Some commenters supported the
definition of a typical employer plan for its flexibility or supported
aspects of the proposed definition. Another commenter noted that if a
State-specific enrollment requirement is added, current EHB-benchmark
plans under the first option may not automatically meet the definition.
Commenters recommended different enrollment thresholds for the
typical employer plan, with some commenters noting that substantial
enrollment varies by State or the lack of justification for the 5,000
enrollee threshold. Other commenters believed that the proposed policy
disregarded the concept of typicality as being the scope of coverage
typically seen in employer-based plans or did not believe enrollment
should be an indicator for typicality (as typicality is about
comparability and enrollment is about size).
Response: We agree with commenters that the definition of EHB
should establish a minimum level of benefits. In response to
commenters' concerns with the proposed definition of typical employer
plan, we are finalizing two sets of typical employer plans from which a
State may choose for purposes of ensuring a minimum scope of benefits
for the State's EHB-benchmark plan, which establishes the State's EHB
definition.
First, we are finalizing that the typical employer plan may be one
of the selecting State's 10 base-benchmark plan options established at
Sec. 156.100 from which the State could select for the 2017 plan year.
This definition, which allows the selecting State to continue to select
from its previous options, will allow a selecting State to modify its
previous base-benchmark plan options to innovate those benefits to
better meet the needs of consumers in its market.
Second, we are finalizing that a typical employer plan also may be
the largest health insurance plan by enrollment in any of the five
largest large group health insurance products by enrollment in the
selecting State, as product and plan are defined at Sec. 144.103,
provided that: (1) The product has at least 10 percent of the total
enrollment of the five largest large group health insurance products by
enrollment in the selecting State; (2) the plan provides minimum value,
as defined under Sec. 156.145; (3) the benefits are not excepted
benefits, as established under Sec. 146.145(b) and Sec. 148.220; and
(4) the benefits in the plan are from a plan year beginning after
December 31, 2013.
For purposes of this definition, we are applying the Federal
definitions of plan and product at Sec. 144.103.\70\ Under these
definitions, the product comprises all plans offered with the same
covered benefits and as a result, each plan within a product must have
the same benefit package. To ensure that these plans are typical within
the selecting State, the determination of each product's enrollment
numbers is based on enrollment in the selecting State.
[[Page 17016]]
Also, to ensure that none of these products are outliers within the
State, only plans from products that have at least 10 percent of the
total enrollment of the five largest large group health insurance
products can be selected. For example, if a selecting State's three
largest large group health insurance products under the second
definition at Sec. 156.111(b)(2)(ii) have 92 percent of the enrollment
in the selecting State among the five largest large group health
insurance products in the State, the fourth and fifth largest large
group health insurance products in the selecting State will not have at
least 10 percent of the enrollment and therefore, will not be an option
under the second prong of the typical employer plan definition. The use
of enrollment size in defining the typical employer plan aligns with
the previous policy where the base-benchmark plan options were also
determined based on the enrollment in those markets. Furthermore, by
using the largest products by enrollment in the selecting State, rather
than on a specified enrollment size, we ensure that any variation in
population size by the selecting State is taken into account. We
believe this second prong of the definition provides States with
important additional flexibility, as it expands the comparison options
available to States when comparing their selected EHB-benchmark plan to
a typical employer plan, while simultaneously ensuring the statutory
requirement that the definition of EHB be equal in scope to a typical
employer plan is met.
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\70\ Section 144.103 defines ``product'' as ``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'' and a plan as ``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.''
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We agree with commenters that self-insured plans have a
significantly greater likelihood of being plans with atypical benefit
designs. Therefore, this definition for typical employer plan does not
include self-insured plans, including health reimbursement
arrangements. We also recognize that States would have challenges
obtaining information about these other types of plans, especially at
the level of detail needed for the plan to be used as a comparison to
the State's EHB-benchmark plan. To limit the burden on States to
determine which plans in the State would be included in the second set
of plans, we are limiting the second set under the definition of
typical employer plan to large group market health insurance plans and
products.
In response to commenters who recommended that the typical employer
plan be required to provide minimum value (MV), we are also finalizing
as part of the second prong of the definition of the typical employer
plan that the plan must meet MV requirements under Sec. 156.145. Under
Sec. 156.145, an employer-sponsored plan provides minimum value only
if the percentage of the total allowed costs of benefits provided under
the plan is greater than or equal to 60 percent, and the benefits under
the plan must include substantial coverage of inpatient hospital
services and physician services, characteristics that we believe are
reflective of typical employer plans. For example, by requiring the
typical employer plan meet MV, outlier plans, such as preventive-
services-only plans, which do not provide substantial coverage of
inpatient hospital and physician services in accordance with the MV
requirement, could not satisfy the second definition of typical
employer plan.
To further respond to comments recommending that we ensure that
outlier plans are excluded from the definition of typical employer
plan, we are finalizing as part of the second prong of the definition a
requirement that the plan's benefits are not excepted benefits, as
defined under Sec. 146.145(b), and Sec. 148.220. For example, a
worker's compensation plan would not meet the second prong of the
definition of a typical employer plan. This requirement specifically
ensures that the typical employer plan is a major medical plan. Lastly,
we are requiring that the benefits in the plan are from a plan year
beginning after December 31, 2013. This requirement is consistent with
the options under the first prong of the typical employer plan
definition, which references plans originally offered in 2014.
In applying the typical employer plan definition, we recognize that
States may find that the plans that meet the definition of a typical
employer plan may not provide coverage for items and services within
each EHB category at Sec. 156.110(a). Therefore, we are finalizing
that the State's EHB-benchmark plan must provide a scope of benefits
that is equal to, or greater than, to the extent any supplementation is
required to provide coverage within each EHB category at Sec.
156.110(a), the scope of benefits provided under a typical employer
plan. The purpose of this approach is to permit States' EHB-benchmark
plans' scope of benefits not to be equal to the benefits under the
typical employer plan definition, only by exceeding the scope of
benefits provided by the typical employer plan, and only if necessary
to ensure that all EHB categories of benefits are being covered. We
believe that these requirements, when taken together, ensure outlier
plans are excluded from the definition of a typical employer plan,
respond to commenters' concerns regarding the risk that the definition
of typical employer plan would include atypical plans and ensure that
the requirement for the EHB-benchmark plans' scope of benefits to be
equal to that of a typical employer plan can account for benefits
within each EHB category at Sec. 156.110(a).
Comment: Some commenters believed that the statute requires that
the scope of benefits for the typical employer plan be informed by the
Department of Labor report \71\ required under section 1302(b)(2)(A) of
PPACA. These commenters did not believe that the proposed typical
employer plan definition was informed by the 2011 DOL report and were
concerned that defining the typical employer plan using enrollment
instead of typicality of benefits allows skimpier benefits, which would
have a detrimental effect on the most vulnerable enrollees in a way
that contravenes the PPACA requirement and implicates the Americans
with Disabilities Act. Some commenters were particularly concerned
about the impact of the proposed typical employer plan definition under
the third option and some commenters expressed concern about the
potential scope of coverage under plans that meet the proposed
definition. Some commenters expressed concern about coverage of
benefits for specific groups, such as those with opioid use disorders.
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\71\ Selected Medical Benefits: A Report from the Department of
Labor to the Department of Health and Human Services. April 15,
2011. https://www.bls.gov/ncs/ebs/sp/selmedbensreport.pdf.
---------------------------------------------------------------------------
Response: As required by section 1302(b)(2)(A) of the PPACA, the
Department of Labor conducted a survey of employer-sponsored coverage
and published a report on the survey on April 15, 2011. In determining
what constitutes a typical employer plan, HHS reviewed and considered
the findings of this survey. As discussed in more detail earlier in
this section, the flexibility established under Sec. 156.111(a) is not
intended to reduce benefits, but to allow for more innovative benefits
within the current benefit requirements. Similarly, with regard to
comparing the scope of benefits of an EHB-benchmark plan to a typical
employer plan, we note that the scope of benefits refers to the overall
extent of benefits covered, not to the inclusion of any particular
benefits. A State's EHB-benchmark plan is not required to cover a
particular benefit because that benefit is part of the typical employer
plan the State uses to assess the scope of benefits in its EHB-
benchmark plan. Rather, the particular
[[Page 17017]]
benefits and limitations in a State's EHB-benchmark plan are
established through one of the options defined in Sec. Sec. 156.100,
156.110 or 156.111 and the resulting EHB-benchmark plan provides a
scope of benefits that is equal to, or greater than the scope of
benefits that typical employer plan, as explained earlier in this
preamble.
We encourage States to consider, as they select their EHB-benchmark
plans, the potential impact on vulnerable populations, and the need to
educate consumers on benefit design changes. Specifically, as States
work to address the opioid crisis, we urge States to consider whether
and how selecting a new EHB-benchmark plan could help address the
crisis in their State.
Comment: Commenters generally supported requiring States to provide
public notice and an opportunity for public comment on its selection of
an EHB-benchmark plan, with some commenters supporting State
flexibility to determine the process. Most commenters, on the other
hand, wanted minimum or standardized requirements for the public
comment process, such as requiring the solicitation of input from
certain groups, a public hearing, a comment period of 30 days or 60
days, the posting of usable and understandable data, analysis and plan
documents (such as the documentation to be submitted to HHS under Sec.
156.111(e)), posting of any changes, a requirement that the State
submit documentation on its public hearing process to HHS, or some
combination of these standards. These commenters typically wanted a
transparent process to ensure meaningful and equal participation of
consumers, or wanted to reduce the burden of having a different process
for each State. One commenter wanted the regulation to at least
reference the State's applicable public comment period under the
State's administrative procedure act or department of insurance rules
while another was concerned that the rule assumes that a State has in
place a reasonable public comment process. Some commenters supported
requiring the State to post public notice while other comments wanted a
process to identify inadequacies or appeal a State's decision.
Response: We agree with commenters that the State public notice and
comment period is important for transparency to allow consumers to
provide feedback on the States' proposed changes to their EHB-benchmark
plans. However, we believe that States have varying processes for
soliciting and receiving comments and may have used varying processes
previously to provide public notice and an opportunity for public
comment on their EHB-benchmark plan selections.
Therefore, in an effort to retain State flexibility under this
requirement, with one exception, we are finalizing a policy under which
States must provide reasonable public notice and opportunity for public
comment, but will look to States to reasonably interpret that
requirement. In response to comments, we are finalizing a requirement
that the State, regardless of the public comment process it uses to
select its EHB-benchmark plan, must post a notice on a relevant State
website regarding the opportunity for public comment with associated
information.
For States that do not have a public notice and comment process for
these purposes, these States should consider using a similar process
for public comment to the one established at Sec. 155.1312(a)-(c). We
also remind States that any public participation processes must
continue to comply with applicable Federal civil rights laws, including
those that require covered entities to provide meaningful access for
individuals with limited English proficiency, and those that require
effective communications for individuals with disabilities, including
web accessibility requirements. The public notice process at Sec.
156.111(c) applies whenever a State changes its EHB-benchmark plan in
accordance with Sec. 156.111(a).
iii. Data Collection for State's EHB-Benchmark Plans for 2020 Plan Year
and Later (Sec. 156.111(e))
We proposed data collection requirements at Sec. 156.111(e) for a
State that opts to select a new EHB-benchmark plan under Sec.
156.111(a) in any given year, beginning with the 2019 plan year. We
proposed that a State must submit documents in a format and manner
specified by HHS by a date determined by HHS and proposed four areas of
documentation. First, at paragraph (e)(1), we proposed to require
documentation that would confirm that the State's EHB-benchmark plan
complies with the requirements under proposed Sec. 156.111(a), (b) and
(c), which includes the requirement that the 10 EHB categories of
benefits are covered under the State's EHB-benchmark plan. This
documentation would also include information on which selection option
under proposed Sec. 156.111(a) the State is using, including whether
the State is using another State's EHB-benchmark plan.
Second, in paragraph (e)(2), we proposed, for a State selecting an
EHB-benchmark plan under Sec. 156.111(a)(2) or (3), that the State's
documentation must include an actuarial certification and an associated
actuarial report from an actuary, who is a member of the American
Academy of Actuaries, in accordance with generally accepted actuarial
principles and methodologies, affirming that the State's EHB-benchmark
plan is equal in scope of benefits provided under a typical employer
plan. We proposed that if the State is selecting its EHB-benchmark plan
using Sec. 156.111(a)(3), which allows the State considerable
flexibility to otherwise select a set of benefits that would become its
EHB-benchmark plan, that the actuarial certification and associated
report would also affirm that the new EHB-benchmark plan does not
exceed the generosity of the most generous among the set of comparison
plans specified in paragraph (a)(3). For the actuarial certification,
we proposed that these documents, in accordance with generally accepted
actuarial principles and methodologies, would include complying with
all applicable Actuarial Standards of Practice (ASOP) (including but
not limited to ASOP 41 on actuarial communications). We also sought
comment on a draft methodology for comparing benefits of a State's EHB-
benchmark plan selection to the benefits of a typical employer plan for
the actuarial certification and associated actuarial report \72\ and on
whether the draft methodology should be the required approach for the
State's actuarial certification and associated actuarial report.
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\72\ The Draft Example of an Acceptable Methodology for
Comparing Benefits of a State's EHB-benchmark Plan Selection to
Benefits of a Typical Employer Plan As Proposed under the HHS Notice
of Benefit and Payment Parameters for 2019 (CMS-9930-F) is available
on CCIIO's Regulation and Guidance web page at https://www.cms.gov/cciio/resources/regulations-and-guidance/index.html.
---------------------------------------------------------------------------
Third, we proposed at paragraph (e)(3) that the State would be
required to submit an EHB-benchmark plan document that reflects the
benefits and limitations in the benchmark plan, including the medical
management requirements, a schedule of benefits and, if the State is
selecting its EHB-benchmark plan using the option in paragraph (a)(3),
a formulary drug list in a format and manner specified by HHS similar
to current Sec. 156.120. For a State that chooses an EHB-benchmark
plan under proposed Sec. 156.111(a)(1), the State may submit the plan
document from the other State's EHB-benchmark plan used for the 2017
plan year to fulfill this proposed requirement. For a State that
selects an EHB-benchmark plan under proposed Sec. 156.111(a)(2), the
[[Page 17018]]
State could create a combined plan document by assembling parts of the
plan documents from the other State's or States' benchmark plan
documents. We acknowledged that States may need to make conforming
edits in the other States' plan documents to align language and
terminology. For a State that chooses the option proposed at Sec.
156.111(a)(3), the State may need to develop a plan document.
Additionally, under proposed Sec. 156.111(e)(3), if the State is
selecting its EHB-benchmark plan using the option in Sec.
156.111(a)(3), we proposed that the State must also include a formulary
drug list for the State's EHB-benchmark plan in a format and manner
specified by HHS. We also proposed that for a benefit, such as the
pediatric dental benefit, that is defined by another program under the
State's EHB-benchmark plan, the State may submit a separate document
that reflects the benefits and limitations, including the medical
management requirements and a schedule of benefits comparable to how
States that defined their dental coverage using their State's CHIP
programs have done previously. Otherwise, regardless of which option
the State is using to select a new EHB-benchmark plan, the State would
be expected to submit one comprehensive plan document for the entire
State's EHB-benchmark plan selection.
Lastly, we proposed under paragraph (e)(4) to require the State to
submit documentation specified by HHS, which is necessary to
operationalize the State's EHB-benchmark plan. This documentation would
be used to provide public resources on a State's EHB-benchmark plan and
support related templates and tools. We proposed that this
documentation would include a complete and accurate EHB summary chart
that reflects the State's EHB-benchmark plan and aligns with the
documentation that we currently make publicly available on a State's
EHB-benchmark plan. For States that choose Sec. 156.111(a)(1) or
(a)(2) where the State is developing its benchmark plan based on
another State's EHB-benchmark plan, the State could develop this
document utilizing information from the EHB summary chart that is
currently publicly available.\73\
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\73\ All States' current benchmark plan documents are posted on
CCIIO's website at https://www.cms.gov/CCIIO/Resources/Data-Resources/ehb.html.
---------------------------------------------------------------------------
We proposed that HHS would post the State's EHB summary document
and the State's EHB-benchmark plan document on the Center for Consumer
Information and Insurance Oversight (CCIIO) website. We also considered
posting the State's EHB-benchmark plan confirmations proposed at Sec.
156.111(e)(1).
We proposed that in order for a State's selection of a new EHB-
benchmark plan from the proposed options to be accepted, the State's
new EHB-benchmark plan must comply with the associated EHB regulatory
and statutory requirements, including those under this final rule. If a
State's EHB-benchmark plan selection does not meet these regulatory and
statutory requirements, the State's current EHB-benchmark plan would
continue to apply. We solicited comments on the proposed processes and
deadlines for the 2019 and 2020 plan years.\74\ We also solicited
comments on the proposed data collection and associated documents and
whether other specifications for these documents are needed. We are
finalizing the provisions at Sec. 156.111(e) with an amendment to
Sec. 156.111(e)(2) to reflect the changes to Sec. 156.111(b)(2)(i)
and (ii) described above. We are finalizing that the policy will begin
applying for the 2020 plan year.
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\74\ For the 2019 plan year, HHS would post States' EHB-
benchmark plan documents after the proposed State submission
deadline, which would likely be in April 2018.
---------------------------------------------------------------------------
Comment: Commenters generally supported transparency in EHB-
benchmark plan documents and making these documents publicly available.
Some commenters noted concerns about the completeness and accuracy of
current EHB-benchmark plan documents and the inconsistent level of
detail among EHB summary charts, encouraging accuracy in plan
information to limit confusion.
Response: Section 156.111(e) is designed to ensure that the State's
EHB-benchmark plan meets the requirements at Sec. 156.111(b), (c), and
(d) and to ensure that the State's EHB-benchmark plan has a clearly
defined set of covered benefits. In an effort to support transparency,
we will post all documents \75\ that a State submits pertaining to its
EHB-benchmark plan selection on CCIIO's website with the exception of
the drug list. These documents will include the State's confirmations
(Sec. 156.111(e)(1)), any actuarial certification and associated
actuarial report (Sec. 156.111(e)(2)), the plan documents (Sec.
156.111(e)(3)), and the documents necessary to operationalize the
State's EHB-benchmark plan (Sec. 156.111(e)(4)). The State's EHB-
benchmark plan drug list will be posted in the category and class count
format in the EHB summary chart as the current drug counts are
currently posted.\76\
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\75\ CMS's PRA website is available at https://www.cms.gov/Regulations-and-Guidance/Legislation/PaperworkReductionActof1995/PRA-Listing.html.
\76\ https://www.cms.gov/CCIIO/Resources/Data-Resources/ehb.html.
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Because EHB-benchmark plan benefits are based on plans that were
sold in 2014, some of the benchmark plan documents may not comply with
current Federal requirements. For this reason, the State confirmations
require the State to confirm that its EHB-benchmark plan meets the
requirements to be an EHB-benchmark plan. Since States are typically
the primary enforcer of EHB policy, States may take varying approaches
to the level of details included in the EHB Summary Chart, as we
believe the manner in which the State displays the EHB-benchmark plan
in the EHB Summary Chart may be reflective of the State's EHB
enforcement strategies.
Furthermore, we also recognize that the States' 2017 EHB-benchmark
plans may need conforming edits to comply with other laws and
regulations, and to account for any benefits considered EHB under Sec.
155.170. For these reasons, we clarified in the proposed rule that
benefits and limits described in the available benchmark plan documents
on our website may not be fully applicable due to other laws and
regulations. For instance, under section 2711 of the PHS Act, as added
by the PPACA, issuers may not impose lifetime or annual dollar limits
on EHBs. When lifetime or annual dollar limits are specified in
available EHB-benchmark plan documents, States would have removed the
dollar limits or converted them to non-dollar limits when interpreting
and applying EHB policy. HHS recognizes most States as the primary
enforcers of EHB policy. Thus, when a State would use an EHB-benchmark
plan that originated in another State under any proposals under Sec.
156.111, we would generally defer to the selecting State's
implementation of the benefits and limits consistent with otherwise
applicable law, even when such interpretation differs from the
originating State's interpretation. Where possible, States should
provide clarity on benefits and limits in the documents collected under
Sec. 156.111(e) or note differences in the States' EHB summary chart.
Lastly, we are codifying in regulation text at Sec. 156.111(d)(1)
a proposed standard that we discussed in the preamble of the proposed
rule, under which the State's new EHB-benchmark plan must comply with
the regulatory
[[Page 17019]]
and statutory requirements, including those under this final rule, in
order for HHS to accept a State's selection of a new EHB-benchmark plan
from the options under Sec. 156.111(a). If a State's EHB-benchmark
plan selection does not meet these regulatory and statutory
requirements, the State's current EHB-benchmark plan would continue to
apply.
Comment: Some commenters on the Draft Example of an Acceptable
Methodology for Comparing Benefits of a State's EHB-benchmark Plan
Selection to Benefits of a Typical Employer Plan As Proposed under the
HHS Notice of Benefit and Payment Parameters for 2019 (CMS-9930-F) did
not support parts of the proposed methodological approach. Comments
generally did not support the use of small group index rates or wanted
an upper-bound limit of 98 percent to 102 percent for the category
comparison, with some commenters, noting the difficulty in conducting
this type of calculation or recommending additional input or more
detail. Others wanted to require actuarial data from the States to
justify adoption of a benchmark plan that varies significantly from
their current benchmarks in any category. Comments on the actuarial
certification and associated actuarial report requirements varied on
which EHB-benchmark selection options it should apply to.
Response: To account for the application of the typical employer
plan definition at Sec. 156.111(b)(2)(i) and the generosity standard
at Sec. 156.111(b)(2)(ii) to all selection options, we are finalizing
Sec. 156.111(e)(2) with certain changes. Specifically, we are
finalizing the requirement that States provide an actuarial
certification and an associated report from an actuary from the
American Academy of Actuaries, in accordance with generally accepted
actuarial principles and methodologies, that affirms: (1) That the
State's EHB-benchmark plan provides a scope of benefits that is equal
to, or greater than, to the extent any supplementation is required to
provide coverage within each EHB category at Sec. 156.110(a), the
scope of benefits provided under a typical employer plan as defined at
Sec. 156.111(b)(2)(i); and (2) the State's EHB-benchmark plan does not
exceed the generosity of the most generous among the set of comparison
plans at Sec. 156.111(b)(2)(ii)(A) and (B). States will be required to
submit an actuarial certification and an associated report under Sec.
156.111(e)(2) to affirm that both of the standards at Sec.
156.111(b)(2)(i) and Sec. 156.111(b)(2)(ii) are met, regardless of
which selection option under Sec. 156.111(a) they use.
The purpose of the policy being finalized at Sec. 156.111 is to
strike a balance between providing flexibility to allow States'
additional options to select their EHB-benchmark plans and ensuring
that States' EHB-benchmark plans meet the associated statutory
requirements. To that end, the actuarial certification and associated
actuarial report are intended to ensure that the scope of EHB is equal
in scope to the benefits provided under a typical employer plan, and to
provide the information to support the certification from the Chief
Actuary of CMS for the Secretary to submit along with a report to
Congress, consistent with section 1302(b)(2)(B) of the PPACA. Section
1302(b)(2)(B) of the PPACA requires that the Chief Actuary of CMS
certify that the scope of EHB as defined by the Secretary is equal to
the scope of benefits provided under a typical employer plan. Through
this rule, the Secretary is determining that the actuarial
certification and associated actuarial report at Sec. 156.111(e)(2)
ensures any EHB-benchmark plan selection is meeting the requirements at
section 1302(b)(2)(A) of PPACA; therefore, we are finalizing these
requirements.
This includes the requirement that the actuarial certification and
associated actuarial report be prepared in accordance with generally
accepted actuarial principles and methodologies. This includes all
applicable ASOPs. For example, ASOP 41 contains disclosure
requirements, including those that apply to the disclosure of
information on the methods and assumptions being used and ASOP 50
contains information on determining MV and AV. In accordance with ASOP
41, we would expect that the actuarial report is based on a data
analysis that is reflective of an appropriate population.
State actuaries may need flexibility in developing the actuarial
certification and report depending on the type of changes that the
State is interested in making to its EHB-benchmark plan and depending
on the typical employer plan that the State is using for the
certification and report. For these reasons, we are finalizing an
example methodology with several changes.\77\ First, to provide
clarification for actuaries, we expanded the methodology to address the
determination of the plan generosity under Sec. 156.111(b)(2)(ii) in
parallel to the determination of the typical employer plan, and further
explained how an actuary could use a typical employer plan or a
comparison plan for this certification and associated report.
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\77\ Example of an Acceptable Methodology for Comparing Benefits
of a State's EHB-benchmark Plan Selection in Accordance with 45 CFR
156.111(b)(2)(i) and (ii) is available at https://www.cms.gov/cciio/resources/regulations-and-guidance/index.html.
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Second, we are finalizing the definition of a typical employer plan
to establish the minimum level of benefits for the State's EHB-
benchmark plan and the generosity standard to establish the maximum
level of benefits for a State's EHB-benchmark plan selection. By tying
the maximum level of benefits, in part, to certain previous States'
EHB-benchmark plan options, the new State EHB-benchmark plan selections
are tied to generosity of the current EHB-benchmark plans in the
States, which is not what a 102 percent upper bound limit would
provide. For these reasons, we believe that creating an additional
upper-bound limit under the typical employer plan in the example
methodology is not necessary, would be duplicative, and would be
difficult to implement with the generosity standard at Sec.
156.111(b)(2)(ii).
Lastly, to support the use of more appropriate data for the
actuarial certification and associated actuarial report, we removed the
use of small group index rates from the calculation of the expected
value. Instead, we provide other examples of acceptable data that an
actuary may use, including data acquired from issuers in the State for
a recent plan year, and weighted the services and benefits provided in
each EHB category. We believe that the changes to the methodology will
help inform actuaries on how to approach the actuarial certification
and associated report at Sec. 156.111(e)(2).
Comment: Commenters generally opposed implementing the new EHB-
benchmark plan options for the 2019 benefit year. Some of these
commenters were concerned about operational and administrative
feasibility and burden to implement an EHB change for 2019, as well as
the lack of adequate time to design products and meet 2019 rate and
form filing deadlines. Other commenters were concerned about the
ability for States and issuers to evaluate options, or the impact of
the policy leading to market instability, increased costs, or consumer
confusion. Some commenters noted that the goal of market stability was
more important than the goal of providing States with added
flexibility. Another commenter was concerned about the potential for
data errors due to short timeframes.
Commenters generally supported making EHB-benchmark plan changes
for the 2020 plan year at the earliest, with some noting that the 2020
timelines aligns with previous
[[Page 17020]]
benchmark plan timelines. Certain commenters wanted additional analysis
or information before implementing any change. Other commenters wanted
to ensure that States provide outreach to consumers on the EHB-
benchmark plan changes. A commenter wanted to understand how guaranteed
renewability might affect changes to plans being made to reflect
changes from a new State EHB-benchmark plan selection.
Response: We acknowledge the operational and administrative
difficulties for States, issuers and consumers with implementing a
changing benefit design under the timeframes for the 2019 benefit year,
and believe that a 2020 implementation date would provide these
stakeholders with additional time to ensure a smooth implementation of
any benefit design changes. For these reasons, we will make Sec.
156.111 effective for the 2020 plan year. We are also finalizing the
deadline for State submission of its EHB-benchmark plan as July 2,
2018, for the 2020 plan year.\78\ This deadline aligns with the timing
of HHS's previous updates to the benchmark plans.
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\78\ We proposed July 1, 2018, but recognize that July 1, 2018
is a Sunday, so we are finalizing the 2020 deadline as July 2, 2018.
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As for guaranteed renewability, under some circumstances, issuers
may be permitted to change their products to reflect new requirements
for providing EHB as uniform modifications of their products.
Otherwise, if the changes to products are deemed to result in the
removal of products from the market, issuers would be required to meet
the product discontinuance requirements under Sec. 147.106, which
generally require at least 90 days advanced notice to the enrollees of
the discontinuance.
c. Provision of EHB (Sec. 156.115)
Currently, to provide EHB, plans are required to provide benefits
that are substantially equal to the EHB-benchmark plan. However, an
issuer of a plan offering EHB may substitute benefits within
categories, if allowed by the State, provided that the benefits are
actuarially equivalent to the benefit that is being replaced.
Substitutions of prescription drug benefits are not permitted.\79\ In
the EHB Rule, we finalized a policy at Sec. 156.115(b)(1) under which
substitution may not occur between different benefit categories.
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\79\ See Sec. 156.115(b)(1)(iii), as established in the EHB
Rule.
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In an effort to promote greater flexibility, consumer choice, and
plan innovation through coverage and plan design options, we proposed
modifying paragraph (b)(1)(ii) to allow States to permit issuers to
substitute benefits within the same EHB category and between EHB
categories, as long as the substituted benefit is actuarially
equivalent to the benefit being replaced and is not a prescription drug
benefit. The plan with substitutions would still be required to provide
benefits that are substantially equal to the EHB-benchmark plan, to
provide an appropriate balance among the EHB categories such that
benefits are not unduly weighted towards any category, and to provide
benefits for diverse segments of the population. It is generally the
State's responsibility to assess that plans required to provide EHB
adhere to these requirements.
We noted that nothing in this proposal would prohibit plans
required to provide EHB from imposing non-dollar limits, unless
otherwise prohibited by Federal law.\80\ In addition, we noted that we
would continue to defer to States, which have the option to set
criteria for benefit substitution, to enforce a stricter standard on
benefit substitution, or to prohibit it altogether consistent with
paragraph (b) of this section. We sought comment on examples of
substitution that issuers would be interested in pursuing.
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\80\ See Frequently Asked Questions on Essential Health Benefits
Bulletin (February 17, 2012), Q9, available at https://www.cms.gov/CCIIO/Resources/Files/Downloads/ehb-faq-508.pdf and the EHB rule. As
finalized in the EHB Rule, issuers of QHPs were permitted to make
actuarially equivalent substitutions within statutory categories
under Sec. 156.115(b)(1)(ii). Therefore, and as further explained
in the EHB FAQ, plans are permitted to impose non-dollar limits,
consistent with other guidance, that are at least actuarially
equivalent to the annual dollar limits.
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We are finalizing the proposal with amendments to clarify when
issuers may substitute benefits and States' roles in permitting or
prohibiting substitution. Specifically, we are finalizing the change to
allow issuers to substitute benefits between EHB categories, beginning
with plan year 2020, if the State in which the plan will be offered
permits such substitution and notifies HHS of its decision to allow
substitution between categories. We also add a clarification at Sec.
156.115(b)(3)(i) that plans with substitutions are not relieved of
their requirements under Sec. 156.115(a), including the requirement to
cover preventive health services, as required under 45 CFR part 147.
We are finalizing 2020 as the first plan year in which issuers,
with the permission of the State, may substitute benefits between
categories to align with the first year for which States may update
their EHB-benchmark plans under Sec. 156.111.
We believe States are best positioned to weigh the benefits of
innovative plan design with any effects on State risk pools, and
therefore, will only permit substitution between EHB categories in
States that have notified HHS that substitution between EHB categories
is permitted by the State. Further, because States are generally the
primary enforcers of EHB requirements, including the prohibition on
discrimination at Sec. 156.125, we believe States can best assure that
plan designs meet the needs of their State residents. We anticipate
that States will notify HHS of their decision, if any, to allow
substitution between EHB categories through the same means States use
to notify HHS of an updated EHB-benchmark plan selection under Sec.
156.111. If a State wishes to permit between-category substitution, it
will notify HHS, and that notification will be in effect unless and
until the State notifies HHS otherwise. States that permit between-
category substitution should work with their issuers to ensure they are
aware of this option. We plan to post on CCIIO's website a list of
States that allow substitution between EHB categories.
Comment: The majority of commenters to this proposal expressed
concerns about this proposed policy, and many commenters to this
proposal raised concerns about this policy's potential impact on the
risk pool. Specifically, commenters were concerned that the proposal
would permit issuers to design products that are intended to be
unattractive to higher-cost populations to discourage enrollment from
these populations. Some of these commenters were concerned about
resulting adverse selection, and were concerned that finalizing the
policy could ultimately interfere with the stability of the individual
and small group market risk pools. Several commenters were concerned
that the requirement that substituted benefits be actuarially
equivalent does not address this concern, because actuarial equivalence
is based on a standard population and cannot take into account the
potential effects of adverse selection. Commenters were concerned that
this type of ``gaming'' to deter enrollment from members of certain
groups could undermine State risk adjustment programs. Additionally,
many commenters requested that if we chose to finalize this proposal,
we publish additional guidance clarifying how issuers could utilize
substitution between EHB categories without violating
antidiscrimination
[[Page 17021]]
requirements. Some commenters stated that they could not conceive of a
situation in which cross-category substitution would be useful, and
notwithstanding our request for such examples, we did not receive
any.\81\
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\81\ One commenter submitted what they described as an example
of how an issuer could use this policy to promote the use of high-
value services, but their example was a case of adjustments to
actuarial value, as opposed to an example of substitution between
EHB categories.
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Response: We seek to promote issuer flexibility and consumer choice
with this proposal, but recognize that there are potential trade-offs
with regard to the risk pool and risk adjustment programs. We believe
that States are more attuned to the needs of their issuers and
consumers than HHS and can better assess the proper balance between
flexibility in plan benefits and risk pool stability. Because issuers
are required under the rule to provide benefits that are substantially
equal to the EHB-benchmark plan, provide an appropriate balance among
the EHB categories such that benefits are not unduly weighted towards
any category, and provide benefits for diverse segments of the
population, we expect that effects on the risk pool will be limited and
can be appropriately managed through State regulation. Because States
are generally the primary enforcers of the prohibition on
discrimination in the provision of EHB, we defer to States to provide
guidance to issuers on how to utilize substitution while meeting anti-
discrimination requirements.
Comment: While commenters generally supported efforts to provide
States and issuers with additional flexibility, a majority of
commenters expressed strong concerns that this specific policy would
put undue burden on multiple stakeholders due to increased plan design
complexity. For example, many commenters wrote that regulators in
States that choose to permit substitution between EHB benefit
categories would face additional challenges due to the difficulty of
determining whether plans that substituted benefits between EHB offered
an adequate distribution of benefits across all EHB categories. One
commenter added that evaluating plans that incorporated substitution
between EHB categories would be more difficult for States than
evaluating plans with substitution within EHB categories, because when
comparing the allowed cost associated with particular types of services
and limits on those services with other services in the same EHB
category, the same dollar amount represents the same proportion of all
services in that EHB category. However, this equivalence of dollar
amounts and proportionality does not apply when comparing between
different categories, making a comparison more difficult. Relatedly,
another commenter noted that the lack of uniformity among plans this
policy could produce could increase administrative burden on issuers,
as well as States, by making it more difficult for issuers to conform
plans to filing templates related to QHP certification.
Due to concerns including additional burden on State regulators,
commenters also requested that if we were to finalize this proposal,
States be permitted to bar substitution between EHB categories.
Almost all commenters asked that we consider the increased burden
that consumers would face when comparing plans due to plan complexity
related to a possible lack of uniformity across EHB benefit categories
and across available plans. In particular, commenters noted that it
would become more difficult for consumers in States that chose to
permit this option to make meaningful comparisons between plans due to
the difficulty in determining whether benefits had been substituted
between EHB categories and, if so, whether the resulting coverage
package adequately met their needs. One commenter added that these
difficulties could also undermine the value of the market signals that
consumers' choices currently generate to issuers and other key
stakeholders.
Finally, in addition to concerns about consumer burden due to
increased plan complexity, many commenters also objected to this
proposal due to the possibility that it could undermine coverage for
services that are crucial for vulnerable consumers and prevent coverage
of chronic conditions.
Response: We agree that permitting substitution between EHB
categories could make it more difficult for State regulators to review
plans. However, we believe States should have the flexibility to
determine whether allowing such a policy will in fact create challenges
for State regulators, and if so, whether those challenges are offset by
the benefits of allowing more innovation in plan design in the form of
between-category substitution. Under the policy we are finalizing,
States that determine that allowing substitution between EHB categories
would pose excessive burden on regulators have the authority to
withhold permission and avoid such burden.
In response to comments, we are finalizing that substitution
between categories would only be permitted if the State in which the
plan will be offered has notified HHS that substitution between EHB
categories is permitted in the State. We recognize that State
legislative cycles may make it challenging for States to adopt
legislative requirements allowing or prohibiting substitution between
categories in time for plan year 2020. By finalizing this notification
approach, we seek to make it easier for States to immediately exercise
the flexibility provided in this rule.
We appreciate the comment about increased burden on issuers.
Because issuers are already familiar with substituting benefits within
benefit categories, we do not believe that broadening the policy to
allow benefit substitution between benefit categories will create
additional burden for issuers. However, if it does, issuers have the
discretion to avoid additional burden by choosing not to substitute
benefits between EHB categories, even if allowed by their State. If a
State chooses, we believe issuers should be permitted to decide whether
the additional flexibility in plan design provided by substitution
between categories is worth any additional required effort. We also
encourage States to consider the impact on issuers as they weigh
whether to allow substitution between categories.
We recognize that consumers may face some additional burden in
comparing plans when States allow between-benefit substitution and one
or more issuers in the State utilize such substitution. However, we
believe permitting substitution between categories could offer
significant benefit to consumers in the form of more choices,
particularly those actively engaged in shopping for health plans. Some
consumers are likely to find plans that better meet their needs under
this change, because issuers are likely to make substitutions that
fulfill consumer demands. Further, we believe States are best
positioned to weigh the benefits of innovative plan design with the
potential for increased burden for consumers in their individual and
small group markets.
We believe that this change will not undermine coverage for
vulnerable consumers or prevent coverage of chronic conditions, because
issuers will still be required to offer benefits substantially equal to
the EHB-benchmark plan, cover each EHB category without undue weight
toward any, provide benefits for diverse segments of the population,
and refrain from discrimination based on an individual's age, expected
length of life, present or predicted disability, degree of medical
dependency, quality of life, or other health conditions.
[[Page 17022]]
d. Premium Adjustment Percentage (Sec. 156.130)
Section 1302(c)(4) of the PPACA directs the Secretary of HHS to
determine an annual premium adjustment percentage, which is used to set
the rate of increase for three parameters detailed in the PPACA: 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;
\82\ 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 in the annual HHS notice of
benefit and payment parameters.
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\82\ As noted above, although the individual shared
responsibility payment in section 5000A is reduced to $0, effective
for months beginning after December 31, 2018, individuals may still
have a need to seek certain exemptions under section 5000A of the
Code to obtain catastrophic coverage after 2018.
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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 estimates and projections of average per enrollee employer-
sponsored insurance premiums from the NHEA, which are calculated by the
CMS Office of the Actuary. Accordingly, using the employer-sponsored
insurance data, the premium adjustment percentage for 2019 is the
percentage (if any) by which the most recent NHEA projection of per
enrollee employer-sponsored insurance premiums for 2018 ($6,396)
exceeds the most recent NHEA estimate of per enrollee employer-
sponsored insurance premiums for 2013 ($5,110).\83\ Using this formula,
the premium adjustment percentage for 2019 is 1.2516634051 or
approximately 25 percent. We are finalizing this index as proposed.
Based on the proposed 2019 premium adjustment percentage, we proposed
the following cost-sharing parameters for calendar year 2019.
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\83\ We note that the 2013 premium used for this calculation has
been updated to reflect the latest NHEA data. See ``NHE Projections
2016-2025--Tables'' available at https://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/proj2016.pdf.
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Maximum Annual Limitation on Cost Sharing for Calendar Year 2019
Under Sec. 156.130(a)(2), for the 2019 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 2019, 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 1.2516634051 for 2019 as proposed above, and the 2014
maximum annual limitation on cost sharing of $6,350 for self-only
coverage, which was published by the IRS on May 2, 2013,\84\ we
proposed that the 2019 maximum annual limitation on cost sharing would
be $7,900 for self-only coverage and $15,800 for other than self-only
coverage. This represents an approximately 7 percent increase above the
2018 parameters of $7,350 for self-only coverage and $14,700 for other
than self-only coverage.
