[Federal Register Volume 86, Number 85 (Wednesday, May 5, 2021)]
[Rules and Regulations]
[Pages 24140-24295]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-09102]



[[Page 24139]]

Vol. 86

Wednesday,

No. 85

May 5, 2021

Part II





Department of Health and Human Services





-----------------------------------------------------------------------





45 CFR Parts 147, 150, 153, et al.





Patient Protection and Affordable Care Act; HHS Notice of Benefit and 
Payment Parameters for 2022 and Pharmacy Benefit Manager Standards; 
Final Rule

  Federal Register / Vol. 86, No. 85 / Wednesday, May 5, 2021 / Rules 
and Regulations  

[[Page 24140]]



DEPARTMENT OF HEALTH AND HUMAN SERVICES

45 CFR Parts 147, 150, 153, 155, 156, 158, and 184

[CMS-9914-F2]
RIN 0938-AU18


Patient Protection and Affordable Care Act; HHS Notice of Benefit 
and Payment Parameters for 2022 and Pharmacy Benefit Manager Standards

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

ACTION: Final rule.

-----------------------------------------------------------------------

SUMMARY: This final rule sets forth payment parameters and provisions 
related to the risk adjustment program and cost-sharing parameters. It 
includes changes related to special enrollment periods; direct 
enrollment entities; the administrative appeals processes with respect 
to health insurance issuers and non-federal governmental group health 
plans; the medical loss ratio program; income verification by 
Exchanges; and other related topics. It also revises the regulation 
requiring the reporting of certain prescription drug information by 
qualified health plans or their pharmacy benefit managers.

DATES: These regulations are effective on July 6, 2021, with the 
exception of the amendments to Sec. Sec.  155.320(c) and 158.221(b) 
which are effective May 5, 2021.

FOR FURTHER INFORMATION CONTACT:
    Jeff Wu, (301) 492-4305, Rogelyn McLean, (301) 492-4229, Grace 
Bristol, (410) 786-8437, Kiahana Brooks, (301) 492-5229, or Sara Rosta, 
(301) 492-4223 for general information.
    Cam Clemmons, (206) 615-2338, for matters related to health 
insurance reform requirements for the group and individual insurance 
markets and administrative appeals for health insurance issuers and 
non-federal governmental group health plans.
    Allison Yadsko, (410) 786-1740, or Jacquelyn Rudich, (301) 492-
5211, for matters related to risk adjustment.
    Isadora Gil, (410) 786-4532, or Colleen Gravens, (301) 492-4107, 
for matters related to EDGE discrepancies.
    Joshua Paul, (301) 492-4347, for matters related to risk adjustment 
data validation.
    Dan Brown, (301) 492-5146, for matters related to web-brokers or 
direct enrollment, other than the direct enrollment option for 
Federally-facilitated and State Exchanges.
    Nicholas Eckart, (301) 492-4452, for matters related to termination 
notices.
    Amanda Brander, (202) 690-7892, for matters related to income 
inconsistencies.
    Marisa Beatley, (301) 492-4307, for matters related to employer-
sponsored coverage verification.
    Carolyn Kraemer, (301) 492-4197, for matters related to special 
enrollment periods for Exchange enrollment under part 155.
    Katherine Bentley, (301) 492-5209, for matters related to special 
enrollment period verification.
    Rebecca Bucchieri, (301) 492-4400, for matters related to EHB-
benchmark plans and defrayal of state-required benefits.
    Aaron Franz, (410) 786-8027, for matters related to user fees.
    Joshua Paul, (301) 492-4347 or Nora Simmons, (410-786-1981), for 
matters related to the premium adjustment percentage.
    Ken Buerger, (410) 786-1190, for matters related to PBM 
transparency reporting requirements.
    Nora Simmons, (410-786-1981), Adrianne Carter, (303) 844-5810, or 
Amber Bellsdale, (301) 492-4411, for matters related to disputes under 
45 CFR 156.1210.
    Nidhi Singh Shah, (301) 492-5110, for matters related to the 
Quality Rating System and the Qualified Health Plan Enrollee Experience 
Survey.
    Alper Ozinal, (301) 492-4178, or Jacquelyn Rudich, (301) 492-5211, 
for matters related to financial program audits and civil money 
penalties.
    Adrianne Patterson, 410-786-0696, or Nora Simmons, (410-786-1981), 
for matters related to netting of payments under 45 CFR 156.1215 and 
administrative appeals under 45 CFR 156.1220.
    Christina Whitefield, (301) 492-4172, for matters related to the 
MLR program.

SUPPLEMENTARY INFORMATION: 

Future Rulemaking on Benefit and Payment Parameters for the 2022 Plan 
Year

    In the December 4, 2020 Federal Register, we published the 
``Patient Protection and Affordable Care Act; HHS Notice of Benefit and 
Payment Parameters for 2022 and Pharmacy Benefit Manager Standards; 
Updates to State Innovation Waiver (Section 1332 Waiver) Implementing 
Regulations'' proposed rule (85 FR 78572) (hereinafter referred to as 
the ``proposed rule'' or ``proposed 2022 Payment Notice'') that 
proposed to reduce fiscal and regulatory burdens across different 
program areas and to provide stakeholders with greater flexibility. In 
the January 19, 2021 Federal Register (86 FR 6138), we published a 
final rule that addressed a subset of the policies proposed in the 
proposed rule. That final rule, among other things, finalized the user 
fee rates for issuers offering qualified health plans through the 
Federally-facilitated Exchanges (FFEs) at 2.25 percent of total monthly 
premiums, and the user fee rate for issuers offering qualified health 
plans (QHPs) through State-based Exchanges on the Federal platform 
((SBE-FPs) at 1.75 percent of total monthly premiums. The final rule 
also codified a new direct enrollment option for states served by any 
Exchange model to use direct enrollment technology and non-Exchange 
websites developed by approved web brokers, issuers and other direct 
enrollment partners to enroll qualified individuals in QHPs offered 
through the Exchange. The final rule also finalized changes to 
regulations governing State Innovation Waivers under section 1332 of 
the Affordable Care Act (ACA) that specifically incorporate policies 
announced in guidance in 2018.
    On January 28, 2021, President Biden issued Executive Order 14009, 
``Strengthening Medicaid and the Affordable Care Act,'' \1\ directing 
HHS, and the heads of all other executive departments and agencies with 
authorities and responsibilities related to the ACA, to review all 
existing regulations, orders, guidance documents, policies, and any 
other similar agency actions to determine whether such agency actions 
are inconsistent with this Administration's policy to protect and 
strengthen the ACA and to make high-quality health care accessible and 
affordable for every American. As part of this review, HHS examined 
policies and requirements under the proposed 2022 Payment Notice and 
the January 19, 2021 final 2022 Payment Notice to analyze whether the 
policies under these rulemakings might undermine the Health Benefits 
Exchanges or the health insurance markets, and whether they may present 
unnecessary barriers to individuals and families attempting to access 
health coverage. HHS also considered whether to suspend, revise, or 
rescind any such actions through appropriate administrative action.
---------------------------------------------------------------------------

    \1\ 86 FR 7793 (February 2, 2021).
---------------------------------------------------------------------------

    In compliance with Executive Order (E.O.) 14009 and as a result of 
HHS's review of the proposed 2022 Payment Notice and the January 19, 
2021 final 2022 Payment Notice, HHS intends to issue rulemaking this 
spring to address policies finalized in the final 2022 Payment Notice 
published on January 19, 2021. Specifically, in future rulemaking, HHS 
intends to propose

[[Page 24141]]

new QHP issuer user fees rates for the 2022 plan year: A new FFE user 
fee rate of 2.75 percent of total monthly premiums; and a new SBE-FP 
user fee rate of 2.25 percent of monthly premiums. We also intend to 
revisit the Exchange Direct Enrollment (DE) option for states and the 
changes to regulations governing State Innovation Waivers under section 
1332 of the ACA. HHS is of the view that pursuit of these proposals is 
consistent with E.O. 14009, and this Administration's goal of 
protecting and strengthening the ACA and making high-quality health 
care accessible and affordable for every American.

Table of Contents

I. Executive Summary
II. Background
    A. Legislative and Regulatory Overview
    B. Stakeholder Consultation and Input
    C. Structure of Proposed Rule
III. Summary of the Proposed Provisions to the HHS Notice of Benefit 
and Payment Parameters for 2022, Analysis of and Responses to Public 
Comments, and Provisions of the Final Rule
    A. Part 147--Health Insurance Reform Requirements for the Group 
and Individual Health Insurance Markets
    B. Part 150--CMS Enforcement in Group and Individual Markets
    C. Part 153--Standards Related to Reinsurance, Risk Corridors, 
and Risk Adjustment
    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 158--Issuer Use of Premium Revenue: Reporting and Rebate 
Requirements
    G. Part 184--Pharmacy Benefit Manager Standards Under the 
Affordable Care Act
IV. Implementation of the Decision in City of Columbus, et al. v. 
Cochran
V. Collection of Information Requirements
    A. Wage Estimates
    B. ICRs Regarding Submission of Adjusted Premium Amounts for 
Risk Adjustment
    C. ICRs Regarding Direct Enrollment Agents and Brokers
    D. ICRs Regarding Prescription Drug Distribution and Cost 
Reporting by QHP Issuers and PBMs
    E. ICRs Regarding Medical Loss Ratio
    F. Summary of Annual Burden Estimates for Proposed Requirements
    G. Submission of PRA Related Comments
VI. Waiver of Proposed Rulemaking and Delay in Effective Date
VII. 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. Executive Summary

    American Health Benefit Exchanges, or ``Exchanges,'' are entities 
established under the Affordable Care Act (ACA) \2\ through which 
qualified individuals and qualified employers can purchase health 
insurance coverage in QHPs. Many individuals who enroll in QHPs through 
individual market Exchanges are eligible to receive a premium tax 
credit (PTC) to reduce their costs for health insurance premiums and to 
receive reductions in required cost-sharing payments to reduce out-of-
pocket expenses for health care services. The ACA also established the 
risk adjustment program, which is intended to increase the workability 
of the ACA regulatory changes in the individual and small group 
markets, both on- and off-Exchange.
---------------------------------------------------------------------------

    \2\ 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 ACA, was enacted on March 30, 
2010. In this final rule, we refer to the two statutes collectively 
as the ``Affordable Care Act'' or ``ACA.''
---------------------------------------------------------------------------

    In the December 4, 2020 Federal Register, we published the 
``Patient Protection and Affordable Care Act; HHS Notice of Benefit and 
Payment Parameters for 2022 and Pharmacy Benefit Manager Standards; 
Updates to State Innovation Waiver (Section 1332 Waiver) Implementing 
Regulations'' proposed rule (85 FR 78572) (hereinafter referred to as 
the ``proposed rule'' or ``proposed 2022 Payment Notice'') that 
proposed to reduce fiscal and regulatory burdens across different 
program areas and to provide stakeholders with greater flexibility. In 
the proposed rule, we proposed to amend provisions and parameters to 
implement many ACA programs and requirements, with a focus on 
maintaining a stable regulatory environment. As proposed, the changes 
would provide issuers with greater predictability for upcoming plan 
years, while simultaneously enhancing the role of states in these 
programs. The proposals would also provide states with additional 
flexibilities, reduce unnecessary regulatory burdens on stakeholders, 
empower consumers, ensure program integrity, and improve affordability.
    Risk adjustment continues to be a core program in the individual 
and small group markets both on and off Exchanges, and some of the 
major proposals from the proposed rule included recalibrated parameters 
for the HHS-operated risk adjustment methodology. We also proposed 
changes to the risk adjustment models to include a two-stage 
specification in the adult and child models, add severity and 
transplant indicators interacted with hierarchical condition category 
(HCC) counts factors to the adult and child models, and proposed to 
modify the enrollment duration factors in the adult models. 
Additionally, we proposed clarifications to the process for HHS to 
audit issuers of risk adjustment covered plans and reinsurance-eligible 
plans and also proposed to establish authority for HHS to conduct 
compliance review of these issuers.
    As we do every year in the HHS notice of benefit and payment 
parameters, we proposed updated parameters applicable in the individual 
and small group markets (including merged markets). We proposed the 
2022 benefit year user fee rates for issuers offering plans through the 
Exchanges on the Federal platform. We proposed lowering the Federally-
facilitated Exchange (FFE) and State-Exchange on the Federal platform 
(SBE-FP) user fees rates to 2.25 and 1.75 percent of total monthly 
premiums, respectively, in order to reflect enrollment, premium and HHS 
contract estimates for the 2022 plan year. We also proposed user fee 
rates of 1.5 percent of total monthly premiums for FFE and SBE-FP 
states that elect the Exchange DE option.\3\ These user fee proposals 
were finalized in the final rule published on January 19, 2021 (86 FR 
6138).
---------------------------------------------------------------------------

    \3\ As noted below, the proposals to establish the Exchange DE 
option were finalized, with modifications, in the final rule 
published on January 19, 2021 (86 FR 6138).
---------------------------------------------------------------------------

    We proposed the 2022 benefit year premium adjustment percentage, 
required contribution percentage, and maximum annual limitations on 
cost sharing, including those for cost-sharing reduction (CSR) plan 
variations. For the 2023 benefit year and beyond, we proposed to 
publish these parameters in guidance annually, and if not in guidance, 
in the annual notice of benefit and payment parameters or another 
appropriate rulemaking. Additionally, we proposed clarifications to the 
process under which HHS conducts audits of QHP issuers to ensure 
compliance with federal requirements related to advance payments of the 
premium tax credit (APTC), CSRs, and user fees. We also proposed to 
establish authority for HHS to conduct compliance reviews of QHP 
issuers to ensure compliance with federal APTC, CSR and user fee 
requirements.
    We proposed changes to the information that FFE-registered web-

[[Page 24142]]

brokers are required to display on their websites. In addition, we 
proposed amendments to codify more detail describing the operational 
readiness reviews that must be successfully completed as a prerequisite 
to a web-broker's non-Exchange website being approved for use by 
consumers to complete an Exchange eligibility application or a QHP 
selection. We similarly proposed to add additional detail about the 
operational readiness reviews applicable to direct enrollment entities.
    Stable and affordable Exchanges with healthy risk pools are 
necessary for ensuring consumers maintain stable access to health 
insurance options. In order to minimize the potential for adverse 
selection in the Exchanges, we shared our future plans for rulemaking 
under which we will propose requirements related to Exchange 
verifications of whether applicants for QHP coverage with APTC or CSR 
have access to employer sponsored coverage that is affordable and 
offers minimum value. We proposed to extend our current enforcement 
posture under which Exchanges may exercise flexibility not to implement 
risk-based employer sponsored coverage verification and to remove the 
requirement that Exchanges select a statistically random sample of 
applicants when no electronic data sources are available.
    We proposed new rules related to special enrollment periods. In 
addition, we proposed to require Exchanges to conduct special 
enrollment period verification for at least 75 percent of new 
enrollments through special enrollment periods granted to consumers not 
already enrolled in coverage through the applicable Exchange.
    We also proposed minor procedural changes to provisions regarding 
administrative hearings in parts 150 and 156 to align with the 
Departmental Appeals Board's current practices for administrative 
hearings to appeal civil money penalties (CMPs).
    We proposed to release additional data from the QHP Enrollee 
Experience Survey (QHP Enrollee Survey). We also solicited comments on 
potential changes to the framework for the Quality Rating System (QRS) 
to support alignment with other CMS quality reporting programs and to 
further balance the individual survey and clinical quality measures on 
the overall quality scores. We noted that we were considering ways to 
modify the hierarchical structure for the QRS, which is how the 
measures are organized together for maximum simplicity and 
understanding of the quality rating information provided by the QRS.
    We proposed revisions to the regulations requiring the collection 
of certain prescription drug data from QHP issuers, and proposed to 
implement a requirement for the reporting of this data from pharmacy 
benefit managers (PBMs) when a QHP issuer contracts with a PBM to 
administer its prescription drug benefit.
    We proposed to further regulate the standards related to QHP 
issuers' acceptance of payments for premiums and cost sharing. We also 
proposed to make clarifications to the network adequacy rules to 
reflect that Sec.  156.230 does not apply to indemnity plans seeking 
QHP certification. These proposals were finalized in the final rule 
published on January 19, 2021 (86 FR 6138).
    We proposed to establish a new Exchange DE option under which a 
State Exchange, State-based Exchange on the Federal platform or an FFE 
state (through an agreement with HHS) can leverage the potential of 
direct enrollment to offer consumers an enhanced QHP shopping 
experience. As proposed, instead of operating a centralized enrollment 
website, states could use direct enrollment technology to establish 
direct pathways to QHP issuers, web-brokers, and agents and brokers 
through which consumers would apply for and enroll in a QHP and receive 
a determination of eligibility for APTC and CSRs. The proposals for the 
Exchange DE option were finalized, with modifications, in the final 
rule published on January 19, 2021 (86 FR 6138).
    We proposed to establish the definition of prescription drug 
rebates and other price concessions that issuers must deduct from 
incurred claims for medical loss ratio (MLR) reporting and rebate 
calculation purposes. We additionally proposed to explicitly allow 
issuers the option to prepay a portion or all of the estimated MLR 
rebate for a given MLR reporting year in advance of the deadlines set 
forth in Sec. Sec.  158.240(e) and 158.241(a)(2) and the filing of the 
MLR Annual Reporting Form, and proposed to establish a safe harbor 
allowing such issuers, under certain conditions, to defer the payment 
of any remaining rebates owed after prepayment until the following MLR 
reporting year. We also proposed to allow issuers to provide MLR 
rebates in the form of a premium credit prior to the date that the 
rules previously provided. Lastly, we proposed to clarify MLR reporting 
and rebate requirements for issuers that choose to offer temporary 
premium credits during a public health emergency (PHE) declared by the 
Secretary of HHS in the 2021 benefit year and beyond, when such credits 
are permitted by HHS.
    In the proposed rule, the Secretaries of HHS and the Department of 
the Treasury proposed to reference and incorporate specific guidance 
published in the Federal Register in order to give states certainty 
regarding the requirements to receive and maintain approval by the 
Departments for State Innovation Waivers under section 1332 of the ACA. 
This proposal and the accompanying regulatory updates were finalized in 
the final rule published on January 19, 2021 (86 FR 6138).

II. Background

A. Legislative and Regulatory Overview

    Title I of the Health Insurance Portability and Accountability Act 
of 1996 (HIPAA) added a new title XXVII to the Public Health Service 
Act (PHS Act) to establish various reforms to the group and individual 
health insurance markets.
    These provisions of the PHS Act were later augmented by other laws, 
including the ACA. Subtitles A and C of title I of the ACA reorganized, 
amended, and added to the provisions of part A of title XXVII of the 
PHS Act relating to group health plans \4\ and health insurance issuers 
in the group and individual markets. The term ``group health plan'' 
includes both insured and self-insured group health plans.
---------------------------------------------------------------------------

    \4\ The term ``group health plan'' is used in title XXVII of the 
PHS Act and is distinct from the term ``health plan'' as used in 
other provisions of title I of ACA. The term ``health plan'' does 
not include self-insured group health plans.
---------------------------------------------------------------------------

    Section 2702 of the PHS Act, as added by the ACA, establishes 
requirements for guaranteed availability of coverage in the group and 
individual markets, including qualifying events that trigger special 
enrollment periods under section 2702(b) of the PHS Act.\5\
---------------------------------------------------------------------------

    \5\ Before enactment of the ACA, HIPAA amended the PHS Act 
(formerly section 2711) to generally require guaranteed availability 
of coverage for employers in the small group market.
---------------------------------------------------------------------------

    Section 2718 of the PHS Act, as added by the ACA, 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 2723(b) of the PHS Act authorizes the Secretary to impose 
CMPs as a means of enforcing the individual and group insurance market 
requirements contained in Part A of title XXVII of the PHS Act with 
respect to health insurance issuers when a state does not have 
authority to enforce or

[[Page 24143]]

fails to substantially enforce these provisions and with respect to 
group health plans that are non-federal governmental plans. Section 
1301(a)(1)(B) of the ACA directs all issuers of QHPs to cover the 
Essential Health Benefit (EHB) package described in section 1302(a) of 
the ACA, including coverage of the services described in section 
1302(b) of the ACA, adherence to the cost-sharing limits described in 
section 1302(c) of the ACA, and meeting the actuarial value (AV) levels 
established in section 1302(d) of the ACA. Section 2707(a) of the PHS 
Act, which is effective for plan or policy years beginning on or after 
January 1, 2014, extends the requirement to cover 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 ACA.
    Section 1302 of the ACA provides for the establishment of an EHB 
package that includes coverage of EHBs (as defined by the Secretary), 
cost-sharing limits, and AV requirements. Section 1302(b) of the ACA 
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.
    To set cost-sharing limits, section 1302(c)(4) of the ACA directs 
the Secretary to determine an annual premium adjustment percentage, a 
measure of premium growth that is used to set the rate of increase for 
three parameters: (1) The maximum annual limitation on cost sharing 
(section 1302(c)(1) of the ACA); (2) the required contribution 
percentage used to determine whether an individual can afford minimum 
essential coverage (MEC) (section 5000A of the Internal Revenue Code of 
1986 (the Code), as enacted by section 1501 of the ACA); and (3) the 
employer shared responsibility payment amounts (section 4980H of the 
Code, as enacted by section 1513 of the ACA).
    Section 1302(d) of the ACA describes the various levels of coverage 
based on their AV. Consistent with section 1302(d)(2)(A) of the ACA, AV 
is calculated based on the provision of EHB to a standard population. 
Section 1302(d)(3) of the ACA directs the Secretary to develop 
guidelines that allow for de minimis variation in AV calculations.
    Sections 1311(b) and 1321(b) of the ACA provide that each state has 
the opportunity to establish an individual market Exchange that 
facilitates the purchase of insurance coverage by qualified individuals 
through QHPs and meets other standards specified in the ACA. Section 
1321(c)(1) of the ACA directs the Secretary to establish and operate 
such Exchange within states that do not elect to establish an Exchange 
or, as determined by the Secretary on or before January 1, 2013, will 
not have an Exchange operable by January 1, 2014.
    Section 1311(c)(1) of the ACA provides the Secretary the authority 
to issue regulations to establish criteria for the certification of 
QHPs, including network adequacy standards at section 1311(c)(1)(B) of 
the ACA. Section 1311(d) of the ACA describes the minimum functions of 
an Exchange. Section 1311(e)(1) of the ACA grants the Exchange the 
authority to certify a health plan as a QHP if the health plan meets 
the Secretary's requirements for certification issued under section 
1311(c)(1) of the ACA, and the Exchange determines that making the plan 
available through the Exchange is in the interests of qualified 
individuals and qualified employers in the state. Section 1311(c)(6)(C) 
of the ACA establishes special enrollment periods and section 
1311(c)(6)(D) of the ACA establishes the monthly enrollment period for 
Indians, as defined by section 4 of the Indian Health Care Improvement 
Act.\6\
---------------------------------------------------------------------------