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\84\ See http://www.irs.gov/pub/irs-drop/rp-13-25.pdf.
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Comment: Several commenters supported the 7 percent increase in the
maximum limitation on cost sharing, saying it permits flexible plan
design. Many other commenters objected to the 2019 maximum limitation
on cost sharing noting it is the highest increase since 2014, saying
the HHS methodology no longer works when paired with plan designs that
offer less generous EHBs and asked HHS to revisit factors including the
premium adjustment percentage used in the methodology.
Commenters noted that while many people with high health needs
benefit from a maximum limitation on cost sharing, the percentage
increase in 2019 is more than twice the rate of medical inflation and
wage growth and far higher than general inflation. Two commenters asked
HHS to spread the maximum limitation over the benefit year to reduce
the financial burden on chronically ill enrollees whose medical
conditions require them to meet the limitation during the first month
or quarter of the year.
Response: The annual maximum limitation on cost sharing reflects
changes in the underlying economic data, as stated above. We are
sympathetic to the hardship faced by those whose health needs require
them to meet their maximum limitation on cost sharing early in the
year, but the indexing of this parameter is required by statute, and a
payment plan for the maximum annual limitation is inconsistent with
industry practice. We are finalizing the 2019 maximum limitation on
cost sharing as proposed.
e. Reduced Maximum Annual Limitation on Cost Sharing (Sec. 156.130)
Sections 1402(a) through (c) of the PPACA direct issuers to reduce
cost sharing for EHBs for eligible individuals enrolled in a silver
level QHP. In the 2014 Payment Notice, we established standards related
to the provision of these cost-sharing reductions. Specifically, in
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. 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 PPACA, section
1402(c)(1)(B)(ii) of the PPACA 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 PPACA (that is, 73 percent, 87 percent, or 94
percent, depending on the income of the enrollee). Accordingly, we
proposed 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
discussed above, the 2019 maximum annual limitation on cost sharing is
$7,900 for self-only coverage and $15,800 for other than self-only
coverage. We analyzed the effect on AV of the reductions in the maximum
annual limitation on cost sharing described in the statute to determine
whether to adjust the reductions so that the AV of a silver plan
variation will not exceed the AV specified in the statute. Below, we
describe our analysis for the 2019 benefit year and our proposed
results.
Consistent with our analysis in the 2014 through 2018 Payment
Notices, we developed three test silver level QHPs, and analyzed the
impact on AV of the reductions described in the PPACA to
[[Page 17023]]
the estimated 2019 maximum annual limitation on cost sharing for self-
only coverage ($7,900). 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 2019, the test
silver level QHPs included a PPO with typical cost-sharing structure
($7,900 annual limitation on cost sharing, $2,350 deductible, and 20
percent in-network coinsurance rate), a PPO with a lower annual
limitation on cost sharing ($5,250 annual limitation on cost sharing,
$3,050 deductible, and 20 percent in-network coinsurance rate), and an
HMO ($7,900 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, $500 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 2019 AV
Calculator and observed how the reductions in the maximum annual
limitation on cost sharing specified in the PPACA affected the AVs of
the plans. We found that the reduction in the maximum annual limitation
on cost sharing specified in the PPACA for enrollees with a household
income between 100 and 150 percent 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 levels (94 and 87 percent,
respectively). In contrast, the reduction in the maximum annual
limitation on cost sharing specified in the PPACA 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 proposed that the maximum annual
limitation on cost sharing for enrollees in the 2017 benefit year with
a household income between 200 and 250 percent of FPL be reduced by
approximately \1/5\, rather than \1/2\. We further proposed that the
maximum annual limitation on cost sharing for enrollees with a
household income between 100 and 200 percent of the FPL be reduced by
approximately \2/3\, as specified in the statute, and as shown in Table
10. These proposed reductions in the maximum annual limitation on cost
sharing should adequately account for unique plan designs that may not
be captured by our three model QHPs. We also note that selecting a
reduction for the maximum annual limitation on cost sharing that is
less than the reduction specified in the statute would not reduce the
benefit afforded to enrollees in aggregate because QHP issuers are
required to further reduce their annual limitation on cost sharing, or
reduce other types of cost sharing, if the required reduction does not
cause the AV of the QHP to meet the specified level. We are finalizing
these reductions as proposed.
In prior years, we have found that for individuals with household
incomes of 250 to 400 percent of the FPL, without any change in other
forms of cost sharing, any reduction in the maximum annual limitation
on cost sharing will cause an increase in AV that exceeds the maximum
70 percent level set in the statute. In the Market Stabilization Rule,
we analyzed the effect of reducing the maximum annual limitation on
cost sharing based on how we calculated the 2018 reduced maximum annual
limitation on cost sharing. We stated that we were not certain what the
AV spread of plan designs will be under the finalized policy, whether
issuers will in fact reduce the AVs of their base silver plans to the
lower end of the de minimis range, and whether issuers will retain plan
designs above the 70 percent AV range and that we would monitor 2018
standard silver plan designs. As a result, we did not propose to reduce
the maximum annual limitation on cost sharing for individuals with
household incomes between 250 and 400 percent FPL.\85\
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\85\ 2014 Payment Notice, 78 FR at 15481; Market Stabilization
Rule. 82 FR at 18370-18371.
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We note that for 2019, 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.\86\ No State submitted a
dataset by the September 1, 2017 deadline.
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\86\ The annual deadline for submitting State specific data for
the AV Calculator was announced August 15, 2014. See https://www.cms.gov/CCIIO/Resources/Regulations-and-Guidance/Downloads/final-state-avc-guidance.pdf.
Table 10--Reductions in Maximum Annual Limitation on Cost Sharing for 2019
----------------------------------------------------------------------------------------------------------------
Reduced maximum Reduced maximum
annual limitation on annual limitation on
Eligibility category cost sharing for self- cost sharing for
only coverage for other than self-only
2019 coverage for 2019
----------------------------------------------------------------------------------------------------------------
Individuals eligible for cost-sharing reductions under Sec. $2,600 $5,200
155.305(g)(2)(i) (that is, 100-150 percent of FPL)...............
Individuals eligible for cost-sharing reductions under Sec. 2,600 5,200
155.305(g)(2)(ii) (that is, 150-200 percent of FPL)..............
Individuals eligible for cost-sharing reductions under Sec. 6,300 12,600
155.305(g)(2)(iii) (that is, 200-250 percent of FPL).............
----------------------------------------------------------------------------------------------------------------
Comment: Several commenters objected to reducing the maximum annual
limitation on cost sharing by only one-fifth for enrollees with 200-250
percent FPL, calling the resulting reduced maximum annual limitation on
cost sharing about 28 percent of income in this category and too high
for most consumers. Commenters asked HHS to revise its test plan, with
one commenter saying it does not reflect shifts in plan network type
and structure and, as a result, hurts enrollees in this income level.
Response: When developing our test plan, we generally try to match
features of actual 2018 plans submitted for certification. We
understand State-by-State plans may differ from the HHS test plans and
we will continue to apply statutory reductions in maximum annual
limitation on cost sharing to plans that most accurately represent
those submitted for certification.
[[Page 17024]]
Comment: One commenter cautioned HHS against introducing a new plan
variation for enrollees with incomes between 250-400 percent FPL in the
absence of Federal payments to issuers for cost-sharing reductions,
stating that additional requirements to provide reduced cost sharing
would cause issuers to increase premium for all enrollees, and
disproportionately hurt those not eligible for any or all subsidies.
Response: We share the commenter's concern that additional
reductions for some enrollees could result in higher charges for others
without other changes. We will continue to monitor plan AV and benefit
design for impact on premiums and out-of-pocket costs.
f. Application to Stand-Alone Dental Plans Inside the Exchange (Sec.
156.150)
Section 1302(d)(2) of the PPACA directs the Secretary to issue
regulations on the calculation of AV and its application to the levels
of coverage. In the 2013 EHB Rule, HHS finalized the requirements for
the calculation of AV for stand-alone dental plans. Specifically, Sec.
156.150 directs SADPs to cover the pediatric dental EHB at one of two
AV levels, within an allowable de minimis variation of +/- 2 percentage
points.
We proposed to remove the requirement under Sec. 156.150(b) for
SADP issuers to meet the low (70 percent +/- 2 percentage points) or
high (85 percent +/- 2 percentage points) AV level. We are finalizing
the elimination of the requirement that SADP issuers offer EHBs at the
low or high levels of coverage. The PPACA does not specifically require
SADP issuers to offer coverage at the high or low levels of AV.
Removing the AV level requirement will give SADP issuers the
opportunity to offer more flexible plan designs to consumers. In
previous comments, SADP issuers had noted that it is difficult to meet
the low AV requirement and offer preventive care without cost sharing,
to which consumers are accustomed in the large group market. Issuers
could offer SADPs at varying premiums and levels of coverage, so long
as they continue to offer the pediatric dental EHB and meet the annual
limitations on cost sharing. We believe that this will allow consumers
to select from a greater variety of plans and find one that is more
likely to meet their specific needs.
We are not finalizing the elimination of the requirement that SADP
issuers certify their plans' level of coverage of EHB, as proposed. We
will no longer require certification of the level of coverage since
SADPs will no longer be required to be offered at certain levels of
coverage. However, HHS will continue to require certification by a
member of the American Academy of Actuaries of the AV of the SADPs'
coverage of EHB. HHS will consider ways to use the certified AV to
provide consumers with additional information to assist in plan
selection.
Comment: Several commenters opposed the proposal. They expressed
concern that the removal of AV requirements for EHB would allow SADP
issuers to offer plans with little value, and that consumers would have
difficulty comparing SADPs. Several commenters requested that HHS
establish a minimum AV of 70 percent for EHB covered by SADPs, and that
the level of coverage of EHB of an SADP be displayed to consumers when
they choose plans.
Several commenters supported the proposal. They expected the
proposal to result in greater plan choice for consumers. Some also
expected SADPs to have greater ability to maintain similar cost sharing
from year to year, since SADP issuers would not be required to alter
their plans to meet a particular level of coverage. One commenter
observed that AV for pediatric EHB is a poor indicator of plan value
for SADPs, since most SADP enrollees are adults. Some commenters
requested that HHS implement consumer support tools to aid consumers in
choosing among SADPs.
Response: In order to facilitate the implementation of consumer
support tools related to SADPs in the future, we are not finalizing the
elimination of the requirement that SADPs' AV for EHB be certified by a
member of the American Academy of Actuaries. Further, we are codifying
an operational requirement that such certification be reported to the
Exchange, which issuers of SADPs have already been fulfilling, as part
of the QHP certification process.
We believe consumers benefit when they have a range of plan
choices, including some plans with lower premiums and a lower AV. All
SADPs will continue to be required to cover the pediatric dental EHB
and to limit annual cost sharing on EHB. We expect many SADPs with AVs
at and above 70 percent will remain available to consumers, even
without a minimum AV standard, because SADPs often provide preventive
services without cost sharing. While we acknowledge that removing AV
standards will make plan comparison more difficult for some consumers,
we note that standardized levels of coverage of pediatric dental EHB
are not a useful plan comparison tool for the large share of SADP
enrollees who are adults. HHS will consider ways to provide consumers
with additional information to assist in comparison and selection of
SADPs.
Comment: Some commenters questioned whether an SADP with a
different AV from one year to the next would be considered the same
plan for the purposes of guaranteed renewability or plan crosswalk.
Response: We note that guaranteed renewability requirements at 45
CFR 147.106 generally do not apply to SADPs because they are excepted
benefit plans. HHS plans to develop a plan crosswalk hierarchy for
Exchanges that use the Federal eligibility and enrollment platform that
does not rely on SADPs being offered at either a high or low level of
coverage.
3. Qualified Health Plan Minimum Certification Standards
a. Qualified Health Plan Certification (Subpart C)
HHS is committed to recognizing States' role as the primary
regulator of their insurance markets, and has made a number of recent
changes in the QHP certification process to promote this role, and to
limit duplicative oversight over issuers. Previously, in the Guidance
to States on Review of Qualified Health Plan Certification Standards in
Federally-facilitated Marketplaces for Plan Years 2018 and Later,\87\
released on April 13, 2017, we outlined areas where, starting in plan
year 2018, HHS began relying on State reviews of QHP certification
standards for States with FFEs, including States with FFEs that perform
plan management functions in partnership with HHS. We made these
changes to streamline the QHP certification process and avoid
duplicative Federal and State efforts. In that guidance, we provided
that in FFE States that do not perform plan management functions, HHS
will continue to review QHP data, but will rely on State review for
licensure and good standing standards required at Sec. 156.200(b)(4),
and for network adequacy standards required at Sec. 156.230. For FFEs
in States performing plan management functions, HHS will continue to
rely on State plan data review for QHP certification standards,
including for service area and prescription drug formulary outliers and
non-discrimination in cost sharing. We stated that we will continue to
review plan data relating to Federal funds or plan display on
HealthCare.gov, such as cost-sharing reductions structures, data
[[Page 17025]]
integrity, and plan crosswalks to implement annual re-enrollment at
Sec. 155.335(j). In the proposed rule, we reaffirmed this approach,
and did not propose changes to this guidance.
---------------------------------------------------------------------------
\87\ https://www.cms.gov/CCIIO/Resources/Regulations-and-Guidance/Downloads/QHP-Certifcation-Reviews-Guidance-41317.pdf.
---------------------------------------------------------------------------
To further streamline QHP certification by avoiding duplicative
reviews, we also previously announced in the QHP Rate Outlier Analysis
for Plan Year 2018 and Beyond \88\ that we would rely on States to
identify rate outliers for purposes of QHP certification,\89\ except
for those States that do not have an Effective Rate Review Program.
These changes were intended to allow States and issuers greater
flexibility in facilitating the certification of plans best suited to
their markets, while avoiding duplicative State and Federal activities.
We did not propose any changes to the approach described in this
guidance.
---------------------------------------------------------------------------
\88\ https://www.regtap.info/uploads/library/QHP_RateOutlier_FAQ_5CR_071017.pdf.
\89\ This review generally identifies rates that are relatively
low compared to other QHP rates in the same rating area. The
identification of a QHP rate as an outlier does not necessarily
indicate inappropriate rate development; instead, this information
helps inform the determination of whether certifying the QHP to be
offered on the Exchange would be in the interest of consumers.
---------------------------------------------------------------------------
In the Market Stabilization final rule, HHS also finalized several
standards to affirm the traditional role of States in overseeing their
health insurance markets while reducing the regulatory burden of
participating in Exchanges for issuers for the 2018 plan year.
In the proposed rule, we continued these efforts to enhance States'
role in the QHP certification process. We proposed to continue to
enhance the State flexibilities in QHP certification that began for
plan year 2018 by identifying additional areas where States are already
performing reviews that are duplicative of the Federal QHP
certification process and incorporating these reviews into the QHP
certification process. In addition to empowering States, we believed
these proposals would reduce issuer burden.
We proposed to extend for the 2019 benefit year and beyond policies
related to QHP certification standards for network adequacy (Sec.
156.230) and essential community providers (Sec. 156.235) that we had
finalized in the Market Stabilization final rule for only plan year
2018. Specifically, with respect to network adequacy, we proposed to
rely on the States' reviews in States in which an FFE is operating,
provided the State has a sufficient network adequacy review process.
For the 2019 benefit year and beyond, we proposed to defer to the
States' reviews in States with the authority to enforce standards that
are at least equal to the ``reasonable access standard'' defined in
Sec. 156.230 and means to assess issuer network adequacy. In States
that do not have the authority and means to conduct sufficient network
adequacy reviews, we proposed for the 2019 benefit year and beyond to
rely on an issuer's accreditation (commercial, Medicaid, or Exchange)
from an HHS-recognized accrediting entity, which we proposed would
include the three accrediting entities HHS has previously recognized
for the accreditation of QHPs: The National Committee for Quality
Assurance, URAC, and Accreditation Association for Ambulatory Health
Care.\90\ Unaccredited issuers would be required to submit an access
plan as part of the QHP application. To show that the QHP's network
meets the requirement in Sec. 156.230(a)(2), the access plan would
need to demonstrate that an issuer has standards and procedures in
place to maintain an adequate network consistent with the National
Association of Insurance Commissioners' Health Benefit Plan Network
Access and Adequacy Model Act (the Model Act is available at http://www.naic.org/store/free/MDL-74.pdf). We proposed to further coordinate
with States to monitor network adequacy, for example, through complaint
tracking.
---------------------------------------------------------------------------
\90\ Recognition of Entities for the Accreditation of Qualified
Health Plans 77 FR 70163 (November 23, 2012) and Approval of an
Application by the Accreditation Association for Ambulatory Health
Care (AAAHC) To Be a Recognized Accrediting Entity for the
Accreditation of Qualified Health Plans 78 FR 77470 (December 23,
2013).
---------------------------------------------------------------------------
With respect to QHP certification review for the essential
community provider (ECP) standard, we proposed for the 2019 benefit
year and beyond that we would continue to allow issuers to use the ECP
write-in process to identify ECPs that are not on the HHS list of
available ECPs and would maintain the 20 percent ECP standard. We
believe this standard will substantially reduce the regulatory burden
on issuers while preserving adequate access to care provided by ECPs.
As in previous years, if an issuer's application does not satisfy the
ECP standard, the issuer would be required to include as part of its
application for QHP certification a satisfactory narrative
justification describing how the issuer's provider networks, as
presently constituted, provide an adequate level of service for low-
income and medically underserved individuals and how the issuer plans
to increase ECP participation in the issuer's provider networks in
future years. At a minimum, such narrative justification would include
the number of contracts offered to ECPs for the applicable plan year;
the number of additional contracts an issuer expects to offer and the
timeframe of those planned negotiations; the names of the specific ECPs
to which the issuer has offered contracts that are still pending; and
contingency plans for how the issuer's provider network, as currently
designed, will provide adequate care to enrollees who might otherwise
be cared for by relevant ECP types that are missing from the issuer's
provider network.
We are finalizing as proposed the policies for network adequacy
(Sec. 156.230) and ECPs (Sec. 156.235).
Comment: Many commenters supported the network adequacy proposal,
favoring the elimination of duplicative reviews, while others opposed
the proposal, stating that States' and accrediting entities' review
processes do not do enough to ensure enrollees have adequate access to
necessary care. We also received many comments that strongly opposed
the continuation of the 20 percent ECP standard and urged that HHS
return to the 30 percent ECP standard, expressing concerns that the
lower threshold requirement will result in access barriers to care for
low-income consumers.
Response: We are finalizing as proposed our policies for network
adequacy and ECP, as we believe they will continue to help stabilize
the markets by reducing regulatory burden on issuers, while also
preserving adequate access to care, and streamlining the QHP
certification process. We have relied on State and accrediting entities
for this review in the past, and believe they provide appropriate
review because both typically have requirements in place that
specifically address access to adequate networks. Many States already
address issuer network adequacy in State-specific regulation. The
National Committee for Quality Assurance requires accredited plans to
create standards for the number and geographic distribution of
providers and establish standards regarding the ability of consumers to
access care. Similarly, URAC requires that plans have proper methods in
place to build, manage, and evaluate their networks. We will also
continue to monitor enrollee complaints for access concerns.
For plan years 2019 and later, HHS proposed to further expand the
role of States in the QHP certification process for FFEs, including
FFEs where the State performs plan management functions. Specifically,
we proposed to defer to States for additional review
[[Page 17026]]
areas, including accreditation requirements at Sec. 156.275,
compliance reviews at Sec. 156.715, minimum geographic area of the
plan's service area at Sec. 155.1055, and quality improvement strategy
reporting at Sec. 156.1130, if feasible and appropriate. In the
proposed rule, we stated that we believed States currently perform
reviews in these areas that are duplicative of the Federal reviews for
QHP certification. As a result, we did not believe this policy would
require States to undertake additional reviews or change existing
reviews to match the Federal standards for QHPs. We are not finalizing
the proposal to defer to States for reviews in these four areas.
Comment: Some commenters supported the proposal to defer the
additional review areas of accreditation, minimum geographic area of
the plan's service area, compliance reviews, and quality improvement
strategy reporting to States for purpose of QHP certification, while
some commenters--including some States--opposed the proposal, citing
lack of State resources, insufficient staff, and the possibility of
increased costs.
Response: We are not finalizing as proposed the deferral to States
for the review of service area; accreditation; compliance review--which
in this context we interpreted to be review of an issuer's
organizational chart and compliance plan; and quality improvement
strategy reporting. Based on comments received, we understand that
States presently lack resources, including staffing resources, to
conduct these reviews. We are less concerned about the potential for
Federal reviews to impose unnecessary additional burden on issuers,
given information from States and commenters that not all States
currently perform these reviews. Our proposal was intended to eliminate
duplication in reviews, not to compel States to take on reviews that
they are not already performing.
b. QHP Issuer Participation Standards
Section 156.200 sets forth many of the standards a plan must meet
to be certified as a QHP. We proposed to amend paragraph (b)(2) to add
a cross reference to proposed Sec. 155.706 to align with other changes
made throughout this final rule regarding changes to SHOP. Comments
related to the proposed approach for SHOP are discussed at the
beginning of section III.D.9 of this rule. We are finalizing the change
as proposed.
c. Additional Standards Specific to SHOP for Plan Years Beginning Prior
to January 1, 2018 (Sec. 156.285)
As discussed in the following section, we proposed and are
finalizing a modification to the regulatory requirements regarding
additional standards specific to SHOP for plan years beginning on or
after January 1, 2018 and are introducing those requirements in a new
Sec. 156.286. To reflect the proposal that the requirements currently
in Sec. 156.285 would apply only for plan years beginning before
January 1, 2018, we proposed to amend the heading of Sec. 156.285 and
add paragraph (f), to state that the section would only apply for plan
years that begin prior to January 1, 2018. We discuss the new standards
applicable for plan years beginning on or after January 1, 2018 in the
following section. These changes will be effective on the effective
date of the final rule.
Comments related to the proposed approach for SHOP are discussed at
the beginning of section III.D.9 of this rule; we are finalizing these
policies as proposed.
d. Additional Standards Specific to SHOP for Plan Years Beginning on or
After January 1, 2018 (Sec. 156.286)
As discussed above, we proposed to make Sec. 156.285, which
describes the requirements on QHP issuers participating in SHOPs to
accept enrollment and payment information from a SHOP on behalf of an
employer or enrollee applicable only for plan years beginning prior to
January 1, 2018, and to modify the additional standards specific to QHP
issuers participating in SHOPs applicable for plan years beginning on
or after January 1, 2018, through the introduction of a new Sec.
156.286. We proposed that new Sec. 156.286 would include only those
standards that have been applicable under Sec. 156.285 that would
continue to apply to the SHOPs under the proposed approach discussed
earlier in this preamble, with minor modifications and clarifications.
We proposed to retain Sec. 156.285(a) as Sec. 156.286(a).
However, we proposed to require issuers to accept payment not only from
the SHOP, but from a qualified employer or enrollee or a SHOP, to
reflect the proposal that a SHOP would not be required to process
enrollments and payments. We also proposed not to include the
requirement currently in Sec. 156.285(a)(4)(ii), which prohibits
issuers in FF-SHOPs from using average enrollee premiums, as the FF-
SHOPs and SBE-FPs for SHOP, would no longer be involved in premium
payments. For the same reason, we also proposed a narrower version of
Sec. 156.285(b) as Sec. 156.286(b), requiring only that issuers
adhere to the enrollment periods and processes established by the SHOP
consistent with Sec. 155.726, and establish uniform enrollment
timelines and processes for qualified employers and group members. We
also proposed in Sec. 156.286(c) to include only those requirements
from Sec. 156.285(c) that do not relate to the payment and enrollment
processes that we have proposed would no longer be required.
We proposed not to include a paragraph mirroring paragraph (d) of
Sec. 156.285. This reflects our proposal to remove the requirements
contained in current Sec. 155.735, and generally not to impose
coverage related timelines on issuers of QHPs through the SHOPs for
plans beginning on or after January 1, 2018. We proposed to include a
paragraph mirroring Sec. 155.285(e) as Sec. 156.286(d).
Finally, under our proposed and finalized approach, SHOPs will no
longer be required to provide employee enrollment functionality. When
enrollments are completed by working with SHOP issuers or SHOP-
registered agents or brokers, which will be the case for FF-SHOPs, it
may not always be immediately apparent to the issuer whether the
enrollment is through the SHOP, and whether it is part of an employer's
offering a choice of plans. To ensure that issuers offering QHPs
through a SHOP do so in a manner that is consistent with our new
interpretation of the SHOP provisions of the statute, we proposed to
add new paragraphs (e) and (f) in Sec. 156.286. These will require
that QHP issuers offering a QHP through the SHOP accept enrollments
from groups in accordance with the employer choice policies applicable
to the SHOP under Sec. 155.706(b)(3), that they maintain processes
sufficient to identify whether a group market enrollment is an
enrollment through the SHOP, and they maintain records of SHOP
enrollments for a period of 10 years following the enrollment. Proposed
paragraph (f) also would require issuers to utilize a uniform
enrollment form, as required by section 1311(c)(1)(F) of the PPACA. As
noted in the preamble to Sec. 155.716, we intend to update the single
employer application to reflect our changes in Sec. 155.731. An issuer
will be considered to satisfy this requirement if it uses that
application form.
Finally, we proposed in paragraph (g) to state that the
requirements contained within Sec. 156.286 are only applicable for
[[Page 17027]]
plan years beginning on or after January 1, 2018.
We are finalizing these policies as proposed, with a minor change
to Sec. 156.286(a)(1) to reflect that SBEs can continue operating
their SHOPs under current practices. These changes are effective as of
the effective date of this rule.
Comment: We received a comment that requested clarification on the
issuer requirements at Sec. 156.286(a)(1), regarding whether the
proposal precluded State Exchanges from directing issuers offering QHPs
in their SHOPs to accept payments only from the SHOP.
Response: State Exchanges that do not take advantage of the
flexibilities described above for their SHOPs are encouraged to
continue operating in a manner consistent with Sec. 156.285, or in a
way that best meets the needs of their small group market. The
requirements in Sec. 156.286(a)(1) represent minimum SHOP requirements
for issuers that would apply to all SHOPs, including those that take
advantage of the flexibilities provided for by this final rule, like
the FF-SHOPs. We did not intend that the leaner approach to SHOP
prohibit State Exchanges from requiring QHP issuers in their SHOPs from
accepting payments on behalf of a qualified employer or enrollee from
sources other than the SHOP, as the FF-SHOPs had previously done. We
have clarified the regulatory text accordingly.
e. Meaningful Difference Standard for Qualified Health Plans in the
Federally-Facilitated Exchanges (Sec. 156.298)
We proposed to remove Sec. 156.298 to eliminate meaningful
difference standards for QHPs offered through an FFE or SBE-FP. Under
this standard, in order to be certified as a QHP, a plan must be
meaningfully different from all other QHPs offered by the same issuer
of that plan within a service area and level of coverage in the
Exchange. As defined in Sec. 156.298(b), QHPs are considered
meaningfully different from other plans if a reasonable consumer would
be able to identify one or more material differences among five key
characteristics between the plan and other plans to be offered by the
same issuer.
This meaningful difference standard was implemented to make it
easier for consumers to understand differences between plans, and
choose the right plan option for them. However, with fewer issuers
participating in the Exchange, and fewer plans for consumers to choose
from, we proposed to remove these standards, as we no longer believe
the requirement is necessary. We believe removing the meaningful
difference standard would encourage plan design innovation, by
providing more flexibility to issuers in designing plans, and thus
increase plan offerings and choice for consumers.
We are finalizing this policy as proposed.
Comment: While some commenters supported removing the meaningful
difference standard, several commenters opposed removing it, stating
that the standard helps consumers avoid confusion and improves the
consumer shopping experience. Some commenters stated that removing the
standard would decrease the comparative value of the data and increase
the probability of duplicative QHP offerings, with one commenter
stating that removing the standard would encourage a proliferation of
plans. One commenter stated that removing the standard could lead to
benefit designs aimed to attract healthy enrollees and repel sick
enrollees. One commenter recommended that we provide an exception to
the meaningful difference standard in cases where a comparison is not
feasible, while maintaining the requirement in cases where comparisons
are feasible. One commenter supported removing the standard as long as
certain conditions outside the scope of this rule were met.
Response: We believe that removing the meaningful difference
standard will not substantially increase the number of materially
similar plans from the same issuer. Plan selection tools provide
consumers with information to distinguish between plans and see
similarities or differences. With fewer plans on the Exchanges than in
prior years, we believe removing this standard will encourage
innovation and increase plan offerings and choice for consumers, the
benefits of which would outweigh any potential confusion.
f. Other Considerations
We sought comment on ways in which HHS can foster market-driven
programs that can improve the management and costs of care and that
provide consumers with quality, person-centered coverage. As we stated
in the 2017 and 2018 Payment Notices, 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 sought
comment on ways in which we can facilitate such innovation, and in
particular on whether there are regulations or policies in place that
we should modify in order to better meet the goals of affordability,
quality, and access to care.
We also sought comment on how we may encourage value-based
insurance design within the individual and small group markets and ways
to support issuers in using cost sharing to incentivize more cost-
effective enrollee behavior and higher quality health outcomes, in
accordance with section 2713(c) of the PHS Act. Currently, under our
rules, issuers have considerable discretion in the design of cost-
sharing structures, subject to certain statutory AV requirements, non-
discrimination laws and rules,\91\ and other applicable law, such as
MHPAEA.
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\91\ We note that issuers are also subject to Federal civil
rights laws, including Title VI of the Civil Rights Act, section 504
of the Rehabilitation Act, the Age Discrimination Act, section 1557
of the Affordable Care Act, and conscience and religious freedom
laws.
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We would like to encourage issuers to offer HDHPs that can be
paired with a health savings account (HSA) as a cost effective option
for enrollees. While the proportion of available HSA-eligible HDHPs has
been stable in the FFEs, the percentage of enrollees in HDHPs has
decreased slightly over the last 3 years as there are certain technical
barriers for issuers in offering HDHPs.\92\ We are particularly
interested in exploring how to use plan display options on
HealthCare.gov to promote the availability of HDHPs to applicants, and
sought comment on how best to do so.
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\92\ For instance, the maximum annual limitation on cost sharing
established at section 1302(c) of the PPACA is increasing at a
faster rate than the maximum out of pocket cost limits for HDHPs
under section 223 of the Code. Therefore, a plan that utilizes the
maximum annual limitation on cost sharing under the PPACA would not
meet the requirements to be an HDHP under the Code that could be
paired with an HSA.
---------------------------------------------------------------------------
We are also interested in value-based insurance designs that focus
on cost effective drug tiering structures; address overused, higher
cost health services; provide innovative network design that
incentivizes enrollees to use higher quality care; and promote use of
preventive care and wellness services. We solicited comments on how HHS
can better encourage these types of plan designs, and whether any
existing regulatory provisions or practices discourage such designs.
Comment: Many commenters supported HHS exploring ways to encourage
innovation and value-based insurance design. There was general support
for HHS to drive towards improved health outcomes and efficient health
care delivery. Commenters noted that issuers should be encouraged to
[[Page 17028]]
engage in value-based insurance design that utilizes clinical
effectiveness research and drives consumers to efficient high quality
providers. Commenters questioned how services would be deemed high-
value and cautioned against disincentivizing consumers from seeking
preventive and wellness care, and care for chronic conditions.
Commenters suggested that HHS seek public comment on services that are
high value or leverage data from comparative effectiveness research to
identify low-value services.
Commenters generally supported increasing transparency of health
information, but cautioned that consumers would need education and
tools in order to make information useful. Some requested that
additional information be incorporated into HealthCare.gov, plan
selection tools, the Summary of Benefits and Coverage, or the out-of-
pocket estimator tool.
Others suggested that specific alternative payment options be
allowable, such as reference pricing or allowing issuers the
flexibility to apply the annual limitation on cost sharing to
accumulate differently in tiered networks.
Comments were mixed regarding HSA-eligible HDHPs. Many commenters
cautioned that HDHPs do not meet the needs of low-income consumers and
urged that HHS provide appropriate explanations and ensure there are
consumer protections to make sure consumers make appropriate plan
selections. Others noted that HealthCare.gov should provide more
information on how to use HDHPs and how to set up HSAs. Others
commented that promoting HDHPs would require training of Navigators and
call center staff to handle additional questions. Some noted that
HealthCare.gov support should not answer questions more appropriate for
HSA custodians.
Commenters noted the statutory and regulatory issues with offering
HSA-eligible HDHPs on Exchanges, including the misalignment of annual
limitations on cost sharing between the PPACA and the Code. Others
requested that the IRS expand preventive care safe harbors under
section 223(c)(2)(C) of the Code to include services and benefits
related to the management of chronic conditions and medications.
One commenter suggested that HHS provide subsidies in the form of
HSA contributions instead of cost-sharing reductions. Other commenters
offered additional responses related to drug pricing, encouraging HHS
to prioritize the transparency of drug pricing in general, and other
health care costs. Others noted that with the removal of standardized
options, HHS should consider other ways to incentivize issuers to offer
at least some QHPs with prescription drugs not subject to the
deductible. Other commenters noted specific examples where issuers were
waiving cost sharing for high value prescription drugs, such as those
to treat high blood pressure. Others suggested that drug rebates could
be available to consumers at the point of sale. Additional commenters
expressed concerns about changes to the 340B drug discount program.
Response: We appreciate these comments and will take them under
consideration. We note that the Treasury Department and the IRS have
jurisdiction over HSAs and HSA-eligible HDHPs under section 223 of the
Code.
4. Standards for Downstream and Delegated Entities (Sec. 156.340)
Section 156.340 sets forth the responsibilities of a QHP issuer and
its applicable downstream entities. We proposed to amend paragraph
(a)(2) to add a cross reference to proposed Sec. 155.706 to align with
other changes made throughout this rule regarding SHOP. Comments
related to the proposed approach for SHOP are discussed at the
beginning of section III.D.9 of this rule.
We are finalizing the change as proposed.
5. Eligibility and Enrollment Standards for Qualified Health Plan
Issuers on State-Based Exchanges on the Federal Platform (Sec.
156.350)
Section 156.350 describes the eligibility and enrollment standards
for issuers that offer QHP coverage in the SBE-FPs. Currently, Sec.
156.350(a)(1) and (2) state that for a QHP issuer to participate in an
SBE-FP for SHOP, it must comply with the requirements at Sec.
156.285(a)(4)(ii) and Sec. 156.285(c)(5) and (c)(8)(iii),
respectively. However, as discussed elsewhere in this final rule, to
align with our proposal regarding the SHOPs, we proposed, and are
finalizing, that these referenced requirements at Sec. 156.285 would
not be applicable for plan years beginning on or after January 1, 2018,
effective on the effective date of this rule. Therefore, we proposed to
amend Sec. 156.350(a)(1) and (a)(2) to specify that they only apply
through plan years beginning prior to January 1, 2018.
Comments related to the proposed approach for SHOP are discussed at
the beginning of section III.D.9 of this rule. We are finalizing the
changes as proposed.
6. Minimum Essential Coverage
a. Other Coverage That Qualifies as Minimum Essential Coverage (Sec.
156.602)
A CHIP program is a type of government-sponsored coverage, defined
under title XXI of the Act that provides low-cost health coverage to
children in low-income families that do not otherwise have health
coverage. States may be eligible to receive Federal funds to initiate
and expand such programs. A CHIP buy-in program, a ``full pay'' option
where a covered family pays the full premium typically without any
Federal or State assistance, often provides similar or identical
benefits as the State's CHIP program under title XXI of the Act (the
title XXI CHIP program) for children in families that do not
financially qualify for the title XXI CHIP program.\93\ We proposed to
amend Sec. 156.602 to specifically designate as MEC CHIP buy-in
programs that provide identical coverage to that title XXI CHIP program
pursuant to the Secretary's authority under section 5000A(f)(1)(E) of
the Code. We sought comment on whether CHIP buy-in programs that
provide greater coverage than the title XXI CHIP program should be
categorically designated as MEC. Finally, we sought comment on whether
other types of government-sponsored buy-in programs, such as Medicaid
buy-in programs, should be categorically designated as MEC. We are not
finalizing the policy to categorically designate as MEC CHIP buy-in
programs that provide identical or greater coverage to the title XXI
CHIP program.
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\93\ Under IRS Notice 2015-37, individuals who may enroll in a
CHIP buy-in program designated as MEC are eligible for MEC under the
CHIP buy-in program for purposes of the premium tax credit under
section 36B of the Code only if they are enrolled in the program.
---------------------------------------------------------------------------
Comment: Some commenters supported categorically designating as MEC
CHIP buy-in programs that provide identical or greater coverage to the
title XXI CHIP program because the categorical designation would drive
down premiums and out-of-pocket costs for full-pay families, as well as
eliminate deductibles. In addition, the change would permit consumers
to move between the title XXI CHIP program and CHIP buy-in programs
without experiencing a change in benefits. Other commenters expressed
concern that a categorical designation would prevent HHS from verifying
that the benefits of a CHIP buy-in program are identical to the title
XXI CHIP program which could lead to adverse selection in the
individual market or erosion of CHIP benefits.
[[Page 17029]]
Response: Following the publication of the proposed rule, Congress
designated qualified CHIP look-alike plans as MEC. Section
5000A(f)(1)(A)(iii) of the Code, as amended by section 3002(g)(2)(A) of
the HEALTHY KIDS Act, specifically designates CHIP look-alike plans as
MEC. Section 2107 of the Social Security Act, as amended by section
3002(g)(1) of the HEALTHY KIDS Act, defines a CHIP look-alike plan as a
CHIP buy-in program that provides ``benefits that are at least
identical to the benefits provided'' by the title XXI CHIP program.\94\
Therefore, we are not finalizing the proposed changes to Sec. 156.602
since CHIP look-alike plans are now statutorily designated as MEC.
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\94\ Extension of Continuing Appropriations Act, 2018; HEALTHY
KIDS Act; Federal Register Printing Savings Act of 2017, Public Law
115-120, 101 (2018).
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However, because the amendment does not designate all CHIP buy-in
programs as MEC, we recognize that States and enrollees may have
questions regarding whether a particular State's CHIP buy-in program is
MEC. To provide States and enrollees with certainty as to whether their
coverage constitutes MEC, States will have the option to verify with
HHS that their CHIP buy-in program meets the definition of a CHIP look-
alike plan. A State may verify that a CHIP buy-in program is a
qualified CHIP look-alike plan by submitting documentation to HHS via
the Health Insurance Oversight System (HIOS) (as described in section V
of the October 31, 2013 Insurance Bulletin \95\) that provides a
detailed summary of the coverage provided by the CHIP buy-in program
and the title XXI CHIP program. Upon review and comparison of the
coverage, if HHS determines that the CHIP buy-in program provides at
least the same coverage as the title XXI CHIP program, then HHS will
confirm that the CHIP buy-in program is a CHIP look-alike plan. If HHS
determines that the CHIP buy-in program does not provide at least the
same coverage as the title XXI CHIP program, then the plan sponsor may
work with HHS to modify the CHIP buy-in program to offer at least the
same coverage as the title XXI CHIP program. In the alternative, the
plan sponsor may apply for MEC recognition through the process outlined
in Sec. 156.604 under which HHS will evaluate whether the CHIP buy-in
program complies with ``substantially all'' of the provisions of title
I of the PPACA that apply to non-grandfathered individual health
insurance coverage.
---------------------------------------------------------------------------
\95\ See CCIIO Sub-regulatory Guidance: Process for Obtaining
Recognition as Minimum Essential Coverage (October 31, 2013).
Available at http://www.cms.gov/CCIIO/Resources/Regulations-and-Guidance/Downloads/mec-guidance-10-31-2013.pdf.
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CHIP buy-in plans that are not CHIP look-alike plans may also
continue to receive MEC recognition through the MEC application process
if the State can demonstrate that the coverage meets substantially all
the requirements of title I of the PPACA pertaining to non-
grandfathered, individual health insurance coverage.
Comment: One commenter stated that States should have the
flexibility to offer a Medicaid buy-in program in an effort to
stabilize the market and increase competition.
Response: While we are not finalizing that Medicaid buy-in programs
are designated as MEC, HHS invites all States to apply for their
Medicaid buy-in programs to be recognized as MEC in the process
outlined in Sec. [thinsp]156.604.
b. Requirements for Recognition as Minimum Essential Coverage for Types
of Coverage Not Otherwise Designated Minimum Essential Coverage in the
Statute or This Subpart (Sec. 156.604)
Under Sec. 156.604, the Secretary may recognize coverage as MEC
provided HHS determines that the plan meets substantially all the
requirements of title I of the PPACA pertaining to non-grandfathered,
individual health insurance coverage (the ``substantially all''
standard). In the proposed rule, we sought comment on whether HHS
should create a new standard of review under which CHIP buy-in programs
must ``substantially resemble'' the title XXI CHIP program under title
XXI to qualify as MEC under Sec. 156.604. We are not finalizing a
substantially resemble standard of review.
Comment: One commenter stated that the ``substantially resemble''
standard is more meaningful to State CHIP administrators than the
``substantially all'' standard and would allow for more reasonable
evaluation by HHS of each individual buy-in program. Some commenters
stated the ``substantially resemble'' standard must be better defined
and delineated to provide clear guidelines on what constitutes a
qualifying buy-in program. The commenters stated that, without clarity,
there would be confusion and States could be more arbitrary in their
decision-making for the scope of benefits. Other commenters stated that
the CHIP buy-in programs should be subject to the ``substantially all''
standard that applies to other MEC applicants. To provide a lesser
standard to CHIP buy-in programs could result in fewer benefits for the
children in those programs.
Response: After reviewing these comments, we agree that it is
important for HHS to provide clear standards of review for the MEC
application process and to ensure that enrollees in these programs
obtain benefits that are similar to the benefits in PPACA compliant
coverage. We are not finalizing a ``substantially resemble'' standard.
As described in the previous section, section 5000A(f)(1)(A)(iii) of
the Code, as amended by section 3002(g)(2)(A) of the HEALTHY KIDS Act,
specifically designates CHIP buy-in programs that provide benefits that
are at least identical to the benefits provided by the title XXI CHIP
program as MEC. CHIP buy-in programs that do not provide identical or
greater benefits than what is provided in the State's title XXI program
will be subject to the ``substantially all'' standard for MEC
recognition.
7. Quality Rating System (Sec. 156.1120)
We recognize that social risk factors play a major role in health,
and one of our core objectives is to improve patients' outcomes
including reducing health disparities. In addition, we seek to ensure
that the quality of care furnished by providers and health plans is
assessed as fairly and accurately as possible under HHS quality
reporting programs, including the Quality Rating System established
under section 1311(c)(3) of the PPACA, while helping to ensure that
individuals and populations receive high quality, person-centered care.
In response to several comments we received from the Request for
Information, we continue to assess ways to reduce burden and promote
State flexibility in the implementation of all statutorily required
Exchange quality programs, including the Quality Rating System, and we
continue to prioritize strategies to improve the value for consumers.
We received many comments as part of the annual Quality Rating System
Call Letter process in response to our request for public comment on
whether we should account for social risk factors in the Quality Rating
System, which provides quality ratings (or star ratings from 1 to 5
stars) that account for member experience, medical care and health plan
administration for QHPs, offered through an Exchange. We did not
propose amendments to the Quality Rating System regulations in the
proposed rule.
We sought comment as part of this rulemaking on types of social
risk factors that may be most appropriate, as well as the methods to
account for social risk factors for QHP issuer quality
[[Page 17030]]
reporting. Examples of social risk factors include: Low income subsidy;
race and ethnicity; and geographic area of residence. Approaches to
account for social risk factors include stratifying measure scores or
risk adjustment of a particular measure. We sought comment on which
social risk factors could be used alone or in combination, current data
sources where this information would be available, and whether other
data should be collected to better capture the effects of social risk.
Comment: Although many commenters expressed that accounting for
social risk factors in measuring performance is contentious and
challenging, there was overall support for the need to address
socioeconomic factors that can affect quality in reporting of quality
data and for CMS to closely monitor the ongoing work of the Office of
the Assistant Secretary for Planning and Evaluation and the National
Quality Forum regarding socioeconomic status in health outcomes and
quality. Commenters encouraged HHS to increase opportunities for
collaboration across all HHS quality rating programs, including the
Exchange Quality Rating System, Medicare Advantage and Medicaid health
plans and provided some recommendations on methods of accounting for
social risk factors in the Quality Rating System. Some commenters did
not support adjusting for socioeconomic status because they believe
that could be counter-productive and potentially signal an expectation,
even acceptance, of lower outcomes for financially disadvantaged
consumers.
Commenters provided examples of types of social risk factors and
combination of factors that would most appropriately account for QHP
issuer quality reporting and clarified which data is readily collected
by Exchanges. The types of social risk factors mentioned included
patient level data about race and ethnicity; income level; preferred
language; disability status; sexual orientation and gender identity;
psychological and behavioral status; alcohol and tobacco use;
residential address; low-income subsidy eligibility status; and per the
recommendations of the National Academies of Sciences, Engineering, and
Medicine: Health and Medicine Division,\96\ the systematic collection
of data in the following domains: Depression, education, financial
resource strain, intimate partner violence, physical activity, social
connections and social isolation, stress, housing status, insurance
status, employment, transportation, incarceration and refugee status.
Commenters also provided support for stratifying measure data and not
risk adjusting the Quality Rating System for social risk factors, to
help plans identify and distinguish efforts to improve quality from
efforts to reduce disparities. Commenters stated that stratifying
measure results by socioeconomic status of patients within affected
measures would highlight disparities, showing plans which
subpopulations among their enrollees most need targeted quality
improvement efforts.
---------------------------------------------------------------------------
\96\ IOM (Institute of Medicine). 2014. Capturing social and
behavioral domains and measures in electronic health records: Phase
2. Washington, DC: The National Academies Press. https://www.nap.edu/read/18951/chapter/1.
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Response: We appreciate the comments, and will take them under
consideration as we continue to assess the appropriateness and
feasibility of accounting for social risk factors in the Quality Rating
System. We will continue to collaborate with the Office of the
Assistant Secretary for Planning and Evaluation, the National Quality
Forum, and with issuer, provider, and enrollee stakeholders to assess
methods for the collection and application of social risk factor
information for future years of the Quality Rating System program.
8. Direct Enrollment With the QHP Issuer in a Manner Considered To Be
Through the Exchange (Sec. 156.1230)
We proposed to amend paragraph (b)(2) of Sec. 156.1230 to conform
with the proposed amendments to Sec. 155.221. The change requires
that, prior to a QHP issuer's internet website being used to complete a
QHP selection, the QHP issuer must engage a third-party entity in
accordance with Sec. 155.221 to demonstrate operational readiness and
compliance with applicable requirements. For a discussion of the
provisions of this final rule related to third-party entities
performing operational readiness reviews, please see the preamble to
Sec. 155.221. We are finalizing the amendments to Sec. 156.1230 as
proposed.
Comment: One commenter requested clarification on whether the
proposed Sec. 156.1230(b)(2) is meant to apply only when an Exchange
delegates the enrollment function to plans operating in the individual
market.
Response: No FFE has delegated the enrollment function to plans
operating in the individual market. Notwithstanding this, Sec.
156.1230(b) permits QHPs in FFEs to directly enroll individual market
applicants in a manner that is considered through the Exchange, to the
extent permitted by applicable State law. Paragraph (b)(2) applies in
all circumstances where an issuer participating in an FFE performs such
a direct enrollment. A QHP issuer participating in an SBE-FP may also,
under Sec. 156.350, directly enroll applicants, and must comply with
the requirements in Sec. 156.1230(b)(2) as if it were an issuer of
QHPs on an FFE when using the direct enrollment pathway.
F. Part 157--Employer Interactions With Exchanges and SHOP
Participation
1. Qualified Employer Participation Process in a SHOP for Plan Years
Beginning Prior to January 1, 2018 (Sec. 157.205)
As discussed in the following section, we proposed to modify the
regulatory requirements regarding the qualified employer participation
process in a SHOP for plan years beginning on or after January 1, 2018
and to introduce those requirements in a new Sec. 157.206. To reflect
the proposal that the requirements currently in Sec. 157.205 would
apply only for plan years beginning before January 1, 2018, we proposed
to amend the heading of Sec. 157.205 and add paragraph (h), to state
that the section would apply only for plan years that begin prior to
January 1, 2018.
Comments related to the proposed approach for SHOP are discussed at
the beginning of section III.D.9 of this rule. We are finalizing these
policies as proposed. These changes will be effective on the effective
date of this rule.
2. Qualified Employer Participation Process in a SHOP for Plan Years
Beginning on or After January 1, 2018 (Sec. 157.206)
Section 157.205 describes requirements for participating SHOP
employers. To reflect the proposal to allow SHOPs to operate in a
leaner fashion, we proposed several changes to the requirements related
to qualified employer participation process in a SHOP for plan years
beginning on or after January 1, 2018, and proposed to introduce these
requirements in Sec. 157.206. With the exception of the proposed
changes to the process described here, the process will remain the same
as in Sec. 157.205. The proposals described in this section will be
effective on the effective date of the final rule.
Paragraph (d) of Sec. 157.205 requires a qualified employer to
submit any contribution towards the premiums of any qualified employee
according to the standards and processes described in Sec. 155.705.
Because we proposed that the requirements in Sec. 155.705 regarding
[[Page 17031]]
employer contribution methods will not apply for plan years beginning
on or after January 1, 2018, we also proposed that the requirement in
Sec. 157.705(d) will not apply for those plan years.
Paragraph (e)(1) of Sec. 157.205 describes obligations of
qualified employers to employees hired outside of the initial or annual
open enrollment periods. We proposed in Sec. 157.206(d) that qualified
employers must provide employees hired outside of the initial or annual
open enrollment period with information about the enrollment process.
We proposed that the requirement in paragraph (e)(1) of Sec. 157.705,
which requires qualified employers to provide these employees with an
enrollment period in accordance with Sec. 155.725(g), would not be
included in Sec. 157.206, as the requirement in Sec. 155.725(g) will
not be applicable for plan years beginning on or after January 1, 2018.
We also proposed that the requirement in Sec. 157.205(e)(2) to provide
information about the enrollment process in accordance with Sec.
155.725 would not apply for plan years beginning on or after January 1,
2018 to reflect that the process provided for in many of the provisions
in Sec. 155.725 will not apply for those plan years.
We also proposed that the requirements in Sec. 157.205(f)
regarding the process for notifying the SHOP in the event the
eligibility status of an employee, or employee's dependent has changed
would not apply for plan years beginning on or after January 1, 2018.
Under the approach finalized in this rule for plan years beginning on
or after January 1, 2018, SHOPs will not be required to process
employee enrollment, so there will be no reason for all qualified
employers to provide such information.
Further, we proposed that the requirement in Sec. 157.205(g) that
qualified employers adhere to the annual employer election period under
Sec. 155.725(c) would not apply for plan years beginning on or after
January 1, 2018. Elsewhere, we finalized that the annual employer
election period provision in Sec. 155.725(c) will not apply for those
plan years, and this change reflects that removal.
Finally, we proposed in paragraph (e) of Sec. 157.206 to include
new requirements for qualified employers reflective of the proposed
approach for SHOPs generally. First, since we proposed in Sec.
155.716(f) that an employer's determination of eligibility to
participate in the SHOP remains valid until the employer makes a change
that could end its eligibility under Sec. 155.710(b), we proposed in
Sec. 157.205(e)(1) that employers must submit a new application to the
SHOP if the employer makes a change that could end its eligibility
under Sec. 155.710 or withdraw from participation in the SHOP. Second,
because under the changes we have finalized elsewhere in this rule,
SHOPs will not be required to process group enrollments, and therefore
will not necessarily communicate with QHP issuers about employer
eligibility determinations, we proposed to require employers to notify
the QHP issuer of an unfavorable eligibility determination. However, we
proposed that the employer be required to provide the notification
within 5 business days of the end of any applicable appeal process
under Sec. 155.741. Specifically, the end of the appeal process could
occur when the time to file an appeal lapses without an appeal being
filed, when the appeal is rejected or dismissed, or when the appeal
process concludes with an adjudication by the appeals entity, as
applicable. We also proposed in paragraph (e)(3) to describe the
employer's obligations regarding loss of eligibility to participate in
a SHOP or termination of enrollment or coverage through the SHOP. Given
that under the approach finalized in this rule there will not
necessarily be communication between the SHOP and a participating QHP
issuer regarding employer eligibility, enrollment, or terminations,
there may be no way for the SHOP to notify an issuer in the event an
employer becomes ineligible to participate in SHOP. Therefore, we
proposed to add paragraph (e)(3) to require employers to notify an
issuer of a loss of eligibility to participate in SHOP, or a desire to
terminate SHOP enrollment or coverage.
We proposed in paragraph (f) of Sec. 157.205 that the section
would apply for plan years beginning on or after January 1, 2018, only.
Substantive comments relating to our proposals regarding SHOP are
addressed in section III.D.9 of this rule, as well as in the preamble
discussing Sec. Sec. 156.285 and 156.286. We are finalizing new Sec.
157.206 as proposed, with minor changes to paragraphs (e)(2) and
(e)(3). As noted in the preamble to the SHOP sections in part 155,
State Exchanges are encouraged to continue to operate their SHOPs as
they do today, or design a SHOP within the bounds of the flexibilities
being finalized within this rule. To ensure that SHOPs can continue to
operate as they do today, we are providing flexibility to employers to
allow them not to notify issuers of determinations of ineligibility to
participate in the SHOP or their desire to terminate their
participation in the SHOP in cases where the SHOP has notified the
issuer. We are making this change to recognize that State-based SHOPs
may continue to provide these notifications, in which case employers
should not be required to provide duplicative notifications. Section
156.206 will become effective as of the effective date of the final
rule.
G. Part 158--Issuer Use of Premium Revenue: Reporting and Rebate
Requirements
1. Reporting of Federal and State Taxes (Sec. 158.162)
Section 2718 of the PHS Act requires that Federal and State taxes
be reported, but that such amounts be excluded from premium revenue
when calculating an issuer's MLR and accompanying rebates. However, the
statute does not define what is included in Federal and State taxes.
The MLR December 1, 2010, interim final rule (75 FR 74864) interprets
this language and broadly describes Federal and State taxes that must
be reported but are excluded from premiums in the MLR and rebate
calculations, and Federal and State taxes that must be reported and are
not excluded from premiums in MLR and rebate calculations. In order to
provide consistency and clarity for MLR reporting, HHS amended Sec.
158.162 in the 2016 Payment Notice (80 FR 10750) to specify that all
issuers must include employment taxes in earned premiums and must not
deduct such taxes in the MLR and rebate calculations starting with the
2016 MLR reporting year.
However, we received several comments in favor of allowing issuers
to deduct such taxes from these calculations in response to the Request
for Information. Therefore, in the proposed rule, we invited comments
on whether, in order to encourage issuer participation and competition
in the markets, HHS should revise paragraph (a)(2) and paragraph
(b)(2)(iv) of Sec. 158.162 to allow all issuers to deduct Federal and
State employment taxes from premiums in their MLR and rebate
calculations, starting with the 2017 MLR reporting year for reports to
be filed by July 31, 2018.
We solicited comments on this approach from all stakeholders,
including on whether we should instead amend the MLR regulations to
collect the employment tax data separately from other tax data as an
informational item on the MLR Annual Reporting Form to gather data to
inform a decision regarding whether to amend the regulation for future
years, and whether changing the treatment of employment
[[Page 17032]]
taxes would be likely to help improve market stability and competition.
Comment: We received almost an equal number of comments opposing
and supporting exclusion of Federal and State employment taxes from
earned premium in the MLR and rebate calculations. Some who commented
in opposition noted that modifying the treatment of employment taxes
would contradict HHS's previous decision. Other commenters expressed
concern that such policy would raise MLRs without producing greater
value for consumers and would undermine consumer protections. Several
commenters stated that it is the uncertainty and the changes to the MLR
reporting parameters, rather than employment taxes that negatively
affect market stability. In contrast, several other commenters stated
that excluding employment taxes would improve market stability and
provide incentives for issuers to enter or remain in the market. Some
commenters stated that the PPACA provides for the exclusion of taxes
from the MLR calculation and that including employment taxes is
inconsistent with the treatment of other taxes. Lastly, a number of
commenters recommended that HHS gather additional information on the
impact of excluding employment taxes on consumers and issuers before
making changes to the current policy. One commenter encouraged HHS to
consider the impact on issuers providing coverage on- versus off-
Exchanges, as well as the potential double-counting that may occur
between excluding employment taxes from premium while also including
them in quality improvement activity (QIA) expenses.
Response: HHS appreciates the comments submitted regarding the
treatment of Federal and State employment taxes in the MLR and rebate
calculations. We share the concern of some commenters that reversing
the policy on the treatment of employment taxes only 1 year after the
policy became effective could contribute to instability. We also
continue to disagree that the PPACA unambiguously requires exclusion of
employment taxes from the MLR and rebate calculations. However, it is
our objective to explore and pursue all policy solutions that may help
stabilize the health insurance market. Therefore, after reviewing the
comments and recommendations, HHS intends to gather data to help
analyze the potential impact on consumers and issuers that would result
from excluding Federal and State employment taxes from earned premium
in the MLR and rebate calculations, and perform additional data
analysis to inform whether a modification to the current policy would
be appropriate. Specifically, while issuers already report the
employment tax amounts together with other taxes on the MLR reporting
form, HHS intends to propose changes to the MLR Annual Reporting Form
to include a separate line that will show these tax amounts for each
issuer. This will provide HHS with more up-to-date and consistent data
on employment taxes to more precisely estimate how potential
modifications to the current policy may affect issuers and consumers
and to determine whether such modifications would likely improve market
stability.
2. Allocation of Expenses (Sec. 158.170)
For a discussion of the proposed amendment to Sec. 158.170(b)
regarding the description of the allocation method for quality
improvement activity (QIA) expenses and a summary of the comments
received and responses provided, please see the preamble to Sec.
158.221. We are finalizing the change as proposed.
3. Formula for Calculating an Issuer's Medical Loss Ratio (Sec.
158.221)
We proposed amending Sec. 158.221 by adding new paragraph (b)(8)
to provide issuers with an option to report quality improvement
activity (QIA) expenses as a single fixed percentage of premium amount
starting with the 2017 MLR reporting year (for reports to be filed by
July 31, 2018). We also proposed conforming amendments to Sec.
158.170(b) (Allocation of expenses) to recognize the new proposed
option for reporting QIA expenses.
Consistent with the NAIC's recommendation to HHS,\97\ the MLR
interim final rule, published on December 1, 2010 (75 FR 74863), allows
issuers to include in the MLR numerator expenditures for five
categories of activities that improve health care quality. Accordingly,
issuers are currently required to report QIA expenditures in alignment
with the five separate categories codified in Sec. 158.150(b)(2)(i)-
(v). Additionally, Sec. 158.170 requires issuers to use and disclose
specific allocation methods to report expenses, including QIA
expenditures.
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\97\ 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 at http://www.naic.org/documents/committees_ex_mlr_reg_asadopted.pdf.
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In the course of conducting the MLR audits, HHS observed that the
current MLR regulations require a substantial effort by issuers to
accurately identify, track and report QIA expenses. HHS has also
observed that, between 2011 and 2015, issuers that did report QIA
expenses have reported spending, on average, a consistent percentage of
premium on total QIA: approximately 0.7 percent in 2011, and 0.8
percent in 2012 through 2015.
Given issuers' relatively low and consistent reported expenditures
on QIA and the significant burden associated with identifying, tracking
and reporting these expenditures, we proposed adding Sec.
158.221(b)(8) to permit issuers an option to report on their MLR
reporting form a single QIA amount equal to 0.8 percent of earned
premium in the relevant State and market, in lieu of tracking and
reporting the issuer's actual expenditures for QIA, as defined in Sec.
158.150 and Sec. 158.151. The accompanying proposed amendments to
Sec. 158.170(b) would require issuers that elect the option to include
0.8 percent of earned premium for QIA expenses to indicate as such when
describing the allocation method used for QIA expenses. Issuers that
spend more than 0.8 percent of earned premium on QIA would have the
option to report the total actual, higher amount spent and, if choosing
this option, would have to report QIA in the five categories described
in Sec. 158.150(b)(2)(i)-(v), as well as comply with the allocation of
expenses requirements established under Sec. 158.170.
We are finalizing this policy as proposed, except that, in response
to comments, we are specifying, as described below, how the optional
QIA reporting method may be used across affiliated issuers, markets,
and years.
Comment: We received comments from consumer and patient advocacy
groups, health insurance issuers, States, and individuals regarding the
proposal to provide a standardized option to report QIA. Most
commenters opposing the proposal stated that the current QIA
requirements motivate issuers to invest in improving the health and
well-being of consumers, and therefore allowing issuers who spend
nothing on QIA to take a standardized credit for QIA would
disincentivize issuers from making such investments. Many commenters
stated that by giving issuers credit for expenses that issuers may not
actually incur, the proposal would result in consumers receiving
coverage of a lower value. Some commenters expressed concern that the
0.8 percent standardized option would further provide a competitive
advantage to issuers that get credit without investing
[[Page 17033]]
in QIA. Many commenters stated that State regulators and consumers are
interested in knowing how much and what types of innovative QIA are
being implemented, and would lose access to this information under the
proposal. These commenters were also concerned that reduced
accountability would adversely affect the integrity of the MLR program.
One commenter pointed out that premiums tend to increase faster than
non-medical expenses so using a flat 0.8 percent may overstate QIA in
the future. Most commenters who supported the proposal stated that the
current process for identifying, tracking and reporting QIA expenses is
burdensome, time consuming and costly. Some commenters indicated that
it is hard for issuers to segregate QIA expenses since QIA is ingrained
throughout issuers' activities and the current process requires issuers
to track individual employees' time spent on a specific task. A few
commenters suggested raising the standardized credit to 1.0 percent of
premiums, some stated that 0.8 percent would be appropriate, while
others contended that 0.8 percent would be excessive. One commenter
requested that HHS clarify whether issuers must make an election to use
the optional QIA reporting method prior to the plan year; whether it
must be elected for a minimum fixed period of years; and the issuer,
State, and market aggregation level(s) to which the election applies.
One commenter recommended that issuers be allowed to retroactively
change the QIA reporting method with respect to the 2 prior years
included in the MLR calculation, while another commenter recommended
that issuers be allowed to elect the standardized QIA option for only
some of their markets. In contrast, another commenter expressed concern
that such approach could lead to inadvertent or intentional double-
counting, particularly for those issuers that incur QIA expenses at the
holding group level, and recommended that HHS require a consistent
reporting methodology across all markets at the holding group level and
for a minimum of 3 consecutive years. Several commenters requested
inclusion of certain other activities in QIA, which we note is beyond
the scope of the amendments proposed in the proposed rule.
Response: We reviewed each of the comments and recommendations and
are finalizing the amendments as proposed with the following
modification. In response to commenters' request for clarification
regarding the application of the new QIA reporting option, and in order
to address commenters' concerns regarding the impact of the new QIA
reporting option on the integrity of the MLR program, we are specifying
that issuers and their affiliates that elect the standardized QIA
reporting option must apply it consistently across all of their States
and markets that are subject to the MLR requirements in section 2718 of
the Public Health Service Act. Further, similarly to some other
optional MLR reporting provisions,\98\ issuers and their affiliates
that elect the standardized QIA reporting option must apply this
reporting method for a minimum of 3 consecutive reporting years. In
addition, we will require all affiliated issuers to elect the same QIA
reporting method. These provisions will ensure that the new QIA
reporting option is appropriately utilized by issuers to simplify
reporting, rather than to inflate the MLR based on the experience of a
particular year. Further, in the course of conducting the MLR audits,
HHS observed that QIA initiatives are often developed and administered
at the parent company level and the costs are then prorated down to
each issuer, State, and market segment using complex allocation
methods. Therefore, the requirement that the new QIA reporting option
be applied in a consistent manner across all States, relevant markets,
and affiliates will additionally eliminate gaming incentives for
companies to use the standardized 0.8 percent of premium QIA amount for
some of their issuers, States, or markets and simultaneously maximize
the allocation of the actual QIA costs to their other issuers, States,
or markets. This approach is also consistent with the fact that the 0.8
percent of premium threshold was identified based on the average across
all issuers, States, and markets. We note that the new QIA reporting
method is optional, and does not prevent issuers from continuing to
allocate and benefit from reporting the actual QIA expenses for each
State and market. While we acknowledge commenters' concerns that the
standardized QIA reporting option may in some cases give issuers credit
for activities that they do not perform, we note that issuers also have
financial incentives to improve the health of their enrollees because
healthier populations incur lower medical costs, and reducing the
administrative burden associated with tracking QIA will free up funds
that issuers can invest in QIA. Additionally, while we recognize that
there is variation in QIA spending between different issuers, we
continue to believe that 0.8 of earned premium is appropriate based on
the average of MLR data over 2011-2015, and that a single nationwide
percentage provides the benefit of simplicity and reduces burdens
associated with tracking and reporting QIA expenses. As noted
previously, issuers will continue to have the option to report the
actual expenditures and therefore will retain the ability to take full
credit if these expenditures exceed 0.8 percent of premium. With
respect to commenters' concern that QIA expenditures may not grow
proportionately to premium and that 0.8 percent may overstate issuers'
average QIA expenditures in the future, as well as commenters' concern
that they may lose access to the detailed QIA data, we also note that
presently, issuers continue to report to States QIA data that in some
respects are even more detailed than the data previously collected by
HHS. Therefore, the public and States retain the ability to access this
type of information. In addition, HHS will monitor QIA reporting and
review available data, and may modify the QIA reporting policy in the
future if HHS determines it to be necessary. Finally, we note this
change will also help level the playing field among issuers, since many
issuers likely do engage in QIA but currently forego reporting because
the burden of analyzing, documenting, tracking, allocating, and
reporting QIA expenses exceeds the benefits for MLR purposes.
---------------------------------------------------------------------------
\98\ Such as the reporting of group health insurance coverage
with dual contracts in Sec. 158.120(c).
---------------------------------------------------------------------------
4. Potential Adjustment to the MLR for a State's Individual Market
(Subpart C)
We proposed to amend 45 CFR part 158, subpart C to modify the
process and criteria for the Secretary to determine whether to adjust
the 80 percent MLR standard in the individual market in a State.
Because the majority of comments focused on the broader merits of
amending subpart C, rather than on the specific sections, we address
all comments after summarizing the proposed amendments to each section.
Section 2718(d) of the PHS Act provides that the Secretary may
adjust the MLR standard in the individual market if the Secretary
determines it appropriate on account of the volatility of the
individual market due to the establishment of Exchanges. The MLR
December 1, 2010, interim final rule (75 FR 74864) set forth the
framework for a State to request such an adjustment and the process and
criteria for the Secretary to determine whether to grant a State's
request. Subpart C of 45 CFR part 158 specifies that the adjustment
request
[[Page 17034]]
must be initiated by the State, the adjustment may be granted for up to
3 years at a time, the information that the State must provide to
support its request, and the criteria that HHS may consider in making a
determination. It also requires the Secretary to invite public comments
on the adjustment requests, allows States to hold optional public
hearings, and enables States to request reconsideration of adverse
determinations.
Because in the current environment, it generally is not the MLR
standard in isolation but rather factors that, taken together, can
contribute to instability of the individual market in certain States,
the current framework in subpart C restricts the States' ability to
obtain adjustments to the MLR standard as part of innovative solutions
for stabilizing their individual markets. Therefore, as outlined below,
we proposed to make amendments throughout subpart C of part 158 to
allow for adjustments to the individual market MLR standard in any
State that demonstrates that a lower MLR standard could help stabilize
its individual market, and to streamline the process for applying for
such adjustments to reduce burdens for States and HHS.
a. Standard for Adjustment to the Medical Loss Ratio (Sec. 158.301)
For the reasons described above, we proposed to amend Sec. 158.301
to permit the Secretary to adjust the individual market MLR standard in
any State if the Secretary determines that there is a reasonable
likelihood that an adjustment to the 80 percent MLR standard will help
stabilize the individual market in that State. We are finalizing the
amendments as proposed.
b. Information Regarding the State's Individual Health Insurance Market
(Sec. 158.321)
We proposed to amend Sec. 158.321 to modify the information that a
State must submit to the Secretary with its request for an adjustment
to the 80 percent MLR standard in its individual market. Specifically,
because we sought to make the MLR adjustment process less burdensome on
States and make adjustments available to enable States to develop
innovative solutions for stabilizing their individual markets, we
proposed to remove the requirements that the State must describe the
State MLR standard and formula for assessing compliance (Sec.
158.321(a)), its market withdrawal requirements (Sec. 158.321(b)), and
the mechanisms available to the State to provide consumers with options
for alternate coverage (Sec. 158.321(c)). Additionally, we proposed to
redesignate paragraph (d) as paragraph (a) and to revise the
redesignated paragraph to describe the information the State must
submit regarding the State's individual health insurance market, as
outlined below.
We also proposed to replace the requirement previously codified at
Sec. 158.321(d)(1) that a State provide detailed product-level
enrollment and premium data with a requirement at Sec. 158.321(a)(2)
to submit information only on the total number of enrollees (life-years
and covered lives) for each type of coverage sold or renewed in the
State's individual market. Similarly, we proposed to eliminate the
requirement previously codified in Sec. 158.321(d)(1) to submit
product-level premium data in favor of the total earned premium data in
the proposed Sec. 158.321(a)(1), and to eliminate the Sec.
158.321(d)(1) requirement to submit the issuer's individual market
share.
We proposed to continue to require States to include information on
total earned premium (proposed Sec. 158.321(a)(1)) and total agent and
broker commission expenses (proposed Sec. 158.321(a)(3)) for each type
of coverage sold or renewed in the State's individual market, as
described in more detail below, as well as the risk-based capital (RBC)
level (proposed Sec. 158.321(a)(5)), which, due to the manner in which
RBC is calculated, would only be appropriate to report at the issuer
level, rather than for each type of coverage. We also proposed to
revise the accompanying regulation text for these data elements for
readability. We further proposed that State requests should include
information on total incurred claims (proposed Sec. 158.321(a)(1)) for
each type of individual market coverage described below, in lieu of the
previous more burdensome requirement to provide reported and estimated
individual market MLRs (Sec. 158.321(d)(2)(ii) through (iii)).
We proposed to modify these requirements to require States to only
include the information for each issuer actively offering individual
market coverage. We also proposed to add a new Sec. 158.321(b) to
require that a State request include the individual market data
required in the proposed new Sec. 158.321(a)(1) through (4) and (6)
separately for each issuer actively offering individual market plans in
that State group by the following categories, as applicable: On-
Exchange, off-Exchange, grandfathered health plans as defined in Sec.
147.140, coverage that meets the criteria for transitional policies
outlined in applicable guidance,\99\ and non-grandfathered single risk
pool coverage, in order to enable the Secretary to assess the situation
in the State's individual market and to appropriately evaluate the
State's proposal. Proposed new Sec. 158.321(b) would also require the
State to report the RBC information at the issuer level for each issuer
actively offering coverage in the State's individual market. A State
would not be required to provide information on student health
insurance coverage as defined in Sec. 147.145 or individual market
excepted benefits as defined in Sec. 148.220.
---------------------------------------------------------------------------
\99\ See, for example, CMS ``Insurance Standards Bulletin
Series--Information--Extension of Transitional Policy through
Calendar Year 2018 (February 23, 2017) available at https://www.cms.gov/CCIIO/Resources/Regulations-and-Guidance/Downloads/Extension-Transitional-Policy-CY2018.pdf.
---------------------------------------------------------------------------
To further reduce the burden on States, we proposed to remove the
requirements to provide net underwriting profit for each issuer's total
business in the State and after-tax profit and profit margin for the
individual market and total business in the State (Sec.
158.321(d)(2)(vii)), as well as to rename the remaining requirement to
provide the individual market ``net underwriting profit'' to ``net
underwriting gain'' to more accurately reflect the accounting term
(proposed Sec. 158.321(a)(4)). We also proposed to delete the
requirement to provide information on estimated MLR rebates (Sec.
158.321(d)(2)(v)). Additionally, we proposed to revise the language at
current paragraph Sec. 158.321(d)(2)(ix), proposed to be redesignated
at Sec. 158.321(a)(6), to require the State to provide information not
only on notices by issuers covered in Sec. 158.321(a) of market exits,
but also the equally or more pertinent issuer notices of beginning to
offer coverage in the individual market, as well as ceasing or
commencing offering individual market coverage on the Exchange or in
specific geographic areas (for example, counties); and to add a new
Sec. 158.321(c) to require similar information on issuers not actively
offering coverage in the individual market that have indicated an
intent to enter or exit the individual market, including ceasing or
commencing offering individual market coverage on the Exchange or in
specific geographic areas. Lastly, we recognize that in many situations
the information proposed to be required in Sec. 158.321(a) will only
be available for the preceding calendar year, but we proposed to
provide States with an option to also include information for the
current year (where available), which may be more
[[Page 17035]]
relevant if a State makes a request in a later part of the year.
We are finalizing the amendments as proposed, with one correction
to Sec. 158.321(b) to indicate that the information required in
paragraph Sec. 158.321(a)(5) is the only information that must be
provided at the issuer level.
c. Proposal for Adjusted Medical Loss Ratio (Sec. 158.322)
To reduce the burden on States, we proposed to remove paragraphs
(a), (c) and (d) of Sec. 158.322, which would remove the requirements
for a State to justify how its proposed adjustment was determined, and
to estimate rebates that would be paid with and without an adjustment
because HHS can make these estimates instead of the State. Consistent
with our proposed changes to Sec. 158.301, we proposed to revise Sec.
158.322 to require the State to both provide its proposed, adjusted MLR
standard and explain how this proposed standard would help stabilize
its individual market. We also proposed to delete current paragraph
(b), which requires an explanation of how an adjustment would permit
issuers to adjust current business models and practices in order to
meet an 80 percent MLR as soon as is practicable, to further reduce
burden on States submitting adjustment requests.
We are finalizing the amendments as proposed.
d. Criteria for Assessing Request for Adjustment to the Medical Loss
Ratio (Sec. 158.330)
Section 158.330 lists the criteria that the Secretary may consider
in determining whether to approve a State request to adjust the 80
percent MLR standard for the individual market. We proposed amendments
throughout the section to reflect the proposal in Sec. 158.301 to
allow adjustments if the Secretary determines the adjustment would help
stabilize the individual market in that State, and the proposed changes
to the information requirements in Sec. 158.321. Specifically, we
proposed conforming amendments to the introductory text of Sec.
158.330 to provide that the Secretary may consider the identified
criteria when assessing whether an adjustment to the individual market
MLR standard would be reasonably likely to help stabilize the
individual market in a State that has requested such an adjustment. We
proposed to replace the information currently outlined at Sec.
158.330(a)(1)-(4) regarding individual market issuers reasonably likely
to exit the State with information regarding the number and financial
performance of issuers actively offering individual market coverage on-
Exchange, off-Exchange, grandfathered health plans as defined in Sec.
147.140, coverage that meets the criteria for transitional policies
outlined in applicable guidance, and non-grandfathered single risk pool
coverage; the number of issuers reasonably likely to cease or begin
offering such individual market coverage in the State; and the
likelihood that an adjustment would increase competition in the State's
individual market, including in underserved areas (proposed Sec.
158.330(a)). We proposed to delete the existing criteria captured at
Sec. 158.330(b) related to consideration of the number of individual
market enrollees covered by issuers that are reasonably likely to exit
the State's individual market absent the requested adjustment because
the goal of a State request for adjustment may be to ensure that health
insurance coverage is available to all, rather than a certain
percentage of, consumers who want it, and that consumers not only have
coverage, but also a choice of several issuers. We proposed conforming
amendments to the criteria currently captured at Sec. 158.330(c),
proposed to be redesignated at Sec. 158.330(b), regarding whether an
adjustment might improve consumers' access to agents and brokers.
Similar to the proposed amendments to Sec. 158.321 described above to
remove the requirement for States to provide information on available
mechanisms to provide alternate coverage, we proposed to replace the
current criteria outlined at Sec. 158.330(d)(1)-(5) with consideration
of information on the capacity of any new issuers or issuers remaining
in the individual market to write additional business in the event one
or more issuers were to cease or begin offering individual market
coverage on Exchanges, in certain geographic areas, or in the entire
individual market in the State (proposed Sec. 158.330(c)). We proposed
to retain and modify the existing criteria at Sec. 158.330(e),
proposed to be redesignated at Sec. 158.330(d), on the impact on
premiums charged, and on benefits and cost sharing provided, to
consumers by issuers remaining in or entering the individual market in
the event one or more issuers were to cease offering individual market
coverage on the Exchange, in certain geographic areas, or in the entire
individual market in the State. Finally, we proposed to retain the
existing criteria at Sec. 158.330(f), proposed to be redesignated at
Sec. 158.330(e), for consideration of any other relevant information
submitted by the State.
We are finalizing the amendments as proposed.
e. Treatment as a Public Document (Sec. 158.341)
Because the format in which States may submit requests for
adjustments may not comply with Federal requirements for documents
posted on Federal websites, some of these documents may not be able to
be posted directly to the applicable Federal website. For example, a
State may submit spreadsheets containing data or copies of issuer
letters in a format that is not accessible for individuals with visual
impairments. However, HHS is committed to transparency and making this
information promptly available to the public. HHS is also committed to
providing accessible information to members of the public, including
individuals with disabilities, and will provide such individuals with
accessible copies of documents submitted by States unless doing so
would impose an undue burden on the agency. Therefore, we proposed to
amend Sec. 158.341 to reflect that Federal requirements for documents
posted on Federal websites may not permit these documents to be posted,
and to specify that instructions for the public to access information
on requests for adjustment to the MLR standard submitted by States will
be provided on the Secretary's internet website. We are finalizing the
amendments as proposed, with a non-substantive change to the regulatory
text.
f. Subsequent Requests for Adjustment to the Medical Loss Ratio (Sec.
158.350)
We proposed to make conforming amendments to Sec. 158.350, which
describes the information that a State must submit with a subsequent
request for an adjustment to the MLR standard, to make this information
consistent with our proposed changes to Sec. 158.301 and Sec.
158.330. We are finalizing the amendments as proposed.
The following is a summary of the public comments received on these
proposals and our responses.
Comment: We received comments from consumer and patient advocacy
groups, health insurance issuers, States, and individuals regarding the
proposal to modify the process for submission of State requests to
adjust the individual market MLR standard and the accompanying criteria
for the Secretary to determine whether to adjust the 80 percent MLR
standard in the individual market in a State. The majority of comments
focused on the merits of the
[[Page 17036]]
proposed amendments to subpart C as a whole, rather than offering
comments on the specific sections of subpart C. Most commenters
opposing the proposals stated that it is unlikely that the MLR standard
is a primary driver of market instability and that most insurers
already meet or exceed the MLR standard. These commenters stated that
lowering the MLR standard would undermine one of the few consumer
protections and lead to higher premiums with consumers receiving lower
value for those premiums, without strengthening the market. Many
commenters focused on the benefits the MLR rule has delivered to
consumers and objected to weakening the rule. Several commenters
expressed concern that the proposal could lead to discrepancies in
standards and access to care. Several commenters disagreed with the
proposed elimination or reduction of various requirements on States
seeking adjustments due to concerns over the possibility of arbitrary
and unjustified requests, inadequately rigorous review, and a decrease
in transparency. Most commenters who supported the proposals expressed
appreciation that the proposals would give greater flexibility to the
States. Some of these commenters stated that a lower MLR standard may
have competitive benefits that outweigh potential costs and that States
are in the best position to assess that tradeoff. Several commenters
stated that the proposals could incentivize issuer expansion and
innovation. Additionally, several commenters recommended that States be
allowed to only lower (not increase) the MLR standard, and that
adjustments not be effective prior to 2020 in order to give issuers
time to incorporate adjusted MLR standards into issuers' market
participation and pricing decisions. Lastly, one commenter recommended
allowing States to adjust the MLR standard for only specific issuers,
such as new entrants, while another commenter urged HHS to disallow
this in order to not disadvantage established issuers and to avoid
encouraging such issuers to leave the market.