    \6\ The Indian Health Care Improvement Act (IHCIA), the 
cornerstone legal authority for the provision of health care to 
American Indians and Alaska Natives, was made permanent when 
President Obama signed the bill on March 23, 2010, as part of the 
ACA.
---------------------------------------------------------------------------

    Section 1311(c)(3) of the ACA directs the Secretary to develop a 
system to rate QHPs offered through an Exchange, based on relative 
quality and price. Section 1311(c)(4) of the ACA requires the Secretary 
to establish an enrollee satisfaction survey that evaluates the level 
of enrollee satisfaction of members with QHPs offered through an 
Exchange, for each QHP with more than 500 enrollees in the prior year. 
Further, sections 1311(c)(3) and 1311(c)(4) of the ACA require 
Exchanges to provide this quality rating information \7\ to individuals 
and employers on the Exchange's website.
---------------------------------------------------------------------------

    \7\ The term ``quality rating information'' includes the QRS 
scores and ratings and the results of the enrollee satisfaction 
survey (which is also known as the ``Qualified Health Plan (QHP) 
Enrollee Experience Survey'').
---------------------------------------------------------------------------

    Section 1312(c) of the ACA generally requires a health insurance 
issuer to consider all enrollees in all health plans (except 
grandfathered health plans) offered by such issuer to be members of a 
single risk pool for each of its individual and small group markets. 
States have the option to merge the individual and small group market 
risk pools under section 1312(c)(3) of the ACA.
    Section 1312(e) of the ACA 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.
    Sections 1313 and 1321 of the ACA 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 ACA 
provides for state flexibility in the operation and enforcement of 
Exchanges and related requirements.
    Section 1321(a) of the ACA 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 ACA. Section 1321(a)(1) of the ACA directs the 
Secretary to issue regulations that set standards for meeting the 
requirements of title I of the ACA for, among other things, the 
establishment and operation of Exchanges. When operating an FFE under 
section 1321(c)(1) of the ACA, HHS has the authority under sections 
1321(c)(1) and 1311(d)(5)(A) of the ACA to collect and spend user fees. 
Office of Management and Budget (OMB) Circular A-25 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 ACA provides that the provisions of 
section 2723(b) of the PHS Act shall apply to the enforcement of the 
Federal Exchange standards and authorizes the Secretary to enforce the 
Exchange standards using CMPs on the same basis

[[Page 24144]]

as detailed in section 2723(b) of the PHS Act.
    Section 1321(d) of the ACA provides that nothing in title I of the 
ACA must be construed to preempt any state law that does not prevent 
the application of title I of the ACA. Section 1311(k) of the ACA 
specifies that Exchanges may not establish rules that conflict with or 
prevent the application of regulations issued by the Secretary.
    Section 1332 of the ACA provides the Secretary of HHS and the 
Secretary of the Treasury (collectively, the Secretaries) with the 
discretion to approve a state's proposal to waive specific provisions 
of the ACA, provided the state's section 1332 waiver plan meets certain 
requirements. The Department of Health and Human Services and the 
Department of the Treasury (collectively, the Departments) finalized 
implementing regulations on February 27, 2012 (76 FR 13553) and 
published detailed guidance on the Department's application of section 
1332 to proposed state waivers on October 24, 2018 (83 FR 53575).
    Section 1341 of the ACA provides for the establishment of a 
transitional reinsurance program in each state to help pay the cost of 
treating high-cost enrollees in the individual market in the 2014 
through 2016 benefit years.
    Section 1343 of the ACA establishes a permanent risk adjustment 
program to provide payments to health insurance issuers that attract 
higher-than-average risk populations, such as those with chronic 
conditions, funded by payments from those that attract lower-than-
average risk populations, thereby reducing incentives for issuers to 
avoid higher-risk enrollees.
    Section 1402 of the ACA provides for, among other things, 
reductions in cost sharing for EHB for qualified low- and moderate-
income enrollees in silver level QHPs offered through the individual 
market Exchanges. This section also provides for reductions in cost 
sharing for American Indians enrolled in QHPs at any metal level.
    Section 1411(c) of the ACA requires the Secretary to submit certain 
information provided by applicants under section 1411(b) of the ACA to 
other federal officials for verification, including income and family 
size information to the Secretary of the Treasury.
    Section 1411(d) of the ACA provides that the Secretary must verify 
the accuracy of information provided by applicants under section 
1411(b) of the ACA for which section 1411(c) of the ACA does not 
prescribe a specific verification procedure, in such manner as the 
Secretary determines appropriate.
    Section 1411(f) of the ACA requires the Secretary, in consultation 
with the Secretary of the Treasury, the Secretary of Homeland Security, 
and the Commissioner of Social Security, to establish procedures for 
hearing and making decisions governing appeals of Exchange eligibility 
determinations.
    Section 1411(f)(1)(B) of the ACA requires the Secretary to 
establish procedures to redetermine eligibility on a periodic basis, in 
appropriate circumstances, including eligibility to purchase a QHP 
through the Exchange and for APTC and CSRs.
    Section 1411(g) of the ACA allows the use or disclosure of 
applicant information only for the limited purposes of, and to the 
extent necessary to, ensure the efficient operation of the Exchange, 
including by verifying eligibility to enroll through the Exchange and 
for APTC and CSRs.
    Section 5000A of the Code, as added by section 1501(b) of the ACA, 
requires individuals to have MEC for each month, qualify for an 
exemption, or make an individual shared responsibility payment. Under 
the Tax Cuts and Jobs Act (Pub. L. 115-97, December 22, 2017) the 
individual shared responsibility payment has been reduced to $0, 
effective for months beginning after December 31, 2018. Notwithstanding 
that reduction, certain exemptions are still relevant to determine 
whether individuals age 30 and above qualify to enroll in catastrophic 
coverage under 45 CFR 155.305(h) or 45 CFR 156.155.
    Section 1150A(a) of the Social Security Act (the Act) requires a 
health benefits plan or PBM that manages prescription drug coverage 
under a contract with a QHP issuer to provide certain prescription drug 
information to the Secretary at such times, and in such form and 
manner, as the Secretary shall specify. HHS will limit disclosure of 
the information disclosed by a health benefits plan or PBM under this 
section as required by section 1150A of the Act and may only disclose 
the information in a form which does not disclose the identity of a 
specific PBM or plan, or prices charged for specific drugs, except that 
for limited purposes, HHS may disclose the information to states to 
carry out section 1311 of the ACA. An issuer or PBM that fails to 
provide the information on a timely basis or that knowingly provides 
false information may be subject to a civil monetary penalty under 
section 1927(b)(3)(C) of the Act in the same manner as such provisions 
apply to a manufacturer with an agreement under that section.
    1. Premium Stabilization Programs \8\
---------------------------------------------------------------------------

    \8\ The term ``premium stabilization programs'' refers to the 
risk adjustment, risk corridors, and reinsurance programs 
established by the ACA. See 42 U.S.C. 18061, 18062, and 18063.
---------------------------------------------------------------------------

    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 June 19, 2013 Federal Register 
(78 FR 37032), we proposed a modification to the HHS-operated 
methodology related to community rating states. In the October 30, 2013 
Federal Register (78 FR 65046), we finalized the proposed modification 
to the HHS-operated methodology related to community rating states. We 
published a correcting amendment to the 2014 Payment Notice final rule 
in the November 6, 2013 Federal Register (78 FR 66653) to address how 
an enrollee's age for the risk score calculation would be determined 
under the HHS-operated risk adjustment methodology.
    In the December 2, 2013 Federal Register (78 FR 72321), we 
published a proposed rule outlining the benefit and payment parameters 
for the 2015 benefit year to expand the provisions related to the 
premium stabilization programs, setting forth certain oversight 
provisions and establishing the payment parameters in those programs 
(proposed 2015 Payment Notice). We published the 2015 Payment Notice 
final rule in the March 11, 2014 Federal Register (79 FR 13743). In the 
May 27, 2014 Federal Register (79 FR 30240), the 2015 fiscal year 
sequestration rate for the risk adjustment program was announced.
    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

[[Page 24145]]

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 
Department of Health and Human Services' Risk Adjustment Data 
Validation (HHS-RADV) process (proposed 2018 Payment Notice). We 
published the 2018 Payment Notice final rule in the December 22, 2016 
Federal Register (81 FR 94058).
    In the November 2, 2017 Federal Register (82 FR 51042), we 
published a proposed rule outlining the benefit and payment parameters 
for the 2019 benefit year, and to further promote stable premiums in 
the individual and small group markets. We proposed updates to the risk 
adjustment methodology and amendments to the HHS-RADV process (proposed 
2019 Payment Notice). We published the 2019 Payment Notice final rule 
in the April 17, 2018 Federal Register (83 FR 16930). We published a 
correction to the 2019 risk adjustment coefficients in the 2019 Payment 
Notice final rule in the May 11, 2018 Federal Register (83 FR 21925). 
On July 27, 2018, consistent with 45 CFR 153.320(b)(1)(i), we updated 
the 2019 benefit year final risk adjustment model coefficients to 
reflect an additional recalibration related to an update to the 2016 
enrollee-level External Data Gathering Environment (EDGE) dataset.\9\
---------------------------------------------------------------------------

    \9\ ``Updated 2019 Benefit Year Final HHS Risk Adjustment Model 
Coefficients,'' July 27, 2018. Available at https://www.cms.gov/CCIIO/Resources/Regulations-and-Guidance/Downloads/2019-Updtd-Final-HHS-RA-Model-Coefficients.pdf.
---------------------------------------------------------------------------

    In the July 30, 2018 Federal Register (83 FR 36456), we published a 
final rule that adopted the 2017 benefit year risk adjustment 
methodology as established in the final rules published in the March 
23, 2012 Federal Register (77 FR 17220 through 17252) and in the March 
8, 2016 Federal Register (81 FR 12204 through 12352). This final rule 
set forth additional explanation of the rationale supporting use of 
statewide average premium in the HHS-operated risk adjustment state 
payment transfer formula for the 2017 benefit year, including the 
reasons why the program is operated in a budget-neutral manner. This 
final rule permitted HHS to resume 2017 benefit year risk adjustment 
payments and charges. HHS also provided guidance as to the operation of 
the HHS-operated risk adjustment program for the 2017 benefit year in 
light of publication of this final rule.\10\
---------------------------------------------------------------------------

    \10\ ``Update on the HHS-operated Risk Adjustment Program for 
the 2017 Benefit Year,'' July 27, 2018. Available at https://www.cms.gov/CCIIO/Resources/Regulations-and-Guidance/Downloads/2017-RA-Final-Rule-Resumption-RAOps.pdf.
---------------------------------------------------------------------------

    In the August 10, 2018 Federal Register (83 FR 39644), we published 
a proposed rule seeking comment on adopting the 2018 benefit year risk 
adjustment methodology in the final rules published in the March 23, 
2012 Federal Register (77 FR 17219) and in the December 22, 2016 
Federal Register (81 FR 94058). The proposed rule set forth additional 
explanation of the rationale supporting use of statewide average 
premium in the HHS-operated risk adjustment state payment transfer 
formula for the 2018 benefit year, including the reasons why the 
program is operated in a budget-neutral manner. In the December 10, 
2018 Federal Register (83 FR 63419), we issued a final rule adopting 
the 2018 benefit year HHS-operated risk adjustment methodology as 
established in the final rules published in the March 23, 2012 Federal 
Register (77 FR 17219) and the December 22, 2016 Federal Register (81 
FR 94058). This final rule sets forth additional explanation of the 
rationale supporting use of statewide average premium in the HHS-
operated risk adjustment state payment transfer formula for the 2018 
benefit year, including the reasons why the program is operated in a 
budget-neutral manner.
    In the January 24, 2019 Federal Register (84 FR 227), we published 
a proposed rule outlining updates to the calibration of the risk 
adjustment methodology, the use of EDGE data for research purposes, and 
updates to HHS-RADV audits. We published the 2020 Payment Notice final 
rule in the April 25, 2019 Federal Register (84 FR 17454).
    In the February 6, 2020 Federal Register (85 FR 7088), we published 
a proposed rule that included updates to the risk adjustment models' 
HCCs and a modification HHS-RADV error rate calculation methodology. We 
published the 2021 Payment Notice final rule in the May 14, 2020 
Federal Register (85 FR 29164).
    In the June 2, 2020 Federal Register (85 FR 33595), we published a 
proposed rule that proposed updates to various aspects of the HHS-RADV 
methodologies and processes. We published the 2020 HHS-RADV Amendments 
final rule in the December 1, 2020 Federal Register (85 FR 76979). This 
final rule made revisions to the HCC failure rate grouping algorithm, 
finalized a sliding scale adjustment in HHS-RADV error rate 
calculation, and a constraint on risk score adjustments for low-side 
failure rate outliers. The final rule also established a transition 
from the prospective application of HHS-RADV adjustments to apply HHS-
RADV results to risk scores from the same benefit year as that being 
audited.
    In the September 2, 2020 Federal Register (85 FR 54820), HHS issued 
an interim final rule containing certain policy and regulatory 
revisions in response to the COVID-19 PHE, wherein we set forth risk 
adjustment reporting requirements for issuers offering temporary 
premium credits in the 2020 benefit year (interim final rule on COVID-
19).
    In the December 4, 2020 Federal Register (85 FR 78572), HHS issued 
a proposed rule containing certain policy and regulatory revisions 
related to the risk adjustment program (proposed 2022 Payment Notice).
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). In the December 27, 2019 Federal Register (84 FR 71674), we 
published a final rule that revised standards relating to oversight of 
Exchanges established by states and periodic data matching frequency.
3. Market Rules
    An interim final rule relating to the HIPAA health insurance 
reforms was published in the April 8, 1997 Federal Register (62 FR 
16894). A proposed rule relating to ACA health insurance market reforms 
that became effective in 2014 was published in the November 26, 2012 
Federal Register (77 FR 70584). A

[[Page 24146]]

final rule implementing those provisions 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 guaranteed 
renewability. In the Market Stabilization final rule that was published 
in the April 18, 2017 Federal Register (82 FR 18346), we released 
further guidance related to guaranteed availability. In the 2019 
Payment Notice final rule in the April 17, 2018 Federal Register (83 FR 
17058), we clarified that certain exceptions to the special enrollment 
periods only apply with respect to coverage offered outside of the 
Exchange in the individual market.
4. Administrative Appeals Process Related to Federal Enforcement in 
Group and Individual Health Insurance Markets and Non-Federal 
Governmental Group Health Plans
    On April 8, 1997 an interim final rule with comment period was 
published in the Federal Register (62 FR 16894) that implemented the 
HIPAA health insurance reforms by adding 45 CFR parts 144, 146, and 
148. Included in those regulations were enforcement provisions. In the 
June 10, 1997 Federal Register (62 FR 31669), we published technical 
corrections to these interim final rules. After gaining some experience 
with direct federal enforcement in some states, we determined that it 
was necessary to provide more detail on the procedures that will be 
used to enforce HIPAA when a state does not do so. On August 20, 1999, 
an interim final rule with comment period was published in the Federal 
Register (64 FR 45786) that provided more detail on the procedures for 
enforcing title XXVII of the PHS Act, as added by HIPAA, and as amended 
by the Mental Health Parity Act of 1996 (Pub. L. 104-204, September 26, 
1996), the Newborns' and Mothers' Health Protection Act of 1996 (Pub. 
L. 104-204, September 26, 1996), and the Women's Health and Cancer 
Rights Act of 1998 (Pub. L. 105-277, October 21, 1998), when a state 
does not enforce such laws. We published a final rule on November 25, 
2005 in the Federal Register (70 FR 71020) that finalized this interim 
final rule, and made non-substantive amendments to the regulations 
detailing procedures for enforcing title XXVII of the PHS Act.
5. 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. In the July 15, 
2011 Federal Register (76 FR 41865), we published a proposed rule with 
proposals 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 Small Business Health Options 
Program (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).
    In the 2014 Payment Notice and in the Amendments to the HHS Notice 
of Benefit and Payment Parameters for 2014 interim final rule, 
published in the March 11, 2013 Federal Register (78 FR 15541), we set 
forth standards related to Exchange user fees. 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 the May 11, 2016 Federal Register (81 FR 29146), we published an 
interim final rule with amendments to the parameters of certain special 
enrollment periods (2016 Interim Final Rule). We finalized these in the 
2018 Payment Notice final rule, published in the December 22, 2016 
Federal Register (81 FR 94058). In the March 8, 2016 Federal Register 
(81 FR 12203), the final 2017 Payment Notice codified State Exchanges 
on the Federal platform along with relevant requirements. 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. In the 2019 Payment Notice final rule, published in 
the April 17, 2018 Federal Register (83 FR 16930), we modified 
parameters around certain special enrollment periods. In the April 25, 
2019 Federal Register (84 FR 17454), the final 2020 Payment Notice 
established a new special enrollment period. In the May 14, 2020 
Federal Register (85 FR 29204), the 2021 Payment Notice final rule made 
certain changes to plan category limitations and special enrollment 
period coverage effective date rules, allowed individuals provided a 
non-calendar year qualified small employer health reimbursement 
arrangement (QSEHRA) to qualify for an existing special enrollment 
period, and discussed plans for future rulemaking for employer-
sponsored coverage verification and non-enforcement discretion for 
Exchanges that do not conduct random sampling until plan year 2021.
    In the December 4, 2020 Federal Register (85 FR 78572), HHS issued 
a proposed rule containing certain policy and regulatory revisions 
related to user fees, Exchanges, and section 1332 State Innovation 
Waivers (proposed 2022 Payment Notice). A final rule was published in 
the Federal Register (86 FR 6138) on January 19, 2021, that addressed a 
subset of the policies proposed in the proposed rule. That final rule 
set forth provisions related to user fees for FFEs and SBE-FPs. It 
finalized the proposed changes related to acceptance of payments by 
issuers of individual market Qualified Health Plans, and clarifies the 
regulation imposing network adequacy standards with regard to Qualified 
Health Plans that do not use provider networks. It also finalized a new 
direct enrollment option for Federally-facilitated Exchanges and State 
Exchanges and implemented changes to codify in regulations certain 
policies related to section 1332 State Innovation Waivers.
6. Essential Health Benefits
    On December 16, 2011, HHS released a bulletin \11\ that outlined an 
intended regulatory approach for defining EHB, including a benchmark-
based framework. A proposed rule relating to EHBs was published in the 
November 26, 2012 Federal Register (77 FR 70643). We established 
requirements relating to EHBs 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 2019 Payment Notice, published in the April 17, 2018 
Federal Register (83 FR 16930), we added Sec.  156.111 to provide 
states with additional options from which to select an EHB-benchmark 
plan for plan years 2020 and beyond.
---------------------------------------------------------------------------

    \11\ ``Essential Health Benefits Bulletin,'' December 16, 2011. 
Available at https://www.cms.gov/CCIIO/Resources/Files/Downloads/essential_health_benefits_bulletin.pdf.

---------------------------------------------------------------------------

[[Page 24147]]

    The 2015 Payment Notice final rule, established a methodology for 
estimating the average per capita premium for purposes of calculating 
the premium adjustment percentage. Beginning with the 2015 benefit 
year, the premium adjustment percentage was calculated based on the 
estimates and 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. In the 
2020 Payment Notice final rule, we amended the methodology for 
calculating the premium adjustment percentage by estimating per capita 
insurance premiums as private health insurance premiums, minus premiums 
paid for Medigap insurance and property and casualty insurance, divided 
by the unrounded number of unique private health insurance enrollees, 
excluding all Medigap enrollees. Additionally, in response to public 
comments to the proposed 2021 Payment Notice, the 2021 Payment Notice 
final rule included a policy stating that we will finalize payment 
parameters that depend on NHEA data, including the premium adjustment 
percentage, based on the data that are available as of the publication 
of the proposed rule for that benefit year, even if NHEA data are 
updated between the proposed and final rules.
    In the December 15, 2020 Federal Register (85 FR 81097), HHS 
published the final rule, along with the Departments of Labor and the 
Treasury, that finalized using the premium adjustment percentage as one 
alternative in setting the parameters for permissible increases in 
fixed-amount cost-sharing requirements for grandfathered group health 
plans.
7. Medical Loss Ratio (MLR)
    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 MLR 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), the December 22, 2016 Federal Register (81 FR 94183), the April 
17, 2018 Federal Register (83 FR 16930), the May 14, 2020 Federal 
Register (85 FR 29164) and an interim final rule was published in the 
September 2, 2020 Federal Register (85 FR 54820).
8. Quality Rating System and Enrollee Satisfaction Survey
    The overall framework and elements of the rating methodology for 
the QRS were published in the November 19, 2013 Federal Register (78 FR 
69418). Consistent with statutory provisions, in May 2014, HHS issued 
regulations at Sec. Sec.  155.1400 and 155.1405 to establish the QRS 
and the QHP Enrollee Experience Survey display requirements for 
Exchanges and has worked towards requiring nationwide the prominent 
display of quality rating information on Exchange websites.\12\ As a 
condition of certification and participation in the Exchanges, HHS 
requires that QHP issuers submit QRS clinical measure data and QHP 
Enrollee Survey response data for their respective QHPs offered through 
an Exchange in accordance with HHS guidance, which has been issued 
annually for each forthcoming plan year.\13\
---------------------------------------------------------------------------

    \12\ ACA; Exchange and Insurance Market Standards for 2015 and 
Beyond, Final Rule, 79 FR 30240 at 30352 (May 27, 2014). Also see 
the ``CMS Bulletin on display of QRS star ratings and QHP Enrollee 
Survey results for QHPs offered through Exchanges,'' August 15, 
2019. Available at https://www.cms.gov/CCIIO/Resources/Regulations-and-Guidance/Downloads/QualityRatingInformationBulletinforPlanYear2020.pdf.
    \13\ See, for example, ``Center for Clinical Standards & 
Quality, CMS, The Quality Rating System and Qualified Health Plan 
Enrollee Experience Survey: Technical Guidance for 2021,'' September 
2020. Available at https://www.cms.gov/files/document/quality-rating-system-and-qualified-health-plan-enrollee-experience-survey-technical-guidance-2021.pdf.
---------------------------------------------------------------------------

9. State Innovation Waivers
    Section 1332(a)(4)(B) of the ACA requires the Secretaries to issue 
regulations regarding procedures for State Innovation Waivers. On March 
14, 2011, the Departments published the ``Application, Review, and 
Reporting Process for Waivers for State Innovation'' proposed rule \14\ 
in the Federal Register (76 FR 13553) to implement section 
1332(a)(4)(B) of the ACA. On February 27, 2012, the Departments 
published the ``Application, Review, and Reporting Process for Waivers 
for State Innovation'' final rule \15\ in the Federal Register (77 FR 
11700) (hereinafter referred to as the ``2012 Final Rule''). On October 
24, 2018, the Departments issued the ``State Relief and Empowerment 
Waivers'' guidance \16\ in the Federal Register (83 FR 53575) 
(hereinafter referred to as the ``2018 Guidance''), which superseded 
the previous guidance \17\ published on December 16, 2015 in the 
Federal Register (80 FR 78131) and provided additional information 
about the requirements that states must meet for waiver proposals, the 
Secretaries' application review procedures, pass-through funding 
determinations, certain analytical requirements, and operational 
considerations. On November 6, 2020, the Departments issued an interim 
final rule \18\ in the Federal Register (85 FR 71142), which revises 
regulations to set forth flexibilities in the public notice 
requirements and post-award public participation requirements for State 
Innovation Waivers under section 1332 of the ACA during the COVID-19 
PHE.
---------------------------------------------------------------------------

    \14\ https://www.govinfo.gov/content/pkg/FR-2011-03-14/pdf/2011-5583.pdf.
    \15\ https://www.govinfo.gov/content/pkg/FR-2012-02-27/pdf/2012-4395.pdf.
    \16\ https://www.govinfo.gov/content/pkg/FR-2018-10-24/pdf/2018-23182.pdf.
    \17\ https://www.govinfo.gov/content/pkg/FR-2015-12-16/pdf/2015-31563.pdf.
    \18\ https://www.federalregister.gov/documents/2020/11/06/2020-24332/additional-policy-and-regulatory-revisions-in-response-to-the-covid-19-public-health-emergency.
---------------------------------------------------------------------------

    In the December 4, 2020 Federal Register (85 FR 78572), HHS issued 
a proposed rule under which policies announced under the 2018 Guidance 
would be incorporated into regulations governing State Innovation 
Waivers. A final rule was published in the Federal Register (86 FR 
6138) on January 19, 2021, which adopted final regulations to 
incorporate certain policies announced in the 2018 Guidance regarding 
State Innovation Waivers.

B. Stakeholder Consultation and Input

    HHS has consulted with stakeholders on policies related to the 
operation of Exchanges and the risk adjustment and HHS-RADV programs. 
We have held a number of listening sessions with consumers, providers, 
employers, health plans, advocacy groups and the actuarial community to 
gather public input. We have solicited input from state representatives 
on numerous topics, particularly risk adjustment and the direct 
enrollment option for FFEs and State Exchanges.
    We consulted with stakeholders through regular meetings with the 
National Association of Insurance Commissioners (NAIC), regular contact 
with states, and health insurance issuers, trade groups, consumer 
advocates, employers, and other interested parties. We considered all

[[Page 24148]]

public input we received as we developed the policies in this final 
rule.

C. Structure of Final Rule

    The regulations outlined in this final rule are codified in 45 CFR 
parts 147, 150, 153, 155, 156, 158, and 184.
    The changes to 45 CFR part 147 make technical and conforming 
amendments regarding limited and special enrollment periods in the 
individual market.
    The changes to 45 CFR part 150 make minor procedural changes to the 
requirements for administrative appeals of CMPs by health insurance 
issuers and non-federal governmental group health plans to align with 
current practices for the Departmental Appeals Board. We are finalizing 
parallel changes to the requirements for administrative appeals of CMPs 
by QHP issuers under 45 CFR part 156, subpart J.
    The changes to 45 CFR part 153 recalibrate the HHS risk adjustment 
models consistent with the approach outlined in the 2020 Payment Notice 
to transition away from the use of MarketScan[supreg] data. However, we 
are finalizing the policy to use the 3 most recent consecutive years of 
enrollee-level EDGE data that are available in time for incorporating 
into the coefficients in the proposed rule, which would utilize 
enrollee-level EDGE data from 2016, 2017 and 2018 for the 2022 model 
recalibration, the same data years used for the 2021 model 
recalibration.\19\
---------------------------------------------------------------------------

    \19\ As detailed below, the one exception relates to RXC 09, 
which involved the use of only 2016 and 2017 enrollee-level data to 
develop the applicable 2022 benefit year coefficients and 
interaction terms.
---------------------------------------------------------------------------

    We are clarifying risk adjustment reporting requirements for 
issuers that choose to offer premium credits, if such credits are 
permitted by HHS for future benefit years. In this final rule, we are 
also approving the requests from Alabama to reduce risk adjustment 
transfers by 50 percent in the individual (including catastrophic and 
non-catastrophic risk pools) and small group markets for the 2022 
benefit year. Additionally, we clarify the process for HHS to audit 
issuers of risk adjustment covered plans and reinsurance-eligible plans 
and establish the authority for HHS to conduct compliance reviews of 
these issuers.
    The provisions in part 153 also relate to the risk adjustment user 
fee for the 2022 benefit year. In this final rule, we revise the 
schedule for the collection of HHS-RADV charges and disbursement of 
payments such that these charges and disbursements will occur in the 
same calendar year in which HHS-RADV results are released. We also 
finalize provisions under part 153 to update the applicable regulations 
to reflect the previously established framework regarding when second 
validation audit (SVA) findings can be disputed or appealed, expand the 
conflict of interest standard for initial validation audit (IVA) 
Entities, and codify two previously established exemptions from the 
requirement to participate in HHS-RADV.
    In part 155, we finalize the required contribution percentage for 
the 2022 benefit year. We amend the definition of direct enrollment 
technology provider and add a definition of QHP issuer direct 
enrollment technology provider in part 155 to recognize that QHP 
issuers may also use QHP issuer direct enrollment technology providers 
to facilitate participation in direct enrollment under Sec. Sec.  
155.221 and 156.1230, and make conforming amendments to the definition 
of web-broker. We also codify more specific operational readiness 
review requirements for web-brokers and direct enrollment entities. We 
also amend the marketing and display requirements for direct enrollment 
entities, and rescind text contained in Sec.  155.320 to implement a 
federal court order invalidating certain requirements in the section.
    We also finalize several amendments to special enrollment period 
policy. Specifically, we add new flexibility to allow current Exchange 
enrollees and their dependents to change to a QHP of a lower metal 
level if they qualify for a special enrollment period due to becoming 
newly ineligible for APTC; allow a qualified individual, enrollee, or 
dependent who did not receive timely notice of a triggering event and 
otherwise was reasonably unaware that a triggering event occurred to 
select a plan within 60 days of the date that he or she knew, or 
reasonably should have known, of the occurrence of the triggering 
event; and clarify that a special enrollment period will be available 
when a qualified individual or his or her dependent is enrolled in 
COBRA continuation coverage, and the employer contributions or 
government subsidies for such coverage completely cease.
    In part 156, we set forth the premium adjustment percentage, 
maximum annual limitation on cost sharing and reduced maximum annual 
limitation on cost sharing for the 2022 benefit year. We also amend 
part 156 to establish that for the 2023 benefit year and beyond, we 
will publish the annual updates to the premium adjustment percentage, 
maximum annual limitation on cost sharing, reduced maximum annual 
limitation on cost sharing and required contribution percentage in 
guidance in January of the benefit year prior to the applicable benefit 
year, rather than in the applicable benefit year's annual HHS notice of 
benefit and payment parameters, as long as no change to the 
methodologies to calculate these amounts are proposed. We finalize a 
methodology for analyzing the impact of preliminary values of the 
reduced annual maximum limitations on cost sharing on the AVs of silver 
plan variations. Additionally, we clarify the process for HHS to audit 
QHP issuers related to compliance with federal requirements for APTC, 
CSRs, and user fees and establish authority for HHS to conduct 
compliance reviews of QHP issuers to ensure compliance with federal 
requirements for APTC, CSRs, and user fee standards.
    The changes to part 158 establish the definition of prescription 
drug rebates and other price concessions that issuers must deduct from 
incurred claims for MLR reporting and rebate calculation purposes. The 
changes to part 158 also remove the option for issuers to report 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 for MLR reporting and 
rebate calculation purposes to implement a federal court order 
invalidating this provision. The changes to part 158 additionally 
explicitly allow issuers the option to prepay a portion or all of the 
estimated MLR rebate for a given MLR reporting year in advance of the 
deadlines set forth in Sec. Sec.  158.240(e) and 158.241(a)(2) and 
filing the MLR Annual Reporting Form, and establish a safe harbor 
allowing such issuers, under certain conditions, to defer the payment 
of rebates remaining after prepayment until the following MLR reporting 
year. In addition, the changes to part 158 allow issuers to provide MLR 
rebates in the form of a premium credit prior to the date that the 
rules previously provided. Lastly, we clarify MLR reporting and rebate 
requirements for issuers that choose to offer temporary premium credits 
during a PHE declared by the Secretary of HHS in the 2021 benefit year 
and beyond when such credits are permitted by HHS.
    The addition of part 184 requires PBMs under contract with an 
issuer of QHPs to report prescription drug data required by section 
1150A of the Act.

[[Page 24149]]

III. Summary of the Proposed Provisions of the HHS Notice of Benefit 
and Payment Parameters for 2022, Analysis of and Responses to Public 
Comments, and Provisions of the Final Rule

    In the December 4, 2020 Federal Register (86 FR 78572), we 
published the ``Patient Protection and Affordable Care Act; HHS Notice 
of Benefit and Payment Parameters for 2022 and Pharmacy Benefit Manager 
Standards; Updates To State Innovation Waiver (Section 1332 Waiver) 
Implementing Regulations'' proposed rule. We received a total of 542 
comments in response to the proposed 2022 Payment Notice. Comments were 
received from state entities, such as departments of insurance and 
State Exchanges, health insurance issuers, providers 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 
are not addressed in this final rule.
    In this final rule, we provide a summary of proposed provisions, a 
summary of the public comments received that directly related to those 
proposals, our responses to these comments, and a description of the 
provisions we are finalizing.
    We first address comments regarding the publication of the proposed 
rule and the comment period.
    Comment: Multiple commenters criticized the length of the comment 
period, stating that a longer comment period is necessary to allow 
stakeholders to review the proposed rule and provide thoughtful 
comments. Some commenters also expressed concern that HHS would not 
adequately review and consider all comments before issuing a final 
rule; that HHS appears to be rushing to finalize substantial changes to 
regulations that would hamper access to access to coverage through the 
Exchanges; and that HHS should defer any major policy decisions 
affecting access to Exchange coverage to the incoming Administration.
    Response: We disagree that the comment period was not long enough 
to allow stakeholders to provide meaningful comments. Each year, we 
generally have set a 30-day comment period to accommodate issuer filing 
deadlines for the upcoming plan year and to avoid creating significant 
challenges for states, Exchanges, issuers, and other entities operating 
under strict deadlines related to approval of products. Moreover, we 
found commenters' submissions to be thoughtful and reflective of a 
detailed review and analysis of the proposed rule.
    We further recognize the importance of federal agencies reviewing 
and considering all relevant comments before issuing a final rule. The 
comment period for the proposed rule closed on December 30, 2020. HHS 
has had ample time to review and fully consider comments relevant to 
the rules and policies finalized under this final rule.
    We also disagree that the rules and policies in this final rule 
will hamper access to Exchange coverage. First, based on a review of 
the comments as a whole, we believe comments that asserted the policies 
in the proposed 2022 Payment Notice would hamper access to Exchange 
coverage were largely relevant to proposals that were finalized in the 
January 19, 2021 final Payment Notice, including the Exchange DE option 
finalized under 45 CFR 155.221(j), and the changes to the regulations 
governing State Innovation Waivers under 31 CFR part 33 and 45 CFR part 
155.\20\ Such comments were not focused on policies that we are 
finalizing in this final rule, and for reasons more fully reviewed in 
the preamble discussions related to specific policies in this final 
rule, we disagree that the rules and policies finalized in this final 
rule will hamper access to Exchange coverage. Further, as noted above, 
HHS reviewed the proposed 2022 Payment Notice and the January 19, 2021 
final 2022 Payment Notice in compliance with E.O. 14009 and intends to 
issue a proposed rule this spring to address certain polices, including 
the Exchange DE option and the changes to the State Innovation Waivers 
regulations.
---------------------------------------------------------------------------

    \20\ These comments were addressed in the January 19, 2021 final 
2022 Payment Notice. See 86 FR 6138.
---------------------------------------------------------------------------

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

1. Guaranteed Availability of Coverage (Sec.  147.104)
    Section 147.104(b)(2) incorporates by reference certain Exchange 
special enrollment periods described in Sec.  155.420, making those 
special enrollment periods applicable to non-grandfathered coverage 
offered in the individual market through or outside of an Exchange. We 
proposed amendments to Sec.  147.104(b)(2) to clarify that paragraph 
(b)(2)(ii) does not apply to references in Sec.  155.420(d)(4) 
(relating to errors of the Exchange), and to make a conforming 
amendment consistent with the proposal in Sec.  155.420(c)(5) relating 
to special enrollment period availability for individuals who do not 
receive timely notice of a triggering event. We are finalizing these 
amendments as proposed.
    Section 155.420(d)(4) establishes an Exchange special enrollment 
period for a qualified individual or their dependent if his or her 
enrollment or non-enrollment in a QHP is unintentional, inadvertent, or 
erroneous and is the result of the error, misrepresentation, 
misconduct, or inaction of an officer, employee, or agent of the 
Exchange or HHS, its instrumentalities, or a non-Exchange entity 
providing enrollment assistance or conducting enrollment activities. 
Section 147.104(b)(2)(ii) states that, when determining the application 
of a special enrollment period for individual market coverage offered 
outside the Exchange, 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.
    However, this paragraph was not intended to change the application 
of Sec.  155.420(d)(4), which is specific to errors of the Exchange, 
not those of the applicable state authority. It would be inappropriate 
for the triggering event in this case to apply to errors of the 
applicable state authority because the state does not perform the same 
functions as the Exchange. For example, the state authority does not 
perform an enrollment function. Thus, basing the triggering event on 
errors of the state is inappropriate and could create different special 
enrollment periods in the individual market on and off of the Exchange.
    Therefore, we proposed to clarify that Sec.  147.104(b)(2)(ii) does 
not apply to references in Sec.  155.420(d)(4). As a result, issuers 
offering health insurance coverage in the individual market must 
provide a limited open enrollment period under the same circumstances 
as described in Sec.  155.420(d)(4).
    In addition, we proposed a conforming amendment to Sec.  
147.104(b)(4)(ii), consistent with the proposal in Sec.  155.420(c)(5), 
to establish that if an individual did not receive timely notice of a 
triggering event described in paragraph (b)(2) or (3) of Sec.  147.104, 
and otherwise was reasonably unaware that such a triggering event 
occurred, an issuer of non-grandfathered

[[Page 24150]]

coverage in the individual market, whether inside or outside an 
Exchange, must assign the date the individual knew, or reasonably 
should have known, of the occurrence of the triggering event as the 
date of the triggering event for a special enrollment period. 
Consistent with Sec. Sec.  147.104(b)(5) and 155.420(b), the proposed 
provision would allow the individual or dependent to choose the 
earliest effective date that would have been available if he or she had 
received timely notice of the triggering event or another effective 
date that would otherwise be available pursuant to Sec.  155.420(b). We 
solicited comments on this approach. We noted that this provision would 
not apply for special enrollment periods in the group market, and 
sought comment on whether we should exclude the reference to the 
triggering events in Sec.  147.104(b)(3) in the amended Sec.  
147.104(b)(4)(ii) to retain alignment of the individual and group 
market special enrollment periods required under Sec.  147.104(b)(3).
    We received public comments on the proposed amendments to Sec.  
147.104. Comments related to the proposal in Sec.  155.420(c)(5) 
regarding when an individual does not receive timely notice of a 
triggering event and otherwise was reasonably unaware that a triggering 
event occurred are summarized and addressed in the preamble to Sec.  
155.420. The following is a summary of and our response to the comments 
we received related to the proposal to clarify that paragraph 
(b)(2)(ii) does not apply to references in Sec.  155.420(d)(4) 
(relating to errors of the Exchange).
    Comment: A commenter generally supported clarifying that the 
special enrollment period for an error of the Exchange does not extend 
to errors of the applicable state authority when applied market-wide in 
the individual market.
    Response: We appreciate this comment, and we are finalizing the 
amendment as proposed.