Response: We are finalizing the proposed amendments to subpart C as
proposed, with one technical correction to Sec. 158.321(b) to indicate
that the information required in paragraph Sec. 158.321(a)(5) is the
only section that must be provided at the issuer level. We appreciate
both the comments highlighting the benefits of the current MLR rule, as
well as the comments supporting our efforts to provide more flexibility
to States to improve the stability of their markets. We acknowledge the
concerns expressed by many commenters that the adjustments to the
individual market MLR standard should not undermine consumer
protections and that the integrity of the adjustment review process
should not be compromised. However, we believe that if States can
develop strategies involving an adjusted MLR standard that States can
demonstrate would be reasonably likely to lead to a more robust and
stable individual market, then this would benefit consumers and
ultimately lead to higher quality and more affordable coverage. We note
that the amendments to subpart C are not intended to reduce the overall
burden of proof on States applying for adjustments, but rather require
States to provide more pertinent information and remove duplicative,
burdensome requirements, such as those that mandate States submit data
that is otherwise publicly available to both HHS and consumers. Given
that the goal of the amendments to subpart C is to provide States the
flexibility to innovate and pursue the best solutions for their
markets, we believe that it would be inconsistent to impose up-front
restrictions on how much or what direction of an adjustment a State may
seek. For the same reason, we will determine the effective date for
each adjustment in consultation with the respective State and based on
the timing of the request submitted by the State, but will, as
appropriate, take commenters' recommendations on the proposed rule into
consideration when making those determinations. We further clarify that
a State should include an effective date and duration (for up to 3 MLR
reporting years \100\) for the requested adjustment to the individual
market MLR standard as part of its proposal. In addition, we note there
will be opportunities for public comment on individual State adjustment
requests. Sections 158.342 and 158.343 are being retained in their
current form, which require the Secretary to invite public comment on
State adjustment requests and provide for optional State public
hearings, respectively. Lastly, because we interpret the statute as
only permitting the Secretary to adjust the MLR standard for the entire
individual market within a State, we are not able to allow issuer-
specific adjustments within a State. However, we note that there are
several other provisions in the MLR regulations that are designed to
recognize the special circumstances of smaller and newer plans, and
provide incentives for issuers that contemplate entering a market.
These include the credibility adjustment for smaller issuers in Sec.
158.323 and the options to defer MLR and rebate calculation for newer
business in Sec. 158.121 and to limit the total rebate payment in
Sec. 158.240(d).
---------------------------------------------------------------------------
\100\ See 45 CFR 158.311.
---------------------------------------------------------------------------
IV. Collection of Information Requirements
Under the Paperwork Reduction Act of 1995, we are required to
provide 30-day notice in the Federal Register and solicit public
comment before a collection of information requirement is submitted to
the Office of Management and Budget (OMB) for review and approval. This
final rule contains information collection requirements (ICRs) that are
subject to review by OMB. A description of these provisions is given in
the following paragraphs with an estimate of the annual burden,
summarized in Table 12. To fairly evaluate whether an information
collection should be approved by OMB, section 3506(c)(2)(A) of the
Paperwork Reduction Act of 1995 (PRA) requires that we solicited
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 solicited public comment on each of the required issues under
section 3506(c)(2)(A) of the PRA for the following information
collection requirements.
A. Wage Estimates
To derive wage estimates, 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.\101\ Table 11 in this final rule presents the
mean hourly wage (calculated at 100 percent of salary), the cost of
fringe benefits and overhead, and the adjusted hourly wage.
---------------------------------------------------------------------------
\101\ See May 2016 Bureau of Labor Statistics, Occupational
Employment Statistics, National Occupational Employment and Wage
Estimates at https://www.bls.gov/oes/current/oes_nat.htm. For State
Government Employees see NAICS 999200--State Government, excluding
schools and hospitals (OES Designation) https://www.bls.gov/oes/current/naics4_999200.htm.
---------------------------------------------------------------------------
As indicated, employee hourly wage estimates have been adjusted by
a factor
[[Page 17037]]
of 100 percent. This is necessarily a rough adjustment, both because
fringe benefits and overhead costs vary significantly across employers,
and because methods of estimating these costs vary widely across
studies. Nonetheless, there is no practical alternative, and we believe
that doubling the hourly wage to estimate total cost is a reasonably
accurate estimation method.
Table 11--Adjusted Hourly Wages Used in Burden Estimates
----------------------------------------------------------------------------------------------------------------
Fringe
Occupational Mean hourly benefits and Adjusted
Occupation title code wage ($/hr.) overhead ($/ hourly wage ($/
hr.) hr.)
----------------------------------------------------------------------------------------------------------------
Business operation specialist *................. 13-1199 $31.59 $31.59 $63.18
Operations Manager.............................. 11-1021 58.70 58.70 117.40
Software Developers, Systems Software........... 15-1133 53.17 53.17 106.34
Actuary......................................... 15-2011 54.87 54.87 109.74
Actuary *....................................... 15-2011 40.41 40.41 80.82
Financial Examiner *............................ 13-2061 33.02 33.02 66.04
Financial Analyst *............................. 13-2051 34.39 34.39 68.78
Financial Manager *............................. 11-3031 45.83 45.83 91.66
Lawyer *........................................ 23-1011 44.87 44.87 89.74
Secretaries and Administrative Assistants, 43-6014 17.38 17.38 34.76
Except Legal, Medical, and Executive...........
Commissioner **................................. .............. 58.45 58.45 116.90
Market Research Analyst......................... 13-1161 33.95 33.95 67.90
Medical Records Technician...................... 29-2071 19.93 19.93 39.86
Psychiatrist.................................... 29-1066 96.26 96.26 192.52
----------------------------------------------------------------------------------------------------------------
* Denotes occupations where wages were obtained for State Government employees (https://www.bls.gov/oes/current/naics4_999200.htm).
** Data on compensation of State Insurance Commissioners collected by the Council of State Governments and
compiled by Ballotpedia (http://www.ballotpedia.org). The wage data used in the burden estimates include the
cost of fringe benefits and the adjusted hourly wage.
B. ICRs Regarding State Flexibility for Risk Adjustment (Sec. 153.320)
We are finalizing our proposal to allow State regulators to request
a reduction, beginning for the 2020 benefit year, to risk adjustment
transfers in the individual, small group or merged markets. We are
finalizing the requirement for any State requesting this reduction to
otherwise applicable transfers to submit its request with the
supporting evidence and analysis to HHS identifying the State-specific
factors that warrant the adjustment to more precisely account for the
differences in actuarial risk in the State's individual, small group or
merged market. Additionally, the State must submit supporting evidence
and analysis demonstrating the reduction percentage requested is
appropriate. This evidence and analysis justifying the percentage
requested must either demonstrate the set of factors and the percentage
by which those factors warrant an adjustment to more precisely account
for the differences in actuarial risk in the State's individual, small
group or merged market compared to the national norm, or it must
demonstrate the requested reduction in risk adjustment payments would
be so small for issuers who would receive risk adjustment payments,
that the reduction would have a de minimis effect on the necessary
premium increase to cover the affected issuer or issuers' reduced
payments. States are required to submit the requests with the
supporting evidence and analysis by August 1st, 2 calendar years prior
to the beginning of the applicable benefit year (for example, August 1,
2018, for the 2020 benefit year). The burden associated with this
requirement is the time and effort for the State regulators to submit
its request and supporting evidence and analysis to HHS. We are
updating the burden estimates from those proposed based on the State
request and supporting evidence and analysis requirements we are
finalizing in this rule. We estimate submitting the request and
supporting evidence and analysis will take a business operations
specialist 40 hours (at a rate of $63.18 per hour) to prepare the
request and 20 hours for a senior manager (at a rate of $117.40 per
hour) to review the request and transmit it electronically to HHS. We
estimate that each State seeking a reduction will incur a burden of 60
hours at a cost of approximately $4,875 per State to comply with this
reporting requirement (40 hours for the insurance operations analyst
and 20 hours for the senior manager). Although we are unable to
precisely estimate the number of States that will make this request, we
expect that no more than 25 States will make these requests annually,
resulting in a total annual burden of approximately 1,500 hours with an
associated total cost of $121,880. We published a revised information
collection approved under OMB control number 0938-1155: Standards
Related to Reinsurance, Risk Corridors, Risk Adjustment, and Payment
Appeals, for comment on December 28, 2017, and intend to update it to
account for this change in burden.
C. ICRs Regarding Risk Adjustment Data Validation (Sec. 153.630)
We finalize that, beginning with 2017 benefit year risk adjustment
data validation, issuers with 500 billable member months or fewer
Statewide that elect to establish and submit data to an EDGE server
will not be subject to the requirement to hire an initial validation
auditor or submit initial validation audit results. We note that,
beginning with 2018 benefit year risk adjustment data validation, these
issuers will not be subject to random sampling under the materiality
threshold discussed below, and will continue to not be subject to the
requirement to hire an initial validation auditor or submit initial
validation audit results. As 2016 benefit year risk adjustment data
validation will be another pilot year, we are also finalizing the
postponement of the application of the materiality threshold to the
2018 benefit year. Under this policy, all issuers of risk adjustment
covered plans will be required to conduct an initial validation audit
for the 2017 benefit year risk adjustment data validation, other than
issuers with 500 billable member months or fewer Statewide as discussed
above. Beginning with the 2018 benefit year, issuers below the $15
million premium materiality threshold will not be
[[Page 17038]]
required to conduct an initial validation audit every year, but rather,
HHS will conduct random and targeted sampling under which issuers below
the materiality threshold would be subject to an initial validation
audit approximately every 3 years.
HHS estimates that not requiring issuers that have 500 or fewer
billable member months Statewide to conduct an initial validation audit
beginning in the 2017 benefit year will exempt 50 issuers from an
initial validation audit and reduce administrative costs for each
issuer by 828 hours with an estimated cost reduction on average of up
to $100,000. The total burden reduction for all 50 issuers will be
41,400 hours with an associated reduction in cost of $3,520,000. The
postponement of the effectiveness of the materiality threshold to the
2018 benefit year will not impact issuer burden relative to previous
estimates for the risk adjustment data validation program included in
the 2014 and 2015 Payment Notices, particularly given that the program
has been converted to a pilot for the first 2 years of operation. We
are revising the current information collection approved under OMB
control number 0938-1155: Standards Related to Reinsurance, Risk
Corridors, Risk Adjustment, and Payment Appeals, to account for this
reduction in burden.
For risk adjustment data validation, HHS requires issuers to
document mental and behavioral health records included in audit
sampling. Without the necessary mental and behavioral health
information for each sample, the diagnosis code for an applicable
enrollee cannot be validated and, therefore, it would be rejected
during risk adjustment data validation.
Because providers may be prevented by some State privacy laws from
furnishing a full mental health or behavioral health record, we are
amending Sec. 153.630(b)(6) to allow issuers an additional avenue to
achieve compliance with data validation requirements by permitting the
submission of mental or behavioral health assessments for risk
adjustment data validation in the event that a provider is subject to
State privacy laws that prohibit the provider from providing HHS with a
complete mental or behavioral health record. For risk adjustment data
validation purposes, to the extent permissible under applicable Federal
and State privacy laws, an assessment should contain: (1) The
enrollee's name; (2) sex; (3) date of birth; (4) current status of all
mental or behavioral health diagnoses; and (5) dates of service. To
submit a mental or behavioral health assessment, an issuer must ensure
that it is accompanied by an attestation from the provider that
applicable State privacy laws prevent him or her from providing the
complete mental or behavioral health record.
HHS expects that this provision may affect 10 percent of issuers or
approximately 70 issuers in States with stricter privacy laws on
medical records. Based on our experience with the first pilot year risk
adjustment data validation audits, we estimate that approximately 40
enrollees in any initial validation audit sample of 200 enrollees could
be affected. Since providers routinely prepare mental or behavioral
health assessments to validate diagnoses, we believe the slight
additional burden is the time it would take to seek patient consent to
provide the assessment, in States that require such permission, to
review and edit the preexisting assessment for each medical record to
include the data elements specified in Sec. 153.630(b)(6), and to
attest that relevant State privacy laws prohibit him or her from
providing the complete mental or behavioral health record.
Comment: Several commenters stated that obtaining patient consent
and provider attestations for mental or behavioral health assessments
would impose a significant administrative, professional, and personal
burden on issuers, providers, and patients, while one commenter stated
that this flexibility could reduce administrative burden if issuers
could develop a standard form for physicians to sign.
Response: As noted above, HHS believes that the policy to permit
the use of existing mental or behavioral health assessments may result
in a slight increase in the burden on issuers and providers, primarily
due to the new provider attestation requirement.
We estimate it will take a medical records technician (at an hourly
rate of $39.86) 15 minutes to obtain consent from each patient, or
approximately 10 burden hours at an estimated cost of $399 per issuer.
In addition, we estimate a qualified licensed provider (psychiatrist,
at an hourly rate of $192.52) will need 45 minutes to prepare an
abbreviated assessment and sign an attestation, for a total of $144 per
enrollee, or $5,776 per issuer. Therefore, for 40 patients, the total
burden per issuer for the provider to obtain consent from each patient
and prepare an abbreviated assessment and signed attestation will be 40
hours and approximately $6,174. The aggregated burden for the estimated
70 affected issuers will be 2,800 hours and approximately $432,194. We
are revising the current information collection approved under OMB
Control Number 0938-1155: Standards Related to Reinsurance, Risk
Corridors, Risk Adjustment, and Payment Appeals, to account for this
additional burden.
D. ICRs Regarding Health Insurance Issuer Rate Increases: Disclosure
and Review Requirements--Applicability (Sec. 154.103)
We are finalizing the proposal to exempt student health insurance
coverage as defined in Sec. 147.145 from the Federal rate review
requirements. Because we will no longer be reviewing the reasonableness
of rate increases for student health insurance coverage, we expect to
collect less information for the 2019 plan or policy year than
collected for previous years. This will reduce burden related to the
submission and review for issuers and States. We estimate that 75
student health insurance issuers will no longer be required to submit
rate increases to HHS. We estimate that each rate review submission
takes 11 hours for an actuary (at a rate of $109.74 per hour) to
prepare, and that each issuer will submit an average of 2.5 plans, at
an estimated annual cost of $3,018, resulting in a total reduction in
the annual burden to issuers of approximately 2,063 hours and an
associated reduction in cost of approximately $226,339. We estimate
that States will no longer submit rate increases for 188 student health
insurance plans to HHS. We estimate a reduction in burden to States of
one hour per plan for an actuary (at a rate of $80.82 per hour) to
prepare and electronically submit the appropriate materials, for a
total reduction in burden of approximately 188 hours annually with an
associated cost reduction of approximately $15,194. We will revise our
current burden estimate approved under OMB control number 0938-1141:
Rate Increase Disclosure and Review Reporting Requirements, to reflect
the reduced burden on States and issuers.
E. ICRs Regarding Rate Increases Subject To Review (Sec. 154.200)
We are finalizing our proposal to establish a 15 percent Federal
default threshold for reasonableness review. We expect this to reduce
burden for issuers because Part II of the Rate Filing Justification
(Consumer Justification Narrative) is only required for increases that
meet or exceed the threshold. In the 2019 plan year, we estimate that
the number of written justifications that will be submitted will
decrease by approximately 125 submissions. That estimate is based on
data from the 2018 plan year. We reached this estimate by counting the
number of submissions
[[Page 17039]]
with a product subject to review due to an increase between 10 percent
and 15 percent. Specifically, CMS received 786 submissions for the 2018
plan year; 579 of those included a rate increase at or above 10
percent; while 454 of those included a rate increase at or above 15
percent, resulting in 125 submissions falling between 10 percent and 15
percent.
We estimate that each written justification will require 1.5 hours
for an actuary (at a cost of $109.74 per hour) to prepare and
electronically transmit the documentation. Therefore, the annual burden
for issuers will be reduced by 187.5 hours, with an estimated annual
savings of $20,576.
As stated above, we estimate 125 fewer submissions with rate
increases subject to review. Assuming that States adopt the Federal
default threshold, we expect the number of State reviews will decrease
by 123 submissions.\102\ We estimate that each State review will
require 38.5 hours of work by an actuary (at a cost of $80.82 per
hour). Therefore, the State burden will decrease by approximately
4,735.5 hours, with an estimated annual savings of $382,723.
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\102\ For the 2018 plan year, CMS reviewed two submissions
proposing a rate increase between 10 percent and 15 percent.
---------------------------------------------------------------------------
We will revise our current burden estimate approved under OMB
control number 0938-1141: Rate Increase Disclosure and Review Reporting
Requirements, to reflect the reduced burden on issuers.
F. ICRs Regarding the Small Business Health Options Program (SHOP)
We are finalizing the proposals granting additional flexibilities,
effective on the effective date of this rule and applicable for plan
years beginning on or after January 1, 2018, to SHOPs, to qualified
employers and employees enrolling in SHOP plans, and to participating
QHP issuers and SHOP-registered agents and brokers in how they interact
with a SHOP. Under the proposals being finalized throughout this
document, SHOPs will no longer be required to provide enrollment,
premium aggregation functions, and online enrollment functionality
through a SHOP website, and the FF-SHOPs and SBE-FPs for SHOP, will no
longer continue to perform these functions. Instead, small groups will
enroll in a SHOP plan through a SHOP-registered agent or broker or
through a participating QHP issuer participating in a SHOP. FF-SHOPs
will follow the approach as outlined in this final rule. SBEs will have
the flexibility to operate their SHOP in a way that meets the needs of
their State and complies with the regulatory flexibilities outlined
herein.
Under the proposals being finalized in this rule several pieces of
information currently being collected by a SHOP may no longer be
collected by a SHOP, or, the way in which the information is collected
may change. For example, employers, employees, and agents and brokers
may be required to provide the information currently collected by a
SHOP to an issuer for the purposes of enrollment in a SHOP plan. A
SHOP, like the FF-SHOPs and SBE-FPs for SHOP, however, will not be the
entity collecting the information and the Federal government thus will
experience a reduction in burden. Under the new regulatory
flexibilities being finalized and described throughout this rule,
employers and employees will no longer be required to visit a SHOP
website in order to enroll in a SHOP plan and a SHOP will no longer be
required to have the capability or the need to collect enrollment
information. Employers will however, be required to apply to the SHOP
to obtain an eligibility determination, as described in Sec. 155.710,
at which point the employer will be requested to provide: (1) Employer
name and address of employer's locations; (2) Information sufficient to
confirm the employer is a small employer; (3) Employer Identification
Number (EIN); and (4) Information sufficient to confirm that the
employer is offering, at a minimum, all full-time employees coverage in
a QHP through a SHOP. Under current regulations, the employer provides,
and a SHOP collects, this information as part of enrolling in a SHOP
QHP through a SHOP. HHS previously estimated that an employer needed
two hours to complete the eligibility determination when it was
included as part of enrolling in a SHOP QHP and that 6,000 employers
will complete an application annually to determine their eligibility
through a SHOP website. Based on these criteria, HHS estimated that the
total annual burden for 6,000 employers was 12,000 hours, with a total
annual cost of $561,240 to complete the SHOP application and
eligibility determination process. With the new regulatory
flexibilities being granted to SHOPs, HHS estimates that for each
employer, an administrative assistant will need less than 5 minutes (at
rate of $34.76 per hour) to complete the required eligibility
determination. Under the new flexibilities, employers will also no
longer be required to create an account on an FF-SHOP website in order
to complete the eligibility determination or enroll in a SHOP QHP.
Therefore, HHS estimates that it will cost an employer approximately $3
to complete an eligibility determination. Assuming that 6,000 employers
will complete an eligibility determination, HHS estimates that the
total annual burden will be approximately 500 hours, with an estimated
total cost of $17,400. This will result in a net burden reduction of
11,500 hours and a net cost reduction of approximately $543,840
annually. Under Sec. 157.206(e)(1), employers will be responsible for
submitting a new eligibility determination or, submitting a notice of
withdrawal, in the event the group experienced a change that will
impact the group's eligibility to participate in a SHOP. Under Sec.
157.206(e)(2), employers will also be required to notify their QHP
issuer(s) of a determination of ineligibility. Finally, employers will
also, under Sec. 157.206(e)(3) be required to notify their issuers of
their intent to no longer participate in a SHOP. While these proposals
will require employers to communicate with issuers in ways they do not
under current SHOP enrollment practices, HHS does not anticipate that
these practices will increase the burden on employers as they, under
current practice, must notify the SHOP of changes in eligibility and
termination. Although the policy in Sec. 155.716 imposes an
information collection requirement, the information that will be
collected is no different from what is already approved under OMB
control number 0938-1193: Data Collection to Support Eligibility
Determinations and Enrollment for Small Businesses in the Small
Business Health Options, and therefore we are not revising the
information collection at this time.
Employees, under Sec. 155.716 will not experience an increase in
burden. Under the policies described throughout this final rule,
employees will no longer be required to visit an FF-SHOP website to
create an account, or, for any application or enrollment purpose, but
they may need to provide similar information to an agent or broker or
issuer as a condition of enrollment into a SHOP QHP. HHS previously
estimated that 60,000 employees will complete an application annually,
each spending approximately one hour to complete an online application
through an FF-SHOP website. The estimated annual burden was 60,000
hours with an annual cost of $1,025,400. With the finalized
flexibilities to a SHOP as described in this rule, HHS predicts that
the burden on employees to complete an online application will shift as
no application
[[Page 17040]]
will be provided through a SHOP website, but the information may be
required by an agent or broker or an issuer in order for the employee
to complete an enrollment into a SHOP QHP. The proposals described
throughout this final rule will allow agents and brokers and issuers to
enroll consumers in SHOP plans using the channels they are most
familiar with, potentially reducing the burden of enrolling SHOP
groups. This information collection is currently approved under OMB
control number 0938-1194: Data Collection to Support Eligibility
Determinations and Enrollment for Employees in the Small Business
Health Options Program. Therefore, we are not revising the information
collection at this time.
Sections 155.705, 155.715, 155.720, 155.725, require SHOPs to
generate certain notices. These notices may include: (1) Notices of
annual election periods; (2) notices to employers of employee coverage
terminations; (3) notices of application inconsistencies; (4) notices
of appeal rights and instructions; (5) notices of employee and employer
eligibility; (6) notices of employer withdrawal; (7) (in FF-SHOPs only)
notices to employees if a dependent turns 26 and is no longer eligible
for dependent coverage; (8) billing invoices, successful and
unsuccessful payment confirmation notices; and (9) past due payment
notices. In prior guidance, HHS previously estimated costs for paper
notices in an FF-SHOP. In that estimate, HHS assumed that 80 percent of
enrollees requested electronic notices and 20 percent of enrollees
requested paper notices. HHS estimated that mailing paper notices costs
a SHOP Exchange $0.53 per notice. HHS determined that SHOPs sent
approximately 48,000 notices to enrollees when--(1) A dependent became
ineligible to remain on the plan; (2) successful payment was processed;
and (3) a payment was unsuccessful in the last year. Assuming that 20
percent of enrollees will opt to receive paper notices instead of
electronic notifications, HHS estimated that approximately 9,600
notices will be sent, costing FF-SHOPs approximately $5,088. Under the
flexibilities being finalized, SHOPs will only be required to send
notices of employer eligibility and appeals. This cost will not
directly be transferred to issuers as issuers may already be required
to send such notices per other applicable State and Federal law. This
collection is currently approved under OMB control number 0938-1207:
Essential Health Benefits in Alternative Benefit Plans, Eligibility
Notices, Fair Hearing and Appeal Processes, and Premiums and Cost
Sharing; Exchanges: Eligibility and Enrollment. Issuers will be
required to collect premiums, as premium aggregation functions will no
longer be provided by the SHOPs that take advantage of the new
flexibilities. HHS does not anticipate a significant increase of
issuers' burden in this scenario, as it is not significantly different
from their current operating practices.
G. ICRs Regarding Essential Health Benefits (Sec. 156.111(e))
In the rule, we are finalizing at Sec. 156.111(e) to revise the
collection of data for selection of States' EHB-benchmark plans for
plan years beginning on or after January 1, 2020. This proposal
includes the documentation that States would be required to submit if
the State chooses to change its EHB-benchmark plan. For this purpose,
we are amending the currently approved information collection (OMB
Control Number: 0938-1174) to reflect the finalized policy in this
rule. Because Sec. 156.111(e) is replacing the current data collection
requirements at Sec. 156.120, we are updating the current EHB-
benchmark plan selection to account for the new regulation and any
associated burden with this requirement that falls on those States that
choose to reselect their EHB-benchmark plan. Under the previous
benchmark plan selection policy, 29 States selected one of the 10 base-
benchmark plan options and 22 States defaulted. The previous benchmark
plan policy did not allow for States to make an annual selection. The
regulation allows States the opportunity to modify their EHB-benchmark
plans annually. The regulation also does not require the State to
respond to this ICR for any year for which they did not change their
EHB-benchmark plan. As such, for purposes of the new EHB-benchmark plan
selection options finalized in this rule, we estimate that 10 States
would choose to make a change to their EHB-benchmark plans in any given
year (total of 30 States over 3 years within the authorization of this
ICR) and respond to this ICR.
To select a new EHB-benchmark plan, we require at Sec.
156.111(e)(1) that the State provide confirmation that the State's EHB-
benchmark plan selection complies with certain requirements, including
those under Sec. 156.111(a), (b), and (c). To complete this
requirement, we estimate that a financial examiner will require 4 hours
(at a rate of $66.04 per hour) to fill out, review, and transmit a
complete and accurate document. We estimate that it costs each State
$264 to meet this reporting requirement, with a total annual burden for
all 10 States of 40 hours and an associated total cost of $2,642.
Second, we require at Sec. 156.111(e)(2) that the State submit an
actuarial certification and associated actuarial report of the methods
and assumptions when selecting options under Sec. 156.111(a).
Specifically, we are finalizing at Sec. 156.111(b)(2)(i) and (ii) that
a State's EHB- benchmark plan must provide a scope of benefits equal
to, or greater than, to the extent any supplementation is required to
provide coverage within each EHB category at Sec. 156.110(a), the
scope of benefits provided under a typical employer plan, and that the
State's EHB-benchmark plan must not exceed the generosity of the most
generous among a set of comparison plans. The actuarial certification
that is being collected under this ICR is required to include an
actuarial report that complies with generally accepted actuarial
principles and methodologies. This estimate includes complying with all
applicable ASOPs. For example, ASOP 41 on actuarial communications
includes disclosure requirements, including those that apply to the
disclosure of information on the methods and assumptions being used and
ASOP 50 contains information on determining MV and AV. In accordance
with ASOP 41, we would expect that the actuarial report is based on a
data analysis that is reflective of an appropriate population. The
actuarial certification for this requirement is provided in a template
and includes an attestation that the standard actuarial practices have
been followed or that exceptions have been noted. The signing actuary
is required to be a Member of the American Academy of Actuaries.
We estimate that an actuary, who is a member of the American
Academy of Actuaries, requires 18 hours (at a rate of $80.82 per hour)
on average for Sec. 156.111(e)(2). This includes the certification and
associated actuarial report from an actuary to affirm, in accordance
with generally accepted actuarial principles and methodologies, that
the State's EHB-benchmark plan provides a scope of benefits that is
equal to, or greater than, to the extent any supplementation is
required to provide coverage within an EHB category at Sec.
156.110(a), the scope of benefits provided under a typical employer
plan, and that the State's EHB-benchmark plan definition does not
exceed the generosity of the most generous among the set of comparison
plans. We are also finalizing a document entitled Example
[[Page 17041]]
of an Acceptable Methodology for Comparing Benefits of a State's EHB-
benchmark Plan Selection in Accordance with 45 CFR 156.111(b)(2)(i) and
(ii) \103\ that provides an example of a method an actuary could use to
develop the actuarial certification and associated report at Sec.
156.111(e)(2) for both the typical employer plan and comparison plan
standards.
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\103\ Example of an Acceptable Methodology for Comparing
Benefits of a State's EHB-benchmark Plan Selection in Accordance
with 45 CFR 156.111(b)(2)(i) and (ii) is available at https://www.cms.gov/cciio/resources/regulations-and-guidance/index.html.
---------------------------------------------------------------------------
For these calculations, the actuary needs to conduct the
appropriate calculations to create and review an actuarial
certification and associated actuarial report, including minimal time
required for recordkeeping. The precise level of effort for the
actuarial certification and associated actuarial report under Sec.
156.111(e)(2) will likely vary depending on the State's approach to its
EHB-benchmark plan and this certification requirement. For example, as
described in the Example of an Acceptable Methodology for Comparing
Benefits of a State's EHB-benchmark Plan Selection in Accordance with
45 CFR 156.111(b)(2)(i) and (ii), to reduce the burden of these
standards, the actuary may want to consider using the same plan for
both the generosity and the typicality tests, provided that the plan
meets the standards at both Sec. 156.111(b)(2)(i) and (ii). For
example, the actuary may only need to do one plan comparison for the
purposes of both of these certification requirements. Specifically, the
actuary could use the same plan, such as the State's EHB-benchmark plan
used for the 2017 plan year. That plan would, by definition, be a
``Comparison Plan.'' Because the State's EHB-benchmark plan used for
the 2017 plan year would simply be one of the State's base-benchmark
plans, supplemented as necessary under Sec. 156.110, that plan also
could be used for purposes of determining typicality, as a proposed
State EHB-benchmark plan that was equal in scope of benefits to the
State's EHB-benchmark plan used for the 2017 plan year within each EHB
category at Sec. 156.110(a) would be equal to or greater in scope of
benefits within each EHB category at Sec. 156.110(a) than the base-
benchmark plan underlying the EHB-benchmark plan used for the 2017 plan
year, to the extent of the required supplementation. We estimate that a
financial examiner will require 1 hour (at a rate of $66.04 per hour)
to review, combine, and electronically transmit these documents to HHS,
as part of a State's EHB-benchmark plan submission.
We increased the estimated burden hours from 16 hours to 18 hours
for the actuary to complete the actuarial certification and associated
report in recognition of the extension of the generosity standard and
in recognition that the definition of typical employer plan may require
the actuary to determine whether the typical employer plan meets MV
requirements. We are also increasing the estimated number of States
that need to respond to this section of the ICR from 7 to 10 since the
typical employer plan standard and the generosity standard applies to
all State's EHB-benchmark plan options at Sec. 156.111(a). We estimate
that each State incurs a burden of 19 hours with an associated cost of
$1,520.80 with a total annual burden for 10 States of 190 hours at
associated total cost of $15,208. We did not receive comments on this
specific estimate.
Third, we require at Sec. 156.111(e)(3) each State to submit its
proposed EHB-benchmark plan documents. The level of effort associated
with this requirement will depend on the State's selection of the EHB-
benchmark plan options under the regulation at Sec. 156.111(a).
However, for the purposes of this estimate, we estimate that it
requires a financial examiner (at a rate of $66.04 per hour) 12 hours
on average to create, review, and electronically transmit the State's
EHB-benchmark plan document that accurately reflects the benefits and
limitations, including medical management requirements and a schedule
of benefits, resulting in a burden of 12 hours and an associated cost
of $792, with a total annual burden for all 10 States of 120 hours and
an associated cost of $7,925. The burden for producing these documents
is significantly higher than previous estimates because the previous
data collection generally only required the State (or issuer) to
transmit the selected benchmark plan document. In contrast, in some
cases, the Sec. 156.111(a) may result in the State needing to create a
completely new document or significantly modify the current document to
represent the plan document. Additionally, this estimate of 12 hours
also includes the burden necessary for a State selecting the option at
Sec. 156.111(e)(3) where the State is required to submit a formulary
drug list for the State's EHB-benchmark plan in a format and manner
specified by HHS. Specifically, the burden for the State selecting this
option is also likely to vary as the State could use an existing
formulary drug list or create its own formulary drug list separately
for this purpose. To collect the formulary drug list, the State is
required to use the template provided by HHS and submit the formulary
drug list as a list of RxNorm Concept Unique Identifiers (RxCUIs).
Section 156.111(e)(4) requires the State to submit the
documentation necessary to operationalize the State's EHB-benchmark
plan. This reporting requirement includes the EHB summary file that is
currently posted on CCIIO's website, used as part of the QHP
certification process, and integrated into HHS's IT Build systems that
feed into the data that is displayed on HealthCare.gov. While this
document is not a new document, the burden associated with this
document is new for States. We estimate that it requires a financial
examiner 12 hours, on average, (at a rate of $66.04 per hour) to
create, review, and electronically submit a complete and accurate
document to HHS resulting in a burden of 12 hours and an associated
cost of $792, with a total annual burden for all 10 States of 120 hours
and an associated cost of $7,925.
Under the previous policy, the burden estimates 226 respondents per
year, for a total yearly burden total of 165 annual burden hours and a
total annual associated cost of $8,094 to meet these reporting
requirements. Under the new policy related to EHB, we estimate that the
total number of respondents will be 10 per year, for a total yearly
burden of 470 hours and an associated cost of $33,699 to meet these
reporting requirements. The estimated burden associated with the
changes represents an increase of 305 hours (increase from 165 hours to
470 hours) and an annual costs increase of $25,605 (from $8,094 to
$33,699) over the previously approved information collection (OMB
Control Number: 0938-1174).
As part of the update to this OMB control number: 0938-1174, we
also sought comment on requirements for SADPs to submit voluntary
reporting. This collection includes data on whether the issuer intends
to offer SADP coverage, the anticipated Exchange market in which
coverage will be offered, and the State and service area in which the
issuer offers coverage. The burden associated with meeting this
requirement includes the time and effort needed by the issuer to report
on whether it intends to offer SADP coverage. We estimate that it will
take one half hour for a health insurance issuer to meet this reporting
requirement. We estimate that approximately 175 issuers will respond to
this data collection. Therefore, we anticipate that the reporting
[[Page 17042]]
requirement will require a market research analyst one half-hour
annually to identify and submit the responsive records to HHS (at a
rate of $67.90 per hour), for a total cost of $34 a year per reporting
entity. This will result in an annual burden of 87.5 hours for all 175
issuers and a resulting estimated annual cost of $5,941. OMB approvals
are issued for 3 years; therefore, the aggregate burden for 3 years
will be approximately 263 hours with an associated cost of
approximately $17,824. We did not receive comments on these estimates.
Lastly, as part of the update to this OMB control number: 0938-
1174, we are adding an information collection request to this ICR to
account for the finalized policy at Sec. 156.115(b)(2)(ii) that allows
the State the option to notify HHS that the State will allow
substitution between EHB categories of benefits, beginning with the
2020 plan year. Specifically, Sec. 156.115(b)(2)(ii) will allow
issuers to substitute benefits only when the State in which the plan
will be offered permits such substitution and notifies HHS of its
decision to allow substitution between categories. We anticipate that
States will notify HHS through the same means the States will notify
HHS of an updated EHB-benchmark plan selection under Sec. 156.111 and
we intend to provide a preformatted response for States to use to
provide the notification to HHS. To provide notification under Sec.
156.115(b)(2)(ii), we estimate that it will require a financial
examiner \1/2\ hour, on average, (at a rate of $66.04 per hour) to
review and electronically submit a notification to HHS. Furthermore, we
estimate that at most 5 States will want to allow the flexibility for
their issuers to substitute between categories under Sec.
156.115(b)(2)(ii). While this aspect of the ICR is not subject to the
PRA because we estimate that no more than 5 States will be affected
annually, we nonetheless provide a total annual burden estimate for
Sec. 156.115(b)(2)(ii), which is 2.5 hours and a total associated cost
of $165.
H. ICRs Regarding Medical Loss Ratio (Sec. Sec. 158.170, 158.221,
158.320-323, 158.340, 158.346, and 158.350)
We are amending Sec. 158.221 to allow issuers the option to report
quality improvement activity expenses as a single fixed percentage of
premium amount beginning with the 2017 MLR reporting year (that is, for
reports filed by July 31, 2018), and making conforming amendments to
Sec. 158.170. We do not anticipate that implementing this provision
will require significant changes to the MLR annual reporting form and
the associated burden. In addition, while we are not making changes to
Sec. 158.162, pursuant to public comments, we intend to make a change
to the MLR annual reporting form in order to collect the information on
issuers' employment taxes separately from other taxes. We do not
anticipate that implementing this provision will significantly change
the reporting burden either, as issuers already include this
information on the reporting form, and would simply have to include it
on a different line on the form. The burden related to this collection
is currently approved under OMB control number 0938-1164; Medical Loss
Ratio Annual Reports, MLR Notices, and Recordkeeping Requirements.
We are also amending subpart C to modify the data and narratives
which a State must submit as part of the State's request for an
adjustment to the MLR standard in the individual market for that State.
There is no standardized application form associated with a State's
request, but each request must contain certain data elements in order
to receive consideration by the Secretary, which are described in
Sec. Sec. 158.320-158.323, 158.340, 158.346, and 158.350. The burden
related to the proposed requirements was previously approved under OMB
control number 0938-1114, Medical Loss Ratio (IFR) Information
Collection Requirements and Supporting Regulations; the approval
expired in 2014. We intend to reinstate this information collection,
with modifications to reflect our finalized revisions to subpart C of
part 158. The proposed rule (82 FR 51052), published on November 2,
2017, served as the 60-day notice to afford the public an opportunity
to comment on this collection of information requirement.
We are eliminating collection of the following information from a
State requesting an adjustment: The State MLR standard and formula for
assessing compliance (Sec. 158.321(a)), its market withdrawal
requirements (Sec. 158.321(b)), and the mechanisms available to the
State to provide consumers with options for alternate coverage (Sec.
158.321(c)); as well as the net underwriting profit for the total
business in the State and the after-tax profit and profit margin for
the individual market and total business in the State (Sec.
158.321(d)(2)(vii)), and the estimated rebate (Sec. 158.321(d)(2)(v))
of each issuer with at least 1,000 enrollees in the State. We expect
these amendments to reduce the burden on States seeking an adjustment.
We are also replacing the requirement that a State requesting an
adjustment must submit enrollment and premium data for every individual
market issuer at the product level (Sec. 158.321(d)(1)) and the
reported and estimated MLRs (Sec. 158.321(d)(2)(ii) and (iii)) for
issuers with at least 1,000 enrollees, with total enrollment (life-
years and covered lives), premium, and total incurred claims for only
active individual market issuers, separately for five types of
individual market coverage: On-Exchange plans, off-Exchange plans,
grandfathered health plans as defined in Sec. 147.140, coverage that
meets the criteria for transitional policies outlined in applicable
guidance, and non-grandfathered single risk pool coverage. States will
not be required to provide information on student health insurance
coverage as defined in Sec. 147.145 or excepted benefits as defined in
Sec. 148.220. We expect these amendments to result in a net reduction
in burden on States seeking an adjustment. We will continue to collect
data on total agents' and broker's commission expenses and net
underwriting gain (proposed to be redesignated from Sec.
158.321(d)(2)(iv) and (vi) to Sec. 158.321(a)(3) and (4),
respectively) for only active individual market issuers, but separately
for the five types of coverage described above. We will also continue
to collect information on risk-based capital levels (proposed to be
redesignated from Sec. 158.321(d)(2)(viii) to Sec. 158.321(a)(5)) at
the issuer level. While the amendments will require more breakdown of
the data than Sec. 158.321 previously required, in most States there
are more issuers with at least 1,000 enrollees than there are active
issuers in the individual market, and consequently we expect that these
amendments will have no net impact on the burden. Additionally, we are
updating Sec. 158.321(d)(2)(ix) to collect more specific information
on issuer notices to the State of changes to participation in the
State's individual market, rather than focusing exclusively on notices
to exit the individual market. We do not expect this amendment to have
an appreciable impact on the burden. We are further eliminating the
requirement that a State requesting an adjustment provide information
explaining and justifying how its proposed adjustment was determined
and estimating rebates that would be paid with and without an
adjustment (Sec. 158.322(a), (c), and (d)); as well as replacing what
information a State must provide pursuant to Sec. 158.322(b) with a
requirement to explain how the adjustment would help stabilize the
State's individual market. We expect these amendments to reduce the
burden. Lastly, we have updated what information a State must submit
with a
[[Page 17043]]
subsequent request for adjustment pursuant to Sec. 158.350. We do not
expect this amendment to change the burden.