B. Part 150--CMS Enforcement in Group and Individual Markets

1. Technical Corrections
    Part 150 sets forth our enforcement processes for all the 
requirements of title XXVII of the PHS Act with respect to health 
insurance issuers and non-federal governmental group health plans. We 
proposed to make technical corrections to multiple sections of part 
150. Specifically, we proposed to remove all references to ``HIPAA'' 
and replacing them with ``PHS Act'' to clarify that the part 150 
processes are used for enforcing not only the requirements emanating 
from HIPAA, but also the ACA and other legislation enacted subsequent 
to HIPAA. These proposed wording changes were made in the February 27, 
2013 Federal Register final rule entitled ``Patient Protection and 
Affordable Care Act; Health Insurance Market Rules; Rate Review'' (78 
FR 13406). However, because of an oversight, some references were not 
updated at that time. In the proposed rule, we proposed this change to 
the definition of ``Complaint'' in Sec.  150.103; the introductory text 
to Sec.  150.303(a), as well as to Sec. Sec.  150.205(e)(2); 
150.213(b); 150.305(a)(1), (a)(2), (b)(1) and (c)(1); 150.311(g) and 
150.313(b).
    We received one comment that acknowledged these technical 
corrections but made no other statement about them, and we are 
finalizing the clarifying amendments as proposed.
2. Administrative Hearings
    Additionally, we proposed certain procedural changes to part 150 
sections regarding administrative hearings. The proposed changes are 
intended to align with the Departmental Appeals Board's (DAB's) current 
practices for administrative hearings to appeal CMPs. Specifically, we 
proposed changes to remove requirements to file submissions in 
triplicate and instead require electronic filing. This change is 
reflected in the proposed amendments to the definition of ``Filing 
date'' in Sec.  150.401, to the introductory text in Sec.  150.427(a), 
and to the service of submission requirements captured in Sec.  
150.427(b). We also proposed amendments to several provisions in part 
150 to allow for the option of video conferencing as a form of 
administrative hearing in part 150 in addition to the forms already 
allowed. To capture this flexibility, we proposed amendments to the 
definition of ``Hearing'' in Sec.  150.401 and to the requirements 
outlined in Sec.  150.419(a) related to the forms for the hearing, 
Sec.  150.441(e) related to prehearing conferences, and Sec.  
150.447(a) related to the record of the hearing. Finally, we proposed 
to update Sec.  150.431 to allow the Administrative Law Judge (ALJ) to 
communicate the next steps for a hearing in either the acknowledgement 
of a request for hearing or on a later date. We proposed parallel 
amendments to the administrative hearings requirements under subpart J 
of part 156.
    We received a small number of public comments on the proposed 
revisions to the administrative hearing requirements captured in part 
150--CMS Enforcement in Group and Individual Markets and subpart J--
Administrative Review of QHP Issuer Sanctions (Sec. Sec.  156.901, 
156.927, 156.931, 156.947). The following is a summary of the comments 
we received and our responses.
    Comment: All commenters supported the availability of electronic 
filing for administrative appeals. However, two commenters opposed the 
elimination of the option to submit paper files. Those commenters 
specifically noted that consumers might not be comfortable with 
technology or have access to electronic means to file administrative 
appeals.
    Response: We appreciate the commenters' concerns about eliminating 
paper filing as an option. However, the administrative appeals 
procedures in part 150 apply to plans and issuers; they are separate 
and apart from consumer appeals processes.\21\ In addition, the 
proposed changes were intended to update the administrative hearing 
regulations in order to align with the DAB's current practices and did 
not make changes to existing practices.
---------------------------------------------------------------------------

    \21\ See, for example, 45 CFR 155.355.
---------------------------------------------------------------------------

    The DAB's Civil Remedies Division, which handles the administrative 
hearings on CMPs under part 150 and subpart J of part 156, fully 
transitioned from paper to electronic filing to increase administrative 
efficiency and provide greater access and convenience to parties. 
However, a party may request a written waiver from the requirement of 
using DAB E-File. See Civil Remedies Division Procedures Sec.  6, 
available at https://www.hhs.gov/about/agencies/dab/different-appeals-at-dab/appeals-to-alj/procedures/filing-and-service-of-written-material. If a waiver is granted, the party may file documents by U.S. 
mail or an express delivery service. Id.
    Therefore, because the changes were intended to reflect the DAB's 
current practices that incorporate a written waiver process, and 
because these changes do not affect the consumer appeals processes, we 
are finalizing the revisions as proposed.
    Comment: All commenters supported allowing video conferencing as a 
form of hearing. One commenter also noted that the system should 
include third party interpreters, whether foreign language or sign 
language.
    Response: We appreciate the commenter's accessibility concerns 
regarding the video conferencing system. While it is not specifically 
noted in the administrative hearing regulations in part 150 and subpart 
J of part 156 language, the DAB complies with applicable Federal civil 
rights laws and does not discriminate on the basis of race, color, 
national origin, age,

[[Page 24151]]

disability, or sex. The DAB provides free aids and services to people 
with disabilities, including sign language interpreters, and provides 
free language services to people whose primary language is not English, 
including qualified interpreters. Instructions for requesting these 
services are available here: https://www.hhs.gov/about/agencies/dab/about-dab/nondiscrimination-notice/index.html. The DAB's Civil Remedies 
Division also provides a written nondiscrimination notice with similar 
instructions to individual parties in every case.
    Because DAB's current system already allows for these means of 
access and these changes align our regulations with the DAB's current 
practices, we are finalizing the revisions as proposed.
    Comment: Two commenters requested that HHS adopt specific 
timeframes for the ALJ to communicate next steps for an administrative 
hearing in order for consumers to better prepare for the hearing and to 
avoid delays in the process. The regulation, as proposed, allows the 
ALJ to communicate next steps either in the acknowledgement of a 
request for a hearing or on a later date.
    Response: We understand commenters' concerns that the lack of a 
specified time period for response from the ALJ may allow for some 
uncertainty related to the timing for the proceedings. However, as 
previously noted, the administrative appeals procedures in part 150 and 
subpart J of part 156 apply to plans and issuers; they are separate and 
apart from consumer appeals processes. Further, the proposed changes 
were intended to update the regulations in order to reflect the DAB's 
current practices and did not make changes to existing practices for 
administrative appeals by plans and issuers. Therefore, we are 
finalizing the revisions as proposed.

C. Part 153--Standards Related to Reinsurance, Risk Corridors, and Risk 
Adjustment

    Subparts A, B, D, G, and H of part 153, provide standards for 
administering the risk adjustment program. The risk adjustment program 
is a permanent program created by section 1343 of the ACA that 
transfers funds from lower-than-average risk, risk adjustment covered 
plans to higher-than-average risk, risk adjustment covered plans in the 
individual and small group markets (including merged markets), inside 
and outside the Exchanges.\22\ 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.\23\ We did not receive any requests from 
states to operate risk adjustment for the 2022 benefit year; therefore, 
HHS will operate risk adjustment in every state and the District of 
Columbia for the 2022 benefit year.
---------------------------------------------------------------------------

    \22\ 42 U.S.C. 18063.
    \23\ Also see 42 U.S.C. 18041(c)(1).
---------------------------------------------------------------------------

    We proposed changes to our approach for identifying the 3 benefit 
years of enrollee-level EDGE data that would be used for purposes of 
the annual recalibration of the HHS risk adjustment models. We also 
proposed modeling updates to improve the models' predictive power for 
certain subgroups of enrollees, as well as proposed changes to the 
enrollment duration factors for the adult models, and we proposed to 
continue a pricing adjustment related to Hepatitis C drugs. We proposed 
to allow states to submit multi-year requests for reductions to 
transfer calculations under the state payment transfer formula and we 
outlined the 2022 benefit year reduction requests submitted by Alabama. 
Additionally, we proposed to clarify risk adjustment reporting 
requirements for issuers that choose to offer premium credits, if 
permitted by HHS for future benefit years, and to codify a materiality 
threshold for EDGE discrepancies. We proposed the risk adjustment user 
fee for the 2022 benefit year and to codify in regulation the 
previously established exemptions from HHS-RADV requirements for 
issuers with only small group market carryover coverage in the benefit 
year being audited and for sole issuers in a state market risk pool 
during the benefit year being audited. We also proposed to revise the 
schedule for the collection of HHS-RADV charges and disbursement of 
payments such that these charges and disbursements would occur in the 
same calendar year in which HHS-RADV results are released. Finally, we 
proposed to shorten the discrepancy reporting windows during HHS-RADV, 
clarify and expand the conflict of interest standards applicable to 
initial validation audit (IVA) entities, and update the risk adjustment 
regulations to more clearly reflect the previously established 
limitations on the ability to dispute or appeal SVA findings and 
clarify the timeframe for HHS-RADV appeals.
1. HHS Risk Adjustment (Sec.  153.320)
    The HHS risk adjustment models predict plan liability for an 
average enrollee based on that person's age, sex, and diagnoses (also 
referred to as hierarchical condition categories (HCCs)), producing a 
risk score. The HHS risk adjustment methodology utilizes separate 
models for adults, children, and infants to account for clinical and 
cost differences in each age group. In 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, to 
calculate enrollee risk scores in the adult models, we added enrollment 
duration factors beginning with the 2017 benefit year, and prescription 
drug categories (RXCs) beginning with the 2018 benefit year.\24\ 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 CSR adjustment that accounts for differences in induced 
demand at various levels of cost sharing.
---------------------------------------------------------------------------

    \24\ For the 2018 benefit year, there were 12 RXCs, but starting 
with the 2019 benefit year, the two severity-only RXCs were removed 
from the adult risk adjustment models. See, for example, 83 FR 
16941.
---------------------------------------------------------------------------

    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 state payment transfer formula, which 
determines the state transfer payment or charge that an issuer will 
receive or be required to pay for that plan for the applicable state 
market risk pool. Thus, the HHS risk adjustment models predict average 
group costs to account for risk across plans, in keeping with the 
Actuarial Standards Board's Actuarial Standards of Practice for risk 
classification.
a. Updates to Data Used for Risk Adjustment Model Recalibration
    Consistent with the approach outlined in the 2020 Payment Notice to 
no longer rely upon MarketScan[supreg] data \25\ for recalibrating the 
risk adjustment models, we proposed to continue to recalibrate the risk 
adjustment models for the 2022 benefit year using only enrollee-level 
EDGE data. However, rather than using 2017, 2018 and 2019 enrollee-
level EDGE data, we proposed to use the 2016, 2017, and 2018 enrollee-
level EDGE data (the same years' data used to recalibrate the 2021 risk 
adjustment models) to recalibrate the risk adjustment models for the 
2022 benefit year. We also proposed to continue to use blended, or 
averaged, coefficients from the 3 years of separately solved models for 
the 2022

[[Page 24152]]

benefit year model recalibration. We are finalizing these policies as 
proposed.
---------------------------------------------------------------------------

    \25\ 84 FR 17463 through 17466.
---------------------------------------------------------------------------

    Previously, we used the three most recent years of 
MarketScan[supreg] data available to recalibrate the 2016, 2017, and 
2018 benefit year risk adjustment models. Then, starting with the 2019 
benefit year, we began transitioning from using the MarketScan[supreg] 
data to using the enrollee-level EDGE data to recalibrate the risk 
adjustment models. The 2021 benefit year was the first year that we 
recalibrated the risk adjustment models using 3 years of enrollee-level 
EDGE data.\26\ Specifically, for the 2021 benefit year, we used the 
2016, 2017, and 2018 benefit years of enrollee-level EDGE data to 
recalibrate the risk adjustment models. During prior recalibrations, we 
implemented an approach that used blended, or averaged, coefficients 
from 3 years of separately solved models to provide stability for the 
risk adjustment coefficients year-to-year, while reflecting the most 
recent years' claims experience available. In some prior years, this 
approach resulted in reliance on data that could not be incorporated 
into the coefficients until after the publication of the applicable 
benefit year's Payment Notice, because the associated data was not 
available in time to incorporate into the models in time for 
publication in the Payment Notice.\27\ For example, due to the timing 
of the proposed 2021 Payment Notice, we were unable to incorporate the 
2018 benefit year enrollee-level EDGE data into the proposed 
coefficients in the proposed 2021 Payment Notice, and instead included 
draft coefficients in the proposed rule reflecting only 2016 and 2017 
benefit years' enrollee-level EDGE data.\28\ We were also unable to 
incorporate the 2018 benefit year enrollee-level EDGE data in the final 
coefficients in the 2021 Payment Notice; therefore, consistent with 
Sec.  153.320(b)(1)(i), we released the final 2021 benefit year 
coefficients in guidance after publication of the 2021 Payment 
Notice.\29\ We followed a similar approach in other benefit years when 
we were unable to incorporate the most recent year of available data in 
the applicable benefit year's Payment Notice.\30\
---------------------------------------------------------------------------

    \26\ 85 FR 29173 through 29175.
    \27\ See, for example, the 2018 Payment Notice final rule, 81 FR 
94058; and the 2021 Payment Notice final rule, 85 FR 29173 through 
29175.
    \28\ See 85 FR 7097 through 7098 and 7104 through 7112.
    \29\ See 85 FR 29173 through 29175. Also see https://www.cms.gov/CCIIO/Resources/Regulations-and-Guidance/Downloads/Final-2021-Benefit-Year-Final-HHS-Risk-Adjustment-Model-Coefficients.pdf. https://www.cms.gov/CCIIO/Resources/Regulations-and-Guidance/Downloads/Final-2021-Benefit-Year-Final-HHS-Risk-Adjustment-Model-Coefficients.pdf.
    \30\ See, for example, the 2018 Payment Notice rule, 81 FR 
94084. Also see https://www.cms.gov/CCIIO/Programs-and-Initiatives/Premium-Stabilization-Programs/Downloads/2018-Benefit-Year-Final-HHS-Risk-Adjustment-Model-Coefficients.pdf. https://www.cms.gov/CCIIO/Programs-and-Initiatives/Premium-Stabilization-Programs/Downloads/2018-Benefit-Year-Final-HHS-Risk-Adjustment-Model-Coefficients.pdf.
---------------------------------------------------------------------------

    Some commenters to the proposed 2021 Payment Notice expressed 
concern about when the final blended coefficients would be available, 
asking that final coefficients be made available earlier. Having the 
risk adjustment coefficients for the upcoming benefit year available 
earlier allows issuers more time to incorporate this information when 
pricing their plans for the upcoming benefit year. Commenters offered 
suggestions for ways HHS could provide final coefficients sooner. 
Stakeholders submitted similar comments in prior years when the final 
coefficients were released in guidance after publication of the 
applicable benefit year's Payment Notice.\31\ While in the initial 
years of risk adjustment and implementation of the 2014 federal market 
reforms (such as guaranteed availability and community rating), the 
markets underwent rapid changes in which the relative impact of using 
the most recent available data for recalibrating the risk adjustment 
models may have been more pronounced. However, in recent years, HHS has 
shifted from recalibrating the risk adjustment models using a blend of 
the three most recent years of large group market data to using data 
collected entirely from the risk adjustment population (enrollee-level 
EDGE data). This change has resulted in coefficients that better 
reflect underlying market conditions, and the markets have continued to 
mature and stabilize in the years following implementation of the risk 
adjustment program and other 2014 federal ACA reforms, thereby reducing 
the relative impact of the most recent data year on model coefficients. 
As a result, we continued to consider these comments and we proposed to 
change our approach for identifying the 3 most recent years of 
enrollee-level EDGE data that would be used to recalibrate the risk 
adjustment models. Previously, we used the 3 most recent years of data 
that were available in time for publication in the final rule or soon 
thereafter in guidance. However, beginning with the 2022 benefit year, 
we proposed to use the 3 most recent consecutive years of enrollee-
level EDGE data that are available in time for incorporating the data 
in the draft recalibrated coefficients published in the proposed rule 
and we proposed to not update the coefficients for additional years of 
data between the proposed and final rules if an additional year of 
enrollee-level EDGE data became available for incorporation. The 
purpose of the proposed change was to respond to stakeholders' request 
to provide the proposed coefficients in the proposed rule and to 
release the final coefficients earlier, while continuing to use the 3 
most recent consecutive years of enrollee-level EDGE data available to 
recalibrate the risk adjustment models. We explained that we believe 
this approach promotes stability and avoids the delays in publication 
of the coefficients while continuing to develop blended, or averaged, 
coefficients from the 3 years of separately solved models for model 
recalibration. As proposed, the approach also would continue to use 
actual data from issuers' individual and small group (or merged) market 
populations, as well as maintain year-to-year stability in risk scores 
as the recalibration would continue to use at least 2 years of 
enrollee-level EDGE data that were used in the previous year's 
models.\32\
---------------------------------------------------------------------------

    \31\ See, for example, 81 FR 94084 through 94085.
    \32\ As detailed earlier, the 2022 benefit year recalibration 
would rely on the same 3 years of enrollee-level EDGE data that were 
used in the 2021 benefit year. For the 2023 benefit year and beyond, 
the recalibration would rely on 2 years of the enrollee-level data 
that were used in the prior year.
---------------------------------------------------------------------------

    For these reasons, we proposed to use 2016, 2017, and 2018 benefit 
years' enrollee-level EDGE data for the 2022 benefit year model 
recalibration. We sought comment on our proposal to determine 
coefficients for the 2022 benefit year based on a blend of separately 
solved coefficients from the 2016, 2017, and 2018 benefit years' 
enrollee-level EDGE data and our proposed approach to identify the 3 
most recent years of data available for the annual recalibration of the 
risk adjustment models moving forward. Additionally, we sought comment 
on whether we should instead maintain the approach that would use the 
2017, 2018, and 2019 benefit years' data to recalibrate the risk 
adjustment models for the 2022 benefit year.
    We also noted that the coefficients could change if the proposed 
recalibration policies, or other proposed modeling parameters, were not 
finalized or were modified in response to comments. In addition, we 
explained that, consistent with Sec.  153.320(b)(1)(i), if we were 
unable to finalize the final coefficients in time for the final rule, 
we would publish the final coefficients for the 2022 benefit year in 
guidance soon after the publication of the final rule.

[[Page 24153]]

    We received public comments on the proposed updates to data used 
for risk adjustment model recalibration and the proposed 2022 benefit 
year model recalibration approach. The following is a summary of these 
comments and our responses.
    Comment: Many commenters supported the inclusion of the actual 
coefficients that would apply to risk adjustment models for that 
benefit year in the applicable benefit year's payment notice. Some 
commenters supported the proposal to use the 3 most recent consecutive 
years of enrollee-level EDGE data that are available in time for 
incorporating in the proposed recalibrated coefficients published in 
the proposed rule and to not update the coefficients for additional 
years of data between the proposed and final rules if an additional 
year of enrollee-level EDGE data becomes available for incorporation. 
Some of these commenters stated that providing the recalibrated 
coefficients earlier in the process will promote stability, better meet 
the goals of the risk adjustment program, and more closely align with 
issuer pricing cycles for individual and small group health insurance 
coverage.
    Other commenters did not support the proposed approach and 
recommended instead to maintain the approach used in previous years, 
which would lead to the use of the 2017, 2018, and 2019 benefit years 
enrollee-level EDGE data for model recalibration for the 2022 benefit 
year. These commenters stated that incorporating newer data was more 
important than having the model coefficients earlier, with several 
commenters expressing concern that the proposed approach would rely on 
older data that would not include the most up-to-date experience and 
would not accurately reflect the reality and actuarial risk of the 
applicable benefit year.
    One commenter that opposed the proposed approach stated that 
because issuers are required to submit all claims information to their 
respective EDGE servers by April 30th following the end of a benefit 
year, there should be enough time to include the most recent year's 
enrollee-level EDGE data in the applicable benefit year's proposed 
payment notice. The commenter expressed the view that if the final 
coefficients are known by the end of March, issuers can properly 
incorporate risk adjustment coefficients for rate-setting for the 
following year. However, another commenter stated that they preferred 
having the final coefficients sooner, by the end of January, and 
expressed support for the proposed approach if the final coefficients 
incorporating the most recent year of data that becomes available are 
not expected to be ready within that timeframe.
    Response: We are finalizing the proposals to use the 3 most recent 
consecutive years of enrollee-level EDGE data that are available in 
time for incorporating the data in the recalibrated coefficients 
published in the proposed rule and that we will not update the 
coefficients for additional years of data between the proposed and 
final rules if an additional year of enrollee-level EDGE data becomes 
available. We agree with commenters that this approach promotes 
stability and avoids the delays in publication of the coefficients 
while continuing to develop blended, or averaged, coefficients from the 
3 years of separately solved models for model recalibration using 
actual data from issuers' individual and small group (or merged) market 
populations.
    Additionally, we clarify that while we may collect the most recent 
plan year's EDGE data prior to the publication of the proposed rule, 
the data are often not available in time for incorporation into the 
proposed coefficients until much later. This is because the process to 
prepare enrollee-level EDGE data for incorporation into risk adjustment 
model recalibration is rigorous and requires time for analysis and data 
quality checks. Therefore, we believe utilizing the 3 most recent 
consecutive years of enrollee-level EDGE data that are available in 
time for inclusion in the coefficients in the proposed rule promotes 
stability while ensuring data quality and avoids the delays in 
publication of the coefficients that stakeholders have continued to 
raise concerns about in comments on the annual payment notices. This 
policy will allow HHS to provide proposed coefficients in the proposed 
rule that reflects the same underlying data as will be utilized for the 
final rule. This approach will minimize changes between the proposed 
and final coefficients that result from differences in data years, 
particularly in cases where the risk adjustment models and any 
accompanying proposed updates are finalized without changes. As noted 
earlier, in the initial years of risk adjustment and implementation of 
the 2014 federal market reforms, the markets underwent rapid changes in 
which the relative impact of using the most recent data for 
recalibrating the risk adjustment models may have been more pronounced. 
However, in recent years, HHS has shifted from recalibrating the risk 
adjustment models using a blend of the three most recent years of large 
group market data to using data collected entirely from the risk 
adjustment population (enrollee-level EDGE data). This change has 
resulted in coefficients that better reflect underlying market 
conditions, and the markets have continued to mature and stabilize, 
thereby reducing the relative impact of the most recent data year on 
model coefficients.
    This policy will also allow us to continue to use the 3 most recent 
consecutive years of enrollee-level EDGE data available to recalibrate 
the risk adjustment models. It also continues to use actual data from 
issuers' individual and small group (or merged) market populations and 
maintains year-to-year stability in risk scores as the recalibration 
would continue to use at least 2 years of enrollee-level EDGE data that 
were used in the previous year's models. Finally, since this approach 
could allow us to finalize the coefficients earlier, it could allow 
issuers more time to incorporate this information when pricing their 
plans for the upcoming benefit year.
    The proposed coefficients that were published in the proposed rule 
reflected the other proposed risk adjustment model specification 
changes (that is, inclusion of a two-stage model specification in the 
adult and child models; addition of severity and transplant indicators 
interacted with HCC counts factors in the adult and child models; 
modification to the enrollment duration factors in the adult models; 
and removal of the current severity indicator and enrollment duration 
factors in the adult models). However, based on our decision to not 
finalize those proposed model specification changes at this time as 
described below, the proposed coefficients outlined in the proposed 
rule are not being finalized. Instead, as discussed in more detail 
below, we will continue to apply the current risk adjustment model 
specifications (that is, the enrollment duration factors for the adult 
models and the severity illness indicators in the adult models that 
were finalized in the 2021 Payment Notice will continue to apply for 
the 2022 benefit year, with trending adjustments made to project the 
data used to develop the factors forward to reflect the 2022 benefit 
year). The final coefficients outlined below reflect the use of the 
2016, 2017, and 2018 benefit years enrollee-level EDGE data to develop 
blended, or averaged, coefficients from the 3 years of separately 
solved models, as proposed, and the maintenance of the current adult 
model severity indicators and enrollment duration factors, with 
trending adjustments made to reflect the

[[Page 24154]]