Based on preliminary data analysis and previous State requests for
adjustments, we estimate that approximately 22 States will submit
applications in the first year. We estimate that it will take
approximately 140 hours on average for each State to complete the
application, including gathering and analyzing data, synthesizing
information, and developing a proposal for an adjusted MLR standard.
Specifically, we assume that the application will take a financial
analyst approximately 96 hours (at a rate of $68.78 per hour), an
actuary 6 hours (at a rate of $80.82 per hour), a financial manager 10
hours (at a rate of $91.66 per hour), a lawyer 24 hours (at a rate of
$89.74 per hour), and the insurance commissioner 4 hours (at a rate of
$116.90 per hour) to assemble and review the various components of the
application, resulting in a total burden for each State of 140 hours
with an associated cost of $10,626 per response, representing an
estimated total burden reduction of 45 hours per response. The
documents will be submitted electronically at minimal cost. We estimate
that the total burden for 22 States to submit a request for an
adjustment to the individual market MLR standard will be 3,080 hours
with an associated cost of approximately $233,767, with an estimated
net total reduction in burden of 620 hours. We recognize that this
burden may vary between States, as some States may have better access
to the required application information elements, while other States
may have to seek some of the required information from health insurance
issuers in their States, which could increase their burden. Some States
may, if providing the requested information is an undue burden, ask the
Secretary to consider their application without some of the information
elements. We received a few comments that generally questioned whether
the burden on States related to the information collection requirements
prior to the finalized amendments may have been overstated, but that
did not specify the basis for such concerns and did not relate to the
estimates for the revised information collection requirements. We also
received one comment that agreed with the estimates for the revised
information collection.
I. Summary of Annual Burden Estimates for Final Requirements
Table 12--Final Annual Recordkeeping and Reporting Requirements
--------------------------------------------------------------------------------------------------------------------------------------------------------
Burden per
Regulation section(s) OMB control Respondents Responses response Total annual Labor cost of Total cost ($)
No. (hours) burden (hours) reporting ($)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Sec. 153.320.......................... 0938-1155 25 25 60 1,500 $121,880.00 $121,880.00
Sec. 153.630(b)(6).................... 0938-1155 70 2,800 1 2,800 432,194.00 432,194.00
Sec. 156.111(e)(1).................... 0938-1174 * 10 10 4 40 2,641.60 2,641.60
Sec. 156.111(e)(2).................... 0938-1174 * 10 10 19 190 15,208.00 15,208.00
Sec. 156.111(e)(3).................... 0938-1174 * 10 10 12 120 7,924.80 7,924.80
Sec. 156.111(e)(4).................... 0938-1174 * 10 10 12 120 7,924.80 7,924.80
Sec. 156.115(b)(2)(ii)................ 0938-1174 * 5 5 0.5 2.5 165.10 165.10
Sec. 156.150.......................... 0938-1174 175 175 0.5 87.5 5,941.25 5,941.25
Sec. Sec. 158.320-323, 158.340, 0938-1114 22 22 140 3,080 233,766.72 233,766.72
158.346-350............................
---------------------------------------------------------------------------------------------------------------
Total............................... .............. 302 3,067 .............. 7,940 827,646.27 827,646.27
--------------------------------------------------------------------------------------------------------------------------------------------------------
* Denote the same entities. For purposes of calculating the total, the value is used only once.
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 12.
J. Submission of PRA-Related Comments
We have submitted a copy of this final rule to OMB for its review
of the rule's information collection and recordkeeping requirements.
These requirements are not effective until they have been approved by
the OMB.
To obtain copies of the supporting statement and any related forms
for the final collections discussed above, please visit CMS's website
at www.cms.hhs.gov/PaperworkReductionActof1995, or call the Reports
Clearance Office at 410-786-1326.
We invite public comments on these information collection
requirements. If you wish to comment, please submit your comments
electronically as specified in the ADDRESSES section of this final rule
and identify the rule (CMS-9930-F), the ICR's CFR citation, CMS ID
number, and OMB control number.
ICR-related comments are due May 17, 2018.
V. Regulatory Impact Analysis
A. Statement of Need
This rule finalizes standards related to the risk adjustment
program for the 2019 benefit year, as well as certain modifications
that will promote State flexibility and control over their insurance
markets, reduce burden on stakeholders, and protect consumers from
increases in premiums due to issuer uncertainty. The Premium
Stabilization Rule and previous Payment Notices provided detail on the
implementation of the risk adjustment program, including the specific
parameters applicable for the 2014, 2015, 2016, 2017, and 2018 benefit
years. This rule finalizes additional standards related to EHBs; cost-
sharing parameters; QHP certification; the Exchanges, including
terminations, exemptions, eligibility and enrollment; AV for stand-
alone dental plans; MEC; the rate review program; the medical loss
ratio program; the Small Business Health Options Program; and FFE and
SBE-FP user fees.
B. Overall Impact
We have examined the impacts of this rule as required by Executive
Order 12866 on Regulatory Planning and Review (September 30, 1993),
Executive Order 13563 on Improving Regulation and Regulatory Review
(January 18, 2011), the Regulatory Flexibility Act (RFA) (September 19,
1980, Pub. L. 96-354), section 202 of the Unfunded Mandates Reform Act
of 1995 (March 22, 1995, Pub. L. 104-4), Executive Order 13132 on
Federalism (August 4, 1999), and the Congressional Review Act (5 U.S.C.
804(2)), and Executive Order 13771 on Reducing Regulation and
Controlling Regulatory Costs (January 30, 2017).
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
[[Page 17044]]
(including potential economic, environmental, public health and safety
effects, distributive impacts, and equity). Executive Order 13563
emphasizes the importance of quantifying both costs and benefits, of
reducing costs, of harmonizing rules, and of promoting flexibility. A
regulatory impact analysis (RIA) must be prepared for rules with
economically significant effects ($100 million or more in any 1 year).
OMB has determined that this final 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 final rule.
Section 3(f) of Executive Order 12866 defines a ``significant
regulatory action'' as an action that is likely to result in a rule--
(1) Having an annual effect on the economy of $100 million or more in
any 1 year, or adversely and materially affecting a sector of the
economy, productivity, competition, jobs, the environment, public
health or safety, or State, local or tribal governments or communities
(also referred to as ``economically significant''); (2) creating a
serious inconsistency or otherwise interfering with an action taken or
planned by another agency; (3) materially altering the budgetary
impacts of entitlement grants, user fees, or loan programs or the
rights and obligations of recipients thereof; or (4) raising novel
legal or policy issues arising out of legal mandates, the President's
priorities, or the principles set forth in the Executive Order. A
regulatory impact analysis (RIA) must be prepared for major rules with
economically significant effects ($100 million or more in any 1 year),
and a ``significant'' regulatory action is subject to review by OMB.
HHS has concluded that this rule is likely to have economic impacts of
$100 million or more in at least 1 year, and therefore, meets the
definition of ``significant rule'' under Executive Order 12866.
Therefore, HHS has provided an assessment of the potential costs,
benefits, and transfers associated with this rule.
The provisions in this final rule aim to improve the health and
stability of the Exchanges, and to provide States with additional
flexibility and control over their insurance markets. They will reduce
regulatory burden, and reduce administrative costs for issuers and
States, and will lower net premiums for consumers. Through the
reduction in financial uncertainty for issuers and increased
affordability for consumers, these provisions are expected to increase
access to affordable health coverage. Although there is some
uncertainty regarding the net effect on enrollment and premiums, we
anticipate that the provisions of this final rule will help further
HHS's goal of ensuring that all consumers have access to quality,
affordable health care; that markets are stable; and that Exchanges
operate smoothly.
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 PPACA is to make affordable health insurance available
to individuals who do not have access to affordable employer-sponsored
coverage or government-sponsored coverage. The provisions within this
final 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 2019.
HHS anticipates that the provisions of this final rule will help
further the Department's goal of ensuring that all consumers have
access to quality and affordable health care and are able to make
informed choices, that Exchanges operate smoothly, that the risk
adjustment program works as intended, and that States have more control
and flexibility over EHBs, QHP certification and the operation and
establishment of Exchanges. Affected entities such as QHP issuers will
incur costs to comply with the proposed provisions, for example, those
related to the functions of a SHOP; including calculating the minimum
participation rate at the employer level and processing SHOP
enrollments for employers and employees; and States will incur costs if
they select a new EHB-benchmark plan under the new regulations. In
accordance with Executive Order 12866, HHS believes that the benefits
of this regulatory action justify the costs.
C. Impact Estimates of the Payment Notice Provisions and Accounting
Table
In accordance with OMB Circular A-4, Table 13 depicts an accounting
statement summarizing HHS's assessment of the benefits, costs, and
transfers associated with this regulatory action.
This final rule implements standards for programs that will have
numerous effects, including providing consumers with access to
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 final rule--such as any reduction in burden
related to changes in the timing related to State deadlines for
submission of rate filings from issuers that only offer non-QHPs;
increased flexibility for Exchanges related to the removal of certain
requirements for Navigator programs and non-Navigator assistance
personnel entities; increased access to the direct enrollment pathway
stemming from permitting a third-party entity to conduct operational
readiness reviews for agents, brokers, and issuers; benefits to
Exchanges related to proposed simplifications of verification
requirements; benefits to consumers, issuers or Exchanges related to
the changes related to the special enrollment periods; increased
flexibility for States relating to the proposals regarding the SHOP
enrollment process; and potential decreases in premiums to consumers
related to removing actuarial value standards for SADPs--and certain
costs--such as the costs incurred by small employers, agents and
brokers, and potential increases in out-of-pocket costs to consumers
related to removing actuarial value standards for SADPs; and costs to
issuers, brokers, agents, and employers related to changes in SHOP
enrollment procedures. The effects in Table 13 reflect qualitative
impacts and estimated direct monetary costs and transfers resulting
from the provisions of this final rule for health insurance issuers.
The annualized monetized costs described in Table 13 reflect direct
administrative costs to health insurance issuers as a result of the
finalized provisions, and include administrative costs associated with
States requesting a reduction in risk adjustment transfers for the
State's individual, small group or merged market, the reduction in
costs relating to issuers and States having to no longer submit rate
increases for student health insurance plans to HHS, and costs
associated with States seeking an adjustment to the MLR standard in the
State's individual market that are estimated in the Collection of
Information section of this final rule. The annual monetized transfers
described in Table 13 include costs associated with SBE-FP user fees,
the risk adjustment user fee paid to HHS by issuers, and reductions in
rebate payments from issuers to consumers related to QIA and MLR
adjustments. We are finalizing a risk adjustment user fee to collect
$1.80 per enrollee per year from risk adjustment issuers to operate the
risk adjustment program on behalf of States, which we expect to cost
[[Page 17045]]
approximately $40 million, similar to the $40 million in contract costs
expected for benefit year 2018 when we established a $1.68 per-
enrollee-per-year risk adjustment user fee rate. As in 2018, the risk
adjustment user fee contract costs for 2019 include additional costs
for risk adjustment data validation; however, we expect reduced costs
related to issuer outreach and education as issuers gain familiarity
with the risk adjustment program, and lower enrollment in risk
adjustment covered QHPs, and additional costs to include administrative
and personnel costs related to the risk adjustment program that were
inadvertently excluded in prior years' cost estimation, which together
results in a slightly higher risk adjustment user fee rate than the
benefit year 2018 rate. As we generally expect similar risk adjustment
user fee costs as the 2018 benefit year, there are no changes to the
risk adjustment user fee transfers to include in Table 13. Also, we
expect a decrease in FFE user fee collections necessary as we estimate
lower contract costs due to streamlining of FFE operations and an
increase in premiums but also lower enrollment, resulting in a proposed
user fee rate of 3.5 percent for 2019, which is the same as the FFE
user fee rate established for 2014 through 2018 benefit years. However,
the decrease in user fee collections required to support FFE functions
for the 2019 benefit year will be similar to the updated costs for the
2018 benefit year, and the user fee rate will yield the same amount of
transfers from FFE issuers to the Federal government as in the prior
benefit year. Therefore, there are no changes to the FFE user fee
transfers to include in Table 13. We also proposed an SBE-FP user fee
rate to be set at 3.0 percent for benefit year 2019, which is higher
than the 2.0 percent SBE-FP user fee rate we finalized for the 2018
benefit year. In this rule, we also finalized a proposal to cease
charging user fees on SHOP issuers offering plans through an FFE or
SBE-FP starting for plan years beginning on and after January 1, 2018.
Table 13--Accounting Table
------------------------------------------------------------------------
-------------------------------------------------------------------------
Benefits:
------------------------------------------------------------------------
Qualitative:
Greater market stability resulting from improvements to the
risk adjustment methodology.
Potential increased enrollment in the individual market
stemming from lower premiums, 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.\a\
More informed Exchange QHP certification decisions.
Increased coverage options for small businesses and
employees with less adverse selection.
Cost savings to consumers and issuers due to reduced
administrative costs for issuers.
Potential decreases in premiums associated with States
opting to select a new EHB-benchmark plan.
Reduced burden to Exchanges, due to the removal of the
requirements that each Exchange must have at least two Navigator
entities, and that one of these entities must be a community and
consumer-focused nonprofit group, and the removal of the
requirement that each Navigator (and each non-Navigator entity
subject to Sec. 155.215) maintain a physical presence in the
Exchange service area.
Reduced costs and burden and increased flexibility to
agents and brokers performing direct enrollment and their third-
party auditors due to the removal of the requirement to obtain HHS
approval to perform reviews.
Reduction in administrative costs to issuers due to the
removal of the meaningful difference standard, and final changes to
the SHOPs.
------------------------------------------------------------------------
Estimate Discount rate
Costs: (million) Year dollar (percent) Period covered
----------------------------------------------------------------------------------------------------------------
Annualized Monetized ($/year)................... -$26.71 2016 7 2018-2022
---------------------------------------------------------------
-25.54 2016 3 2018-2022
----------------------------------------------------------------------------------------------------------------
Quantitative:
Costs incurred by issuers and States to comply with provisions in the final rule as detailed in the
Collection of Information Requirements section, taking into account the reduction in burden and costs for
issuers and States due to the elimination of the requirement to submit rate reviews to HHS for student
health insurance coverage \b\ and increase in the rate review threshold and the reduction in burden and
costs to States related to the requests for adjustment to the MLR standard in their individual markets.....
Reduction in costs to issuers due to changes to the requirements for risk adjustment data
validation.................................................................................................
Reduction in potential costs to Exchanges since they will no longer be required to conduct sampling
as a verification process for eligibility for employer-based insurance starting plan year 2018, and can
instead conduct an alternate process through plan year 2019................................................
Costs incurred by Exchanges to implement new verification requirements for income inconsistencies..
Regulatory familiarization costs...................................................................
----------------------------------------------------------------------------------------------------------------
Qualitative:
Costs due to increases in providing medical services (if health insurance enrollment increases)....
Costs to issuers of redesigning SADPs to account for the removal of actuarial value standards for
SADPs......................................................................................................
Potential increases in out of pocket costs associated with States opting to select a new EHB-
benchmark plan.............................................................................................
Potential increases in out of pocket costs and loss of benefits and services associated with
substitution between EHB categories.\c\....................................................................
Potential increase in consumer burden related to plan comparisons in those States allowing
substitution between EHB categories........................................................................
----------------------------------------------------------------------------------------------------------------
Transfers: Estimate Year Discount rate Period
(million) dollar (percent) covered
----------------------------------------------------------------------------------------------------------------
Federal Annualized Monetized ($/year)........... $17.8 2017 7 2018-2022
---------------------------------------------------------------
18.6 2017 3 2018-2022
----------------------------------------------------------------------------------------------------------------
Other Annualized Monetized ($/year)............. 87 2017 7 2018-2022
---------------------------------------------------------------
87 2017 3 2018-2022
----------------------------------------------------------------------------------------------------------------
[[Page 17046]]
Quantitative:
Transfer from health insurance issuers to the Federal government of $40 million as risk adjustment
user fees for 2022 (the same amount as previously estimated for 2018-2021).................................
Increased transfers from SBE-FP issuers to the Federal government of $20 million due to increase in
user fee rate from 2.0 set in 2018 to 3.0 percent final for 2019...........................................
Decrease in user fee transfers from SHOP issuers offering plans through an FF-SHOP or SBE-FP for
SHOP to the Federal government of approximately $6 million in 2019.........................................
Reduced transfers to consumers from health insurance issuers in the form of rebates of $75 million
to $87 million due to final amendments to the medical loss ratio requirements.\d\..........................
----------------------------------------------------------------------------------------------------------------
Qualitative:
Lower premium rates in the individual market due to the improved risk profile of the insured,
competition, and pooling...................................................................................
A decrease in the premiums and risk adjustment transfers in the individual, small group or merged
markets as a result of potential State requests to reduce risk adjustment transfers for the State's
individual, small group or merged market...................................................................
Potential increases in premiums associated with adjustments to MLR.................................
Potential decreases in premiums associated with removal of AV standards for SADPs..................
Potential increases in out of pocket costs associated with removal of AV standards for SADPs.......
----------------------------------------------------------------------------------------------------------------
\a\ Removal of AV standards for SADPs may reduce enrollment due to reductions in coverage and potential higher
out-of-pocket costs.
\b\ The reduction in burden and costs associated with student health insurance could result in lower premiums.
\c\ Some consumers may experience an increase in services and benefits. The net result is uncertain.
\d\ For the purpose of calculating total transfers, the upper bound was used.
This RIA expands upon the impact analyses of previous rules and
utilizes the Congressional Budget Office's (CBO) analysis of the
PPACA's impact on Federal spending, revenue collection, and insurance
enrollment. The PPACA transitional reinsurance program and temporary
risk corridors program end after the benefit year 2016. Therefore, the
costs associated with those programs are not included in Tables 14 or
15 for fiscal years 2019-2022. Table 14 summarizes the effects of the
risk adjustment program on the Federal budget from fiscal years 2018
through 2022, with the additional, societal effects of this final rule
discussed in this RIA. We do not expect the provisions of this final
rule to significantly alter CBO's estimates of the budget impact of the
premium stabilization programs that are described in Table 14. We note
that transfers associated with the risk adjustment program were
previously estimated in the Premium Stabilization Rule; therefore, to
avoid double-counting, we do not include them in the accounting
statement for this final rule (Table 13).
In addition to utilizing CBO projections, HHS conducted an internal
analysis of the effects of its regulations on enrollment and premiums.
Based on these internal analyses, we anticipate that the quantitative
effects of the provisions proposed in this rule are consistent with our
previous estimates in the 2018 Payment Notice for the impacts
associated with the APTC, the premium stabilization programs, and FFE
user fee requirements.
Table 14--Estimated Federal Government Outlays and Receipts for the Risk Adjustment, Reinsurance, and Risk
Corridors Programs From Fiscal Year 2018-2022
[In billions of dollars]
----------------------------------------------------------------------------------------------------------------
Year 2018 2019 2020 2021 2022 2018-2022
----------------------------------------------------------------------------------------------------------------
Risk Adjustment, Reinsurance, and Risk 5 5 5 6 6 27
Corridors Program Payments.............
Risk Adjustment, Reinsurance, and Risk 5 5 6 6 6 28
Corridors Program Collections *........
----------------------------------------------------------------------------------------------------------------
Note 1: Risk adjustment program payments and receipts lag by one quarter. Receipt will fully offset payments
over time.
Note 2: The CBO score reflects an additional $1 million in payments in FY 2018 that are collected in prior
fiscal years. CBO does not expect a shortfall in these programs.
Source: Congressional Budget Office. Federal Subsidies for Health Insurance Coverage for People Under Age 65:
2017 to 2027 Table 2. September 2017. Available at https://www.cbo.gov/system/files/115th-congress-2017-2018/reports/53091-fshic.pdf.
1. Risk Adjustment
The risk adjustment program is a permanent program created by the
PPACA that transfers funds from lower risk, non-grandfathered plans to
higher risk, non-grandfathered plans in the individual and small group
markets, inside and outside the Exchanges. We established standards for
the administration of the risk adjustment program, in subparts D and G
of part 153 in Title 45 of the CFR.
A State approved or conditionally approved by the Secretary to
operate an Exchange may establish a risk adjustment program, or have
HHS do so on its behalf. As described in the 2014 through 2018 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 2019 benefit year, we estimate that the total cost for HHS to
operate the risk adjustment program on behalf of States for 2019 will
be approximately $40 million, and that the risk adjustment user fee
would be approximately $1.80 per enrollee per year. This user fee
reflects costs to support the risk adjustment data validation process
in 2019, lower costs related to risk adjustment issuer outreach and
education and lower enrollment in risk adjustment covered QHPs, and
includes administrative and personnel cost related to the risk
adjustment program, resulting in a slightly higher user fee rate for
2019 than the 2018 benefit year rate.
We believe that the approach of blending the coefficients
calculated from the 2016 benefit year enrollee-level EDGE data with
2014 and 2015 MarketScan[supreg] data finalized in this rule will
provide stability within the risk adjustment program and minimize
volatility in changes to risk scores from the 2018 benefit year to the
2019 benefit
[[Page 17047]]
year due to differences in the datasets' underlying populations.
We are finalizing the provision for States to request a reduction
in risk adjustment transfers in the individual, small group or merged
market. We expect this policy will reduce transfers proportional to the
percent by which the States seek to reduce the transfers to account for
State-specific market rules or relevant factors without the necessity
for States to undertake operation of their own risk adjustment program.
However, because the risk adjustment program is budget neutral, any
State decision to request a reduction in the risk adjustment transfers
will have no net impact on risk adjustment transfers.
2. Risk Adjustment Data Validation
We are finalizing several changes to the requirements for risk
adjustment data validation that overall would reduce regulatory burden
and costs for issuers of risk adjustment covered plans. HHS believes
that adjusting issuers' risk adjustment risk scores only when an
issuer's failure rate for a group of HCCs is statistically different
from the weighted mean failure rate for that group of HCCs for all
issuers that submitted initial validation audits will help market
stability by increasing issuers' ability to predict risk adjustment
transfers and liquidity needs. We anticipate that many issuers required
to participate in risk adjustment data validation will not have their
risk scores adjusted, based on our analysis of error rates in the
Medicare risk adjustment data validation program.
We anticipate that the post-transfer adjustment of risk adjustment
transfers for issuers that exited a State market will result in
transfer adjustments for a small subset of issuers that previously
would not have had their transfers adjusted, but HHS does not expect
this policy to increase burden for these issuers, especially in light
of the revised payment adjustments for error rates policy finalized in
this rule.
HHS estimates that not requiring issuers that have 500 or fewer
billable member months Statewide to conduct an initial validation audit
beginning in the 2017 benefit year will reduce the administrative
burden and costs on those issuers. The reduction in burden and costs
related to this ICR has been discussed previously in the Collection of
Information Requirements section.
Under the change to the sampling methodology finalized in this
rule, issuers that were the sole issuer in a risk pool will still need
to provide a sample for data validation, but the sample will not
include enrollees from the risk pool where they were the sole issuer.
Therefore, this change will not have a significant impact on costs or
burden for affected issuers.
We are finalizing an amendment to Sec. 153.630(b)(6) to state that
a qualified provider licensed to diagnose mental illness that is
prohibited by State privacy laws from furnishing a complete medical
record for data validation may furnish a signed mental or behavioral
health assessment that providers routinely prepare along with the
required attestation. For risk adjustment data validation purposes, a
mental or behavioral health assessment should, to the extent
permissible under applicable State and Federal privacy laws, contain:
(i) The enrollee's name; (ii) sex; (iii) date of birth; (iv) current
status of all mental or behavioral health diagnoses; and (v) dates of
service. The burden associated with this requirement has been discussed
previously in the Collection of Information Requirements section.
We are finalizing an amendment to Sec. 153.630(b)(9) to state
that, if an issuer of a risk adjustment covered plan (1) fails to
engage an initial validation auditor; (2) fails to submit the results
of an initial validation audit to HHS; (3) engages in misconduct or
substantial non-compliance with the risk adjustment data validation
standards and requirements applicable to issuers of risk adjustment
covered plans; or (4) intentionally or recklessly misrepresents or
falsifies information that it furnishes to HHS, HHS may impose CMPs in
accordance with the procedures set forth in Sec. 156.805(b) through
(e). Because risk adjustment data validation has thus far operated as a
pilot program, we cannot estimate the number of issuers that will be
subject to CMPs. However, we do not expect that a significant number of
issuers will engage in the extreme misconduct required to warrant a CMP
under this amended regulation.
3. Rate Review
We are amending Sec. 154.103 to exclude student health insurance
coverage effective on or after July 1, 2018 from the Federal rate
review requirements. This will reduce burden related to rate review
submission and review for issuers and States. In addition, providing
States with more flexibility regarding timing of submission of rate
filing justification from issuers that offer non-QHPs only, and
reducing the advance notification requirement for rate increase
announcements, will reduce regulatory burden for issuers and States.
The reduction in burden and costs related to ICRs have been discussed
previously in the Collection of Information Requirements section.
Raising the Federal default review threshold from 10 percent to 15
percent will reduce administrative burden for issuers and States while
continuing to provide the Secretary and the States with the information
necessary to effectively carry out their responsibilities to monitor
rate increases inside and outside of Exchanges. As discussed previously
in the Collection of Information Requirements section, issuer burden
will decrease by an estimated $20,576 and the State burden will
decrease by an estimated $519,674 annually. Given that only one rate
filing subject to review over the last 4 years in the 10 to 15 percent
rate increase range was determined to be unreasonable, we feel this is
a reasonable tradeoff for the potential burden savings.
4. Additional Required Benefits (Sec. 155.170)
We are extending the applicability of the policies governing State-
required benefits at Sec. 155.170 to the policies finalized at Sec.
156.111, which provide States with new options for selecting their EHB-
benchmark plans beginning for the 2019 plan year. Specifically, under
any of the three EHB-benchmark plan selection options, or if the State
defaults to its current EHB-benchmark plan, the policies regarding
State-required benefits will continue to apply. Because these policies
continue to be in effect, we do not anticipate any additional burden on
States or issuers.
5. Standards for Navigators and Certain Non-Navigator Assistance
Personnel (Sec. Sec. 155.210 and 155.215)
We amended Sec. 155.210(c)(2) to remove the requirements that each
Exchange must have at least two Navigator entities and that one of
these entities must be a community and consumer-focused nonprofit
group. We also amended Sec. Sec. 155.210(e)(7) and 155.215(h) to
remove the requirements that Navigators and non-Navigator assistance
personnel entities subject to those regulations maintain a physical
presence in the Exchange service area. These amendments to Sec.
155.210(c)(2) will reduce the burden on Exchanges to have at least two
separate Navigator entities, and as a result, Exchanges may be able to
reduce funding amounts while still meeting program requirements.
Removing these requirements will help promote flexibility and autonomy
for each Exchange to structure its Navigator program, and to award
grant funding to the number and type of entities that will be most
effective and efficient for that specific Exchange service area. To the
[[Page 17048]]
extent that Exchanges take advantage of these flexibilities, consumers
may have fewer options of Navigator grantees and may not have access to
a Navigator grantee or a non-Navigator assistance personnel entity that
maintains a physical presence in the Exchange service area. Exchanges
continue to have the flexibility to fund more than one Navigator
grantee and State Exchanges continue to have the flexibility to require
that Navigators maintain a physical presence in the Exchange service
area.
6. Standards for Third-Party Entities To Perform Audits of Agents,
Brokers, and Issuers Participating in Direct Enrollment (Sec. 155.221)
The final regulations replace the requirement that an HHS-approved
third party perform audits of agents and brokers participating in
direct enrollment and use their own internet website for QHP selection
or to complete the Exchange eligibility application to instead permit
an agent, broker or issuer to select a third-party entity that meets
HHS requirements to conduct an annual operational readiness review
prior to participating in direct enrollment. HHS anticipates this
approach will reduce the regulatory burden on agents, brokers, and
issuers participating in direct enrollment. HHS also anticipates these
changes will reduce the burden on third-party auditors performing
reviews under Sec. 155.221, as those entities will no longer be
required to obtain HHS approval to perform the reviews. Furthermore, we
believe this policy will expand the available number of qualified
third-party auditors by removing any time and operational restrictions
imposed by the HHS pre-approval requirement, which will provide more
flexibility to agents, brokers, or issuers as they complete operational
readiness reviews. Additionally, we believe this will enable more
agents, brokers and issuers to demonstrate operational readiness by
reducing the burden on HHS for conducting reviews, expediting the
ability of these entities to demonstrate readiness, and increasing the
feasibility of approval for use of innovative pathways, thereby
creating more opportunities for enrollment in QHP coverage for
consumers, potentially increasing enrollment. HHS anticipates that some
of the burden will be lessened by the fact that many agents, brokers,
or issuers already have the established privacy and security controls,
and may have existing relationships with auditors that could be
leveraged for these reviews. We intend to provide additional technical
details regarding compliance with the specific requirements under these
rules in guidance in the future.
7. Eligibility Standards (Sec. 155.305)
The requirement in Sec. 155.305(f)(4)(ii) that the Exchange must
send direct notification to the tax filer before denying eligibility
for APTC to consumers who fail to file and reconcile went into effect
in mid-January 2017; therefore, it did not impact operations for the
2017 open enrollment period, which was nearly over then. At that point
in time, for the FFE, the household contacts for non-filers had been
notified of their tax filer's non-compliance, and APTC had been
discontinued at auto re-enrollment for those who did not file a Federal
income tax return according to IRS data or inform the FFE that they had
filed a Federal tax return and reconciled past APTC. Requiring the
Exchange to deny APTC for failure to file and reconcile even in the
absence of ``direct notification . . . to the tax filer'' is unlikely
to add new burden since Exchanges have not yet implemented Sec.
155.305(f)(4)(ii). We do not believe that Exchanges have built an FTI-
compliant noticing infrastructure since the publication of the final
rule establishing Sec. 155.305(f)(4)(ii) that they will need to
dismantle. However, removing Sec. 155.305(f)(4)(ii) avoids significant
costs for Exchanges that, as discussed above, no longer must build the
infrastructure necessary to directly notify tax filers about their tax
filing status while protecting FTI.
8. Verification Requirements (155.320)
This rule amends Sec. 155.320(c)(3)(iii) to create annual income
data matching issues when applicants attest to income above 100 percent
FPL, but trusted data sources show income below 100 percent FPL. We
estimate that each SBE will incur one-time costs of approximately
$450,000 to complete the necessary system changes to implement this
policy. For 12 SBEs, the estimated total cost will be $5.4 million.
This estimate does not take into account the ongoing operational
expenses of processing data matching issues from this new requirement.
Ongoing operational costs will be dependent on the Exchange's number of
applicants with income inconsistencies and the threshold for setting a
data matching issue.
This final rule will amend Sec. 155.320(d)(4) to allow an Exchange
to conduct an HHS-approved alternative process instead of sampling, as
provided under paragraph (d)(4)(ii) through benefit year 2019. We
believe this will relieve Exchanges from the burden of investing
resources to conduct sampling when the FFEs' study of a sampling-like
process found that this method of verification may not be cost-
effective for some Exchanges at this time. We estimate the burden
associated with sampling based in part on the alternative process used
for the FFEs. HHS incurred approximately $750,000 in costs to design
and operationalize this study and the study indicated that $353,581 of
APTC was potentially incorrectly granted to individuals who
inaccurately attested to their eligibility for or enrollment in a
qualifying eligible employer-sponsored plan. We placed calls to
employers to verify 15,125 cases but were only able to verify 1,948
cases. A large number of employers either could not be reached or were
unable to verify a consumer's information, resulting in a verification
rate of approximately 13 percent. The sample-size involved in the 2016
study did not represent a statistically significant sample of the
target population and did not fulfill all regulatory requirements for
sampling under paragraph (d)(4)(i) of Sec. 155.320.
Taking additional costs into account--namely, the cost of sending
notices to employees as required under paragraph (d)(4)(i)(A), the cost
of building the infrastructure and implementing the first year of
operationalizing this process, and the cost of expanding the number of
cases to a statistically significant sample size of approximately 1
million cases--we estimate that the overall cost of implementing
sampling would be approximately $8 million for the FFE, and between $2
million and $7 million for other Exchanges, depending on their
enrollment volume and existing infrastructure. Therefore, we estimate
that the average per-Exchange cost of implementing sampling that
resembles the FFE's approach would be approximately $4.5 million for a
total cost to SBEs of $54 million, when assuming 12 SBEs (operating in
11 States and the District of Columbia). This cost estimate does not,
however, take into account the cost of notifying consumers when the
information provided by their employer changes their eligibility
determination described under paragraph (d)(4)(i)(E), the cost of
providing employees consumer support that may be needed to understand
notices and any change in eligibility, or the cost of ending those
consumers' APTCs, when necessary. This estimate also does not account
for the unique operating costs of each Exchange, the change to
paragraph (d)(4) to allow
[[Page 17049]]
Exchanges to continue to use an alternate process through benefit year
2019, and the flexibility afforded Exchanges described at Sec.
155.315(h) and referenced in Sec. 155.320(a)(2).
We believe this finalized change will lessen the financial and
technical burdens on Exchanges under current regulation and allow
Exchanges to conduct an alternative process to sampling under paragraph
(d)(4) as approaches to sampling are refined and data bases are
compiled over time. We sought comment on the reduction in burden
associated with extending the option to allow Exchanges to fulfill
verification requirements by conducting an HHS-approved alternative
process to sampling through plan year 2019. We did not receive any
comments on the reduction of burden associated with our proposed
change.
9. Special Enrollment Periods (Sec. 155.420)
We do not anticipate that the revisions to Sec. 155.420 will
create significant costs or burdens because several changes will
simplify special enrollment period policy, and we also believe that
they will generate some benefit in the form of added efficiency for
Exchanges and improvements in some consumers' ability to maintain
continuous coverage and understand their coverage options.
For example, the amendment to paragraph (d)(1)(iii) allows
Exchanges to provide similar treatment to all women losing non-MEC
pregnancy-related coverage, which enables a more streamlined special
enrollment period eligibility process.
Additionally, the revisions in paragraph (b)(2)(i) align regulatory
policy for special enrollment periods based on a court order with other
similar special enrollment period types, and create operational
efficiencies for Exchanges by streamlining effective date options
across similar special enrollment periods with qualifying events
related to gaining or becoming a dependent. For example, this revision
to the regulation will enable the FFE to use a simpler online,
automated application pathway for more special enrollment period-
eligible consumers, meaning that fewer consumers will need to use a
manual and costly casework process to use their special enrollment
period. For limited cases when casework support is required, operations
would also be simplified.
We acknowledge that this may not be the case for all Exchanges, and
that an Exchange that has automated the option for consumers to elect
that their coverage take effect on the first of the month after the
date of their qualifying event may need to make updates so that
consumers instead have the option to elect that their coverage take
effect the first of the month after their date of plan selection.
However, as discussed in the preamble, we believe that this burden will
be limited, and mitigated due to the fact that offering a ``first of
the month'' coverage effective date is optional for Exchanges,
permitting a delayed rollout if necessary.
Additionally, amending paragraph (a)(5) to exempt qualified
individuals from the prior coverage requirement that applies to certain
special enrollment periods if they lived in a service area where no
qualified health plan was available through the Exchange for 1 or more
days during the 60 days preceding the qualifying event or during their
most recent preceding enrollment period, as specified in Sec. Sec.
155.410 and 155.420, may provide a pathway to coverage for a small
group of individuals, and is not anticipated to impact the Exchange
risk pool. It may generate burden on Exchanges due to required
technical and operational updates should it become necessary to
implement, but we anticipate that this burden will be mitigated by the
small size of the affected group and by practices that are already in
place in many Exchanges to verify eligibility for special enrollment
periods. Additionally, Exchanges already exempt qualified individuals
from the prior coverage requirement who may not previously have had
access to QHP coverage through an Exchange, including those who were
previously living in a foreign country or United States territory and
Indians as defined by section 4 of the Indian Health Care Improvement
Act. Therefore, we do not believe that adding an additional small
population to this exemption will create additional costs or burdens.
Finally, because simplified special enrollment period eligibility
policy provides improved pathways to continuous coverage for special
enrollment period-eligible consumers, we anticipate that the provisions
in this rule may result in less burden on call center representatives
and caseworkers related to fewer questions about special enrollment
periods due to gaining or becoming a dependent and loss of certain
types of pregnancy-related coverage. We also anticipate that the
revisions will reduce burden on consumers, have a positive effect on
the risk pool, and not result in additional costs or burdens for
issuers.
In addition, some States that operate Exchanges expressed concern
that amending the plan option restrictions available to dependents who
are newly enrolling in a plan with a QHP enrollee through a special
enrollment period will increase the burden on States, which will be
required to do a system build to align their systems with this change.
We appreciate these concerns raised by States, but do not anticipate
that this change will add significant additional burden on top of the
system builds States are already doing. The intent of this policy
change is to streamline the plan option rules for dependents who are
newly enrolling in coverage with enrollees through a special enrollment
period and so we anticipate that any additional burden incurred to
amend Exchange system functionality will be offset by the efficiencies
gained in streamlining Exchange eligibility rules.
10. Effective Dates for Terminations (Sec. 155.430)
Permitting all enrollee-initiated terminations to become effective
on the date of enrollee request or a later date of their choosing, and
removing the special termination effective date for newly eligible
Medicaid/CHIP/BHP consumers streamlines termination effective dates for
Exchanges and reduces complication and confusion among consumers and
issuers. Exchanges and issuers were not expected to incur new costs by
aligning these termination dates, as Exchanges and issuers are well
acquainted with same-day termination transactions. However, we received
comments from some SBEs that their systems would not allow for mid-
month terminations. Therefore, we are not requiring the alignment of
termination effective dates as proposed, but rather are providing
Exchanges flexibility to choose whether to implement the changes that
were proposed. Operationalizing the aligned termination dates may
reduce system errors and related casework, as well as confusion for
consumers, issuers, and caseworker and call center staff based on
contradictory rules for different scenarios.
11. Eligibility Standards for Exemptions (Sec. 155.605)
We do not anticipate that the amendment to Sec. 155.605(d) will
create additional costs or burdens. The amendment to Sec.
155.605(d)(2)(iv) will enable the Exchanges to process the consumer's
exemption from the individual shared responsibility provision due to
lack of affordable coverage based on projected income, for those not
eligible for employer-sponsored coverage, when there is no bronze plan
available by allowing the Exchanges to process the consumer's
[[Page 17050]]
exemption based on the lowest cost Exchange metal level plan, excluding
catastrophic coverage, available in the individual market through the
Exchange in the State in the county in which the individual resides.
This policy will not increase the burden on consumers or Exchanges.
Without these revisions, individuals may lack access to qualifying or
affordable health coverage, but be unable to qualify for an exemption
from the individual shared responsibility provision to purchase
qualifying health coverage and the associated financial penalty due to
the lack of coverage in their area or the inability to calculate
whether coverage is unaffordable. This policy will also not result in
additional costs or burdens for issuers.
12. Small Business Health Options Program (Part 155, Subpart H, Sec.
155.200, Sec. Sec. 156.285 and 156.286, Sec. 156.350, Sec. Sec.
157.205 and 157.206)
HHS is finalizing the proposal to grant additional flexibilities,
for plan years beginning on or after January 1, 2018, to small
employers enrolling in SHOP QHPs and to participating QHP issuers in
how they interact with a SHOP. These changes will be effective as of
the effective date of the final rule and the FF-SHOPs and SBE-FPs for
SHOP will operate under the new enrollment approach. Under this final
rule, several existing requirements on SHOPs will not apply for plan
years beginning on or after January 1, 2018, allowing State Exchanges
the flexibility to operate their SHOP in a way that makes sense for the
small businesses in their State, with reduced limitations imposed by
Federal regulation. The FF-SHOPs and SBE-FPs for SHOP will take
advantage of the flexibility of the enrollment approach described
through this final rule and operate in a leaner fashion. Under the
approach being finalized, SHOPs are no longer required to enroll small
groups in SHOP QHPs through a SHOP website. Instead, small employers
will, in SHOPs that operate under this approach, enroll through a
participating QHP issuer, or a SHOP-registered agent or broker.