2022 benefit year.\33\ In response to comments expressing concern about 
the use of older years of data, we note that, similar to previous 
years, we used 3 years of blended data to develop the 2022 risk 
adjustment models with certain adjustments to that data, such as 
trending the data to reflect the applicable benefit year.\34\ These 
adjustments are necessary because recalibration efforts have always 
used data from prior benefit years to project a future benefit year. As 
such, even if we adopted the alternative approach suggested by some 
commenters and used the 2017, 2018 and 2019 data for the 2022 benefit 
year recalibration, the recalibration data would still need to be 
trended forward to project for the applicable benefit year. We believe 
this approach of incorporating adjustments to the enrollee-level EDGE 
data to project the coefficients for the applicable benefit year is 
appropriate and consistent with the use of prior benefit years data for 
model recalibration, and strikes the appropriate balance between the 
policy desire to provide the coefficients earlier in the pricing cycle 
for the upcoming plan year and the concerns about recalibration data 
not reflecting the most up-to-date experience. After our continued 
consideration of stakeholder requests for earlier release of the risk 
adjustment coefficients, along with the comments on the proposed 2022 
Payment Notice, we are finalizing the proposals to use the 3 most 
recent consecutive years of enrollee-level EDGE data available in time 
for incorporating the data in the recalibrated coefficients published 
in the proposed rule and that we will not update the coefficients for 
additional years of data between the proposed and final rules if an 
additional year of enrollee-level EDGE data becomes available. The 
final coefficients outlined below for the 2022 benefit year reflect the 
use of the 2016, 2017, and 2018 benefit years enrollee-level EDGE data 
for recalibration purposes.\35\
---------------------------------------------------------------------------

    \33\ As detailed later in the preamble, the one exception 
relates to RXC 09, which involved the use of only 2016 and 2017 
enrollee-level data to develop the applicable 2022 benefit year 
coefficients and interaction terms.
    \34\ We previously discussed trending and standardized benefit 
design parameters in the risk adjustment models in the ``March 31, 
2016, HHS-Operated Risk Adjustment Methodology Meeting Discussion 
Paper,'' March 24, 2016, available at https://www.cms.gov/CCIIO/Resources/Forms-Reports-and-Other-Resources/Downloads/RA-March-31-White-Paper-032416.pdf.
    \35\ As detailed later in the preamble, the one exception 
relates to RXC 09, which involved the use of only 2016 and 2017 
enrollee-level data to develop the applicable 2022 benefit year 
coefficients and interaction terms.
---------------------------------------------------------------------------

    Comment: One commenter sought clarification on the reasoning and 
implications for using the 2016, 2017, and 2018 enrollee-level EDGE 
data.
    Response: We proposed changes to how we identify the 3 most recent 
consecutive years of enrollee-level EDGE data for the annual 
recalibration of the HHS risk adjustment models to respond to 
stakeholders' request to provide the coefficients earlier. This 
approach allows HHS to avoid delays in publication of the coefficients, 
which will allow issuers more time to incorporate this information when 
pricing their plans for the upcoming benefit years. While this approach 
will utilize a set of data that is one year older than what we have 
used in previous years, we will continue to project the coefficients to 
reflect estimated costs for the applicable benefit year. We believe 
that this approach will promote stability while ensuring data quality 
and avoid the delays in publication of the coefficients. It also 
continues to use actual data from issuers' individual and small group 
(or merged) market populations and maintains year-to-year stability in 
risk scores as the recalibration would continue to use at least 2 years 
of enrollee-level EDGE data that were used in the previous year's 
models. Therefore, we are finalizing the use of the 3 most recent 
consecutive years of enrollee-level EDGE data that is available to HHS 
in time for incorporation in the proposed coefficients in the annual 
proposed payment notice.
    Comment: One commenter noted that the stated advantages for 
publishing final coefficients earlier has similarly applied in prior 
years as well, and HHS could always publish the final Payment Notice 
earlier. This commenter also stated that the changed approach in the 
proposed rule disrupts issuers' settled expectations, namely, that 
issuers had assumed a continuation of past practice, through which the 
proposed rule's coefficients are updated in the final rule to include 
new data.
    Response: As stated in the proposed rule, we proposed changes to 
our approach to identify the 3 most recent consecutive years of 
enrollee-level EDGE data that would be used for the annual 
recalibration of the risk adjustment models in response to stakeholder 
feedback. HHS has continued to receive numerous comments from 
stakeholders that expressed concerns about the timing for release of 
the model coefficients and asked that final coefficients be made 
available earlier. The approach we used in previous benefit years 
sometimes resulted in delays in publication of the final coefficients 
until after the publication of the applicable benefit year's Payment 
Notice,\36\ because the associated data was not available in time to 
incorporate into the models in time for publication in the Payment 
Notice.
---------------------------------------------------------------------------

    \36\ For example, the final 2021 benefit year risk adjustment 
model coefficients were published in guidance after the final annual 
benefit and payment parameters. https://www.cms.gov/CCIIO/Resources/Regulations-and-Guidance/Downloads/Final-2021-Benefit-Year-Final-HHS-Risk-Adjustment-Model-Coefficients.pdf.
---------------------------------------------------------------------------

    We considered the potential disruption to issuers' settled 
expectations and we explicitly sought comments from stakeholders on 
whether to finalize the proposed approach, or whether we should instead 
maintain the approach of using the 2017, 2018, and 2019 benefit years' 
data to recalibrate the risk adjustment models for the 2022 benefit 
year. As part of our analysis, we considered that it is appropriate for 
HHS to consider changes to program parameters through notice-and-
comment rulemaking, including the proposed changes to the approach for 
the annual model recalibration. We further note that even if we were to 
maintain the approach suggested by commenters to utilize the 2017, 
2018, and 2019 benefit years, changes in the underlying data would 
attenuate the relative impact of the most recent benefit year data on 
risk adjustment coefficients. This is because the coefficients also 
incorporate changes to the risk adjustment methodology for the 
applicable benefit year, updated plan design parameters, and certain 
other adjustments to the data, such as trending the data to reflect the 
applicable benefit year. Finally, as noted above, in the initial years 
of risk adjustment and implementation of the 2014 federal market 
reforms, the markets underwent rapid changes, however, in recent years 
the markets have continued to mature and stabilize. We believe the 
approach finalized in this rule will provide stability and easier price 
prediction for issuers for the 2022 benefit year and beyond. It is an 
appropriate and reasonable response to comments submitted by 
stakeholders over the years asking HHS to reevaluate these issues and 
find a way to release the coefficients earlier to align with issuer 
pricing cycles.
    Comment: One commenter who supported the proposed approach noted 
that there may be circumstances that result in changes to the risk 
adjustment models between the date the proposed rule is published and 
the date the final rule is published, and recommended that if HHS makes 
any final

[[Page 24155]]

modifications to the coefficients, they should be issued no later than 
the release of the final payment notice for the applicable benefit 
year.
    Response: We agree that the coefficients could still change between 
the proposed and final rules. There are various reasons that this could 
happen, such as the proposed recalibration policies (or other proposed 
modeling parameters) not being finalized, or those parameters are 
modified in response to comments. As stated above and described more 
fully below, our decision not to finalize the proposed changes to the 
risk adjustment model specifications and other proposed model updates 
demonstrates how changes between the proposed and final rule can impact 
the risk adjustment coefficients.
    While we intend to make the proposed and final coefficients 
available as early as possible, we did not propose to delete and are 
still retaining the flexibility under Sec.  153.320(b)(1)(i) that 
permits HHS to release the final coefficients in guidance after 
publication of the final rule. Consistent with prior years where we 
have invoked this flexibility, we intend any subsequent publication of 
final coefficients would occur either in the final rule or in guidance 
published soon after the publication of the final rule.
    Comment: Several commenters recommended that we consider whether 
utilizing the 2020 benefit year enrollee-level EDGE data for future 
years' risk adjustment model calibration would be appropriate in light 
of the COVID-19 pandemic.
    Response: We did not propose to use 2020 benefit year enrollee-
level EDGE data as part of the annual recalibration of the risk 
adjustment models for the 2022 benefit year. However, we understand 
commenters' questions about the 2020 benefit year enrollee-level EDGE 
data and its use for recalibration of future benefit years' risk 
adjustment models. We intend to carefully review the 2020 benefit year 
enrollee-level EDGE data as it becomes available to assess the 
potential impact of the COVID-19 pandemic and consider whether it 
should be used for recalibration of the HHS risk adjustment models in 
future benefit years. Additionally, we note that our decision to use 
the 2016, 2017, and 2018 benefit years data for the 2022 benefit year 
model recalibration provides an additional year to evaluate the 2020 
benefit year enrollee-level EDGE data and assess the implications for 
using 2020 benefit year enrollee-level EDGE data for risk adjustment 
model recalibration.\37\ If necessary, we will propose any needed 
changes related to risk adjustment model recalibration through 
rulemaking published in advance of the applicable benefit year.
---------------------------------------------------------------------------

    \37\ Consistent with the approach finalized in this rulemaking, 
the earliest the 2020 enrollee-level EDGE data would be used for 
model recalibration is the 2024 benefit year.
---------------------------------------------------------------------------

    After consideration of the comments on these proposals, we are 
finalizing the approach to use the 3 most recent consecutive years of 
enrollee-level EDGE data that are available in time for incorporating 
the data in the recalibrated coefficients published in the proposed 
rule and to not update the coefficients for additional years of data 
between the proposed and final rules if an additional year of enrollee-
level EDGE data becomes available. As a result, we will use 2016, 2017, 
and 2018 enrollee-level EDGE data to recalibrate the 2022 risk 
adjustment models.\38\
---------------------------------------------------------------------------

    \38\ As detailed later in the preamble, the one exception 
relates to RXC 09, which involved the use of only 2016 and 2017 
enrollee-level data to develop the applicable 2022 benefit year 
coefficients and interaction terms.
---------------------------------------------------------------------------

b. Risk Adjustment Model Updates
    Beginning with the 2022 benefit year, we proposed several updates 
to the risk adjustment models. These proposed updates include changes 
to the specifications for the adult and child models and updates to the 
enrollment duration factors in the adult models to improve the models' 
predictions. We also proposed to continue the market pricing adjustment 
for Hepatitis C drugs that has been in place since the 2020 benefit 
year.
    We are not finalizing the proposed model specification changes and 
enrollment duration factor updates or the accompanying removal of the 
current severity illness indicators and enrollment duration factors in 
the adult models at this time. Therefore, the current adult model 
severity illness indicators and enrollment duration factors, with 
trending adjustments made to reflect the 2022 benefit year, will apply 
for the 2022 benefit year without the proposed specification changes. 
We are finalizing and will continue the market pricing adjustment for 
the Hepatitis C drugs that has been in place since the 2020 benefit 
year.
(1) Changes to the Model Specifications
    Beginning with the 2022 benefit year, we proposed to modify the 
adult and child models specifications to improve prediction for 
enrollees at both the low and highest ends of expected expenditures. 
The current HHS-HCC models are estimated by a weighted least squares 
regression.\39\ The dependent variable is annualized simulated plan 
liability expenditures, and the weight is the person-specific sample 
eligibility fraction. The effective outcome is that the models predict 
per member per month (PMPM) expenditures.
---------------------------------------------------------------------------

    \39\ See, for example, 78 FR 15420 and Section 3.7 of the 
``March 31, 2016 HHS-Operated Risk Adjustment Methodology Meeting 
Discussion Paper,'' March 24, 2016. Available at https://www.cms.gov/CCIIO/Resources/Forms-Reports-and-Other-Resources/Downloads/RA-March-31-White-Paper-032416.pdf.
---------------------------------------------------------------------------

    As described in the 2021 Payment Notice, the current HHS-HCC 
models, which are linear models, underpredict plan liability for 
enrollees without HCCs (enrollees with low expected expenditures) and 
underpredict plan liability for enrollees with the highest HCC counts 
(enrollees with high expected expenditures).\40\ In the 2021 Payment 
Notice, we described options that we were considering to address these 
issues, such as adding a non-linear term or HCC counts factors to the 
risk adjustment models.\41\ For the non-linear model option, we 
considered adding a coefficient-weighted sum of payment HCCs raised to 
a power that could be interpreted as a measure of overall disease 
burden. For the HCC counts model option, we considered adding eight 
indicator variables corresponding to 1 to 8-or-more payment HCCs, 
similar to the CMS-HCC risk adjustment counts models used for Medicare 
Advantage.\42\ We have further evaluated the performance of these 
options, their potential for improved prediction, and considered other 
alternatives to improve the HHS risk adjustment models' prediction.
---------------------------------------------------------------------------

    \40\ 85 FR 29188 and 29189.
    \41\ Ibid.
    \42\ ``Advance Notice of Methodological Changes for Calendar 
Year (CY) 2020 for the Medicare Advantage (MA) CMS-HCC Risk 
Adjustment Model,'' December 20, 2018. Available at https://www.cms.gov/Medicare/Health-Plans/MedicareAdvtgSpecRateStats/Downloads/Advance2020Part1.pdf.
---------------------------------------------------------------------------

    Our initial analyses showed that the non-linear and HCC counts 
models would yield considerable gains in predictive accuracy in the 
adult models across several subgroups when compared to the current 
linear models.\43\ We tested both the HCC counts and non-linear models' 
impact on the adult silver risk adjustment models and found that the 
enrollees in the lowest cost deciles had better predictive ratios under 
either the HCC counts or non-linear model specification than under the 
current linear model specification. However, both models had 
shortcomings that prompted us to

[[Page 24156]]

consider alternate model options to improve the predictive power of the 
current HHS risk adjustment models. For the HCC counts model, we noted 
that we were concerned that the presence of counts across all HCCs may 
promote gaming in coding practices. We explored ways to assure modeling 
convergence across all metals and data years, and found that the non-
linear models did not consistently converge in all testing scenarios, 
and that convergence could not reliably be assured without constraining 
model factors and revising those techniques with each metal and data 
year model run. Therefore, we continued to explore additional types of 
model specifications refinements that could balance the goals of 
improving the models' prediction with mitigating modeling complexity 
and gaming concerns. Specifically, as described later in this section, 
we explored a two-stage specification with additional weighting in the 
second stage based on the inverse capped prediction from the first 
stage (``two-stage specification''), a specification with HCC counts 
included for a small number of severity and transplant HCCs 
(``interacted HCC counts factors''), and an approach combining the two-
stage specification with the interacted HCC counts factors.
---------------------------------------------------------------------------

    \43\ 85 FR 7101 through 7104.
---------------------------------------------------------------------------

    For the two-stage specification, we explored calibrating the adult 
and child models in two stages: In the first-stage estimation, the 
model coefficients would be estimated using the current model 
specifications; and in the second stage, we would re-estimate the model 
weighted by the reciprocal of the predicted values of relative 
expenditures from the first step estimation with the same model 
specification.\44\ The first stage of the weighted estimation method 
involved a linear regression (weighted by the person-specific 
eligibility fraction of the number of months enrolled divided by 12) of 
simulated plan liability on age-sex factors, payment HCC factors, the 
enrollment duration factors,\45\ and RXCs for the adult models. For the 
child models, the first stage of the weighted estimation method 
involved a linear regression of simulated plan liability on age-sex 
factors and payment HCC factors. The second stage involved using the 
reciprocal of first-stage predictions as weights for a second linear 
regression.\46\ To stabilize the weights for the second stage 
estimation, we imposed lower and upper bound caps on the first-stage 
predictions at the 2.5th and 97.5th percentiles in the adult models, 
and the 2.5th and 99.5th percentiles in the child models. We tested 
various caps for the weights based on the distribution of costs, and 
found these lower and upper bound caps achieved better prediction on 
average. This approach has the material effect of weighting the 
healthier enrollees, who represent a majority of enrollees in the 
individual and small group (including merged) markets but who are 
underpredicted by the current models, more heavily so that the 
statistical model predicts their expenditures more accurately. On the 
other hand, this approach systematically underweights, and therefore 
underpredicts, very expensive enrollees. However, the capped weighting 
approach would mitigate the potential to underpredict at the high end 
for expensive enrollees, as well as any possible low-end 
overprediction. In our consideration of this option, we tested various 
weights, including reciprocals of the square root of prediction, log of 
prediction, and residuals from first step estimation, but the 
reciprocal of the capped predictions resulted in better predictive 
ratios for low-cost enrollees compared to any of these alternative 
weighting functions.
---------------------------------------------------------------------------

    \44\ This weighted approach is similar to the weighted least 
squares approach with the weight equal to the reciprocal of the 
estimated variance that is often used to correct for 
heteroskedasticity. However, in our proposed approach, we would use 
the reciprocal of predictions from the first step as weights to 
correct for underprediction of low-valued coefficients.
    \45\ We proposed to remove and replace the enrollment duration 
factors in the adult models in the proposed rule, but we are not 
finalizing the proposed changes to the enrollment duration factors 
in this final rule and will apply the current enrollment duration 
factors of up to 11 months, with trending adjustments made to 
reflect the 2022 benefit year, in the adult models for the 2022 
benefit year.
    \46\ Under the proposed two-stage specification and interacted 
HCC counts model described later in this section, we proposed to 
remove and replace the severity illness indicators in the adult risk 
adjustment models with the proposed interacted HCC counts factors in 
the adult and child models. However, we not are finalizing these 
proposed model specification changes in this final rule and will 
continue to apply the current severity illness indicators in the 
adult models for the 2022 benefit year.
---------------------------------------------------------------------------

    We also explored how the addition of severity and transplant 
indicators interacted with HCC counts, wherein an indicator flagging 
the presence of at least one severity or transplant payment HCC is 
being interacted with counts of the enrollee's payment HCCs.\47\ The 
goals for this approach were to: (1) Address the non-linearity in costs 
between enrollees with no or very low costs and enrollees with high 
costs; (2) empirically incorporate the cost impact of multiple complex 
diseases; and (3) mitigate the gaming concerns with the HCC counts 
model. We tested different types of severity and transplant indicators 
interacted with HCC counts with the goal of improving prediction for 
enrollees with the highest costs and multiple HCCs to counter balance 
the reciprocal prediction weights that relatively underpredicted costs 
for these enrollees. For this approach, we assessed the HCCs for 
enrollees with extremely high costs, and HCCs that were being 
underpredicted in the current risk adjustment models. We found that 
many of the HCCs that were flagged as being under-predicted were those 
HCCs that indicated severe illness, such as the transplant HCCs, and 
other HCCs related to severity of disease; therefore, we considered 
dropping the current severity illness indicators in the adult models 
and replacing them with severity and transplant indicators interacted 
with HCC counts factors in the adult and child models. Table 3 in the 
proposed rule \48\ listed the HCCs that were selected for the severity 
and transplant indicators for the adult and child models for purposes 
of exploring this option. The severity and transplant indicators were 
then interacted with HCC counts factors, which are described below.
---------------------------------------------------------------------------

    \47\ For HCCs in a group, the group is counted at most once. 
These groups of HCCs in the risk adjustment models are typically 
detailed in the Tables 6 and 7 of the HHS-Developed Risk Adjustment 
Model Algorithm ``Do It Yourself (DIY)'' Software.
    \48\ See 85 FR at 78593.
---------------------------------------------------------------------------

    The purpose of adding severity and transplant indicators interacted 
with HCC counts factors is to account for the fact that costs of 
certain HCCs rise significantly when they occur with multiple other 
HCCs. To mitigate the incentive to upcode multiple HCCs, we only 
increased incremental risk scores in the presence of at least one of 
the selected HCCs in the severity or transplant indicator groups in 
Table 3 in the proposed rule. That is, an adult or child enrollee would 
have to have at least one HCC in the ``severity'' or ``transplant'' 
indicator groups in Table 3 in the proposed rule to receive the 
interacted HCC counts coefficient toward their risk score.
    Under this approach, when an adult or child enrollee has a severity 
indicator HCC in Table 3 in the proposed rule, the enrollee's risk 
score would include the sum of: (1) Severity HCC variable coefficient; 
\49\ and (2) applicable severity HCC counts variable coefficient. The 
HCC counts factors, which indicate the

[[Page 24157]]

counts of all payment HCCs for an enrollee with at least one HCC, 
interacted with the severity indicator in Table 3 in the proposed rule, 
range from one, two, to 10+ payment HCCs (1, 2, . . . , 10+) for the 
adult models, and from one, two, to 5, then 6 or 7, and 8+ payment HCCs 
for the child models. To implement the severity indicator HCC counts 
factors and further explore this option, we removed the current 
severity illness indicators in the adult models, and added severity 
indicator interacted HCC counts variables for the adult and child 
models.
---------------------------------------------------------------------------

    \49\ This is in addition to the HCC coefficients for any other 
HCCs that the enrollee has, as well other risk adjustment factors 
that the enrollee has (such as demographic factors). If an enrollee 
has no severity HCCs the severity count interaction term 
coefficients are not applicable.
---------------------------------------------------------------------------

    For the transplant-related HCCs within the severity indicator HCC 
counts in Table 3 in the proposed rule, we found separating out 
transplant HCCs into their own additional indicator to interact HCC 
counts factors improved prediction for these high-cost enrollees. 
Therefore, for the transplant HCCs, we created a separate transplant 
indicator to interact with payment HCC counts of 4, 5, 6, 7, or 8+ for 
the adult models, and a single indicator variable of payment HCC counts 
of 4+ for the child models. For example, an adult enrollee with a 
transplant HCC 34 ``Liver Transplant Status/Complications'' in the 
transplant indicator group and three other payment HCCs received the 
following factors toward their risk score in the adult models: (1) The 
four coefficients for their individual HCCs (the three non-transplant 
HCCs and the HCC 34 transplant HCC coefficient), (2) severity 
interacted HCC counts of 4 coefficient, and (3) transplant interacted 
HCC counts of 4 coefficient.\50\ The child model operated similarly. 
For a child enrollee with a transplant HCC in the transplant indicator 
group and three other payment HCCs, the following was used to calculate 
the enrollee's risk score: (1) Coefficients for all four HCCs, 
(including the transplant HCC coefficient), (2) severity interacted HCC 
counts of 4 coefficient, and (3) transplant interacted HCC counts of 4 
coefficient.
---------------------------------------------------------------------------

    \50\ This is in addition to other risk adjustment factors that 
the enrollee has (such as demographic factors).
---------------------------------------------------------------------------

    As an alternative, we explored interacting the HCC counts factors 
with each selected severity and transplant HCC, but found it was 
sufficient to interact the HCC counts factors with a variable 
indicating the presence of at least one of the selected HCCs in each 
group to improve prediction for enrollees with these HCCs. We also 
explored different combinations of HCC counts to identify the counts 
factors for both indicator groups in the adult and child models that 
provided the best balance of reasonable sample sizes and relative cost 
differences between each counts factor. More specifically, in the adult 
models, we found that starting with 4+ HCCs for the transplant 
interacted factors improved predictions of enrollees at the very high 
end in terms of risk and cost and ending at 8+ HCCs instead of 10+ HCCs 
addressed the small sample sizes of enrollees with a transplant and 9 
or more payment HCCs. For the child models, we found having one 
variable for 4+ payment HCCs provided more stable estimates as compared 
to separate variable for each payment HCC above that number, given the 
smaller sample sizes for children than those for adults.
    Lastly, we tested combining these specifications into an 
alternative approach that incorporated both the two-stage specification 
and the severity and transplant indicators interacted HCC counts 
factors described above for the HHS adult and child models. We found 
this combined approach generally improved prediction for enrollees at 
both the low and highest ends of expected expenditures. Specifically, 
even though we found that the age-sex factors and some HCCs might have 
slightly worse predictive ratios under the proposed combined approach 
than the current linear models, we found that this combined approach 
improves predictive ratios in comparison to the current models in each 
decile of predicted plan liability. We also found that this combined 
approach improves R-squared in comparison to the current model and that 
even though the coefficients for the model factors that are most 
impacted by the combined approach (the age-sex factors and the severity 
and transplant HCCs) would be changing under the 2022 benefit year 
models compared to the 2021 benefit year models, the average enrollee's 
adult risk score in the recalibration sample in the silver metal level 
only increased slightly between 2021 benefit year models to 2022 
benefit year models. Therefore, we proposed to modify the HHS risk 
adjustment model specifications for the adult and child models by 
combining a two-stage specification and adding interacted HCC counts 
factors beginning with the 2022 benefit year. For the two-stage 
specification, we proposed calibrating the adult and child models in 
two stages. The first stage of the weighted estimation method would 
involve a linear regression of simulated plan liability on age-sex 
factors and payment HCC factors for the adult and child models, with 
the addition of the enrollment duration and RXCs factors for the adult 
models. The second stage would use the reciprocal of prediction as 
weights from the first step as a second stage linear regression. To 
stabilize the weights from the first stage predictions, we proposed 
lower and upper bound caps on the predictions at the 2.5th and 97.5th 
percentiles in the adult models, and the 2.5th and 99.5th percentiles 
in the child models. This two-stage specification would be combined 
with the severity and transplant indicators from the interacted HCC 
counts factors. For the severity indicator group, we proposed to add 
separate count factors for one to 10+ payment HCCs counts factors (1, 
2, . . ., 10+) for the adult models and one to 5, 6 or 7, and 8+ 
payment HCCs (1, 2, . . . . 5, 6 or 7, 8+) for the child models. The 
proposed HCCs that would flag the severity indicator are listed in 
Table 3 of the proposed rule.\51\ For the transplant HCCs, we proposed 
to incorporate variables for 4 to 8+ payment HCCs (4, 5, 6, 7, 8+) for 
the adult models and one variable for 4+ payment HCCs for the child 
models. All variables, including the severity and transplant indicators 
interacted in the interacted HCC counts factors, would be included in 
both stages of the regressions. We proposed to incorporate these model 
specification updates beginning with the 2022 benefit year HHS risk 
adjustment adult and child models. We also proposed to remove the 
current severity illness indicators in the adult models beginning with 
the 2022 benefit year.
---------------------------------------------------------------------------

    \51\ See 85 FR at 78593.
---------------------------------------------------------------------------

    We sought comment on these proposals, including on the HCCs 
selected for flagging as severity and transplant indicators listed in 
Table 3 of the proposed rule such as whether we should include HCC 18 
Pancreas Transplant in the transplant indicator group, and the 
alternatives described above. We also requested comment on whether we 
should pursue both the interacted HCC counts factors and the two-stage 
specification beginning with the 2022 benefit year (as proposed), if we 
should implement one of the two approaches beginning with the 2022 
benefit year (and if so, which one), or if we should wait to implement 
the proposed changes that combines the proposed model specification 
updates until the 2023 benefit year.
    We are not finalizing the risk adjustment model specification 
changes as proposed at this time, but will further consider potential 
changes that could increase the predictive power of the HHS risk 
adjustment models. We also

[[Page 24158]]

are not finalizing the accompanying proposals to remove the current 
severity illness indicators in the adult models; those factors, as 
finalized in the 2021 Payment Notice, will continue to apply to the 
2022 benefit year adult models with trending adjustments made to 
project the data used to develop the factors forward to reflect the 
2022 benefit year.\52\
---------------------------------------------------------------------------

    \52\ See the Severity Factors listed in Table 1.
---------------------------------------------------------------------------

    We received public comments on the proposed updates to the model 
specification changes. The following is a summary of these comments and 
our responses.
    Comment: Many commenters opposed the proposed risk adjustment model 
specification changes and wanted to know more about the specific 
impacts of the proposed risk adjustment model specification changes. 
Many of these commenters were concerned that HHS did not give 
stakeholders adequate information or time to assess the model 
specification changes, while some stated that the model specification 
changes were unexpected and not fully reviewed with stakeholders in 
advance of them being proposed for implementation. These commenters 
suggested that, consistent with recent efforts to update risk 
adjustment data validation, HHS should release a White Paper and 
conduct listening sessions to provide stakeholders with the opportunity 
to evaluate the impact of the changes and provide HHS with feedback in 
advance of pursuing such changes through rulemaking. Some commenters 
generally wanted additional analyses or more specificity about the 
model changes while others requested specific types of analyses.
    Some commenters that opposed the proposed model specification 
changes were concerned the changes added complexity to the models and 
would hinder issuers' ability to price accurately, resulting in higher 
premiums. Other commenters recommended that HHS collect data to 
estimate the impact of the proposed model specification changes on risk 
adjustment transfers before finalizing them. Another commenter 
recommended evaluating model performance at the plan level instead of 
the enrollee level using the plan liability risk score predictive 
ratios because the transfer formula operates at the plan and rating 
level, wanting HHS to collect data to do this type of analysis.
    A few commenters were concerned that the proposed model 
specification changes would reduce the quality of coverage available to 
consumers and would threaten the market's ability to support robust 
competition. One of these commenters recommended that we reconsider the 
goal of reducing under prediction for enrollees with low spending, 
because this commenter believed that plans that disproportionately 
attract sick enrollees tend to attract enrollees who are higher-than-
average risk based on characteristics not captured in risk adjustment, 
and that therefore risk adjustment should underpay for low spending 
enrollees relative to payment for higher-risk enrollees.
    However, other commenters supported our proposed model 
specifications changes. These commenters tended to support improving 
the predictive power of the risk adjustment models and were concerned 
about the potential for plans to lose money on enrollees with no HCCs 
under the current model specifications, discouraging issuers from 
enrolling healthier enrollees and resulting in excessive risk 
adjustment payments. One of these commenters reported engaging in their 
own analysis of the proposed model specification changes and found that 
they achieved HHS's goals of improving the models' prediction while 
mitigating modeling complexity and gaming concerns.
    Response: After consideration of comments on these proposals, we 
are not finalizing the proposed model specifications changes at this 
time and will retain the existing severity illness indicators in the 
adult models. We intend to continue to consider potential changes that 
could increase the predictive power of the HHS risk adjustment models 
in future rulemaking for future benefit years. While we believe 
stakeholders had sufficient time and adequate information to evaluate 
these model specifications, as reflected in the detailed comments 
received on these proposals, we understand stakeholders' desire for 
additional analyses on these types of model specification changes prior 
to implementing them in the risk adjustment models. We also appreciate 
issuers' desire for additional time to prepare for these types of model 
specification changes and to consider how to price for these model 
specification changes. While we are limited in our ability to evaluate 
model performance at the plan level because the enrollee-level EDGE 
data does not include plan level information, to test the performance 
of the risk adjustment models for subgroups, we calculate the 
expenditure ratio of predicted to actual weighted mean plan liability 
expenditures by subgroup, also referred as the predictive ratios.\53\ 
Regardless, we agree that more time, and some additional analysis, 
would help stakeholders further review these changes, help issuers 
price more accurately, and prevent the introduction of inadvertent 
volatility in the market(s) as a result of new model specifications. It 
will also help inform whether refinements to these proposals or other 
options would be appropriate to meet the overall policy goal of 
improving the models' predictive power for the lowest cost and highest 
cost enrollees and developing a model that most accurately captures 
risk for those with and without HCCs. For these reasons, we are 
considering releasing a technical paper to provide further assessment 
of potential changes to the risk adjustment models and additional 
analysis of options to improve the prediction of the risk adjustment 
models. In addition, if we decide to pursue these changes, or other 
options, to improve the predictive power of the models for future 
benefit years, we would propose such updates through notice-and-comment 
rulemaking.
---------------------------------------------------------------------------

    \53\ March 31, 2016, HHS-Operated Risk Adjustment Methodology 
Meeting. Discussion Paper. March 24, 2016. https://www.cms.gov/CCIIO/Resources/Forms-Reports-and-Other-Resources/Downloads/RA-March-31-White-Paper-032416.pdf.
---------------------------------------------------------------------------

    Comment: Some commenters were concerned that the two-stage 
specification would over-fit the model or would worsen the fit along 
other dimensions. One of these commenters questioned the basis for the 
weighting function chosen in the two-stage specification noting that it 
appeared to be arbitrary and recommended that HHS consider using 
industry-standard methods to test modeling choices for overfitting and 
then publish the results of these tests when explaining modeling 
decisions. This commenter cautioned against an overemphasis on 
improving model performance in the absence of both a sound theoretical 
basis for changes and an independent data set to confirm an increase in 
accuracy. Another commenter recommended that HHS not finalize the 
proposed risk adjustment model specifications since the two-stage 
specification does not mitigate the under-prediction of health care 
costs for enrollees with the highest number of HCCs. One commenter was 
concerned that the proposed two-stage specification would not predict 
future costs.
    Response: We are not implementing the proposed model specifications 
at this time. However, in response to comments, we note that as part of 
our assessment of the proposed model specification changes we tested 
for

[[Page 24159]]

overfitting of the models by running predictive ratios on the separate 
validation samples for both the child and adult models. While the 
sample sizes are smaller in the child models than the adult models, 
leading to greater fluctuations for the child models, we found that the 
predictive ratios in the separate validation samples showed no material 
difference relative to predictive ratios in the estimation sample. 
Thus, we did not find empirical concerns with respect to overfitting of 
the models with the proposed model specification changes.
    As previously mentioned, we believe it is appropriate to continue 
to analyze the two-stage specification and interacted HCC counts 
factors and are considering releasing a technical paper to provide our 
further assessment of potential changes to the risk adjustment models 
that could include these model specification changes or other options. 
In addition, we would pursue adoption of any of these model 
specification changes, or other options, for future benefit years 
through notice-and-comment rulemaking.
    Comment: Some commenters were concerned about the potential for 
small sample sizes for the interacted HCC counts model specification. 
These commenters tended to be concerned that the number of enrollees 
could drop significantly as the interacted HCC counts go up, which 
could lead to erratic interacted HCC counts factors coefficients, and 
had concerns that the proposed rule had some large changes between 
coefficients and coefficients going from negative to positive for a 
given count across metal levels. One commenter was concerned that the 
low sample sizes at higher HCC counts associated with larger 
coefficients could increase the models' volatility, making it more 
difficult for issuers to price coverage. Other commenters were 
concerned that the interacted HCC counts model specification could 
incentivize unwanted gaming in coding practices by issuers. One 
commenter that supported the adoption of the interacted HCC counts 
model specification was concerned that the interacted HCC count model 
change would encourage issuers to invest additional resources in 
diagnosis coding. Another commenter did not believe that using 
interacted HCC counts factors would create an opportunity for gaming, 
and did not understand how using a full HCC counts model specification 
would result in gaming opportunities either.
    Response: As noted previously, after consideration of comments, we 
are not finalizing the proposed model specification updates, including 
the interacted HCC counts factors, at this time. While we believe that 
the proposed rule provided stakeholders with adequate information to 
evaluate these model specifications, we recognize that stakeholders 
could benefit from further analysis and additional time to analyze the 
structure of the proposed interacted HCC counts factors. In response to 
the commenters expressing concerns about negative coefficients under 
the proposed interacted HCC counts factors, we note that when an 
enrollee has a severity indicator HCC, the enrollee's risk score would 
include the sum of: (1) Severity HCC variable coefficient; \54\ and (2) 
applicable severity HCC counts variable coefficient. This means that 
even though many of the interacted HCC counts factors outlined in the 
proposed rule were negative coefficients, the net combined impact of 
the HCC coefficients and the interacted ``severity'' or ``transplant'' 
HCC counts coefficient, to the enrollee's risk score would be 
positive.\55\
---------------------------------------------------------------------------

    \54\ This is in addition to the HCC coefficients for any other 
HCCs that the enrollee has, as well other risk adjustment factors 
that the enrollee has (such as demographic factors). If an enrollee 
has no severity HCCs the severity count interaction term 
coefficients would not be applicable.
    \55\ To further illustrate, we can consider a male enrollee age 
63 in silver metal level who has diabetes but no other risk markers. 
Using the proposed coefficients in the proposed rule, his proposed 
model predicted cost would be: 0.343 (age-sex estimate) + 0.262 
(diabetes HCC estimate) = 0.605.
    If he develops sepsis, which is an interacted ``severity'' HCC, 
his predicted cost would be: 0.605 + 9.394 (sepsis HCC) + -5.824 
(interacted severity HCC counts factor for 2 total HCCs estimate) = 
4.175.
    If this enrollee also develops heart failure, his predicted cost 
would further rises: 0.605 + 9.394 + 1.874 (heart failure HCC) + -
4.526 (interacted severity HCC counts factor for 3 total HCCs) = 
7.347. As can be seen in these illustrative examples, although the 
interacted ``severity'' HCC counts factors are negative, the 
interacted ``severity'' HCC counts factor rise with the enrollee's 
total number of HCCs, increasing the enrollee's total predicted cost 
as his number of HCC diagnoses increases. In fact, the increasing 
risk scores with each additional HCC is consistent with the current 
models and predictions are higher for enrollees with many HCCs under 
the interacted counts specification than under the current model 
specification.
---------------------------------------------------------------------------

    In developing the proposed interacted HCC counts factors, we also 
considered sample sizes of the various interacted HCC counts factors. 
We analyzed multiple years of enrollee-level EDGE data and we chose the 
model specifications that grouped all of the HCC counts interacted with 
individual severity and transplant HCCs into two sets of aggregated 
factors to maximize sample size, reduce concerns of overfitting the 
model, and reduce the number of factors being added to the models. The 
resulting sample size for the proposed interacted HCC counts factors 
were consistent with the sample size for individual HCCs in the risk 
adjustment models. Furthermore, by limiting the proposed interacted HCC 
counts factors to certain severity and transplant HCCs, we believe that 
the interacted HCC counts factors would restrict the scope for coding 
proliferation in accordance with the principles of risk adjustment.\56\
---------------------------------------------------------------------------

    \56\ We have described our principles for risk adjustment in 
various documents, but a complete list of them is available in the 
March 31, 2016, HHS-Operated Risk Adjustment Methodology Meeting 
Discussion Paper. March 24, 2016. Pages 12-13, https://www.cms.gov/CCIIO/Resources/Forms-Reports-and-Other-Resources/Downloads/RA-March-31-White-Paper-032416.pdf.
---------------------------------------------------------------------------

    As discussed in the 2021 Payment Notice, we considered using a 
counts model specification where all HCCs were subject to the counts 
model specifications, but, as stated in the proposed rule, we were 
concerned that the presence of counts across all HCCs may promote 
gaming in coding practices. This was our reasoning for investigating an 
interacted HCC counts model specification to find a way to get the 
benefits afforded by the HCC counts model while mitigating the 
potential for gaming. The proposed interacted HCC counts factors would 
have made changes primarily to the HCCs most associated with 
underprediction of high-cost cases in the model and would have only 
applied to less than two percent of the population thereby reducing the 
concern about additional coding incentives in comparison to a general 
HCC counts model.
    We agree that stakeholders will benefit from additional time to 
analyze the proposed factors that we presented in the proposed rule to 
understand the incremental effects of the interacted HCC counts factors 
and consider the associated coding incentives. After consideration of 
comments received on these proposals, we are not finalizing the 
proposed model specification changes or the removal of the current 
severity illness indicator factors in the adult models at this time. 
However, we intend to continue to consider changes that can increase 
the predictive power of the HHS risk adjustment models in rulemaking 
for future benefit years and also intend to provide stakeholders with 
further information and additional analysis on potential model 
specifications changes.
    Comment: One commenter believed that inclusion of the interacted 
HCC counts factors appears to be a discriminatory practice.

[[Page 24160]]

    Response: We are not finalizing the policy at this time, but we 
disagree. The interacted HCC counts factors proposed to be added to the 
HHS risk adjustment models are not discriminatory. HHS takes very 
seriously our obligation to protect individuals from discrimination. 
Consistent with section 1343 of ACA, the HHS-operated risk adjustment 
program reduces the incentives for issuers to avoid higher-than-average 
risk enrollees, such as those with chronic conditions, by using charges 
collected from issuers that attract lower-than-average risk enrollees 
to provide payments to health insurance issuers that attract higher-
than-average risk enrollees. The proposed interacted HCC counts factors 
would help predict enrollee risk better for certain subpopulations. 
Therefore, we do not believe the inclusion of the interacted HCC counts 
factors is a discriminatory practice and as stated above, the proposed 
inclusion of interacted HCC counts would reduce the under-prediction of 
the highest cost cases and the under-prediction of the low-risk 
enrollees, thereby helping to mitigate the potential for adverse 
selection by improving the predictive power of the HHS risk adjustment 
models for these enrollees.
    Comment: One commenter wanted HHS to consider using more metrics 
than R-squared statistics to assess the proposed model specification 
changes, such as mean absolute prediction error or predictive ratios 
for subsets of the population. Another commenter was concerned that the 
proposed revisions to incorporate interacted HCC counts factors and 
modify the enrollment duration factors alone would result in worse 
model performance among lower-cost deciles even if they result in 
higher R-squared values overall. Another commenter wanted to ensure 
that HHS's modeling was taking into account the high-cost risk pool 
component of the HHS risk adjustment methodology.
    Response: While we did assess R-squared statistics for the 
performance of our proposed model specification changes, our primary 
metric to evaluate performance and the proposed changes was predictive 
ratios by subgroup. We found that the proposed interacted HCC counts 
and the proposed revised enrollment duration factors (discussed in the 
below section) improved the model performance for the low-end deciles 
even without the inclusion of the proposed two-stage specifications. We 
intend to continue to assess model performance in future benefit years, 
and we will also consider assessing the mean absolute prediction error 
along with predictive ratios and R-squared statistics as we continue to 
assess potential model specification changes in the future. We also 
confirm that the annual recalibration of the HHS risk adjustment 
models, including both the development of final coefficients listed in 
this rule and the proposed coefficients reflecting the proposed model 
specification changes in the proposed rule, accounts for the costs 
covered by the high-cost risk pool component of the HHS risk adjustment 
methodology.57 58
---------------------------------------------------------------------------

    \57\ Beginning with the 2018 benefit year risk adjustment 
recalibration, we incorporated the high-cost risk pool parameters in 
our recalibration of the models by truncating 40 percent of costs 
above $1 million in our dataset used to simulate plan liability. 
See, for example, 81 FR 94058 at 94082.
    \58\ See, for example, the proposed 2022 Payment Notice, 85 FR 
at 78586 (In announcing the proposed coefficients, noting that 
``(t)he adult, child, and infant models have been truncated to 
account for the high-cost risk pool payment parameters by removing 
60 percent of costs above the $1 million threshold.'')
---------------------------------------------------------------------------