HHS believes that the changes will reduce burden on participating
QHP issuers, small employers, and agents and brokers for several
reasons. Under the approach being finalized, for plan years beginning
on or after January 1, 2018, effective on the effective date of this
rule, participating QHP issuers will, in SHOPs that operate under the
new flexibilities like the FF-SHOPs and SBE-FPs for SHOP, enroll small
groups through their existing enrollment channels--utilizing their
existing technologies and processes. Small groups enrolled in SHOP QHPs
for plan years before January 1, 2018 will not be affected by the
proposed changes to enrollment through a SHOP until they are due to
renew in a SHOP QHP for the 2018 plan year. While some additional
requirements will be imposed onto issuers, HHS anticipates that any
additional burden on issuers as a result of the changes in this rule
will be negated in an ultimate net reduction in burden as many Federal
regulations are being removed and any additional requirements onto
issuers mainly consist of practices they currently perform in the
private market.
In the 2018 Payment Notice, HHS finalized the removal of a
participation provision that had required certain QHP issuers to
participate in an FF-SHOP in order to participate in an FFE. As a
result, there has been a significant decrease in the number of issuers
in the FF-SHOPs in the 2018 plan year and therefore, HHS also expects
fewer enrollments in the FF-SHOPs for plan year 2018. As of January 1,
2017, approximately 7,554 employer groups were enrolled in the FF-
SHOPs, covering 38,749 lives. With the anticipated significant
decreases in QHP issuer participation for enrollment beginning in 2018,
it is not cost effective for the Federal government to continue to
maintain certain FF-SHOP functionalities, collect significantly reduced
user fees on a monthly basis, maintain the technologies required to
maintain an FF-SHOP website and payment platform, generate enrollment
and payment transaction files, and perform enrollment reconciliation.
Under the approach being finalized in this rule, issuers will still
be subject to their State requirements, and HHS will minimize Federal
requirements related to SHOP plans (that is, notice requirements, etc.)
for plan years beginning on or after January 1, 2018. For example,
issuers are often required by State law to generate enrollment and
payment notices, and will continue to generate any State-required
notices under the new SHOP enrollment approach. Under the proposed
approach, the FF-SHOPs and SBE-FPs for SHOP will no longer generate
enrollment notices, but the notice requirements for the FF-SHOPs and
SBE-FPs for SHOP will not necessarily be transferred directly to
participating QHP issuers. HHS can imagine a scenario where an issuer
might generate an additional notice to a SHOP consumer that they are
not required by Federal law to send, but may be required by State law,
to send.
Issuers will still be required to accept enrollment from employers
that offer their employees a choice of plans. HHS can foresee a
circumstance where an employer offers its employees a choice of plans,
across plan categories, and where the employees choose to enroll in
plans offered by multiple issuers. In this circumstance, it will also
be possible that an issuer will receive one application for enrollment
from a group. Under the approach to SHOP enrollment being finalized,
the issuer will be required to accept that single enrollment so long as
the employer's group has met the minimum participation rate for their
State, or is enrolling between November 15 and December 15, when the
minimum participation rate rules do not apply. With the decrease in
issuer participation in the SHOPs beginning in plan year 2018, HHS
believes that a circumstance, similar to the one discussed above may
occur. In the absence of premium aggregation functions, issuers, under
the approach being finalized will be working directly with an employer,
or their appointed SHOP-registered agent or broker for matters of
enrollment and premium billing and payment. Under the new regulations,
effective as of the effective date of this rule, issuers will be
required to enroll consumers into plans, even if only one employee of a
group wants to enroll. Further, issuers will also be required to
process enrollments into SHOP QHPs, and, handle appeals (other than
appeals related to employer eligibility), administer special enrollment
periods and terminations. Issuers will still be subject to the market
wide effective dates outlined in Sec. 147.104(b)(1)(i)(C). While HHS
believes that issuers currently perform the majority of these tasks,
issuers may experience an increase in burden as it relates to the
volume of consumers enrolling in their SHOP QHPs. Overall, HHS believes
that under this approach, issuers will see a net cost savings, as their
business processes for SHOP enrollments may be more closely aligned
with their current business practices for enrollments outside the SHOP,
and they will no longer be remitting user fees for FF-SHOP and SBE-FP
SHOP enrollments.
As noted, SHOPs will be given the flexibility to adopt an
enrollment approach through which enrollments occur directly with
issuers or SHOP-registered agents or brokers, to continue to operate
with the same functionalities as they currently do or to develop new
practices as permitted by the proposals in this rule. In any case,
SHOPs will need to meet only the regulatory minimums outlined in this
final rule, therefore minimizing the overall amount
[[Page 17051]]
of regulatory requirements that SHOPs will otherwise need to meet. HHS
believes that the new flexibility for SHOPs will result in an overall
reduction in burden and cost for States operating their own SHOPs
because we are providing States with the flexibility to pursue the
enrollment approach that best meets their needs, because we are
reducing the overall regulatory requirements for the SHOP Exchanges,
and for the same reasons described above regarding why the enrollment
approach being finalized will reduce burdens on the FF-SHOP and its
stakeholders.
Under the new enrollment approach for SHOP plan years beginning on
or after January 1, 2018, HHS believes that employers seeking to
purchase coverage through an FF-SHOP or SBE-FP for SHOP will experience
a reduction in regulatory burden related to enrollment, despite the
fact that they may be required to visit at least two websites (the SHOP
website and the issuer's website) prior to completing an enrollment in
SHOP coverage as they will be able to enroll in coverage through a
SHOP-registered agent or broker or through a participating QHP issuer--
using issuers' streamlined enrollment technologies. Employers will also
be required, as described throughout this document to notify their QHP
issuer of their eligibility to purchase a SHOP QHP and of their
ineligibility, if their eligibility were to be revoked. Employers will
also be required to inform the SHOP if they become ineligible to
participate in a SHOP, or choose to withdraw their eligibility, unless
the issuer is notified by the SHOP. We believe this is still less
cumbersome than the existing eligibility and enrollment process.
Under the flexibilities being finalized with this rule, some
employers, specifically those who offer their employees a choice of
plans, will experience an increase in administrative burden with the
removal of a SHOP's premium aggregation functions. Without a SHOP's
premium aggregation functions, employers will have to collect the
enrollment and payment information needed from each of the issuers
whose plans the employer intends to offer to its employees. In the
event employees select plans from multiple insurance companies, the
employer will be responsible for distributing the applications for
enrollment to the individual issuers, collecting payments from the
employees and sending the individual payments to each issuer. Due to
the decrease in issuer participation in the FF-SHOPs, some SHOP
employers only have one issuer offering FF-SHOP plans in their area and
will not be able to offer their employees a choice of plans across
issuers. In addition, historically, a majority of employers have not
offered employee choice across different issuers. Therefore HHS does
not believe the potential increased burden in this area due the removal
of premium aggregation functions to be significant. Employers will
still be able to view a listing of all of the SHOP QHPs available, by
plan category and issuer on a SHOP website. HHS expects that the actual
process of enrolling in SHOP QHPs under this approach will be less
burdensome than the existing enrollment approach through a SHOP
website. As previously mentioned, HHS anticipated significantly lower
issuer participation for the SHOP in the 2018 plan year. A decrease in
issuer participation unfortunately also results in less choice for
consumers. While employers may experience an increase in burden,
especially if offering employees a choice of plans, under the new
flexibilities for SHOPs, HHS anticipates the benefits of the finalized
approach will ultimately outweigh the minimal additional costs
employers could face.
Further, the Federal government will experience a dramatic
reduction in the role it plays in operating an FF-SHOP and the contract
support that it requires in order to support it. In 2016, the cost of
running the FF-SHOP website (utilized by both FF-SHOPs and SBE-FPs for
SHOP) was approximately $30 million, and HHS expects annual
expenditures to drop significantly--by at least 90 percent--within a
few years, as it responsibly wind-downs the integration of the FF-
SHOPs.
13. User Fees (Sec. 156.50)
To support the operation of FFEs, we require in Sec. 156.50(c)
that a participating issuer offering a plan through an FFE or SBE-FP
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 final rule, for the 2019 benefit
year, we set the monthly FFE user fee rate at 3.5 percent of the
monthly premium, and the monthly SBE-FP user fee rate at 3.0 percent of
the monthly premium. This increase in SBE-FP user fee rate from 2.0
percent in 2018 to 3.0 percent in 2019 will increase transfers from
SBE-FP issuers to the Federal government by $20 million. Additionally,
we will cease charging monthly user fees to SHOP issuers offering plans
through an FF-SHOP or SBE-FP SHOP for plan years beginning on and after
January 1, 2018, effective on the effective date of the final rule.
This will decrease user fee transfers from SHOP issuers offering plans
through an FFE or SBE-FP by approximately $6 million.
14. Provision of EHB
Under Sec. 156.111, we provide States with more flexibility by
offering States three new methods for selecting their State EHB-
benchmark plans. Under this policy, if the State does not select one of
the three methods for changing its EHB-benchmark plan, the State will
default to its current EHB-benchmark plan. We recognize that, to the
extent that States take advantage of the EHB-benchmark plan selection
options at Sec. 156.111, States and issuers will experience an
increase in burden to develop new policies and implement new plan
designs. We anticipate that most States will need to invest resources
to analyze the three new EHB-benchmark selection options to make an
informed selection, even if the State ultimately defaults. Several
States may select one of the new options, and will need additional
resources to facilitate a public notice and comment period and develop
and submit the necessary documents specified by HHS (including the
requisite actuarial certification) to effectuate the State's selection.
Additionally, in States that choose to select their EHB-benchmark plan
under any of the three available options, issuers offering plans that
provide EHB will incur additional administrative costs associated with
designing plans compliant with the State's newly selected EHB-benchmark
plan.
Due to the many PPACA policies directly or indirectly tied to EHB,
HHS recognizes the impact this policy will have on parties beyond
issuers required to provide EHB-compliant plans. For example, the
State's new EHB-benchmark selection can impact how issuers set their
annual limitation on cost sharing and how issuers determine which
benefits may not be subject to annual and lifetime dollar limits.\104\
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\104\ The definition of EHB also has an impact on the annual
limitation on cost sharing at section 1302(c) of the PPACA (which is
incorporated into section 2707(b) of the PHS Act) and the
prohibition of annual and lifetime dollar limits at section 2711 of
the PHS Act, as added by the PPACA.
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It is our aim that the flexibility under the policy will allow for
States and issuers to be more innovative in designing benefit
structures that will ultimately affect affordability for consumers.
However, we realize that
[[Page 17052]]
this policy will have varying impact on consumers depending on how a
State chooses to implement the policy. Consumers enrolled in individual
and small group market plans will be affected by changes to EHB in that
their benefits may change and in some cases premiums may increase or
decrease depending upon State implementation of the policies.
Additionally, in States that use one of the methods to select a new
EHB-benchmark plan, the new EHB-benchmark plan selection may impact the
amount of PTC and CSRs for enrollees in the State. For these consumers,
subsidies will increase or decrease when compared to their State's
current EHB-benchmark plan. PTC is available only for that portion of a
plan's premium attributed to EHB. To the extent that a State's EHB-
benchmark plan, under the policy, leads to lower premiums for the
second lowest cost silver plan, PTC will be reduced, but not the
percent of income a consumer with PTC is expected to contribute to
their premium. This effect will represent a transfer from consumers who
receive PTC to the Federal government. Individual and small group
market enrollees who do not receive PTC will experience lower premiums
for less comprehensive coverage that can result in more affordable
coverage options but possibly higher out-of-pocket costs for the
consumer.
We anticipate that States are more likely to select EHB-benchmark
plans under this policy such that premiums have the potential to be
reduced in the long-term to achieve affordability in benefit design.
However, even with the generosity standard now being applied to all of
the EHB-benchmark selection options, the policy may provide some
ability for States, depending on the State, to select EHB-benchmark
plans in a manner that will increase premiums. To the extent that a
State's EHB-benchmark plan leads to higher premiums for the second
lowest cost silver plan, PTC will be increased.
Consumers who have specific health needs may also be affected by
the policy. In the individual and small group markets, depending on the
selection made by the State in which the consumer lives, consumers with
less comprehensive plans may no longer have coverage for certain
services. In other States, again depending on State choices, consumers
may gain coverage for some services.
As explained above, HHS anticipates that Sec. 156.111 will
generate additional costs for States, issuers, and certain consumers in
the short run. However, although we are uncertain as to how States will
take advantage of this flexibility, and States are not required to make
any changes under this policy, we also believe the additional
flexibility in plan and benefit design may produce long-term premium
savings. The policies offer issuers in States that use the flexibility
to select a new EHB-benchmark plan the opportunity to lower plan
premiums, which will increase affordability of health insurance for
consumers in the individual and small group markets who do not receive
PTC and do not require the benefits that are no longer considered EHB.
When adjusting coverage of services under the options, we encourage
States to consider the spillover effects in addition to the costs and
utilization of these services. Spillover effects include increased use
of other services, such as increased use of emergency services or
increased use of public services provided by the State or other
government entities, when a certain service is no longer covered by
insurance. Depending on the State population's use of services and
health care needs, States may arrive at different conclusions about the
effects of adjusting a particular benefit. Because we do not know how
States will choose to adjust their benchmark plans, we are not able to
predict the effects these modifications may have on costs.
Additionally, we also proposed at Sec. 156.115 to allow for
benefit substitution to occur within the same EHB category or between
EHB categories to offer additional issuer flexibility. Because issuers
are already familiar with substituting benefits within benefit
categories, we did not believe that broadening the policy to allow
benefit substitution between benefit categories would create additional
burden for issuers. We are finalizing Sec. 156.115 to allow issuers to
substitute benefits between EHB categories to the extent allowed by the
State, beginning in plan year 2020. As finalized, this rule will
increase burden on consumers, when their State allows between-category
substitution and issuers in their State utilize such substitution.
Under such circumstances, consumers who choose between plans offered in
the individual and small group markets may need to spend more time and
effort comparing benefits offered by different plans in order to
determine what, if any, benefits are substituted, and what plan would
best suit their health care and financial needs. However, some
consumers may benefit from expanded access to plans that better suit
their needs. We also note that States are generally primarily
responsible for enforcement of EHB and continue to have the option to
set criteria for benefit substitution.
We solicited comments on the impact of the proposed EHB policy and
on whether other impacts should be considered.
Comment: Many commenters were concerned about the impact of the
proposed EHB-benchmark plan policies. Some commenters were concerned
that reduced benefits might lead to consumers forgoing care, which
could lead to a more serious condition that would increase or shift
costs. Some commenters focused on the potential downstream effects,
with most commenters agreeing with our assessment that there may be
potential downstream effects that a State would want to take under
consideration, with some noting that the spillover could also affect
the productivity of the nation, leading to even higher government
costs.
Commenters on the premium impact and cost impact of the proposed
policy typically were concerned that reducing benefits would only have
a minor or no premium impact and would result in consumers having to
pay more for services that are not covered, which some noted is not
what consumers want. Some of these commenters noted that premiums are
affected by other factors than benefits while some commenters were
concerned about the risk pool impact and risk adjustment since
enrollment could be affected by the scope of benefits being offered.
Other commenters noted that Medicaid, the large group and self-insured
plans, and PTC are also affected by the definition of EHB.
Commenters also opposed allowing issuers to substitute benefits
between EHB categories. Commenters cited a wide range of concerns,
including those we acknowledged in the proposed rule, as well as
several that we did not, and suggested that the proposal's negative
impact would be significant. For example, commenters noted that this
type of substitution would permit issuers to design plans so that they
were unattractive to people with certain high-cost health conditions,
or people with conditions not adequately reimbursed by risk adjustment.
They voiced concerns that this new market dynamic could harm the
individual market risk pool and State risk adjustment programs, as well
as imposing burden on certain individuals with chronic or high cost
conditions affected by the lack of coverage options that met their
needs and the difficulty of comparing plans due to the increased
complexity of plan design.
[[Page 17053]]
Commenters also stated that substitution between EHB benefit
categories is significantly different than substitution within
categories and, therefore that current substitution practices do not
provide helpful precedent for plan design, or for States' review of
plans that include substitution within categories. One commenter stated
that it would be particularly difficult to establish actuarial
equivalence between benefits from different EHB-benefit categories,
which could result in added burden for State regulators and for issuers
required to comply with varying standards in different States. One
commenter added that while this proposal would allow States to bar
issuers from using benefit substitution between EHB categories, some
States would need to take this step through legislative action, which
would require time and resources simply to maintain their current
policy. Finally, we did not receive any examples of how issuers could
use substitution between EHB benefit categories to improve coverage
options.
Response: In response to commenters, we are finalizing the new EHB-
benchmark plan options at Sec. 156.111 with certain modifications.
Because we do not know how States will choose to adjust their benchmark
plans, we are not able to predict the effects these modifications may
have on costs. Furthermore, we also recognize that the effects of a
specific change will likely vary from State to State given market and
demographic differences. Therefore, we emphasize that States may also
wish to consider a variety of different factors when selecting an EHB-
benchmark plan. We encourage States to consider the impact of the EHB-
benchmark plan's scope of benefits on the availability of PTC and CSRs
for enrollees in the State, as the PTC is based on the amount of
premiums allocable to EHB, and CSRs provide reduced cost sharing for
EHB only. Additionally, we encourage States to consider the impact on
Medicaid, and on large group and self-insured group health plans. While
we cannot predict the effects of the policy, we hope that this policy,
as finalized, allows States the flexibility to innovate their EHB-
benchmark plans that balances access and costs. We hope to learn from
those States that choose a new EHB-benchmark plan under this policy, as
we consider creating a Federal default benchmark plan in the future.
We appreciate commenters' concerns about the impact of allowing
substitution between EHB categories. We assess the impact on States to
be minimal, as under the final rule they have authority to withhold
permission for substitution between categories. We also expect minimal
impact on issuers, since they have experience in substituting benefits
within EHB categories and may decline to substitute between categories
even when their State allows it.
We anticipate both additional burden and benefit for consumers, to
the extent that their States permit and issuers utilize substitution
between EHB categories. It may require greater time and effort for
consumers to choose among plans in the individual and small group
market if some of those plans substitute some benefits for those in
separate EHB categories. However, we anticipate that this additional
time and effort will be limited because issuers must meet the
requirement at Sec. 156.115(b)(3)(i) to provide benefits that are
substantially equal to their State's EHB-benchmark plan. The impact on
consumers of the substituted benefits themselves will be mixed--some
consumers stand to benefit by gaining access to benefits they desire
that would not have been provided without this policy, while other
consumers may find that a particular issuer no longer offers benefits
they desire. Benefits no longer offered by one issuer, however, may be
offered by another issuer. The net effect is uncertain.
15. Application to Stand-Alone Dental Plans Inside the Exchange (Sec.
156.150)
We are removing AV level of coverage requirements for SADP issuers
for coverage of pediatric dental EHB, however we are maintaining the AV
certification requirement at revised Sec. 156.150(b)(2) and codifying
an operational requirement that such certification be reported to the
Exchange, which issuers of SADPs have already been fulfilling, as part
of the QHP certification process. We estimate that the change in AV
could lead to a reduction in premiums for certain SADPs. Issuers may
choose to offer more SADPs at varying premiums and levels of coverage.
The offering of more SADPs and SADPs with lower premiums may lead to
increased enrollment in SADPs. Because certain eligible taxpayers can
use PTC to pay for the portion of SADP premiums attributable to EHB, a
reduction in premiums will likely reduce the premium for purposes of
the PTC, leading to a small transfer from credit recipients to the
government. If enrollment increases due to potentially lower premiums
there may be an overall increase in the total PTC payments by the
government. The net effect is uncertain. While the requirement to
report a SADP's AV is newly codified in regulation, issuers of SADPs
previously reported level of coverage as part of the QHP certification
process, so this change is not expected to have an impact on issuers'
reporting burden.
16. Qualified Health Plan Certification
For plan years 2019 and later, we proposed to further expand the
role of States in the QHP certification process for FFEs, including
FFEs where the State performs plan management functions. Specifically,
we proposed to defer to States for additional review areas, including
accreditation requirements at Sec. 156.275, compliance reviews at
Sec. 156.715, minimum geographic area of the plan's service area at
Sec. 155.1055, and quality improvement strategy reporting at Sec.
156.1130, if feasible and appropriate. We received comments that this
policy would impose burdens on States, particularly those States that
are not performing these reviews, and we are not finalizing this
proposal for these four review areas. Some States commented that they
presently lack resources, including staffing resources, to conduct
these reviews. We are finalizing a policy to extend for the 2019
benefit year and beyond the QHP certification review standards related
to network adequacy and ECPs that we finalized in the Market
Stabilization rule. We do not anticipate this policy will increase
burden on States because we believe these reviews are already being
performed by States. We anticipated slight reduction in burden for
issuers due to not needing to undergo duplicative reviews and a
reduction in costs to the Federal government. We sought comment on
whether there are burdens we are not considering. While commenters
expressed concern that these policies could increase burden for
consumers to obtain care from needed providers, we believe that State
reviews related to network adequacy are capable of adequately
preserving consumer access to care from such providers.
We are removing the meaningful difference standard at Sec.
156.298. Issuers will have a potential reduction in administrative
costs since they will no longer have to implement their internal
assessments as to whether their plan offerings meet this standard. We
acknowledged and commenters noted that consumers may have more QHPs to
select from which may increase the burden in selecting a QHP. However,
we do not have evidence from any Exchange that removing the meaningful
difference standard creates any new burden on consumers.
[[Page 17054]]
We also anticipate that the removal of the meaningful difference
standard will reduce the regulatory burden on SBE-FPs. Under Sec.
155.200(f)(2)(iv), SBE-FPs are required to establish and oversee
requirements for their issuers that are no less stringent than the
meaningful difference standard as it applies to issuers participating
in the FFEs. SBE-FPs will no longer need to establish such a standard
or oversee it.
We are removing the requirements for SBE-FPs to enforce FFE
standards for network adequacy at Sec. 155.200(f)(2)(ii) and essential
community providers at Sec. 155.200(f)(2)(iii). We anticipate that
SBE-FPs will have a potential reduction in administrative costs since
they will have the flexibility to determine how to implement the
network adequacy and essential community provider standards with which
issuers offering QHPs through the SBE-FP must comply. We believe SBE-
FPs are best positioned to determine these standards for the QHP
certification process in their States, and that the removal of the
requirement that SBE-FPs establish and oversee requirements for their
issuers that are no less strict that the manner in which these
regulatory requirements are applied to FFE issuers will streamline
certain aspects of the QHP certification process, reduce issuer burden,
and return traditional insurance market regulatory authority to the
States.
17. Provisions Related to Cost Sharing (Sec. 156.130)
The PPACA provides for the reduction or elimination of cost sharing
for certain eligible individuals enrolled in QHPs offered through the
Exchanges. This assistance helps many low- and moderate-income
individuals and families obtain health insurance--for many people, cost
sharing is a barrier to obtaining needed health care.\105\
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\105\ 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.
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We set forth in this final 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 PPACA to the estimated 2019 maximum
annual limitation on cost sharing for self-only coverage. We do not
believe these changes will result in a significant economic impact.
Therefore, we do not believe the provisions related to cost-sharing
reductions in this final rule will have an impact on the program
established by and described in past Payment Notices.
We also finalized the premium adjustment percentage for the 2019
benefit year. Under Sec. 156.130(e), and 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 the percentage (if any) by which the average
per enrollee premium for employer-sponsored health insurance coverage
for the preceding calendar year exceeds such average per enrollee
premium for employer-sponsored health insurance for 2013. The annual
premium adjustment percentage sets the rate of increase for three
parameters detailed in the PPACA: 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) of the Code. We believe that the 2019 premium adjustment
percentage is well within the parameters used in the modeling of the
PPACA, and we do not expect that these provisions will alter CBO's
March 2016 baseline estimates of the budget impact.
18. Minimum Essential Coverage (Sec. 156.602, Sec. 156.604)
We proposed to designate CHIP buy-in programs that provide
identical coverage to the CHIP program under title XXI of the Act in
the applicable State as minimum essential coverage. This final rule
does not provide categorical designation of CHIP buy-in programs as
minimum essential coverage. States will have the option of
electronically submitting to HHS information regarding their plans and,
after review and comparison of the coverage, HHS will verify whether or
not the CHIP buy-in programs provide at least the same coverage as the
title XXI CHIP programs, such that they statutorily qualify as minimum
essential coverage. Currently, very few States offer CHIP buy-in
programs, and such plans in two States have applied for and been
recognized as minimum essential coverage. Of the States that opt into
the verification process, there will be a reduction in burden related
to making changes to their plans to provide at least the same coverage
as the title XXI CHIP program.
19. Medical Loss Ratio (Part 158)
We are amending Sec. 158.221(b) to allow issuers the option to
report a single quality improvement activity expense amount equal to
0.8 percent of earned premium, in lieu of reporting the actual QIA
amounts in five separate categories described in Sec.
158.150(b)(2)(i)-(v). Based on MLR data for the 2015 MLR reporting
year, HHS estimates that the amendment will decrease rebate payments
from issuers to consumers by approximately $23 million.
We are also amending several sections of 45 CFR part 158, subpart C
(Sec. Sec. 158.301, 158.321-158.322, 158.330, 158.341, 158.350) to
modify the process and criteria for the Secretary to determine whether
to adjust the 80 percent MLR standard in the individual market in a
State. While it is uncertain what specific adjustments States may
request, most adjustments previously granted by the Secretary have
ranged from 70 to 75 percent. Based on MLR data for the 2015 MLR
reporting year, and assuming that 22 States will request an adjustment
(including 17 States that previously requested adjustments prior to
2014), HHS estimates that the amendments will decrease rebate payments
from issuers to consumers or increase premiums paid by consumers to
issuers by approximately $52 million (assuming a reduction of the 80
percent MLR standard to 75 percent for all 22 States) to $64 million
(assuming a reduction of the MLR standard to 70 percent for all 22
States) annually, for up to 3 years at a time. This represents an
estimated 74 percent to 91 percent reduction, respectively, in rebates
payable in those 22 States, which together accounted for $70 million
out of the nationwide total $107 million in rebates that issuers owed
to individual market consumers for 2015. The actual reduction in
rebates may be lower or higher depending on which States apply for an
adjustment, and whether and how much the Secretary may adjust the
individual market MLR standard in each State.
20. Regulatory Review Costs
If regulations impose administrative costs on private entities,
such as the time needed to read and interpret this final rule, we
should estimate the cost associated with regulatory review. Due to the
uncertainty involved with accurately quantifying the number of entities
that will review the rule, we assume that the total number of unique
commenters on the proposed rule will be the number of reviewers of this
final rule. We acknowledge that this
[[Page 17055]]
assumption may understate or overstate the costs of reviewing this
rule. It is possible that not all commenters reviewed the proposed rule
in detail, and it is also possible that some reviewers chose not to
comment on the proposed rule. For these reasons we thought that the
number of past commenters would be a fair estimate of the number of
reviewers of this rule.
We are required to promulgate a substantial portion of this rule
each year under our regulations and we estimate that approximately half
of the remaining provisions will cause additional regulatory review
burden that stakeholders do not already anticipate. We also recognize
that different types of entities are in many cases affected by mutually
exclusive sections of this proposed rule, and therefore for the
purposes of our estimate we assume that each reviewer reads
approximately 50 percent of the rule, excluding the portion of the rule
that we are required to promulgate each year.
Using the wage information from the BLS for medical and health
service managers (Code 11-9111), we estimate that the cost of reviewing
this rule is $105.16 per hour, including overhead and fringe
benefits.\106\ Assuming an average reading speed, we estimate that it
will take approximately 1 hour for the staff to review the relevant
portions of this proposed rule that causes unanticipated burden. We
received 416 comments, including 99 comments that were substantially
similar to one of four different letters, resulting in 322 unique
comments on the proposed rule. We assume that for form letters, only
the staff at the organization that arranged for those letters will
review the final rule. For each entity that reviews the rule, the
estimated cost is $105.16. Therefore, we estimate that the total cost
of reviewing this regulation is approximately $33,862 ($105.16 x 322
reviewers). This may underestimate the review costs, since not all
reviewers may have submitted comments. In addition, stakeholders that
will need to do a detailed analysis in order to implement the
unanticipated provisions of this rule will need additional time and
personnel, which will vary depending on the extent to which they are
affected. To estimate an upper bound, we assumed that on average 530
issuers and 50 States will spend 10 hours each, 100 other organizations
will spend 5 hours each and 100 individuals will spend 1 hour each to
review the rule. Under these assumptions, total time spent reviewing
the rule would be 6,400 hours with an estimated cost of approximately
$673,024.
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\106\ https://www.bls.gov/oes/current/oes_nat.htm.
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D. Regulatory Alternatives Considered
In developing the policies contained in the final rule, we
considered numerous alternatives to the policies being finalized.
Below, we discuss the key regulatory alternatives that we considered.
For the 2019 benefit year, we considered using only the 2016
benefit year enrollee-level EDGE data to recalibrate the risk
adjustment model coefficients. However, this could lead to uncertainty
in issuers' expectation of risk adjustment transfers due to the sole
use of a new dataset for recalibrating the model coefficients. We
believe that blending multiple years of data will promote stability for
the risk adjustment coefficients year-to-year, particularly for rare
conditions with small sample sizes. Therefore, we proposed to blend
coefficients calculated from the 2016 benefit year enrollee-level EDGE
data with 2014 and 2015 MarketScan[supreg] data. Additionally, given
the timing of the proposed rule, we were unable to analyze the 2016
enrollee-level EDGE data in time to publish the coefficients calibrated
using the EDGE data in the proposed rule. Similar to the 2018 benefit
year final risk adjustment coefficients, we considered publishing the
2019 benefit year final risk adjustment coefficients in guidance after
the publication of the final rule with more recent MarketScan[supreg]
data that will become available at the end of this year. However, the
2016 benefit year enrollee-level risk adjustment data was available in
time to complete our analysis and publish the final coefficients in
this rule. Additionally, we considered but did not propose to use the
2016 MarketScan[supreg] data that will become available at the end of
this year for the 2019 benefit year risk adjustment model
recalibration. We also considered assigning higher weights to the
coefficients solved from more recent data, however, to allow stability
in the market have equally blended the 3 years of data. We are
finalizing the 2019 benefit year model coefficients blended with 2016
EDGE data, and 2014 and 2015 MarketScan[supreg] data published in this
rule.
For the State flexibility to request reductions of other applicable
risk adjustment transfers, we considered alternate requirements for
States requesting a reduction. We considered requiring actuarially
certified standards, State's attestation noting consensus from all
issuers of risk adjustment covered plans in the State's market, or
simulation studies demonstrating the effect of the reduction on State's
market risk pool. We determined that to ensure issuers are adequately
compensated for the actuarial risk of their enrollees and do not have
incentives to avoid higher risk enrollees, the State regulators need to
submit evidence and analysis demonstrating the State-specific factors
that warrant an adjustment to more precisely account for the
differences in actuarial risk in the State's market. States must also
justify the percentage reduction by providing evidence and analysis
demonstrating the State-specific factors and the percentage by which
those factors warrant an adjustment to more precisely account for the
differences in actuarial risk in the State's market as compared to the
national norm, or demonstrating the requested reduction in risk
adjustment payments would be so small for issuers who would receive
risk adjustment payments, that the reduction would have a de minimis
effect on the necessary premium increase to cover the affected issuer's
or issuers' reduced payments. We also considered only making the
flexibility available to States in the small group market, but
determined that just as with the States' small group markets, it is
possible that the national methodology may not precisely account for
unique State market dynamics in the individual or merged markets.
For the risk adjustment data validation program, HHS considered
alternate approaches for evaluating error rates and adjusting risk
scores when an error rate deviates from a statistically significant
value. We considered calculating a national central tendency of errors
and then adjusting risk scores only when an error rate that falls
outside of the confidence interval around the national central
tendency; however, we determined that the evaluation of error rates
relative to a national average would likely result in significantly
less accurate risk score adjustments, primarily because it would not
account for differences in error rates due to issuer size or the
distribution of HCCs in the enrollee population.
We considered maintaining the current applicability of the Federal
rate review requirements, and continuing to review the reasonableness
of student health insurance coverage rate increases subject to review.
However, this rule will provide States with greater flexibility to meet
the needs of their markets and reduce the burden associated with review
of plans that are not part of the single risk pool. As a practical
matter, student health insurance coverage has generally been given the
same plan design flexibility as
[[Page 17056]]
plans in the large group market. Just like purchasers of large group
plans, purchasers in the student market are viewed as more
sophisticated, with greater leverage and ability to avoid the
imposition of unreasonable rate increases. Single risk pool pricing,
the primary focus of the rate review program, does not apply to student
health insurance coverage.
We considered maintaining the current 30-day notice requirement for
States to notify HHS prior to posting the required information on
proposed and final rate increases. However, such advanced notice may be
impractical in some States so we have decreased the notice requirement
to 5 business days. We considered permitting States to post the
required information on rate increases on a rolling basis. However, we
agree with the concerns shared by the majority of public comments
opposing that proposal, so we are maintaining the uniform posting
requirement.
In adding standards for Sec. 155.221, HHS considered making no
changes to the existing rule and retaining the existing standard for
agents and brokers to contract with a third-party entity approved by
HHS for conducting audits under the section. In finalizing the
proposal, we continue to believe that it is necessary to include
issuers and to provide the necessary flexibility in oversight that both
protects consumers and encourages enrollment pathway innovation for
agents, brokers, and issuers using direct enrollment.
For the amendments to Sec. 155.320, we considered developing a
comprehensive database using information from employers on the plans
they offer to their employees and their family members that could
satisfy verification requirements under paragraph (d)(2) for all
Exchanges. This approach would be resource-intensive for Exchanges, and
would produce a database with limited utility due to data limitations.
Developing a database; recruiting and educating employers to
participate in voluntarily submitting the data; and providing technical
assistance to employers for the first year of implementation on how to
input the data is estimated to cost at least $38 million. Building such
a database would also rely on the voluntary participation of
substantially all employers. This participation would be onerous for
employers. Employers would need to provide individual employee level
data regarding plans the employer will offer, information that may not
be available in time to populate a comprehensive database prior to the
Exchange's plan year. In addition, since the PPACA does not require
employers to provide to the Exchange the relevant information on what
coverage they offer, Exchanges and HHS would not receive data from all
employers. After weighing our options, we decided that this approach
would be overly costly and burdensome, and of limited value due to gaps
in the data Exchanges and HHS would be able to collect. We also
considered removing the requirement to connect to an HHS-approved data
source, and the requirement to use an alternative method if the
Exchange does not connect to the required data sources, but were
concerned about the potential impact on program integrity.
In finalizing the policy related to the SHOP enrollment process, we
considered maintaining the status quo, but believe that the increase in
flexibility, cost savings and reduction in burden resulting from the
new enrollment approach, will have a positive impact on small
businesses across the country and provide States with needed
flexibility.
In finalizing the policy for the new EHB-benchmark plan selection
options described at Sec. 156.111, we considered a variety of
alternatives, including maintaining the current EHB-benchmark policy
without modification. Although maintaining the current policy would
have promoted stability by preserving the current EHB-benchmarks across
all States, we do not believe it would have offered the additional
flexibility that States have requested in selecting an EHB-benchmark
plan to best meet the needs of their consumer population. We also
considered whether it was feasible to offer States increased
flexibility by allowing them to set a range of acceptable EHB within
their State, such that issuers could offer plans within that range with
more limited EHB coverage or more robust EHB coverage. However, we
determined that this option did not meet statutory requirements. To
balance stability, flexibility, and statutory requirements, we instead
finalized the proposal to offer States the expanded EHB-benchmark plan
selection options at Sec. 156.111, as well as the option to default to
the State's current EHB-benchmark plan. We believe this approach will
provide States with the opportunity to take advantage of greater
flexibility in selecting an EHB-benchmark plan while also providing
those States that value stability with the option to retain their
current benchmark plan.
With respect to the provision regarding removing the AV requirement
for SADPs, we considered making no change or proposing an expansion to
the de minimis range to mirror the expanded de minimis range for QHPs
(-4/+2 percentage points) or of +/-3 percentage points. We determined
that these alternatives were less desirable because they do not provide
issuers with as much flexibility to offer a range of SADPs as the
proposed removal of the AV standards for SADPs. We finalized the policy
to remove the level of coverage AV requirement for SADPs as proposed,
but retained a requirement to certify AV and codified an operational
requirement that such certification be reported to the Exchange, which
SADP issuers already have been doing, as part of the QHP certification
process. For the QHP certification standard regarding meaningful
difference, we considered maintaining the requirement on issuers, but
we believe that removing this provision will promote the offering of a
variety of affordable QHPs that will meet consumers' needs, will
provide issuers with more flexibility, and will remove an unnecessary
regulatory requirement.
For the amendments to Sec. 158.221(b), we considered retaining the
current quality improvement activity reporting requirements, since
giving issuers the option to report a standardized rate for QIA
expenditures may inhibit HHS from being able to analyze trends in
issuers' investment in improving the quality of health care in the
future, and may also reduce rebates to consumers by allowing issuers to
effectively increase their MLRs by 0.8 percent even if those issuers
engaged in and spent only trivial amounts on QIA. However, this change
will also potentially level the playing field among issuers to a
certain extent and lead to more accurate rebate payments, since many
issuers likely do engage in QIA but forego reporting that spending
because the burden of analyzing, documenting, tracking, allocating, and
reporting QIA expenses exceeds the benefits for MLR purposes. Because
the finalized approach of giving issuers the option to report a
minimal, standardized rate will reduce unwarranted regulatory and
economic burdens for issuers that do not want to track and report the
exact QIA amounts for their MLR calculation, we believe that the
finalized approach will be more effective and represents a better
balance than the current requirements.
For the amendments to part 158, subpart C, we considered retaining
the current requirements for States to request an adjustment to the 80
percent MLR standard in the individual market in a State. However, HHS
recognizes that many of the current State application requirements are
burdensome and less relevant in the
[[Page 17057]]
post-2014 reformed environment, and may preclude or discourage States
from proposing innovative solutions to help stabilize their individual
markets. Therefore, we believe the finalized amendments will reduce
regulatory burdens on States, and provide States with an additional
tool to promote stability in their individual markets.
E. Regulatory Flexibility Act
The Regulatory Flexibility Act, (5 U.S.C. 601, et seq.), requires
agencies to prepare an initial regulatory flexibility analysis to
describe the impact of the proposed rule on small entities, unless the
head of the agency can certify that the rule will not have a
significant economic impact on a substantial number of small entities.
The RFA generally defines a ``small entity'' as (1) a proprietary firm
meeting the size standards of the Small Business Administration (SBA),
(2) a not-for-profit organization that is not dominant in its field, or
(3) a small government jurisdiction with a population of less than
50,000. States and individuals are not included in the definition of
``small entity.'' HHS uses a change in revenues of more than 3 to 5
percent as its measure of significant economic impact on a substantial
number of small entities.
This final rule includes standards for the risk adjustment and risk
adjustment data validation programs, which are intended to stabilize
premiums as insurance market reforms are implemented and Exchanges
facilitate increased enrollment. Because we believe that insurance
firms offering comprehensive health insurance policies generally exceed
the size thresholds for ``small entities'' established by the SBA, we
do not believe that an initial regulatory flexibility analysis is
required for such firms.
For purposes of the RFA, we expect the following types of entities
to be affected by this final rule:
Health insurance issuers.
Group health plans.
We believe that health insurance issuers and group health plans
will 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 may
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.\107\ We
believe that few, if any, insurance companies selling comprehensive
health insurance policies (in contrast, for example, to travel
insurance policies or dental discount policies) fall below these size
thresholds.
---------------------------------------------------------------------------
\107\ ``Table of Small Business Size Standards Matched to North
American Industry Classification System Codes'', effective February
26, 2016, U.S. Small Business Administration, available at https://www.sba.gov/contracting/getting-started-contractor/make-sure-you-meet-sba-size-standards/table-smallbusiness-size-standards.
---------------------------------------------------------------------------
This final rule will allow enrollment in a SHOP QHP through a SHOP-
registered agent or broker, or through a participating QHP issuer. The
SHOPs are generally limited by statute to employers with at least one
but not more than 50 employees, unless a State opts to provide that
employers with from 1 to 100 employees are ``small employers.'' For
this reason, we expect that many employers who will be affected by the
finalized policies will meet the SBA standard for small entities. We do
not believe that the finalized policies impose requirements on
employers offering health insurance through a SHOP that are more
restrictive than the current requirements on small businesses offering
employer sponsored insurance. We believe the processes that we have
established constitute the minimum amount of requirements necessary to
implement the SHOP program and accomplish our policy goals, and that no
appropriate regulatory alternatives can be developed to further lessen
the compliance burden.
Based on data from MLR annual report submissions for the 2015 MLR
reporting year, approximately 92 out of over 530 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 50
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. We estimate that 57 of these 92 potentially small entities may
experience a decrease in the rebate amount owed to consumers under the
amendments to the quality improvement activity reporting provisions in
part 158, and 27 of these 57 entities are part of larger holding
groups. In addition, we estimate that no small entities will be
impacted by the amendments to 45 CFR part 158, subpart C. Therefore, we
believe that the provisions of this final rule regarding MLR will not
affect a substantial number of small entities, and further, the impact
of the proposed QIA provisions on small entities will be positive.
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 final rule that includes any
Federal mandate that may result in expenditures in any 1 year by a
State, local, or Tribal governments, in the aggregate, or by the
private sector, of $100 million in 1995 dollars, updated annually for
inflation. Currently, that threshold is approximately $148 million.
Although we have not been able to quantify all costs, we expect the
combined impact on State, local, or Tribal governments and the private
sector to be below the threshold.
G. Federalism
Executive Order 13132 establishes certain requirements that an
agency must meet when it promulgates a final rule that imposes
substantial direct costs on State and local governments, preempts State
law, or otherwise has Federalism implications.
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 rule, HHS attempted to balance the States'
interests in regulating health insurance issuers with the need to
ensure market stability. By doing so, it is HHS's view that we have
complied with the requirements of Executive Order 13132.
Because States have flexibility in designing their Exchange and
Exchange-related programs, State decisions will ultimately influence
both administrative expenses and overall premiums. States are not
required to establish an Exchange or risk adjustment program. For
States that elected previously to operate an Exchange, or risk
adjustment program, much of the initial cost of creating these programs
was funded by Exchange Planning and Establishment Grants. After
establishment, Exchanges must be financially self-sustaining, with
revenue sources at the discretion of the
[[Page 17058]]
State. Current State Exchanges charge user fees to issuers.
In HHS's view, while this final rule will 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.
For example, we are finalizing proposals to provide States with
substantially more flexibility in selecting an EHB-benchmark plan, to
explore ways to make it easier for States to establish and maintain a
State Exchange, to provide States with substantially more flexibility
in how they operate a SHOP, to provide States with the option to
request a reduction to risk adjustment transfers in their small group
market; and to make it easier for States to apply for and be granted an
adjustment to the MLR standard in their State. We are also returning
flexibility to States in their review of rate increases. We are also
finalizing the proposal to give States the choice to review rate
increases for student health insurance coverage. We are also reducing
the advanced notification that States must give HHS about the posting
of rate increases from 30 days to 5 business days. Finally, States will
no longer be required to seek approval if the State-specific threshold
for reasonableness review is lower than the Federal default rate review
threshold.
H. Congressional Review Act
This final rule is subject to the Congressional Review Act
provisions of the Small Business Regulatory Enforcement Fairness Act of
1996 (5 U.S.C. 801, et seq.), which specifies that before a rule can
take effect, the Federal agency promulgating the rule shall submit to
each House of the Congress and to the Comptroller General a report
containing a copy of the rule along with other specified information,
and has been transmitted to Congress and the Comptroller for review.
I. Reducing Regulation and Controlling Regulatory Costs
Executive Order 13771, titled Reducing Regulation and Controlling
Regulatory Costs, was issued on January 30, 2017. Section 2(a) of
Executive Order 13771 requires an agency, unless prohibited by law, to
identify at least two existing regulations to be repealed when the
agency publicly proposes for notice and comment, or otherwise
promulgates, a new regulation. In furtherance of this requirement,
section 2(c) of Executive Order 13771 requires that the new incremental
costs associated with new regulations shall, to the extent permitted by
law, be offset by the elimination of existing costs associated with at
least two prior regulations. This final rule is an E.O. 13771
deregulatory action.\108\
---------------------------------------------------------------------------
\108\ We estimate cost savings of approximately $52.74 million
in 2018, $58.12 million in 2019, and annual cost savings of $4.12
million thereafter. Thus the annualized value of cost savings, as of
2016 and calculated over a perpetual time horizon with a 7 percent
discount rate, is $9.26 million.
---------------------------------------------------------------------------
List of Subjects
45 CFR Part 147
Health care, Health insurance, Reporting and recordkeeping
requirements.
45 CFR Part 153
Administrative practice and procedure, Health care, Health
insurance, Health records, Intergovernmental relations, 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 interests, Consumer protection, Grants 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, Advisory
committees, Conflict of interests, Consumer protection, Grant
programs--health, Grants administration, Health care, Health insurance,
Health maintenance organization (HMO), Health records, Hospitals,
Indians, 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 amends 45 CFR parts 147, 153, 154, 155, 156, 157 and
158 as set forth below.
PART 147--HEALTH INSURANCE REFORM REQUIREMENTS FOR THE GROUP AND
INDIVIDUAL HEALTH INSURANCE MARKETS
0
1. 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
2. Section 147.102 is amended by revising paragraph (c)(3)(iii)((D) to
read as follows:
Sec. 147.102 Fair health insurance premiums.
* * * * *
(c) * * *
(3) * * *
(iii) * * *
(D) To the extent permitted by applicable State law and, in the
case of coverage offered through a SHOP, as permitted by the SHOP,
apply this paragraph (c)(3)(iii) uniformly among group health plans
enrolling in that product, giving those group health plans the option
to pay premiums based on average enrollee premium amounts.
* * * * *
0
3. Section 147.104 is amended by--
0
a. Revising paragraphs (b)(1)(i)(B), (b)(1)(i)(C) and (b)(1)(ii);
0
b. Removing paragraph (b)(1)(iii); and
0
c. Revising paragraphs (b)(2)(i) introductory text and (ii).
The revisions read as follows:
Sec. 147.104 Guaranteed availability of coverage.
* * * * *
(b) * * *
(1) * * *
(i) * * *
[[Page 17059]]
(B) In the case of a group health plan in the small group market
that cannot comply with employer contribution or group participation
rules for the offering of health insurance coverage, as allowed under
applicable State law, and in the case of a QHP offered in the SHOP, as
permitted by Sec. 156.285(e) or Sec. 156.286(e) of this subchapter, a
health insurance issuer may restrict the availability of coverage to an
annual enrollment period that begins November 15 and extends through
December 15 of each calendar year.
(C) With respect to coverage in the small group market, and in the
large group market if such coverage is offered through a SHOP in a
State, for a group enrollment received on the first through the
fifteenth day of any month, the coverage effective date must be no
later than the first day of the following month. For a group enrollment
received on the 16th through last day of any month, the coverage
effective date must be no later than the first day of the second
following month. In either such case, a small employer may instead opt
for a later effective date within a quarter for which small group
market rates are available.
(ii) Individual market. A health insurance issuer in the individual
market must allow an individual to purchase health insurance coverage
during the initial and annual open enrollment periods described in
Sec. 155.410(b) and (e) of this subchapter. Coverage must become
effective consistent with the dates described in Sec. 155.410(c) and
(f) of this subchapter.
(2) * * *
(i) A health insurance issuer in the individual market must provide
a limited open enrollment period for the triggering events described in
Sec. 155.420(d) of this subchapter, excluding, with respect to
coverage offered outside of an Exchange, the following:
* * * * *
(ii) In applying this paragraph (b)(2), a reference in Sec.
155.420 (other than in Sec. 155.420(a)(5)) of this subchapter to a
``QHP'' is deemed to refer to a plan, a reference to ``the Exchange''
is deemed to refer to the applicable State authority, and a reference
to a ``qualified individual'' is deemed to refer to an individual in
the individual market.
* * * * *
PART 153--STANDARDS RELATED TO REINSURANCE, RISK CORRIDORS, AND
RISK ADJUSTMENT UNDER THE AFFORDABLE CARE ACT
0
4. The authority citation for part 153 continues to read as follows:
Authority: Secs. 1311, 1321, 1341-1343, Pub. L. 111-148, 24
Stat. 119.
0
5. Section 153.320 is amended by adding paragraph (d) to read as
follows:
Sec. 153.320 Federally certified risk adjustment methodology.
* * * * *
(d) State flexibility to request reductions to transfers. Beginning
with the 2020 benefit year, States can request to reduce risk
adjustment transfers in the State's individual, small group or merged
markets by up to 50 percent in States where HHS operates the risk
adjustment program.
(1) State requests. State requests for a reduction to transfers
must include:
(i) Supporting evidence and analysis demonstrating the State-
specific factors that warrant an adjustment to more precisely account
for the differences in actuarial risk in the State market;
(ii) The adjustment percentage of up to 50 percent requested for
the State individual, small group or merged market; and
(iii) A justification for the reduction requested demonstrating the
State-specific factors that warrant an adjustment to more precisely
account for relative risk differences in the State individual, small
group or merged market, or demonstrating the requested reduction would
have de minimis impact on the necessary premium increase to cover the
transfers for issuers that would receive reduced transfer payments.
(2) Timeframe to Submit Reduction Requests. States must submit
requests for a reduction to transfer in the individual, small group or
merged market by August 1 of the year, 2 calendar years prior to the
applicable benefit year in the form and manner specified by HHS.
(3) Publication of Reduction Requests. HHS will publish State
reduction requests in the applicable benefit year's HHS notice of
benefit and payment parameters proposed rule and make the supporting
evidence available to the public for comment. HHS will publish any
approved State reduction requests or denied State reduction requests in
the applicable benefit year's HHS notice of benefit and payment
parameters final rule.
(4) HHS approval. (i) Subject to paragraph (d)(4)(ii) of this
section, HHS will approve State requests if HHS determines, based on
the review of the information submitted as part of the State's request,
along with other relevant factors, including the premium impact of the
transfer reduction for the State market, and relevant public comments:
(A) That State-specific rules or other relevant factors warrant an
adjustment to more precisely account for relative risk differences in
the State individual, small group or merged market and support the
percentage reduction to risk adjustment transfers requested; or
(B) That State-specific rules or other relevant factors warrant an
adjustment to more precisely account for relative risk differences in
the State's individual, small group or merged market and the requested
reduction would have de minimis impact on the necessary premium
increase to cover the transfers for issuers that would receive reduced
transfer payments.
(ii) HHS may approve a reduction amount that is lower than the
amount requested by the State if the supporting evidence and analysis
do not fully support the requested reduction amount. HHS will assess
other relevant factors, including the premium impact of the transfer
reduction for the State market.
0
6. Section 153.630 is amended by revising paragraphs (b)(6), (8), and
(9) to read as follows:
Sec. 153.630 Data validation requirements when HHS operates risk
adjustment.
* * * * *
(b) * * *
(6) An issuer must provide the initial validation auditor and the
second validation auditor with all relevant source enrollment
documentation, all claims and encounter data, and medical record
documentation from providers of services to each enrollee in the
applicable sample without unreasonable delay and in a manner that
reasonably assures confidentiality and security in transmission.
Notwithstanding any other provision of this section, a qualified
provider that is licensed to diagnose mental illness by the State and
that is prohibited from furnishing a complete medical record by
applicable State privacy laws concerning any enrollee's treatment for
one or more mental or behavioral health conditions may furnish a signed
mental or behavioral health assessment that, to the extent permissible
under applicable Federal and State privacy laws, should contain: The
enrollee's name; sex; date of birth; current status of all mental or
behavioral health diagnoses; and dates of service. The mental or
behavioral health assessment should be signed by the provider and
submitted with an attestation that the provider is prohibited from
furnishing a complete medical record by applicable State privacy laws.
* * * * *
[[Page 17060]]
(8) The initial validation auditor must measure and report to the
issuer and HHS, in a manner and timeframe specified by HHS, its inter-
rater reliability rates among its reviewers. The initial validation
auditor must achieve a consistency measure of at least 95 percent for
his or her review outcomes, except that for validation of risk
adjustment data for the 2015 and 2016 benefit years, the initial
validation auditor may meet an inter-rater reliability standard of 85
percent for review outcomes.
(9) HHS may impose civil money penalties in accordance with the
procedures set forth in Sec. 156.805(b) through (e) of this subchapter
if an issuer of a risk adjustment covered plan--
(i) Fails to engage an initial validation auditor;
(ii) Fails to submit the results of an initial validation audit to
HHS;
(iii) Engages in misconduct or substantial non-compliance with the
risk adjustment data validation standards and requirements applicable
to issuers of risk adjustment covered plans; or
(iv) Intentionally or recklessly misrepresents or falsifies
information that it furnishes to HHS.
* * * * *
PART 154--HEALTH INSURANCE ISSUER RATE INCREASES: DISCLOSURE AND
REVIEW REQUIREMENTS
0
7. 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
8. Section 154.103 is amended by revising paragraph (b) to read as
follows:
Sec. 154.103 Applicability.
* * * * *
(b) Exceptions. The requirements of this part do not apply to--
(1) Grandfathered health plan coverage as defined in Sec. 147.140
of this subchapter;
(2) Excepted benefits as described in section 2791(c) of the PHS
Act; and
(3) For coverage effective on or after July 1, 2018, student health
insurance coverage as defined in Sec. 147.145 of this subchapter.
0
9. Section 154.200 is revised to read as follows:
Sec. 154.200 Rate increases subject to review.
(a) A rate increase filed in a State, or effective in a State that
does not require a rate increase to be filed, is subject to review if:
(1) The rate increase is 15 percent or more applicable to a 12-
month period that begins on January 1, as calculated under paragraph
(b) of this section; or
(2) The rate increase meets or exceeds a State-specific threshold
applicable to a 12-month period that begins on January 1, as calculated
under paragraph (b) of this section, determined by the Secretary. A
State-specific threshold shall be based on factors impacting rate
increases in a State to the extent that the data relating to such
State-specific factors are available by August 1 of the preceding year.
States interested in proposing a State-specific threshold greater than
the Federal default stated in paragraph (a)(1) of this section are
required to submit a proposal for approval of such threshold to the
Secretary by August 1 of the preceding year, in the form and manner
specified by the Secretary.
(b) A rate increase meets or exceeds the applicable threshold set
forth in paragraph (a) of this section if the average increase,
including premium rating factors described in Sec. 147.102 of this
subchapter, for all enrollees weighted by premium volume for any plan
within the product meets or exceeds the applicable threshold.
(c) If a rate increase that does not otherwise meet or exceed the
threshold under paragraph (b) of this section meets or exceeds the
threshold when combined with a previous increase or increases during
the 12-month period preceding the date on which the rate increase would
become effective, then the rate increase must be considered to meet or
exceed the threshold and is subject to review under Sec. 154.210, and
such review shall include a review of the aggregate rate increases
during the applicable 12-month period.
0
10. Section 154.215 is amended by revising paragraph (h)(2) to read as
follows:
Sec. 154.215 Submission of rate filing justification.
* * * * *
(h) * * *
(2) CMS will make available to the public on its website the
information contained in Parts I and III of each Rate Filing
Justification that is not a trade secret or confidential commercial or
financial information as defined in HHS's Freedom of Information Act
regulations, 45 CFR 5.31(d).
* * * * *
0
11. Section 154.301 is amended by revising paragraph (b)(2) to read as
follows:
Sec. 154.301 CMS's determinations of Effective Rate Review Programs.
* * * * *
(b) * * *
(2) If a State intends to make the information in paragraph
(b)(1)(i) of this section available to the public prior to the date
specified by the Secretary, or if it intends to make the information in
paragraph (b)(1)(ii) of this section available to the public prior to
the first day of the annual open enrollment period in the individual
market for the applicable calendar year, the State must notify CMS in
writing, no later than five (5) business days prior to the date it
intends to make the information public, of its intent to do so and the
date it intends to make the information public.
* * * * *
PART 155--EXCHANGE ESTABLISHMENT STANDARDS AND OTHER RELATED
STANDARDS UNDER THE AFFORDABLE CARE ACT
0
12. 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
13. Section 155.106 is amended by revising paragraph (c) introductory
text to read as follows:
Sec. 155.106 Election to operate an Exchange after 2014.
* * * * *
(c) Process for State Exchanges that seek to utilize the Federal
platform for select functions. States may seek approval to operate a
State Exchange utilizing the Federal platform for only the individual
market. A State seeking approval to operate a State Exchange utilizing
the Federal platform for the individual market to support select
functions through a Federal platform agreement under Sec. 155.200(f)
must:
* * * * *
0
14. Section 155.200 is amended by removing and reserving paragraphs
(f)(2)(ii) through (iv); and revising paragraph (f)(4) introductory
text to read as follows;
Sec. 155.200 Functions of an Exchange.
* * * * *
(f) * * *
(2) * * *
(ii) [Reserved]
(iii) [Reserved]
(iv) [Reserved]
* * * * *
(4) A State Exchange on the Federal platform that utilizes the
Federal
[[Page 17061]]
platform for SHOP functions, for plan years beginning on or after
January 1, 2018, must require its QHP issuers to make any changes to
rates in accordance with the timeline applicable in a Federally-
facilitated SHOP under Sec. 155.706(b)(6)(i)(A). A State Exchange on
the Federal platform that utilizes the Federal platform for SHOP
functions, as set forth in paragraphs (f)(4)(i) through (vii) of this
section, for plan years beginning prior to January 1, 2018, must--
* * * * *
0
15. Section 155.210 is amended by revising paragraphs (c)(2)
introductory text and (e)(7) to read as follows:
Sec. 155.210 Navigator program standards.
* * * * *
(c) * * *
(2) The Exchange must include an entity from at least one of the
following categories for receipt of a Navigator grant:
* * * * *
(e) * * *
(7) In a Federally-facilitated Exchange, no individual or entity
shall be ineligible to operate as a Navigator solely because its
principal place of business is outside of the Exchange service area;
* * * * *
0
16. Section 155.215 is amended by revising paragraph (h) to read as
follows:
Sec. 155.215 Standards applicable to Navigators and Non-Navigator
Assistance Personnel carrying out consumer assistance functions under
Sec. Sec. 155.205(d) and (e) and 155.210 in a Federally-facilitated
Exchange and to Non-Navigator Assistance Personnel funded through an
Exchange Establishment Grant.
* * * * *
(h) Physical presence. In a Federally-facilitated Exchange, no
individual or entity shall be ineligible to operate as a non-Navigator
entity or as non-Navigator assistance personnel solely because its
principal place of business is outside of the Exchange service area.
* * * * *
0
17. Section 155.221 is revised to read as follows:
Sec. 155.221 Standards for third-parties to perform audits of
agents, brokers, and issuers participating in direct enrollment.
(a) An agent, broker, or issuer participating in direct enrollment
must engage a third-party entity to conduct an annual review to
demonstrate operational readiness in accordance with Sec.
155.220(c)(3)(i)(K) and with Sec. 156.1230(b)(2) of this subchapter.
The third-party entity will be a downstream or delegated entity of the
agent, broker or issuer that participates or wishes to participate in
direct enrollment.
(b) An agent, broker, or issuer participating in direct enrollment
must satisfy the requirement to demonstrate operational readiness under
paragraph (a) of this section by engaging a third-party entity that
meets each of the following standards:
(1) Has experience conducting audits or similar services, including
experience with relevant privacy and security standards;
(2) Adheres to HHS specifications for content, format, privacy, and
security in the conduct of an operational readiness review, which
includes ensuring that agents, brokers, and issuers are in compliance
with the applicable privacy and security standards and other applicable
requirements;
(3) Collects, stores, and shares with HHS all data related to the
third-party entity's audit of agents, brokers, and issuers in a manner,
format, and frequency specified by HHS until 10 years from the date of
creation, and complies with the privacy and security standards HHS
adopts for agents, brokers, and issuers as required in accordance with
Sec. 155.260;
(4) Discloses to HHS any financial relationships between the entity
and individuals who own or are employed by an agent, broker, or issuer
for which it is conducting an operational readiness review.
(5) Complies with all applicable Federal and State requirements;
(6) Ensures, on an annual basis, that appropriate staff
successfully complete operational readiness review training as
established by HHS prior to conducting audits under paragraph (a) of
this section;
(7) Permits access by the Secretary and the Office of the Inspector
General or their designees in connection with their right to evaluate
through audit, inspection, or other means, to the third-party entity's
books, contracts, computers, or other electronic systems, relating to
the third-party entity's audits of agent's, broker's, or issuer's
obligations in accordance with Federal standards under paragraph (a) of
this section until 10 years from the date of creation; and
(8) Complies with other minimum business criteria as specified in
guidance by HHS.
(c) An agent, broker or issuer may engage multiple third-party
entities to conduct the audit under paragraph (a) of this section and
each third-party entity must satisfy the standards outlined under
paragraph (b) of this section.
0
18. Section 155.305 is amended by revising paragraph (f)(4) to read as
follows:
Sec. 155.305 Eligibility standards.
* * * * *
(f) * * *
(4) Compliance with filing requirement. The Exchange may not
determine a tax filer eligible for APTC if HHS notifies the Exchange as
part of the process described in Sec. 155.320(c)(3) that APTC were
made on behalf of the tax filer or either spouse if the tax filer is a
married couple for a year for which tax data would be utilized for
verification of household income and family size in accordance with
Sec. 155.320(c)(1)(i), and the tax filer or his or her spouse did not
comply with the requirement to file an income tax return for that year
as required by 26 U.S.C. 6011, 6012, and implementing regulations and
reconcile the advance payments of the premium tax credit for that
period.
* * * * *
0
19. Section 155.320 is amended by--
0
a. Revising paragraphs (c)(3)(iii) introductory text, and paragraph
(c)(3)(iii)(A);
0
b. Adding paragraphs (c)(3)(iii)(D) through (F);
0
c. Revising paragraph (c)(3)(vi)(C), (D), (F) and (G); and
0
d. Revising paragraph (d)(4) introductory text.
The revisions and additions read as follows:
Sec. 155.320 Verification process related to eligibility for
insurance affordability programs.
* * * * *
(c) * * *
(3) * * *
(iii) Verification process for changes in household income. (A)
Except as specified in paragraph (c)(3)(iii)(B), (C), and (D) of this
section, if an applicant's attestation, in accordance with paragraph
(c)(3)(ii)(B) of this section, indicates that a tax filer's annual
household income has increased or is reasonably expected to increase
from the data described in paragraph (c)(3)(ii)(A) of this section for
the benefit year for which the applicant(s) in the tax filer's family
are requesting coverage and the Exchange has not verified the
applicant's MAGI-based income through the process specified in
paragraph (c)(2)(ii) of this section to be within the applicable
Medicaid or CHIP MAGI-based income standard, the Exchange must accept
the applicant's attestation regarding a tax filer's annual household
income without further verification.
* * * * *
[[Page 17062]]
(D) If an applicant's attestation to projected annual household
income, as described in paragraph (c)(3)(ii)(B) of this section, is
greater than or equal to 100 percent but not more than 400 percent of
the FPL for the benefit year for which coverage is requested and is
more than a reasonable threshold above the annual household income
computed in accordance with paragraph (c)(3)(ii)(A) of this section,
the data described in paragraph (c)(3)(ii)(A) of this section indicates
that projected annual household income is under 100 percent FPL, and
the Exchange has not verified the applicant's MAGI-based income through
the process specified in paragraph (c)(2)(ii) of this section to be
within the applicable Medicaid or CHIP MAGI-based income standard, the
Exchange must proceed in accordance with Sec. 155.315(f)(1) through
(4). However, this paragraph (c)(3)(iii)(D) does not apply if the
applicant is a non-citizen who is lawfully present and ineligible for
Medicaid by reason of immigration status. For the purposes of this
paragraph, a reasonable threshold is established by the Exchange in
guidance and approved by HHS, but must not be less than 10 percent, and
can also include a threshold dollar amount.
(E) If, at the conclusion of the period specified in Sec.
155.315(f)(2)(ii), the Exchange remains unable to verify the
applicant's attestation, the Exchange must determine the applicant's
eligibility based on the information described in paragraph
(c)(3)(ii)(A) of this section, notify the applicant of such
determination in accordance with the notice requirements specified in
Sec. 155.310(g), and implement such determination in accordance with
the effective dates specified in Sec. 155.330(f).
(F) If, at the conclusion of the period specified in Sec.
155.315(f)(2)(ii), the Exchange remains unable to verify the
applicant's attestation and the information described in paragraph
(c)(3)(ii)(A) of this section is unavailable, the Exchange must
determine the tax filer ineligible for advance payments of the premium
tax credit and cost-sharing reductions, notify the applicant of such
determination in accordance with the notice requirements specified in
Sec. 155.310(g), and discontinue any advance payments of the premium
tax credit and cost-sharing reductions in accordance with the effective
dates specified in Sec. 155.330(f).
* * * * *
(vi) * * *
(C) Increases in annual household income. If an applicant's
attestation, in accordance with paragraph (c)(3)(ii)(B) of this
section, indicates that a tax filer's annual household income has
increased or is reasonably expected to increase from the data described
in paragraph (c)(3)(vi)(A) of this section to the benefit year for
which the applicant(s) in the tax filer's family are requesting
coverage and the Exchange has not verified the applicant's MAGI-based
income through the process specified in paragraph (c)(2)(ii) of this
section to be within the applicable Medicaid or CHIP MAGI-based income
standard, the Exchange must accept the applicant's attestation for the
tax filer's family without further verification, unless:
(1) The Exchange finds that an applicant's attestation of a tax
filer's annual household income is not reasonably compatible with other
information provided by the application filer, or
(2) The data described in paragraph (c)(3)(vi)(A) of this section
indicates that projected annual household income is under 100 percent
FPL and the applicant's attestation to projected household income, as
described in paragraph (c)(3)(ii)(B) of this section, is greater than
or equal to 100 percent but not more than 400 percent of the FPL for
the benefit year for which coverage is requested and is more than a
reasonable threshold above the annual household income as computed
using data sources described in paragraph (c)(3)(vi)(A) of this
section, in which case the Exchange must follow the procedures
specified in Sec. 155.315(f)(1) through (4). The reasonable threshold
used under this paragraph must be equal to the reasonable threshold
established in accordance with paragraph (c)(3)(iii)(D) of this
section.
(D) Decreases in annual household income and situations in which
electronic data is unavailable. If electronic data are unavailable or
an applicant's attestation to projected annual household income, as
described in paragraph (c)(3)(ii)(B) of this section, is more than a
reasonable threshold below the annual household income as computed
using data sources described in paragraphs (c)(3)(vi)(A) of this
section, the Exchange must follow the procedures specified in Sec.
155.315(f)(1) through (4). The reasonable threshold used under this
paragraph must be equal to the reasonable threshold established in
accordance with paragraph (c)(3)(vi) of this section.
* * * * *
(F) If, at the conclusion of the period specified in Sec.
155.315(f)(2)(ii), the Exchange remains unable to verify the
applicant's attestation, the Exchange must determine the applicant's
eligibility based on the information described in paragraph
(c)(3)(ii)(A) of this section, notify the applicant of such
determination in accordance with the notice requirements specified in
Sec. 155.310(g), and implement such determination in accordance with
the effective dates specified in Sec. 155.330(f).
(G) If, at the conclusion of the period specified in Sec.
155.315(f)(2)(ii), the Exchange remains unable to verify the
applicant's attestation for the tax filer and the information described
in paragraph (c)(3)(ii)(A) of this section is unavailable, the Exchange
must determine the tax filer ineligible for advance payments of the
premium tax credit and cost-sharing reductions, notify the applicant of
such determination in accordance with the notice requirement specified
in Sec. 155.310(g), and discontinue any advance payments of the
premium tax credit and cost-sharing reductions in accordance with the
effective dates specified in Sec. 155.330(f).
* * * * *
(d) * * *
(4) Alternate procedures. For any benefit year for which it does
not reasonably expect to obtain sufficient verification data as
described in paragraphs (d)(2)(i) through (iii) of this section, the
Exchange must follow the procedures specified in paragraph (d)(4)(i) of
this section or, for benefit years 2016 through 2019, the Exchange may
follow the procedures specified in paragraph (d)(4)(ii) of this
section. For purposes of this paragraph (d)(4), the Exchange reasonably
expects to obtain sufficient verification data for any benefit year
when, for the benefit year, the Exchange is able to obtain data about
enrollment in and eligibility for qualifying coverage in an eligible
employer-sponsored plan from at least one electronic data source that
is available to the Exchange and that has been approved by HHS, based
on evidence showing that the data source is sufficiently current,
accurate, and minimizes administrative burden, as described under
paragraph (d)(2)(i) of this section.
* * * * *
0
20. Section 155.420 is amended by:
0
a. Revising paragraphs (a)(4)(iii), (a)(5) and (b)(2)(i);
0
b. Removing paragraph (b)(2)(v);
0
c. Redesignating paragraph (b)(2)(vi) as paragraph (b)(2)(v);
0
d. Revising paragraph (d)(1)(iii); and
0
e. Revising paragraph (d)(10)(i).
The revisions read as follows:
Sec. 155.420 Special enrollment periods.
(a) * * *
[[Page 17063]]
(4) * * *
(iii) For the other triggering events specified in paragraph (d) of
this section, except for paragraphs (d)(2)(i), (d)(4), (d)(6)(i) and
(ii) of this section for becoming newly eligible for CSRs, (d)(8), (9),
(10) and (12) of this section:
(A) If an enrollee qualifies for a special enrollment period, the
Exchange must allow the enrollee and his or her dependents to change to
another QHP within the same level of coverage (or one metal level
higher or lower, if no such QHP is available), as outlined in Sec.
156.140(b) of this subchapter; or
(B) If a dependent qualifies for a special enrollment period, and
an enrollee is adding the dependent to his or her QHP, the Exchange
must allow the enrollee to add the dependent to his or her current QHP;
or, if the QHP's business rules do not allow the dependent to enroll,
the Exchange must allow the enrollee and his or her dependents to
change to another QHP within the same level of coverage (or one metal
level higher or lower, if no such QHP is available), as outlined in
Sec. 156.140(b) of this subchapter, or enroll the new qualified
individual in a separate QHP.
(5) Prior coverage requirement. Qualified individuals who are
required to demonstrate coverage in the 60 days prior to a qualifying
event can either demonstrate that they had minimum essential coverage
as described in 26 CFR 1.5000A-1(b) for 1 or more days during the 60
days preceding the date of the qualifying event; lived in a foreign
country or in a United States territory for 1 or more days during the
60 days preceding the date of the qualifying event; are an Indian as
defined by section 4 of the Indian Health Care Improvement Act; or
lived for 1 or more days during the 60 days preceding the qualifying
event or during their most recent preceding enrollment period, as
specified in Sec. Sec. 155.410 and 155.420, in a service area where no
qualified health plan was available through the Exchange.
(b) * * *
(2) * * *
(i) In the case of birth, adoption, placement for adoption,
placement in foster care, or child support or other court order as
described in paragraph (d)(2)(i) of this section, the Exchange must
ensure that coverage is effective for a qualified individual or
enrollee on the date of birth, adoption, placement for adoption,
placement in foster care, or effective date of court order; or it may
permit the qualified individual or enrollee to elect a coverage
effective date of the first of the month following plan selection; or
in accordance with paragraph (b)(1) of this section. If the Exchange
permits the qualified individual or enrollee to elect a coverage
effective date of either the first of the month following the date of
plan selection or in accordance with paragraph (b)(1) of this section,
the Exchange must ensure coverage is effective on the date duly
selected by the qualified individual or enrollee.
* * * * *
(d) * * *
(1) * * *
(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)) or loses access to health
care services through coverage provided to a pregnant woman's unborn
child, based on the definition of a child in 42 CFR 457.10. The date of
the loss of coverage is the last day the qualified individual would
have pregnancy-related coverage or access to health care services
through the unborn child coverage; or
* * * * *
(10) * * *
(i) Is a victim of domestic abuse or spousal abandonment as defined
by 26 CFR 1.36B-2 or a dependent or unmarried victim within a
household, is enrolled in minimum essential coverage, and sought to
enroll in coverage separate from the perpetrator of the abuse or
abandonment; or
* * * * *
0
21. Section 155.430 is amended by:
0
a. Revising paragraph (d)(2)(ii);
0
b. Redesignating paragraphs (d)(2)(iii), (d)(2)(iv) and (d)(2)(v) as
paragraphs (d)(2)(iv), (d)(2)(v), and (d)(2)(vi), respectively;
0
c. Adding new paragraph (d)(2)(iii); and
0
d. Revising newly redesignated paragraphs (d)(2)(iv), and (v).
The revisions and additions read as follows:
Sec. 155.430 Termination of Exchange enrollment or coverage.
* * * * *
(d) * * *
(2) * * *
(ii) If the enrollee does not provide reasonable notice, fourteen
days after the termination is requested by the enrollee; or
(iii) At the option of the Exchange, on the date on which the
termination is requested by the enrollee, or on another prospective
date selected by the enrollee; or
(iv) If an Exchange does not require an earlier termination date in
accordance with paragraph (d)(2)(iii) of this section, at the option of
the QHP issuer, on a date on or after the termination is requested by
the enrollee that is less than 14 days after the termination is
requested by the enrollee, if the enrollee requests an earlier
termination date; or
(v) At the option of the Exchange, for an individual who is newly
determined eligible for Medicaid, CHIP, or the Basic Health Program, if
a Basic Health Program is operating in the service area of the
Exchange, the day before the enrollee's date of eligibility for
Medicaid, CHIP, or the Basic Health Program.
* * * * *
0
22. Section 155.500 is amended by revising the definitions of ``Appeal
request'' and ``Appeals entity'' to read as follows:
Sec. 155.500 Definitions.
* * * * *
Appeal request means a clear expression, either orally or in
writing, by an applicant, enrollee, employer, or small business
employer or employee to have any eligibility determination or
redetermination contained in a notice issued in accordance with Sec.
155.310(g), Sec. 155.330(e)(1)(ii), Sec. 155.335(h)(1)(ii), Sec.
155.610(i), Sec. 155.715(e) or (f), or Sec. 155.716(e) reviewed by an
appeals entity.
Appeals entity means a body designated to hear appeals of
eligibility determinations or redeterminations contained in notices
issued in accordance with Sec. 155.310(g), Sec. 155.330(e)(1)(ii),
Sec. 155.335(h)(1)(ii), Sec. 155.610(i), Sec. 155.715(e) and (f), or
Sec. 155.716(e).
* * * * *
0
23. Section 155.605 is amended by revising paragraph (d)(2)(iv) to read
as follows:
Sec. 155.605 Eligibility standards for exemptions.
* * * * *
(d) * * *
(2) * * *
(iv) For an individual who is ineligible to purchase coverage under
an eligible employer-sponsored plan, the Exchange determines the
required contribution for coverage in accordance with section
5000A(e)(1)(B)(ii) of the Code, inclusive of all members of the family,
as defined in 26 CFR 1.36B-1(d), who have not otherwise been granted an
exemption through the Exchange and who are not treated as eligible to
purchase coverage under an eligible employer-sponsored plan, in
accordance with paragraph (d)(4)(ii) of this section. If there is not a
bronze level plan offered through the Exchange in the
[[Page 17064]]
individual's county, the Exchange must use the annual premium for the
lowest cost Exchange metal level plan, excluding catastrophic coverage,
available in the individual market through the Exchange in the State in
the county in which the individual resides to determine whether
coverage exceeds the affordability threshold specified in section
5000A(e)(1) of the Code; and
* * * * *
0
24. Section 155.610 is amended by revising paragraph (h)(2) to read as
follows:
Sec. 155.610 Eligibility process for exemptions.
* * * * *
(h) * * *
(2) The Exchange will only accept an application for an exemption
described in Sec. 155.605(d)(1) during one of the 3 calendar years
after the month or months during which the applicant attests that the
hardship occurred.
* * * * *
0
25. Section 155.700 is amended by revising paragraph (a) to read as
follows:
Sec. 155.700 Standards for the establishment of a SHOP.
(a) General requirement. (1) For plan years beginning before
January 1, 2018, an Exchange must provide for the establishment of a
SHOP that meets the requirements of this subpart and is designed to
assist qualified employers and facilitate the enrollment of qualified
employees into qualified health plans.
(2) For plan years beginning on or after January 1, 2018, an
Exchange must provide for the establishment of a SHOP that meets the
requirements of this subpart and is designed to assist qualified
employers in facilitating the enrollment of their employees in
qualified health plans.
* * * * *
0
26. Section 155.705 is amended by revising the section heading and
adding paragraph (e) to read as follows:
Sec. 155.705 Functions of a SHOP for plan years beginning prior to
January 1, 2018.
* * * * *
(e) Applicability date. The provisions of this section apply for
plan years beginning prior to January 1, 2018. Section 155.706 is
applicable for plan years beginning on or after January 1, 2018.
0
27. Section 155.706 is added to read as follows:
Sec. 155.706 Functions of a SHOP for plan years beginning on or
after January 1, 2018.
(a) Exchange functions that apply to SHOP. The SHOP must carry out
all the required functions of an Exchange described in this subpart and
in subparts C, E, K, and M of this part, except:
(1) Requirements related to individual eligibility determinations
in subpart D of this part;
(2) Requirements related to enrollment of qualified individuals
described in subpart E of this part;
(3) The requirement to issue certificates of exemption in
accordance with Sec. 155.200(b); and
(4) Requirements related to the payment of premiums by individuals,
Indian tribes, tribal organizations and urban Indian organizations
under Sec. 155.240.
(b) Unique functions of a SHOP. The SHOP must also provide the
following unique functions:
(1) Enrollment and eligibility functions. The SHOP must adhere to
the requirements outlined in subpart H.
(2) Employer choice requirements. The SHOP must allow a qualified
employer to select a level of coverage as described in section
1302(d)(1) of the Affordable Care Act, in which all QHPs within that
level are made available to the qualified employees of the employer.
(3) SHOP options with respect to employer choice requirements. (i)
A SHOP:
(A) Must allow an employer to make available to qualified employees
all QHPs at the level of coverage selected by the employer as described
in paragraph (b)(2) of this section, and
(B) May allow an employer to make one or more QHPs available to
qualified employees by a method other than the method described in
paragraph (b)(2) of this section.
(ii) A Federally-facilitated SHOP will provide a qualified employer
a choice of two methods to make QHPs available to qualified employees:
(A) The employer may choose a level of coverage as described in
paragraph (b)(2) of this section, or
(B) The employer may choose a single QHP.
(iii) A SHOP may, and a Federally-facilitated SHOP will provide a
qualified employer a choice of two methods to make stand-alone dental
plans available to qualified employees:
(A) The employer may choose to make available a single stand-alone
dental plan.
(B) The employer may choose to make available all stand-alone
dental plans offered through a SHOP.
(iv) A SHOP may also provide a qualified employer with a choice of
a third method to make QHPs available to qualified employees by
offering its qualified employees a choice of all QHPs offered through
the SHOP by a single issuer across all available levels of coverage, as
described in section 1302(d)(1) of the Affordable Care Act and
implemented in Sec. 156.140(b) of this subchapter. A State with a
Federally-facilitated SHOP may recommend that the Federally-facilitated
SHOP not make this additional option available in that State, by
submitting a letter to HHS in advance of the annual QHP certification
application deadline, by a date to be established by HHS. The State's
letter must describe and justify the State's recommendation, based on
the anticipated impact this additional option would have on the small
group market and consumers.