    Comment: Some commenters focused on the proposed timeline for 
implementation of the proposed model specification changes. Some of 
these comments were opposed to implementing the model specification 
changes in 2022 and some supported delaying implementation to the 2023 
benefit year (or beyond). One commenter wanted all model specification 
changes completed within one benefit year and then recommended limiting 
model changes in future benefit years to provide year-to-year 
stability. Another commenter supported applying the proposed model 
specification changes beginning with the 2022 benefit year risk 
adjustment models.
    Response: As noted previously in this rule, after consideration of 
comments on these proposals, we are not finalizing the proposed model 
specifications at this time and are retaining the current severity 
illness indicator factors in the adult models. We agree that 
stakeholders would benefit from having additional analysis and time to 
consider these changes. Therefore, we intend to provide stakeholders 
with additional analysis and further information about potential model 
specification changes and will continue to consider changes that can 
increase the predictive power of the HHS risk adjustment models. Any 
such changes would be pursued through rulemaking for future benefit 
years. As part of our continued analysis of potential future changes, 
we intend to consider ways to balance the desire to adopt refinements 
to improve the predictive power of the models with the need to promote 
stability.
c. Changes to the Enrollment Duration Factors
    In the proposed rule, we proposed changes to the enrollment 
duration factors in the adult risk adjustment models to improve the 
prediction for partial year enrollees with HCCs. After consideration of 
comments received, we are not finalizing the proposal to remove the 
current 11 enrollment duration factors of up to 11 months for all 
enrollees in the adult models, or the addition of new monthly 
enrollment duration factors of up to 6 months that would only apply for 
enrollees with payment HCCs in the adult models. For the 2022 benefit 
year, we will continue to apply the current 11 enrollment duration 
factors of up to 11 months for all enrollees in the adult models, with 
trending adjustments made to project the data used to develop the 
factors forward to reflect the 2022 benefit year. See Table 1. Similar 
to the other proposed model specification changes outlined elsewhere in 
this rule that we are not finalizing in this rule, we intend to 
continue to analyze potential changes to the enrollment duration 
factors to improve model prediction for partial year enrollees with 
HCCs.
    As described in the proposed 2021 Payment Notice, we have been 
considering potential adjustments to the enrollment duration factors 
and previously analyzed the current factors using the 2016 and 2017 
enrollee-level EDGE data.\59\ We explored heterogeneity (variations) of 
costs for partial year enrollees in the presence of certain diagnosis 
codes, by market (individual or small group),\60\ and under various 
enrollment circumstances, such as enrollment beginning later in the 
year or ending before the end of the year. Our preliminary analysis of 
2017 enrollee-level EDGE data found that the current enrollment 
duration factors are driven by enrollees with HCCs. That is, partial 
year enrollees with HCCs had higher PMPM expenditures on average as 
compared to full year enrollees with HCCs. On the other hand, partial 
year enrollees without HCCs were not significantly different in PMPM 
expenditures compared to full year enrollees without HCCs. In the 2021 
Payment Notice, we also explained that our preliminary analysis found 
that, in comparison to the effect of the presence of HCCs on enrollment 
duration factors, enrollment timing (for example, enrollment at the 
beginning of the year compared to enrollment after open

[[Page 24161]]

enrollment period, or drop in enrollment before the end of the year) 
did not appear to affect PMPM expenditures on average. While we did not 
make changes to the enrollment duration factors in the 2021 Payment 
Notice, we stated that we were considering eliminating the monthly 
enrollment duration factors up to 11 months and replacing them with 
monthly enrollment duration factors up to 6 months for enrollees with 
HCCs. We also stated that we intended to review the trends observed in 
our preliminary analysis using an additional year's data before 
proposing changes.
---------------------------------------------------------------------------

    \59\ See 85 FR 7103 and 7104.
    \60\ In the enrollee-level EDGE data, merged market enrollees 
are assigned to the individual or small group market indicator based 
on their plan.
---------------------------------------------------------------------------

    Since the publication of the 2021 Payment Notice, we have 
reassessed enrollment duration factors for adults using the 2018 
benefit year enrollee-level EDGE data. The additional data year's 
findings were consistent with our prior finding that partial year 
enrollees without HCCs do not have PMPM expenditures that are 
significantly different compared to full year enrollees without HCCs. 
Therefore, beginning with the 2022 benefit year, we proposed to remove 
the current 11 enrollment duration factors of up to 11 months for all 
enrollees in the adult models, and add new monthly enrollment duration 
factors of up to 6 months to the adult models that would only apply for 
enrollees with payment HCCs. Under the proposal, there would be no 
enrollment duration factors for adult enrollees without payment HCCs 
starting with the 2022 benefit year adult models. As part of this 
analysis, we also considered adoption of enrollment duration factors by 
market, but we did not find a meaningful distinction in relative costs 
between markets on average once we implemented the proposed enrollment 
duration factors of up to 6 months for adult enrollees with payment 
HCCs. Therefore, we did not propose enrollment duration factors for the 
adult models by market type at this time. We also proposed to continue 
to incorporate enrollment duration factors only in the adult 
models.\61\ We solicited comment on the changes to the enrollment 
duration factors for the adult models. We also sought comment on 
whether we should implement these model changes starting with the 2022 
benefit year, whether we should delay implementation until the 2023 
benefit year, or whether we should create the enrollment duration 
factors for different lengths, such as up to 9 months of enrollment, 
instead of up to 6 months.
---------------------------------------------------------------------------

    \61\ As explained in the 2021 Payment Notice proposed rule, we 
found that partial year enrollees in the child models did not have 
the same risk differences as partial year enrollees in the adult 
models and they tended to have similar risk to full year enrollees 
in the child models. In the infant models, we found that partial 
year infants had higher expenditures on average compared to their 
full year counterparts; however, the incorporation of enrollment 
duration factors created interaction issues with the current 
severity and maturity factors and did not have a meaningful impact 
on the general predictive power of the infant models. See 85 FR 7103 
and 7104.
---------------------------------------------------------------------------

    We are not finalizing the proposal to remove the current 11 
enrollment duration factors of up to 11 months for all enrollees in the 
adult models, or to add new monthly enrollment duration factors of up 
to 6 months that would only apply for enrollees with payment HCCs in 
the adult models. We intend to consider proposing changes that increase 
the predictive power of the HHS risk adjustment models model in the 
future, including with respect to improving model prediction for 
partial year enrollees with HCCs. We received public comments on the 
proposed changes to the adult model enrollment duration factors. The 
following is a summary of the comments we received on these proposals 
and our responses.
    Comment: Many commenters were opposed to the new enrollment 
duration factors for up to 6 months for adult enrollees with a payment 
HCC. These commenters wanted additional analysis on the new enrollment 
duration factors, such as further evaluation of the new enrollment 
duration factors in a White Paper or dialogue during stakeholder 
listening sessions. Other commenters supported the new enrollment 
duration factors (of up to 6 months for adult enrollees with a payment 
HCC). These commenters believed that the new enrollment duration 
factors would capture adverse selection related to partial year 
enrollment and were concerned that plans are unable to recover premiums 
for the foreseeable additional costs that result from partial year 
enrollees.
    A few commenters opposed the new enrollment duration factors 
because they believed that the current enrollment duration factors that 
apply to all adult enrollees help to offset under-prediction of healthy 
enrollees in the risk adjustment models and that the proposed 
enrollment duration factors would undermine this offset by only 
applying to adult enrollees with an HCC. Other commenters believed that 
the current enrollment duration factors helped mitigate some potential 
under-prediction issues in the small group market.
    Some commenters wanted HHS to implement the proposed enrollment 
duration factors changes beginning with the 2022 benefit year. Other 
commenters recommended delaying implementation of the proposed 
enrollment duration factor changes to the 2023 benefit year, asking 
that HHS provide additional analysis on the enrollment duration factor 
changes in the interim to assist issuers with pricing their plans to 
reflect these changes. One commenter wanted HHS to implement the 
proposed enrollment duration factor changes now so that carriers are 
not deterred from enrolling people seeking coverage during special 
enrollment periods with millions of people losing employer-sponsored 
insurance due to COVID-19.
    Response: Similar to the other proposed model specification 
changes, we are not finalizing the revisions to the enrollment duration 
factors at this time and will consider proposing changes that increase 
the predictive power of the HHS risk adjustment models in the future. 
For the 2022 benefit year, we will continue to apply the current 11 
enrollment duration factors of up to 11 months for all enrollees in the 
adult models with trending adjustments made to project the data used to 
develop the factors forward to reflect the 2022 benefit year. We 
recognize that stakeholders would benefit from additional analysis and 
time to assess these or other potential changes to the enrollment 
duration factors. We also see value in making any changes to the 
enrollment duration factors at the same time as other model 
specification changes under consideration to address the under-
prediction of no HCC enrollees. This approach to aligning the 
enrollment duration factors changes with the timing of other potential 
model specification changes targeted to improve the predictive power of 
the models would support a balanced approach to addressing the over-
prediction of no HCC enrollees with partial year enrollment at the same 
time that we address the under-prediction of no HCC enrollees (with 
full or close to full year enrollment) in the risk adjustment models. 
We note that the current enrollment duration factors still compensate 
plans for partial year enrollees, and therefore, already help mitigate 
any disincentive to enroll partial-year enrollees.
    Therefore, we are also not finalizing the proposed changes to the 
enrollment duration factors at this time and will continue to apply the 
current 11 enrollment duration factors of up to 11 months, with 
trending adjustments made to reflect the 2022 benefit year, for all 
enrollees in the adult models. In addition, we are considering 
releasing a further analysis of potential changes to the risk 
adjustment models that could include updates to the adult model 
enrollment duration factors.

[[Page 24162]]

    Comment: Some commenters wanted HHS to consider whether enrollment 
duration factors should be tied to certain HCCs, believing that not all 
HCCs contribute equally to the coefficient for enrollees with the one 
month enrollment duration factor and wanting us to constrain the 
enrollment duration factor to a subset of HCCs driving the high one-
month enrollment duration factor coefficient value. One commenter 
recommended HCC specific enrollment duration factors for maternity HCCs 
be finalized for the 2022 benefit year. Another commenter recommended 
the creation of enrollment duration factors up to 9 months of 
enrollment for adult enrollees with HCCs (instead of up to 6 months for 
enrollees with HCCs, as proposed).
    Response: While we are not finalizing changes to the adult model 
enrollment duration factors at this time, as part of our analysis of 
the enrollment duration factors, we did review the most common HCCs in 
the 2018 enrollee-level EDGE data for one month enrollees. We found 
that the most common HCCs for one month adult enrollees are also common 
HCCs in the enrollee-level EDGE data. However, our main concern with 
the suggestion to tie enrollment duration factors to certain HCCs or 
specific to maternity HCCs is that many new factors would have to be 
added to the models to create HCC-specific enrollment duration factors, 
adding an additional level of complexity and potential instability to 
the models.
    We also note that as part of our analysis of potential changes to 
the adult model enrollment duration factors, we considered creating 
factors for adult enrollees with HCCs for up to 9 months and tested 
this alternative model specification using 2018 enrollee-level EDGE 
data. We found that the estimated coefficients for the factors between 
6 and 9 months were small and in some cases negative. We also did not 
find meaningful improvement in the predictive ratios when using 
enrollment duration factors up to 9 months. For these reasons, we 
proposed using enrollment duration factors of up to 6 months for 
enrollees with HCCs. However, as detailed above, we are not finalizing 
the proposed changes to the enrollment duration factors or the 
accompanying removal of the current enrollment duration factors in the 
adult models at this time.
    Comment: Some commenters wanted enrollment duration factors by 
market type or wanted HHS to consider whether the individual and small 
group markets should have market specific risk adjustment model 
coefficients. Some of these commenters were concerned that the proposed 
enrollment duration factors were created to address a partial year 
enrollment issue that primarily exists in the individual market and had 
concerns about making changes to the enrollment duration factors in the 
small group market which has non-calendar coverage that can somewhat 
artificially create partial year enrollees. Other commenters had 
concerns about removing the previous enrollment duration factors for 
the small group market, believing that the previous enrollment duration 
factors mitigate the disconnect between the calendar year for EDGE 
claims and the renewal year for the small group market, which is often 
not on the calendar year. One commenter was concerned that eliminating 
the existing enrollment duration factors would be destabilizing for any 
market where an issuer may obtain a higher percentage of new small 
employer business relative to other competitors. Other commenters were 
concerned about issuers' ability to capture HCCs in the small group 
market, especially when plan renewal can occur in December, limiting 
the amount of time that issuers would have to collect diagnosis codes 
for the applicable benefit year of risk adjustment even though the 
issuer would have claims for December. Another commenter was concerned 
about small issuers and Medicaid issuers being able to effectively 
capture HCCs from churning enrollees.
    Response: As discussed in the proposed rule, we considered adoption 
of enrollment duration factors by market, but we did not find a 
meaningful distinction in relative costs between markets on average 
once we implemented the proposed enrollment duration factors of up to 6 
months for adult enrollees with payment HCCs. Therefore, we did not 
propose and are not finalizing market-specific enrollment duration 
factors. Furthermore, we are not aware of any evidence that would 
indicate that various types of issuers (for example, issuers of various 
sizes, Medicaid issuers, private market issuers) are unable to capture 
HCCs for partial year enrollees.
    After consideration of the comments received, we are not finalizing 
the proposed revisions to the enrollment duration factors at this time. 
For the 2022 benefit year, we will continue to apply the current 11 
enrollment duration factors of up to 11 months, with trending 
adjustments made to reflect the 2022 benefit year, for all enrollees in 
the adult models.
d. Pricing Adjustment for the Hepatitis C Drugs
    For the 2022 benefit year models, we proposed to continue applying 
the market pricing adjustment to the plan liability associated with 
Hepatitis C drugs that has been in place beginning with the 2020 
benefit year final risk adjustment models.\62\ We are finalizing the 
pricing adjustment for Hepatitis C drugs as proposed.
---------------------------------------------------------------------------

    \62\ 84 FR 17463 through 17466.
---------------------------------------------------------------------------

    As explained in the proposed rule, we continue to believe this 
market pricing adjustment is necessary and appropriate to account for 
the significant pricing changes associated with the introduction of new 
and generic Hepatitis C drugs between the data years used for 
recalibrating the models and the applicable recalibration benefit year. 
We also continue to be cognizant that issuers might seek to influence 
provider prescribing patterns if a drug claim can trigger a large 
increase in an enrollee's risk score that is higher than the actual 
plan liability of the drug claim, and therefore, make the risk 
adjustment transfer results more favorable for the issuer. We 
previously stated that we intended to reassess this pricing adjustment 
with future benefit years' enrollee-level EDGE data.\63\ However, in 
alignment with the proposal to use the same 3 years of enrollee-level 
EDGE data for the 2022 benefit year model recalibration as those used 
for the 2021 benefit year, we proposed to continue making a market 
pricing adjustment to the plan liability associated with Hepatitis C 
drugs to reflect future market pricing prior to solving for 
coefficients for the 2022 benefit year models.\64\ We noted that we 
intend to reassess this pricing adjustment in future recalibrations 
with additional years of enrollee-level EDGE data. We sought comment on 
this proposal.
---------------------------------------------------------------------------

    \63\ 85 FR 29185.
    \64\ The Hepatitis C drugs market pricing adjustment to plan 
liability is applied for all enrollees taking Hepatitis C drugs in 
the data used for recalibration.
---------------------------------------------------------------------------

    We received public comments on the proposed continuation of the 
market pricing adjustment for Hepatitis C drugs for the 2022 benefit 
year. The following is a summary of the comments we received and our 
responses.
    Comment: Most commenters supported the continuation of the pricing 
adjustment for Hepatitis C drugs stating that it would more accurately 
reflect the average cost of treatment in the risk adjustment models, 
ensure enrollees can continue to receive incremental credit for having 
both the Hepatitis C RXC and HCC, and account

[[Page 24163]]

for the introduction of new Hepatitis C drugs. One commenter 
recommended HHS clarify the data source and approach used to constrain 
the Hepatitis C RXC coefficient, and cautioned against reducing the 
coefficient more than the expected decrease in cost. One commenter 
similarly recommended HHS reassess this adjustment on an ongoing basis 
to ensure the coefficient is not constrained beyond the expected 
decrease in the cost of the drugs.
    Response: In response to comments, we note that we continue to 
assess trends in the enrollee-level EDGE data as well as monitor for 
developments that would impact expectations for pricing for Hepatitis C 
drugs to ensure that the adjustments are reasonable and are not reduced 
below the expected decrease in cost. We reassessed the pricing 
adjustment for Hepatitis C drugs for the 2022 benefit year model 
recalibration using the most recent year of data (2019 enrollee-level 
EDGE data) and found the costs for Hepatitis C drugs continued to show 
a significant decline when compared to the costs in the 2018 enrollee-
level EDGE data. Therefore, we continue to believe that it is necessary 
and appropriate to use a pricing adjustment for Hepatitis C drugs for 
the 2022 benefit year since the data used to recalibrate the risk 
adjustment models, which does not include the 2019 enrollee-level EDGE 
data, does not reflect the average cost of Hepatitis C treatments 
applicable to the 2022 benefit year when newer and cheaper Hepatitis C 
drugs will be available. Because the cost of these drugs were reflected 
in the 2016, 2017 and 2018 enrollee-level EDGE datasets without a 
pricing adjustment to plan liability, the Hepatitis C RXC in the 2022 
benefit year based on this data could overcompensate issuers and 
incentivize them to encourage overprescribing practices to favorably 
impact their risk adjustment transfers (increase their payment or 
decrease their charge). The pricing adjustment finalized here helps 
avoid perverse incentives, and leads to Hepatitis C RXC coefficients 
that better reflect anticipated actual 2022 benefit year plan liability 
associated with Hepatitis C drugs. We intend to continue to reassess 
this pricing adjustment in future benefit years' model recalibrations 
using additional years of available enrollee-level EDGE data.
    Comment: One commenter agreed with HHS's stated concern that 
issuers might seek to influence provider prescribing patterns if a drug 
claim can trigger a large increase in an enrollee's risk score that is 
higher than the actual plan liability of the drug claim. In contrast, 
another commenter questioned the view that issuers are gaming risk 
adjustment by encouraging providers to prescribe particular treatments 
when they are unnecessary.
    Response: Due to the changing cost of these drugs reflected in the 
data used for recalibration purposes (that is, the 2016, 2017 and 2018 
enrollee-level EDGE data), without a pricing adjustment to plan 
liability, issuers could be overcompensated for the Hepatitis C RXC in 
the 2022 benefit year and could be incentivized to ``game'' risk 
adjustment or encourage overprescribing practices. More specifically, 
the absence of a pricing adjustment could incentivize some issuers to 
influence provider prescribing patterns because the drug claim could 
trigger a large increase in an enrollee's risk score that is higher 
than the actual plan liability of the drug claim. This would lead to 
the calculation of inflated risk scores and would make the risk 
adjustment transfer results more favorable for the issuer (that is, 
increase a payment or decrease a charge). To avoid perverse incentives 
to influence overprescribing behavior, we are finalizing a market 
pricing adjustment for Hepatitis C drugs. It is an appropriate and 
necessary adjustment in light of the cost of the drugs reflected in the 
2016 through 2018 enrollee-level EDGE data and the introduction of 
newer and lower cost Hepatitis C drugs that will be available in the 
2022 benefit year. We intend to continue to reassess whether this 
pricing adjustment is needed for future benefit years.
    Comment: One commenter expressed concern about issuers potentially 
gaming risk adjustment based on when the Hepatitis C drug prescription 
is filled. The commenter noted that because HHS-operated risk 
adjustment operates on a calendar year basis an issuer could receive 
credit for a prescription filled in December of Year 1 and receive 
credit for the same individual for a prescription filled in January of 
Year 2, potentially double-dipping in risk adjustment. The commenter 
recommended we modify the EDGE server requirements to mandate the 
tracking of the days supply of each prescription fill and scale the 
coefficient by the percentage of a recommended therapeutic regime 
supplied over the course of the year to reduce the possibility of 
gaming.
    Response: While some stakeholders have expressed concern about 
timing for filling Hepatitis C prescriptions, we have previously 
analyzed the potential for issuers to game HHS-operated risk adjustment 
by encouraging consumers to refill prescriptions for the treatment for 
Hepatitis C in December and January and have not found clear evidence 
that this type of behavior is occurring. However, as part of our 
consideration of the comments received on this proposal, we revisited 
this analysis using more recent data and found similar results. 
Therefore, based on our analysis and continued study of this issue, we 
do not believe modifications to HHS-operated risk adjustment program or 
EDGE server requirements are needed at this time. However, we will 
continue to monitor usage trends to assess whether modifications to the 
Hepatitis C pricing adjustment or the adoption of other safeguards to 
prevent potential double-dipping are warranted in the future. We 
further note that the proposed suggestions by the commenter--to modify 
EDGE server requirements or scale the coefficient--would introduce 
burden and complexity to the HHS-operated risk adjustment program. If 
we determine pursuit of these types of measures is warranted for future 
benefit years, we would need to weigh these disadvantages against any 
potential benefits.
    Comment: Some commenters asked HHS to monitor the market and 
introduction of new expensive therapies and treatments, such as gene 
therapy drugs, and incorporate them into the risk adjustment model 
factors due to the anticipated high costs of these drugs and associated 
services. The comments noted that the costs of very new, high cost 
treatments will not be reflected in prior year enrollee-level EDGE 
data. One commenter noted that that while the high-cost risk pool, 
which compensates plans for enrollees with claims over $1 million, is 
helpful, there may be a need for something more specific in the risk 
adjustment model to account for these costs.
    Response: We did not propose to update the risk adjustment model 
factors to reflect the costs of gene therapy drugs in the proposed rule 
and are not finalizing such updates in this rule. We recognize that the 
data used to recalibrate the risk adjustment models are lagged by 
several benefit years and cannot account for the costs of new, 
expensive gene therapy drugs that are expected to be available by the 
2022 benefit year. Thus, we considered whether to include any gene 
therapy drugs in the risk adjustment models for the 2022 benefit year 
as a separate RXC or an additive HCC. In considering these options, our 
primary concern was that we do not have adequate data on these drugs to 
create a separate RXC or an additive HCC for the 2022 benefit year and 
we are concerned with the ability