(v) A SHOP may also provide a qualified employer with a choice of a
third method to make stand-alone dental plans available to qualified
employees by offering its qualified employees a choice of all stand-
alone dental plans offered through the SHOP by a single issuer. A State
with a Federally-facilitated SHOP may recommend that the Federally-
facilitated SHOP not make this additional option available in that
State, by submitting a letter to HHS in advance of the annual QHP
certification application deadline, by a date to be established by HHS.
The State's letter must describe and justify the State's
recommendation, based on the anticipated impact this additional option
would have on the small group market and consumers.
(vi) States operating a State Exchange utilizing the Federal
platform for SHOP enrollment functions will have the same employer
choice models available as States with a Federally-facilitated SHOP,
except that a State with a State Exchange utilizing the Federal
platform for SHOP enrollment functions may decide against offering the
employer choice models specified in paragraphs (b)(3)(iv) and (v) of
this section in that State, provided that the State notifies HHS of
that decision in advance of the annual QHP certification application
deadline, by a date to be established by HHS.
(4) Continuation of Coverage. The SHOP may, upon an election by a
qualified employer, enter into an agreement with a qualified employer
to facilitate the administration of continuation coverage by collecting
premiums for continuation coverage enrolled in through the SHOP
directly from a person enrolled in continuation coverage through the
SHOP consistent with applicable law and the terms of the group health
plan, and remitting
[[Page 17065]]
premium payments for this coverage to QHP issuers.
(5) QHP Certification. With respect to certification of QHPs in the
small group market, the SHOP must ensure each QHP meets the
requirements specified in Sec. 156.285 of this subchapter.
(6) Rates and rate changes. The SHOP must--
(i) Require all QHP issuers to make any change to rates at a
uniform time that is no more frequently than quarterly.
(A) In a Federally-facilitated SHOP, rates may be updated quarterly
with effective dates of January 1, April 1, July 1, or October 1 of
each calendar year. The updated rates must be submitted to HHS at least
60 days in advance of the effective date of the rates.
(B) [Reserved]
(ii) Prohibit all QHP issuers from varying rates for a qualified
employer during the employer's plan year.
(7) QHP availability in merged markets. If a State merges the
individual market and the small group market risk pools in accordance
with section 1312(c)(3) of the Affordable Care Act, the SHOP may permit
employer groups to enroll in any QHP meeting level of coverage
requirements described in section 1302(d) of the Affordable Care Act.
(8) QHP availability in unmerged markets. If a State does not merge
the individual and small group market risk pools, the SHOP must permit
employer groups to enroll only in QHPs in the small group market.
(9) SHOP expansion to large group market. If a State elects to
expand the SHOP to the large group market, a SHOP must allow issuers of
health insurance coverage in the large group market in the State to
offer QHPs in such market through a SHOP beginning in 2017 provided
that a large employer meets the qualified employer requirements other
than that it be a small employer.
(10) Participation rules. Subject to Sec. 147.104 of this
subchapter, the SHOP may authorize a uniform group participation rate
for the offering of health insurance coverage in the SHOP, which must
be a single, uniform rate that applies to all groups and issuers in the
SHOP. If the SHOP authorizes a minimum participation rate, such rate
must be based on the rate of employee participation in the SHOP, not on
the rate of employee participation in any particular QHP or QHPs of any
particular issuer.
(i) Subject to Sec. 147.104 of this subchapter, a Federally-
facilitated SHOP must use a minimum participation rate of 70 percent,
calculated as the number of full-time employees accepting coverage
offered by a qualified employer plus the number of full-time employees
who, at the time the employer submits the SHOP group enrollment, are
enrolled in coverage through another group health plan, governmental
coverage (such as Medicare, Medicaid, or TRICARE), coverage sold
through the individual market, or in other minimum essential coverage,
divided by the number of full-time employees offered coverage.
(ii) Notwithstanding paragraphs (b)(10)(i) of this section, a
Federally-facilitated SHOP may utilize a different minimum
participation rate in a State if there is evidence that a State law
sets a minimum participation rate or that a higher or lower minimum
participation rate is customarily used by the majority of QHP issuers
in that State for products in the State's small group market outside
the SHOP.
(11) Premium calculator. In the SHOP, the premium calculator
described in Sec. 155.205(b)(6) must facilitate the comparison of
available QHPs.
(c) Coordination with individual market Exchange for eligibility
determinations. A SHOP that collects employee eligibility or enrollment
data must provide data related to eligibility and enrollment of a
qualified employee to the individual market Exchange that corresponds
to the service area of the SHOP, unless the SHOP is operated pursuant
to Sec. 155.100(a)(2).
(d) Duties of Navigators in the SHOP. In States that have elected
to operate only a SHOP pursuant to Sec. 155.100(a)(2), at State option
and if State law permits the Navigator duties described in Sec.
155.210(e)(3) and (4) may be fulfilled through referrals to agents and
brokers.
(e) Applicability date. The provisions of this section apply for
plan years beginning on or after January 1, 2018.
0
28. Section 155.715 is amended by revising the section heading and
adding paragraph (h) to read as follows:
Sec. 155.715 Eligibility determination process for SHOP for plan
years beginning prior to January 1, 2018.
* * * * *
(h) Applicability date. The provisions of this section apply for
plan years beginning prior to January 1, 2018. Section 155.716 is
applicable for plan years beginning on or after January 1, 2018.
0
29. Section 155.716 is added to read as follows:
Sec. 155.716 Eligibility determination process for SHOP for plan
years beginning on or after January 1, 2018.
(a) General requirement. The SHOP must determine whether an
employer requesting a determination of eligibility to participate in a
SHOP is eligible in accordance with the requirements of Sec. 155.710.
(b) Applications. The SHOP must accept a SHOP single employer
application form from employers, in accordance with the relevant
standards of Sec. 155.730.
(c) Verification of eligibility. For the purpose of verifying
employer eligibility, the SHOP--
(1) May establish, in addition to or in lieu of reliance on the
application, additional methods to verify the information provided by
the applicant on the applicable application;
(2) Must collect only the minimum information necessary for
verification of eligibility in accordance with the eligibility
standards described in Sec. 155.710; and
(3) May not perform individual market Exchange eligibility
determinations or verifications described in subpart D of this part.
(d) Eligibility adjustment period. When the information submitted
on the SHOP single employer application is inconsistent with
information collected from third-party data sources through the
verification process described in paragraph (c)(1) of this section or
otherwise received by the SHOP, the SHOP must--
(1) Make a reasonable effort to identify and address the causes of
such inconsistency, including through typographical or other clerical
errors;
(2) Notify the employer of the inconsistency;
(3) Provide the employer with a period of 30 days from the date on
which the notice described in paragraph (d)(2) of this section is sent
to the employer to either present satisfactory documentary evidence to
support the employer's application, or resolve the inconsistency; and
(4) If, after the 30-day period described in paragraph (d)(2) of
this section, the SHOP has not received satisfactory documentary
evidence, the SHOP must--
(i) Notify the employer of its denial or termination of eligibility
in accordance with paragraph (e) of this section and of the employer's
right to appeal such determination; and
(ii) If the employer was enrolled pending the confirmation or
verification of eligibility information, discontinue the employer's
participation in the
[[Page 17066]]
SHOP at the end of the month following the month in which the notice is
sent.
(e) Notification of employer eligibility. The SHOP must provide an
employer requesting eligibility to purchase coverage through the SHOP
with a notice of approval or denial or termination of eligibility and
the employer's right to appeal such eligibility determination.
(f) Validity of Eligibility Determination. An employer's
determination of eligibility to participate in SHOP remains valid until
the employer makes a change that could end its eligibility under Sec.
155.710(b) or withdraws from participation in the SHOP.
(g) Applicability date. The provisions of this section apply for
plan years beginning on or after January 1, 2018.
0
30. Section 155.720 is amended by revising the section heading and
adding paragraph (j) to read as follows:
Sec. 155.720 Enrollment of employees into QHPs under SHOP for plan
years beginning prior to January 1, 2018.
* * * * *
(j) Applicability date. The provisions of this section apply for
plan years beginning prior to January 1, 2018. Section 155.721 is
applicable for plan years beginning on or after January 1, 2018.
0
31. Section 155.721 is added to read as follows:
Sec. 155.721 Record retention and IRS Reporting for plan years
beginning on or after January 1, 2018.
(a) Records. The SHOP must receive and maintain for at least 10
years records of qualified employers participating in the SHOP.
(b) Reporting requirement for tax administration purposes. The SHOP
must, at the request of the IRS, report information to the IRS about
employer eligibility to participate in SHOP coverage.
(c) Applicability date. The provisions of this section apply for
plan years beginning on or after January 1, 2018.
0
32. Section 155.725 is amended by revising the section heading and
adding paragraph (l) to read as follows:
Sec. 155.725 Enrollment periods under SHOP for plan years beginning
prior to January 1, 2018.
* * * * *
(l) Applicability date. The provisions of this section apply for
plan years beginning prior to January 1, 2018. Section 155.726 is
applicable for plan years beginning on or after January 1, 2018.
0
33. Section 155.726 is added to read as follows:
Sec. 155.726 Enrollment periods under SHOP for plan years beginning
on or after January 1, 2018.
(a) General requirements. The SHOP must ensure that issuers
offering QHPs through the SHOP adhere to applicable enrollment periods,
including special enrollment periods.
(b) Rolling enrollment in the SHOP. The SHOP must permit a
qualified employer to purchase coverage for its small group at any
point during the year. The employer's plan year must consist of the 12-
month period beginning with the qualified employer's effective date of
coverage, unless the plan is issued in a State that has elected to
merge its individual and small group risk pools under section
1312(c)(3) of the Affordable Care Act, in which case the plan year will
end on December 31 of the calendar year in which coverage first became
effective.
(c) Special enrollment periods. (1) The SHOP must ensure that
issuers offering QHPs through the SHOP provide special enrollment
periods consistent with the section, during which certain qualified
employees or dependents of qualified employees may enroll in QHPs and
enrollees may change QHPs.
(2) The SHOP must ensure that issuers offering QHPs through a SHOP
provide a special enrollment period for a qualified employee or a
dependent of a qualified employee who;
(i) Experiences an event described in Sec. 155.420(d)(1) (other
than paragraph (d)(1)(ii)), or experiences an event described in Sec.
155.420(d)(2), (4), (5), (7), (8), (9), (10), (11), or (12);
(ii) Loses eligibility for coverage under a Medicaid plan under
title XIX of the Social Security Act or a State child health plan under
title XXI of the Social Security Act; or
(iii) Becomes eligible for assistance, with respect to coverage
under a SHOP, under such Medicaid plan or a State child health plan
(including any waiver or demonstration project conducted under or in
relation to such a plan).
(3) A qualified employee or dependent of a qualified employee who
experiences a qualifying event described in paragraph (j)(2) of this
section has:
(i) Thirty (30) days from the date of a triggering event described
in paragraph (c)(2)(i) of this section to select a QHP through the
SHOP; and
(ii) Sixty (60) days from the date of a triggering event described
in paragraph (c)(2)(ii) or (iii) of this section to select a QHP
through the SHOP;
(4) A dependent of a qualified employee is not eligible for a
special enrollment period if the employer does not extend the offer of
coverage to dependents.
(5) The effective dates of coverage for special enrollment periods
are determined using the provisions of Sec. 155.420(b).
(6) Loss of minimum essential coverage is determined using the
provisions of Sec. 155.420(e).
(d) Limitation. Qualified employees will not be able to enroll
unless the employer group meets any applicable minimum participation
rate implemented under Sec. 155.706(b)(10).
(e) Applicability date. The provisions of this section apply for
plan years beginning on or after January 1, 2018.
0
34. Section 155.730 is amended by revising the section heading and
adding paragraph (h) to read as follows:
Sec. 155.730 Application standards for SHOP for plan year beginning
prior to January 1, 2018.
* * * * *
(h) Applicability date. The provisions of this section apply for
plan years beginning prior to January 1, 2018. Section 155.731 is
applicable for plan years beginning on or after January 1, 2018.
0
35. Section 155.731 is added to read as follows:
Sec. 155.731 Application standards for SHOP for plan years beginning
on or after January 1, 2018.
(a) General requirements. Application forms used by the SHOP must
meet the requirements set forth in this section.
(b) Single employer application. The SHOP must use a single
application to determine employer eligibility. Such application must
collect the following--
(1) Employer name and address of employer's locations;
(2) Information sufficient to confirm the employer is a small
employer;
(3) Employer Identification Number (EIN); and
(4) Information sufficient to confirm that the employer is
offering, at a minimum, all full-time employees coverage in a QHP
through a SHOP.
(c) Model application. The SHOP may use the model single employer
application provided by HHS.
(d) Alternative employer application. The SHOP may use an
alternative application if such application is approved by HHS and
collects the information described in paragraph (b).
(e) Filing. The SHOP must:
(1) Accept applications from SHOP application filers; and
(2) Provide the tools to file an employer eligibility application
via an internet website.
(f) Additional safeguards. (1) The SHOP may not provide to the
employer any information collected on an
[[Page 17067]]
employee application with respect to spouses or dependents other than
the name, address, and birth date of the spouse or dependent.
(2) The SHOP is not permitted to collect information on the single
employer or on an employee application unless that information is
necessary to determine SHOP eligibility or effectuate enrollment
through the SHOP.
(g) Applicability date. The provisions of this section apply for
plan years beginning on or after January 1, 2018.
0
36. Section 155.735 is amended by revising the section heading and
adding paragraph (h) to read as follows:
Sec. 155.735 Termination of SHOP enrollment or coverage for plan
years beginning prior to January 1, 2018.
* * * * *
(h) Applicability date. The provisions of this section apply for
plan years beginning before January 1, 2018.
0
37. Section 155.740 is amended by revising the section heading and
adding paragraph (p) to read as follows:
Sec. 155.740 SHOP employer and employee eligibility appeals
requirements for plan years beginning prior to January 1, 2018.
* * * * *
(p) Applicability date. The provisions of this section apply for
plan years beginning prior to January 1, 2018. Section 155.741 is
applicable for plan years beginning on or after January 1, 2018.
0
38. Section 155.741 is added to subpart H to read as follows:
Sec. 155.741 SHOP employer and employee eligibility appeals
requirements for plan year beginning on or after January 1, 2018.
(a) Definitions. The definitions in Sec. Sec. 155.20, 155.300, and
155.500 apply to this section.
(b) General requirements. (1) A State, establishing an Exchange
that provides for the establishment of a SHOP pursuant to Sec. 155.100
must provide an eligibility appeals process for the SHOP. Where a State
has not established an Exchange that provides for the establishment of
a SHOP pursuant to Sec. 155.100, HHS will provide an eligibility
appeals process for the SHOP that meets the requirements of this
section and the requirements in paragraph (b)(2) of this section.
(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).
(c) Employer right to appeal. An employer may appeal--
(1) A notice of denial or termination of eligibility under Sec.
155.716(e); or
(2) A failure by the SHOP to provide a timely eligibility
determination or a timely notice of an eligibility determination in
accordance with Sec. 155.716(e).
(d) Appeals notice requirement. Notices of the right to appeal a
denial of eligibility under Sec. 155.716(e) must be written and
include--
(1) The reason for the denial or termination of eligibility,
including a citation to the applicable regulations; and
(2) The procedure by which the employer may request an appeal of
the denial or termination of eligibility.
(e) Appeal request. The SHOP and appeals entity must--
(1) Allow an employer to request an appeal within 90 days from the
date of the notice of denial or termination of eligibility to--
(i) The SHOP or the appeals entity; or
(ii) HHS, if no State Exchange that provides for establishment of a
SHOP has been established;
(2) Accept appeal requests submitted through any of the methods
described in Sec. 155.520(a)(1);
(3) Comply with the requirements of Sec. 155.520(a)(2) and (3);
and
(4) Consider an appeal request valid if it is submitted in
accordance with paragraph (e)(1) of this section.
(f) Notice of appeal request. (1) Upon receipt of a valid appeal
request, the appeals entity must--
(i) Send timely acknowledgement to the employer of the receipt of
the appeal request, including--
(A) An explanation of the appeals process; and
(B) Instructions for submitting additional evidence for
consideration by the appeals entity.
(ii) Promptly notify the SHOP of the appeal, if the appeal request
was not initially made to the SHOP.
(2) Upon receipt of an appeal request that is not valid because it
fails to meet the requirements of this section, the appeals entity
must--
(i) Promptly and without undue delay, send written notice to the
employer that is appealing that--
(A) The appeal request has not been accepted,
(B) The nature of the defect in the appeal request; and
(C) An explanation that the employer may cure the defect and
resubmit the appeal request if it meets the timeliness requirements of
paragraph (e) of this section, or within a reasonable timeframe
established by the appeals entity.
(ii) Treat as valid an amended appeal request that meets the
requirements of this section.
(g) Transmittal and receipt of records. (1) Upon receipt of a valid
appeal request under this section, or upon receipt of the notice under
paragraph (f)(2) of this section, the SHOP must promptly transmit, via
secure electronic interface, to the appeals entity--
(i) The appeal request, if the appeal request was initially made to
the SHOP; and
(ii) The eligibility record of the employer that is appealing.
(2) The appeals entity must promptly confirm receipt of records
transmitted pursuant to paragraph (g)(1) of this section to the SHOP
that transmitted the records.
(h) Dismissal of appeal. The appeals entity--
(1) Must dismiss an appeal if the employer that is appealing--
(i) Withdraws the request in accordance with the standards set
forth in Sec. 155.530(a)(1); or
(ii) Fails to submit an appeal request meeting the standards
specified in paragraph (e) of this section.
(2) Must provide timely notice to the employer that is appealing of
the dismissal of the appeal request, including the reason for
dismissal, and must notify the SHOP of the dismissal.
(3) May vacate a dismissal if the employer makes a written request
within 30 days of the date of the notice of dismissal showing good
cause why the dismissal should be vacated.
(i) Procedural rights of the employer. The appeals entity must
provide the employer the opportunity to submit relevant evidence for
review of the eligibility determination.
(j) Adjudication of SHOP appeals. SHOP appeals must--
(1) Comply with the standards set forth in Sec. 155.555(i)(1) and
(3); and
(2) Consider the information used to determine the employer's
eligibility as well as any additional relevant evidence submitted
during the course of the appeal by the employer or employee.
(k) Appeal decisions. Appeal decisions must--
(1) Be based solely on--
(i) The evidence referenced in paragraph (j)(2) of this section;
(ii) The eligibility requirements for the SHOP under Sec.
155.710(b), as applicable.
(2) Comply with the standards set forth in Sec. 155.545(a)(2)
through (5)
(3) Be effective as follows:
(i) If an employer is found eligible under the decision, then at
the employer's option, the effective date of coverage or enrollment
through the SHOP under the decision can either be made retroactive to
the effective date of coverage or enrollment through the
[[Page 17068]]
SHOP that the employer would have had if the employer had been
correctly determined eligible, or prospective to the first day of the
month following the date of the notice of the appeal decision.
(ii) If the employer is found ineligible under the decision, then
the appeal decision is effective as of the date of the notice of the
appeal decision.
(l) Notice of appeal decision. The appeals entity must issue
written notice of the appeal decision to the employer and to the SHOP
within 90 days of the date the appeal request is received.
(m) Implementation of SHOP appeal decisions. The SHOP must promptly
implement the appeal decision upon receiving the notice under paragraph
(l) of this section.
(n) Appeal record. Subject to the requirements of Sec. 155.550,
the appeal record must be accessible to the employer in a convenient
format and at a convenient time.
(o) Applicability date. The provisions of this section apply for
plan years beginning on or after January 1, 2018.
PART 156--HEALTH INSURANCE ISSUER STANDARDS UNDER THE AFFORDABLE
CARE ACT, INCLUDING STANDARDS RELATED TO EXCHANGES
0
39. The authority citation for part 156 continues to read as follows:
Authority: Title I of the Affordable Care Act, sections 1301-
1304, 1311-1313, 1321-1322, 1324, 1334, 1342-1343, 1401-1402, Pub.
L. 111-148, 124 Stat. 119 (42 U.S.C. 18021-18024, 18031-18032,
18041-18042, 18044, 18054, 18061, 18063, 18071, 18082, 26 U.S.C.
36B, and 31 U.S.C. 9701).
0
40. Section 156.100 is amended by revising the section heading and the
introductory text and by adding paragraph (d) to read as follows:
Sec. 156.100 State selection of benchmark plan for plan years
beginning prior to January 1, 2020.
For plan years beginning before January 1, 2020, each State may
identify a base-benchmark plan according to the selection criteria
described below:
* * * * *
(d) Applicability date: For plan years beginning on or after
January 1, 2020, Sec. 156.111 applies in place of this section.
0
41. Section 156.111 is added to Subpart B to read as follows:
Sec. 156.111 State selection of EHB-benchmark plan for plan years
beginning on or after January 1, 2020.
(a) Subject to paragraphs (b), (c), (d) and (e) of this section,
for plan years beginning on or after January 1, 2020, a State may
change its EHB-benchmark plan by:
(1) Selecting the EHB-benchmark plan that another State used for
the 2017 plan year under Sec. 156.100 and Sec. 156.110;
(2) Replacing one or more categories of EHBs established at Sec.
156.110(a) in the State's EHB-benchmark plan used for the 2017 plan
year with the same category or categories of EHB from the EHB-benchmark
plan that another State used for the 2017 plan year under Sec. 156.100
and Sec. 156.110; or
(3) Otherwise selecting a set of benefits that would become the
State's EHB-benchmark plan.
(b) A State's EHB-benchmark plan must:
(1) EHB coverage. Provide coverage of items and services for at
least the categories of benefits at Sec. 156.110(a), including an
appropriate balance of coverage for these categories of benefits.
(2) Scope of benefits. (i) Provide a scope of benefits equal to, or
greater than, to the extent any supplementation is required to provide
coverage within each EHB category at Sec. 156.110(a), the scope of
benefits provided under a typical employer plan, defined as either:
(A) One of the selecting State's 10 base-benchmark plan options
established at Sec. 156.100, and available for the selecting State's
selection for the 2017 plan year; or
(B) The largest health insurance plan by enrollment within one of
the five largest large group health insurance products by enrollment in
the State, as product and plan are defined at Sec. 144.103 of this
subchapter, provided that:
(1) The product has at least 10 percent of the total enrollment of
the five largest large group health insurance products in the State;
(2) The plan provides minimum value, as defined under Sec.
156.145;
(3) The benefits are not excepted benefits, as established under
Sec. 146.145(b), and Sec. 148.220 of this subchapter; and
(4) The benefits in the plan are from a plan year beginning after
December 31, 2013.
(ii) Not exceed the generosity of the most generous among a set of
comparison plans, including:
(A) The State's EHB-benchmark plan used for the 2017 plan year, and
(B) Any of the State's base-benchmark plan options for the 2017
plan year described in Sec. 156.100(a)(1), supplemented as necessary
under Sec. 156.110.
(iii) Not have benefits unduly weighted towards any of the
categories of benefits at Sec. 156.110(a);
(iv) Provide benefits for diverse segments of the population,
including women, children, persons with disabilities, and other groups;
and
(v) Not include discriminatory benefit designs that contravene the
non-discrimination standards defined in Sec. 156.125.
(c) The State must provide reasonable public notice and an
opportunity for public comment on the State's selection of an EHB-
benchmark plan that includes posting a notice on its opportunity for
public comment with associated information on a relevant State website.
(d) A State must notify HHS of the selection of a new EHB-benchmark
plan by a date to be determined by HHS for each applicable plan year.
(1) If the State does not make a selection by the annual selection
date, or its benchmark plan selection does not meet the requirements of
this section and section 1302 of the PPACA, the State's EHB-benchmark
plan for the applicable plan year will be that State's EHB-benchmark
plan applicable for the prior year.
(2) [Reserved]
(e) A State changing its EHB-benchmark plan under this section must
submit documents in a format and manner specified by HHS by a date
determined by HHS. These must include:
(1) A document confirming that the State's EHB-benchmark plan
definition complies with the requirements under paragraphs (a), (b) and
(c) of this section, including information on which selection option
under paragraph (a) of this section the State is using, and whether the
State is using another State's EHB-benchmark plan;
(2) An actuarial certification and an associated actuarial report
from an actuary, who is a member of the American Academy of Actuaries,
in accordance with generally accepted actuarial principles and
methodologies, that affirms:
(i) That the State's EHB-benchmark plan provides a scope of
benefits that is equal to, or greater than, to the extent any
supplementation is required to provide coverage within each EHB
category at Sec. 156.110(a), the scope of benefits provided under a
typical employer plan, as defined at (b)(2)(i) of this section; and
(ii) That the State's EHB-benchmark plan does not exceed the
generosity of the most generous among the plans listed in paragraphs
(b)(2)(ii)(A) and (B) of this section.
(3) The State's EHB-benchmark plan document that reflects the
benefits and limitations, including medical management requirements, a
schedule of benefits and, if the State is selecting its EHB-benchmark
plan using the
[[Page 17069]]
option in paragraph (a)(3) of this section, a formulary drug list in a
format and manner specified by HHS; and
(4) Other documentation specified by HHS, which is necessary to
operationalize the State's EHB-benchmark plan.
0
42. Section 156.115 is amended by revising paragraph (b) to read as
follows:
Sec. 156.115 Provision of EHB.
* * * * *
(b) An issuer of a plan offering EHB may substitute benefits for
those provided in the EHB-benchmark plan under the following
conditions--
(1) The issuer substitutes a benefit that:
(i) Is actuarially equivalent to the benefit that is being replaced
as determined in paragraph (b)(4) of this section; and
(ii) Is not a prescription drug benefit.
(2) An issuer may substitute a benefit under this paragraph:
(i) Within the same EHB category, unless prohibited by applicable
State requirements; and
(ii) For plan years beginning on or after January 1, 2020, between
EHB categories, if the State in which the plan will be offered has
notified HHS that substitution between EHB categories is permitted in
the State.
(3) The plan that includes substituted benefits must:
(i) Continue to comply with the requirements of paragraph (a) of
this section, including by providing benefits that are substantially
equal to the EHB-benchmark plan;
(ii) Provide an appropriate balance among the EHB categories such
that benefits are not unduly weighted toward any category; and
(iii) Provide benefits for diverse segments of the population.
(4) The issuer submits to the State evidence of actuarial
equivalence that is:
(i) Certified by a member of the American Academy of Actuaries;
(ii) Based on an analysis performed in accordance with generally
accepted actuarial principles and methodologies;
(iii) Based on a standardized plan population; and
(iv) Determined without taking cost-sharing into account.
* * * * *
0
43. Section 156.150 is amended by revising paragraph (b) to read as
follows:
Sec. 156.150 Application to stand-alone dental plans inside the
Exchange.
* * * * *
(b) Calculation of AV. A stand-alone dental plan:
(1) May not use the AV calculator in Sec. 156.135; and
(2) Must have the plan's actuarial value of coverage for pediatric
dental essential health benefits certified by a member of the American
Academy of Actuaries using generally accepted actuarial principles and
reported to the Exchange.
* * * * *
0
44. Section 156.200 is amended by revising paragraph (b)(2) to read as
follows:
Sec. 156.200 QHP issuer participation standards.
* * * * *
(b) * * *
(2) Comply with Exchange processes, procedures, and requirements
set forth in accordance with subpart K of part 155 of this subchapter
and, in the small group market, Sec. Sec. 155.705 and 155.706 of this
subchapter;
* * * * *
0
45. Section 156.285 is amended by revising the section heading and
adding paragraph (f) to read as follows:
Sec. 156.285 Additional standards specific to SHOP for plan years
beginning prior to January 1, 2018.
* * * * *
(f) Applicability date. The provisions of this section apply for
plan years beginning prior to January 1, 2018. Additional standards
specific to SHOP for plan years beginning on or after January 1, 2018
are in Sec. 156.286.
0
46. Section 156.286 is added to read as follows:
Sec. 156.286 Additional standards specific to SHOP for plan years
beginning on or after January 1, 2018.
(a) SHOP rating and premium payment requirements. QHP issuers
offering a QHP through a SHOP must:
(1) Accept payment from a qualified employer or an enrollee, or a
SHOP on behalf of a qualified employer or enrollee, in accordance with
applicable SHOP requirements.
(2) Adhere to the SHOP timeline for rate setting as established in
Sec. 155.706(b)(6) of this subchapter;
(3) Charge the same contract rate for a plan year; and
(4) Adhere to the premium rating standards described in Sec.
147.102 of this subchapter regardless of whether the QHP being sold
through the SHOP is sold in the small group market or the large group
market.
(b) Enrollment periods and processes for the SHOP. QHP issuers
offering a QHP through the SHOP must adhere to enrollment periods and
processes established by the SHOP, consistent with Sec. 155.726 of
this subchapter, and establish a uniform enrollment timeline and
process for enrolling qualified employers and employer group members.
(c) Enrollment process for the SHOP. A QHP issuer offering a QHP
through the SHOP must:
(1) Provide new enrollees with the enrollment information package
as described in Sec. 156.265(e); and
(2) Enroll all qualified employees consistent with the plan year of
the applicable qualified employer.
(d) Participation rules. QHP issuers offering a QHP through the
SHOP may impose group participation rules for the offering of health
insurance coverage in connection with a QHP only if and to the extent
authorized by the SHOP in accordance with Sec. 155.706 of this
subchapter.
(e) Employer choice. QHP issuers offering a QHP through the SHOP
must accept enrollments from groups in accordance with the employer
choice policies applicable to the SHOP under Sec. 155.706(b)(3) of
this subchapter.
(f) Identification of SHOP enrollments. QHP issuers offering a QHP
through the SHOP must use a uniform enrollment form, maintain processes
sufficient to identify whether a group market enrollment is an
enrollment through the SHOP, and maintain records of SHOP enrollments
for a period of 10 years following the enrollment.
(g) Applicability date. The provisions of this section apply for
plan years beginning on or after January 1, 2018.
Sec. 156.298 [Removed]
0
47. Section 156.298 is removed.
0
48. Section 156.340 is amended by revising paragraph (a)(2) to read as
follows:
Sec. 156.340 Standards for downstream and delegated entities.
(a) * * *
(2) Exchange processes, procedures, and standards in accordance
with subparts H and K of part 155 and, in the small group market, Sec.
155.705 and Sec. 155.706 of this subchapter;
* * * * *
0
49. Section 156.350 is amended by revising paragraphs (a)(1) and (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) * * *
(1) Section 156.285(a)(4)(ii) regarding the premiums for plans
offered on the SHOP, for plan years beginning prior to January 1, 2018;
(2) Section 156.285(c)(5) and (c)(8)(iii) regarding the enrollment
process for
[[Page 17070]]
SHOP, for plan years beginning prior to January 1, 2018; and
* * * * *
0
50. Section 156.1230 is amended by revising paragraph (b)(2) to read as
follows:
Sec. 156.1230 Direct enrollment with the QHP issuer in a manner
considered to be through the Exchange.
* * * * *
(b) * * *
(2) The QHP issuer must engage a third-party entity in accordance
with Sec. 155.221 of this subchapter to demonstrate operational
readiness and compliance with applicable requirements prior to the QHP
issuer's internet website being used to complete a QHP selection.
* * * * *
PART 157--EMPLOYER INTERACTIONS WITH EXCHANGES AND SHOP
PARTICIPATION
0
51. 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
52. Section 157.205 is amended by revising the section heading and
adding paragraph (h) to read as follows:
Sec. 157.205 Qualified employer participation process in a SHOP for
plan years beginning prior to January 1, 2018.
* * * * *
(h) Applicability date. The provisions of this section apply for
plan years beginning prior to January 1, 2018. Section 157.206 is
applicable for plan years beginning on or after January 1, 2018.
0
53. Section 157.206 is added to read as follows:
Sec. 157.206 Qualified employer participation process in a SHOP for
plan years beginning on or after January 1, 2018.
(a) General requirements. When joining the SHOP, a qualified
employer must comply with the requirements, processes, and timelines
set forth by this part and must remain in compliance for the duration
of the employer's participation in the SHOP.
(b) Selecting QHPs. During an election period, a qualified employer
may make coverage in a QHP available through the SHOP in accordance
with the processes developed by the SHOP in accordance with Sec.
155.706 of this subchapter.
(c) Information dissemination to employees. A qualified employer
participating in the SHOP must disseminate information to its qualified
employees about the process to enroll in a QHP through the SHOP.
(d) Employees hired outside of the initial or annual open
enrollment period. Qualified employers must provide employees hired
outside of the initial or annual open enrollment period with
information about the enrollment process.
(e) Participation in the SHOP and termination of coverage or
enrollment through the SHOP. (1) Changes affecting participation.
Employers must submit a new single employer application to the SHOP or
withdraw from participating in the SHOP if the employer makes a change
that could end its eligibility under Sec. 155.710 of this subchapter.
(2) If an employer receives a determination of ineligibility to
participate in the SHOP or the SHOP terminates its eligibility to
participate in the SHOP, unless the SHOP notifies the issuer or issuers
of the determination of ineligibility or termination of eligibility,
the employer must notify the issuer or issuers of QHPs in which their
group members are enrolled in coverage of its ineligibility or
termination of eligibility within 5 business days of the end of any
applicable appeal process under Sec. 155.741 of this subchapter, which
could include when the time to file an appeal lapses without an appeal
being filed, when the appeal is rejected or dismissed, or when the
appeal process concludes with an adjudication by the appeals entity, as
applicable.
(3) Employers must promptly notify the issuer or issuers of QHPs in
which their group members are enrolled in coverage if it wishes to
terminate coverage or enrollment through the SHOP, unless the SHOP
notifies the issuer or issuers.
(f) Applicability date. The provisions of this section apply for
plan years beginning on or after January 1, 2018.
PART 158--ISSUER USE OF PREMIUM REVENUE: REPORTING AND REBATE
REQUIREMENTS
0
54. 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
55. Section 158.170 is amended by revising paragraph (b) introductory
text to read as follows:
Sec. 158.170 Allocation of expenses.
* * * * *
(b) Description of the methods used to allocate expenses. The
report required in Sec. 158.110 must include a detailed description of
the methods used to allocate expenses, including incurred claims,
quality improvement expenses (unless the report utilizes the percentage
of premium option described in Sec. 158.221(b)(8), in which case the
allocation method description should state so), Federal and State taxes
and licensing or regulatory fees, and other non-claims costs, to each
health insurance market in each State. A detailed description of each
expense element must be provided, including how each specific expense
meets the criteria for the type of expense in which it is categorized,
as well as the method by which it was aggregated.
* * * * *
0
56. Section 158.221 is amended by adding paragraph (b)(8) to read as
follows:
Sec. 158.221 Formula for calculating an issuer's medical loss ratio.
* * * * *
(b) * * *
(8) Beginning with the 2017 MLR reporting year, an issuer has the
option of reporting an amount equal to 0.8 percent of earned premium in
the relevant State and market in lieu of reporting the issuer's actual
expenditures for activities that improve health care quality, as
defined in Sec. Sec. 158.150 and 158.151. If an issuer chooses this
method of reporting, it must apply it for a minimum of 3 consecutive
MLR reporting years and for all of its individual, small group, and
large group markets; and all affiliated issuers must choose the same
reporting method.
* * * * *
0
57. Section 158.301 is revised to read as follows:
Sec. 158.301 Standard for adjustment to the medical loss ratio.
The Secretary may adjust the MLR standard that must be met by
issuers offering coverage in the individual market in a State, as
defined in section 2791 of the PHS Act, for a given MLR reporting year
if, in the Secretary's discretion, the Secretary determines that there
is a reasonable likelihood that an adjustment to the 80 percent MLR
standard of section 2718(b)(1)(A)(ii) of the Public Health Service Act
will help stabilize the individual market in that State.
0
58. Section 158.321 is revised to read as follows:
Sec. 158.321 Information regarding the State's individual health
insurance market.
(a) Subject to Sec. 158.320, the State must provide, for each
issuer who actively offers coverage in the individual market in the
State, the following information, in accordance with paragraph (b) of
this section, for
[[Page 17071]]
the preceding calendar year and, at the State's option, for the current
year:
(1) Total earned premium and incurred claims;
(2) Total number of enrollees (life-years and covered lives);
(3) Total agents' and brokers' commission expenses;
(4) Net underwriting gain;
(5) Risk-based capital level; and
(6) Whether the issuer has provided notice to the State's insurance
commissioner, superintendent, or comparable State authority that the
issuer will cease or begin offering individual market coverage on the
Exchange, certain geographic areas, or the entire individual market in
the State.
(b) The information required in paragraphs (a)(1) through (4) and
(6) of this section must be provided separately for the issuer's
individual market plans grouped by the following categories, as
applicable: On-Exchange, off-Exchange, grandfathered health plans as
defined in Sec. 147.140 of this subchapter, coverage that meets the
criteria for transitional policies outlined in applicable guidance, and
non-grandfathered single risk pool coverage. The information required
in paragraph (a)(5) of this section must be provided at the issuer
level.
(c) The State must also provide information regarding whether any
issuer other than those described in paragraph (a) of this section has
provided notice to the State's insurance commissioner, superintendent,
or comparable State authority that the issuer will cease or begin
offering individual market coverage on the Exchange, certain geographic
areas, or the entire individual market in the State.
0
59. Section 158.322 is revised to read as follows:
Sec. 158.322 Proposal for adjusted medical loss ratio.
A State must provide its own proposal as to the adjustment it seeks
to the MLR standard. This proposal must include an explanation of how
an adjustment to the MLR standard for the State's individual market
will help stabilize the State's individual market.
0
60. Section 158.330 is revised to read as follows:
Sec. 158.330 Criteria for assessing request for adjustment to the
medical loss ratio.
The Secretary may consider the following criteria in assessing
whether an adjustment to the 80 percent MLR standard, as calculated in
accordance with this subpart, would be reasonably likely to help
stabilize the individual market in a State that has requested such
adjustment:
(a) The number and financial performance (based on data provided by
a State under Sec. 158.321) of issuers actively offering individual
health insurance coverage on- and off-Exchange, grandfathered health
plans as defined in Sec. 147.140 of this subchapter, coverage that
meets the criteria for transitional policies outlined in applicable
guidance, and non-grandfathered single risk pool coverage; the number
of issuers reasonably likely to cease or begin offering individual
market coverage in the State; and the likelihood that an adjustment to
the 80 percent MLR standard could help increase competition in the
individual market in the State, including in underserved areas.
(b) Whether an adjustment to the 80 percent MLR standard for the
individual market may improve consumers' access to agents and brokers.
(c) The capacity of any new issuers or issuers remaining in the
individual market to write additional business in the event one or more
issuers were to cease offering individual market coverage on the
Exchange, in certain geographic areas, or in the entire individual
market in the State.
(d) The impact on premiums charged, and on benefits and cost
sharing provided, to consumers by issuers remaining in or entering the
individual market in the event one or more issuers were to cease or
begin offering individual market coverage on the Exchange, in certain
geographic areas, or in the entire individual market in the State.
(e) Any other relevant information submitted by the State's
insurance commissioner, superintendent, or comparable official in the
State's request.
0
61. Section 158.341 is revised to read as follows:
Sec. 158.341 Treatment as a public document.
A State's request for an adjustment to the MLR standard, and all
information submitted as part of its request, will be treated as a
public document. Instructions for how to access documents related to a
State's request for an adjustment to the MLR standard will be made
available on the Secretary's website.
0
62. Section 158.350 is revised to read as follows:
Sec. 158.350 Subsequent requests for adjustment to the medical loss
ratio.
A State that has made a previous request for an adjustment to the
MLR standard must, in addition to the other information required by
this subpart, submit information as to what steps the State has taken
since its prior requests, if any, to improve the stability of the
State's individual market.
Dated: March 6, 2018.
Seema Verma,
Administrator, Centers for Medicare & Medicaid Services.
Dated: March 28, 2018.
Alex M. Azar II,
Secretary, Department of Health and Human Services.
[FR Doc. 2018-07355 Filed 4-9-18; 4:15 pm]
BILLING CODE 4120-01-P