[[Page 24164]]

to obtain data of an adequate population size given the limited use of 
these drugs.
    We note that if an enrollee in an issuer's risk adjustment covered 
plan has claims for gene therapy or other expensive treatments, that 
enrollee would be eligible for the high-cost risk pool payments if 
claims for that enrollee are over $1 million. We intend to assess the 
use of gene therapy drugs as additional data become available and 
consider whether model updates are warranted to address their 
anticipated costs in the future.
    Comment: One commenter wanted to ensure the required ancillary 
services associated with pre-exposure prophylaxis (PrEP) use were being 
incorporated into risk adjustment. Another commenter expressed concern 
that some prescription drug codes (Descovy[supreg]) that are used for 
PrEP would map to an RXC in the risk adjustment models while others 
prescription drug codes used for PrEP would not.
    Response: In the 2021 Payment Notice, we incorporated PrEP as a 
preventive service in the simulation of plan liability in the risk 
adjustment adult and child models with zero cost sharing after careful 
analysis of preventive drugs that are recommended at grade A or B by 
the United States Preventive Services Task Force (USPSTF). We are again 
incorporating the costs of PrEP in this same manner in the 2022 risk 
adjustment models to give issuers credit at the preventive services 
level for the costs of these drugs. We also considered treating 
ancillary services for PrEP as preventive services in risk adjustment 
model recalibration. However, we found that many of the recommended 
PrEP ancillary services (such as, HIV screenings) already qualify as 
preventive services and as such are already calibrated at 100 percent 
plan liability; therefore, no updates were made to capture these 
services in the simulation of plan liability in the adult and child 
models. However, we will continue to consider whether additional PrEP 
ancillary services should be treated as preventive services for risk 
adjustment model recalibration for future benefit years.
    We further note that we also continuously assess the availability 
of drugs in the market and the associated mapping of those drugs to 
RXCs in the adult risk adjustment models. As a result of this on-going 
assessment, we make quarterly updates to the RXC Crosswalk to ensure 
drugs are being mapped to RXCs where appropriate, including adding and 
removing new and old drugs. In response to the comments regarding the 
potential different treatment of PrEP drugs in risk adjustment, we note 
that in January 2021, we announced that consistent with our treatment 
of other PrEP drugs, Descovy[supreg] would be removed from RXC 1 in the 
final Benefit Year (BY) 2020 Do it Yourself (DIY) update, released in 
April 2021, since it can be used as a preventive drug.\65\ Enrollees 
that use Descovy[supreg] (or other PrEP drugs) in combination with 
other HIV treatment drugs will still receive credit for RXC 1. We will 
continue these types of reviews in the future.
---------------------------------------------------------------------------

    \65\ HHS-Developed Risk Adjustment Model Algorithm ``Do It 
Yourself (DIY)'' Software Instructions for the 2020 Benefit Year 
(April 15, 2021 Update), available at https://www.cms.gov/files/document/cy2020-diy-instructions04132021.pdf.
---------------------------------------------------------------------------

    After consideration of the comments we received on this proposal, 
we are finalizing the proposal to continue the market pricing 
adjustment for Hepatitis C drugs.
e. List of Factors To Be Employed in the Risk Adjustment Models (Sec.  
153.320)
    The final 2022 benefit year risk adjustment model factors resulting 
from the equally weighted (averaged) blended factors from separately 
solved models using the 2016, 2017, and 2018 enrollee-level EDGE data, 
consistent with the policies finalized in this rulemaking, are shown in 
Tables 1 through 6.\66\ The adult, child, and infant models have been 
truncated to account for the high-cost risk pool payment parameters by 
removing 60 percent of costs above the $1 million threshold.\67\ Table 
1 contains factors for each adult model, including the age-sex, HCCs, 
RXCs, RXC-HCC interactions, severity interactions, and enrollment 
duration coefficients. Table 2 contains the HCCs in the severity 
illness indicator variable. Table 3 contains the factors for each child 
model. Table 4 contains the factors for each infant model. Tables 5 and 
6 contain the HCCs included in the infant models' maturity and severity 
categories, respectively.
---------------------------------------------------------------------------

    \66\ As detailed below, the one exception relates to RXC 09, 
which involved the use of only 2016 and 2017 enrollee-level data to 
develop the applicable 2022 benefit year coefficients and 
interaction terms.
    \67\ As detailed below, we did not propose and are finalizing 
any changes to the high-cost risk pool parameters for the 2022 
benefit year. Therefore, we are maintaining the $1 million threshold 
and 60 percent coinsurance rate.
---------------------------------------------------------------------------

BILLING CODE 4150-28-P

[[Page 24165]]

[GRAPHIC] [TIFF OMITTED] TR05MY21.005


[[Page 24166]]


[GRAPHIC] [TIFF OMITTED] TR05MY21.006


[[Page 24167]]


[GRAPHIC] [TIFF OMITTED] TR05MY21.007


[[Page 24168]]


[GRAPHIC] [TIFF OMITTED] TR05MY21.008


[[Page 24169]]


[GRAPHIC] [TIFF OMITTED] TR05MY21.009


[[Page 24170]]


[GRAPHIC] [TIFF OMITTED] TR05MY21.010


[[Page 24171]]


[GRAPHIC] [TIFF OMITTED] TR05MY21.011

[GRAPHIC] [TIFF OMITTED] TR05MY21.012


[[Page 24172]]


[GRAPHIC] [TIFF OMITTED] TR05MY21.013


[[Page 24173]]


[GRAPHIC] [TIFF OMITTED] TR05MY21.014


[[Page 24174]]


[GRAPHIC] [TIFF OMITTED] TR05MY21.015


[[Page 24175]]


[GRAPHIC] [TIFF OMITTED] TR05MY21.016


[[Page 24176]]


[GRAPHIC] [TIFF OMITTED] TR05MY21.017

[GRAPHIC] [TIFF OMITTED] TR05MY21.018


[[Page 24177]]


[GRAPHIC] [TIFF OMITTED] TR05MY21.019


[[Page 24178]]


[GRAPHIC] [TIFF OMITTED] TR05MY21.020


[[Page 24179]]


[GRAPHIC] [TIFF OMITTED] TR05MY21.021

BILLING CODE 4150-28-C
    We received public comments on the proposed list of factors to be 
employed in the 2022 benefit year risk adjustment models (Sec.  
153.320). The following is a summary of the comments on these proposals 
and our responses.
    Comment: A few commenters expressed concerns that the HCC 
coefficients in the list of factors would adversely affect individuals 
with preexisting conditions or diagnosed disabilities. One of these 
commenters was also concerned with the gender differences in the list 
of factors.
    Response: The list of factors for the adult, child, and infant risk 
adjustment models include the coefficients in the statistical models 
developed by HHS to predict the plan liability for an average enrollee 
based on demographics, diagnosed conditions (grouped into HCCs), 
enrollment duration (for the adult models), and prescription drugs (for 
the adult models). The list of factors represents the different levels 
of risk plans take on in providing health coverage to enrollees. These 
factors do not affect enrollee costs and therefore do not adversely 
affect any consumers, including individuals with preexisting conditions 
or diagnosed disabilities or based on gender. Rather, the purpose of 
the risk adjustment program is to transfer funds from risk adjustment 
covered plans with lower than average risk to risk adjustment covered 
plans with higher than average risk, with the goal of minimizing 
adverse selection and providing coverage to all consumers. Therefore, 
these factors actually help individuals with preexisting conditions or 
diagnosed disabilities through compensating plans more for more severe 
conditions, incentivizing plans to cover such individuals rather than 
avoid covering them. In addition, gender differences in the list of 
factors that will be used for the HHS risk adjustment models do not 
result in differences in premium paid by male and female enrollees.\68\ 
Rather, the different age-sex factors represent differences in the 
level of risk plans take on in providing coverage to men and women; for 
example, adult women within childbearing years tend to cost more than 
men of the same age due to pregnancy and childbirth.
---------------------------------------------------------------------------

    \68\ Section 2701 of the PHS Act prohibits issuers of non-
grandfathered coverage in the individual and small group markets 
from varying rates with respect to any characteristic aside from 
whether the plan covers an individual or a family, rating area, age, 
and tobacco use. Therefore, those four factors held constant, female 
enrollees cannot be charged higher premiums than male enrollees, and 
vice versa, for the same plan.
---------------------------------------------------------------------------

    Comment: A few commenters made suggestions for additions to or 
deletions from the list of factors. These commenters asked that HHS not 
include acute, unpredictable HCCs in the list of factors, such as the 
severe head injury and extensive third degree burns HCCs, as these 
conditions do not differentiate adverse selection risk. One of these 
commenters asked that HHS bifurcate transplant status codes into a set 
of coefficients for transplant procedure codes and another set of 
coefficients for transplant history or status. Another commenter 
suggested that HHS simplify the risk adjustment models by combining 
coefficients for HCCs where similar risk selection patterns would 
result in minimal member-level prediction improvements when risk scores 
are averaged at the plan level to calculate the plan liability risk 
score.
    Response: We continue to believe that the acute conditions 
identified by these commenters (severe head injury and extensive third 
degree burns) should be included in the risk adjustment models. We 
detailed our consideration of incorporating these HCCs in the risk 
adjustment models in the paper on the Potential Updates to HHS-HCCs for 
the HHS-operated Risk Adjustment Program.\69\ For example, we explained 
that severe head injury represents a condition with ongoing care costs, 
similar to other injury HCCs currently included in the V05 models \70\ 
(for example, hip fractures and vertebral fractures). Stakeholders also 
had an opportunity to comment on the addition of these HCCs as part of 
the 2021 Payment Notice rulemaking.\71\ Based on our analysis, these 
conditions indicate the presence of underlying chronic conditions and 
frailty, were underpredicted in the risk adjustment models, and have 
high costs in the year after the diagnosis.\72\ Therefore, we do not 
agree that the HCCs for severe head injury and extensive third degree 
burns do not differentiate adverse selection risk, and we believe they 
are appropriate to include in the risk adjustment models, as previously 
stated in the 2021 Payment Notice final rule.\73\ There is evidence of 
ongoing chronic costs associated with these conditions, and issuers can 
potentially adversely select against enrollees with a higher risk of 
incurring costs related to these conditions in a given benefit year. 
Isolating and omitting the near-term ongoing costs for these conditions 
would reduce the predictive accuracy of the model without any benefit 
in reduced model complexity, as the costs for the excluded near-term 
codes would end up in the associated longer term HCCs. The ability to 
separate costs associated with the acute event and chronic conditions 
can be complex for certain HCCs, including severe head injury, 
extensive third degree burns, and transplants. We also believe that by 
including the acute costs for these conditions, we are also accounting 
for the ongoing costs of care during the first year. The continued 
inclusion of these HCCs in the risk adjustment models, as proposed, is 
consistent with our goals to improve model prediction and identify 
chronic or systematic conditions that represent insurance risk 
selection or risk

[[Page 24180]]

segmentation. In addition, both of these HCCs--extensive third degree 
burns and severe head injury--are also payment HCCs in Medicare's CMS-
HCC models. As for transplant procedure versus transplant status, we do 
not currently use procedure codes to define any HCCs, but we are 
interested in analyzing this topic for further consideration for 
potential model changes in future benefit years.
---------------------------------------------------------------------------

    \69\ Potential Updates to HHS-HCCs for the HHS-operated Risk 
Adjustment Program. June 17, 2019. Available at https://www.cms.gov/CCIIO/Resources/Regulations-and-Guidance/Downloads/Potential-Updates-to-HHS-HCCs-HHS-operated-Risk-Adjustment-Program.pdf.
    \70\ The shorthand ``V05'' refers to the HHS-HCC classification 
for the HHS risk adjustment models that applies through the 2020 
benefit year.
    \71\ 85 FR 7088 at 7098 through 7101. Also see 85 FR 29164 at 
29181.
    \72\ 85 FR 29164 at 29181.
    \73\ 85 FR 29164 at 29181.
---------------------------------------------------------------------------

    Consistent with the risk adjustment principles described 
previously,\74\ the HHS-operated risk adjustment models exclude HCCs 
containing diagnoses that are vague or nonspecific (for example, 
cough), discretionary in medical treatment or coding (for example, 
attention deficit disorder), or not medically significant (for example, 
heartburn). The payment models also exclude HCCs that do not add 
empirically to costs (for example, non-melanoma forms of skin cancer). 
We did not propose to combine HCCs and are not finalizing combining 
HCCs in the 2022 risk adjustment models. At this time, we do not 
believe that combining HCCs for reasons stated by the commenter is 
necessary, as we have already analyzed and selected HCCs for inclusion 
in the models that capture the largest risk differences. However, in 
our efforts to continuously improve the risk adjustment models, we will 
continue to analyze the risk adjustment model factors for future 
benefit years and consider whether changes are needed.
---------------------------------------------------------------------------

    \74\ See, for example, the 2021 Payment Notice, and Section 2.1 
of the ``March 31, 2016 HHS-Operated Risk Adjustment Methodology 
Meeting Discussion Paper,'' March 24, 2016. Available at https://www.cms.gov/CCIIO/Resources/Forms-Reports-and-Other-Resources/Downloads/RA-March-31-White-Paper-032416.pdf.
---------------------------------------------------------------------------

    For all these reasons, we believe the proposed and final list of 
factors applicable to the 2022 benefit year includes the appropriate 
HCCs.
    Comment: One commenter suggested creating separate models for the 
individual and small group markets, using only individual market 
enrollee-level EDGE data for the individual market models but 
supplementing small group market enrollee-level EDGE data with 
MarketScan[supreg] data for the small group market models.
    Response: We did not propose and are not finalizing separate 
individual and small group market models. At this time, we are 
concerned that creating two separate risk adjustment models for the 
individual and small group markets for each of the age groups (adult, 
child, and infant) would result in significantly increased complexity 
of the risk adjustment program. For example, this would double the 
number of risk adjustment models, complicating rate setting for issuers 
and destabilizing the child and infant models due to small sample 
sizes. However, we intend to continue to analyze the differences in 
costs and utilization between the individual and small group markets to 
consider whether these types of changes would be necessary or 
appropriate in future benefit years. A more detailed discussion of our 
current analysis of these issues based on our review of the 2016, 2017 
and 2018 enrollee-level EDGE data appears in the proposed rule as part 
of the discussion of the proposed changes to the adult model enrollment 
duration factors.\75\
---------------------------------------------------------------------------

    \75\ See 85 FR at 78585.
---------------------------------------------------------------------------

    After consideration of comments on the proposed factors, we are 
finalizing the above list of final coefficients for the 2022 benefit 
year.
    As noted above in the Pricing Adjustment for the Hepatitis C Drugs 
preamble, we continuously assess the availability of drugs in the 
market and the associated mapping of those drugs to RXCs in the adult 
risk adjustment models. As a result of this ongoing assessment, we make 
quarterly updates to the RXC Crosswalk to ensure drugs are being mapped 
to RXCs where appropriate, including adding and removing new and old 
drugs based on approval status, prescribing patterns, and expenditure 
data. In a recent update, HHS removed hydroxychloroquine from RXC 09 
effective March 24, 2021, due to concerns regarding unrepresentative 
expenditures and off-label prescribing during the COVID-19 public 
health emergency.\76\ Additionally, based on pre-2020 data, HHS's 
analysis showed that the costs of hydroxychloroquine are much lower 
than the costs of other drugs that one with HCC 048, 056, or 057 may 
take. However, hydroxychloroquine still appears in the 2018 enrollee-
level EDGE data we are otherwise finalizing for use for 2022 benefit 
year model recalibration. Therefore, we only used 2016 and 2017 
enrollee-level EDGE data for the limited purpose of developing the RXC 
09 coefficients, RXC 09 HCC related coefficients, and RXC 09 
interaction term coefficients for the 2022 benefit year adult 
models.\77\ This approach best aligns the 2022 benefit year adult model 
coefficients with the removal of hydroxychloroquine from RXC 09 and 
avoids the undesired impact of diluting the coefficient values for RXC 
09 (including the associated interactions). As seen in Table 1, the 
coefficients for RXC 09 Immune Suppressants and Immunomodulators, the 
HCC factors relevant for RXC 09 (HCC41, HCC48, HCC56, HCC57), and the 
related RXC 09 interactions (RXC 09 x HCC056 or 057 and 048 or 041; RXC 
09 x HCC056; RXC 09 x HCC057; RXC 09 x HCC048, 041) result from the 
equally weighted (averaged) blended factors from separately solved 
models using only the 2016 and 2017 enrollee-level EDGE data.
---------------------------------------------------------------------------

    \76\ See HHS-Developed Risk Adjustment Model Algorithm ``Do It 
Yourself (DIY)'' Software Instructions for the 2020 Benefit Year, 
April 15, 2021 Update, available at https://www.cms.gov/files/document/cy2020-diy-instructions04132021.pdf.
    \77\ The same concern was not present for the 2016 and 2017 
enrollee-level EDGE data because hydroxychloroquine was not included 
in the crosswalk until 2018.
---------------------------------------------------------------------------

f. Cost-Sharing Reduction Adjustments
    We proposed to continue including an adjustment for the receipt of 
CSRs in the risk adjustment models to account for increased plan 
liability due to increased utilization of health care services by 
enrollees receiving CSRs in all 50 states and the District of Columbia. 
For the 2022 benefit year, to maintain stability and certainty for 
issuers, we proposed to maintain the CSR factors finalized in the 2019, 
2020, and 2021 Payment Notices.\78\
---------------------------------------------------------------------------

    \78\ See 83 FR 16930 at 16953; 84 FR 17454 at 17478 through 
17479; and 85 FR 29164 at 29190.
---------------------------------------------------------------------------

    Consistent with the approach finalized in the 2017 Payment 
Notice,\79\ we also proposed to continue to use a CSR adjustment factor 
of 1.12 for all Massachusetts wrap-around plans in the risk adjustment 
plan liability risk score calculation, as all of Massachusetts' cost-
sharing plan variations have AVs above 94 percent.
---------------------------------------------------------------------------

    \79\ See 81 FR 12203 at 12228.
---------------------------------------------------------------------------

    We are finalizing the CSR adjustment factors as proposed, including 
the CSR adjustment factor of 1.12 for all Massachusetts wrap-around 
plans.
    We received public comments on the proposed cost-sharing reduction 
adjustments. The following is a summary of the comments we received and 
our responses.
    Comment: Many commenters supported the proposed CSR adjustment 
factors for the 2022 benefit year and continuing the CSR adjustment 
factor of 1.12 for all Massachusetts wrap-around plans. Some of these 
commenters stated that the current CSR adjustment factors will ensure 
stability and that the CSR adjustment factor of 1.12 for all 
Massachusetts wrap-around plans appropriately accounts for the 
different market dynamics and the level of wrapped benefits in 
Massachusetts.
    Response: We are finalizing the CSR adjustment factors as proposed.

[[Page 24181]]

Consistent with the approach finalized in the 2017 Payment Notice,\80\ 
we will continue to use a CSR adjustment factor of 1.12 for all 
Massachusetts wrap-around plans in the risk adjustment plan liability 
risk score calculation for the 2022 benefit year, as all of 
Massachusetts' cost-sharing plan variations have AVs above 94 percent. 
We agree that the CSR adjustment factor of 1.12 for all Massachusetts 
wrap-around plans accounts for the state's unique market dynamics, and 
that the continuation of the current CSR adjustment factors for all 
states and the District of Columbia lend stability to the markets.
---------------------------------------------------------------------------

    \80\ Ibid.
---------------------------------------------------------------------------

    Comment: Some commenters wanted HHS to analyze the CSR adjustment 
factors for future benefit years to consider whether changes are 
needed. These commenters specifically asked HHS to consider factors 
like whether or not the state expanded Medicaid or offers a Basic 
Health Program, as well as the impact of the discontinuation of CSR 
payments and implementation of silver loading, in analyzing the CSR 
adjustment factors for future benefit years. One commenter opposed the 
CSR adjustment factors and stated that, as a result of these factors, 
the risk adjustment models overcompensate issuers for those enrolled in 
silver plans and undercompensate issuers for other metal level 
enrollees.
    Response: We will continue to examine whether changes to the CSR 
adjustment factors are warranted in the future as more enrollee-level 
EDGE data becomes available. We appreciate the suggestions for analysis 
from commenters and may consider these and other elements in our future 
analysis. We note that the current CSR adjustment factors are set at a 
national level and do not vary by state, while the suggested analysis 
on the effect of expanded Medicaid or presence of a Basic Health 
Program would vary by state. Adopting an approach that would require 
further variation by state would introduce a level of complexity to the 
risk adjustment program, which is another factor we would consider as 
part of any such analysis.
    Furthermore, notwithstanding the cessation of federal CSR payments 
to issuers in October 2017, section 1402 of the ACA requires Exchange 
plans to provide CSRs for eligible enrollees, and plans face increased 
liability for silver plan enrollees receiving CSRs. As such, the CSR 
adjustment factors account for the higher plan liability of CSR plans, 
which is not experienced by other metal level plans. Therefore, we do 
not believe that the presence of CSR multipliers for CSR-eligible 
enrollees in silver plans automatically creates inaccurate risk 
differentials between CSR eligible and non-CSR eligible enrollees. 
Regardless, any refinements to the HHS-operated risk adjustment 
methodology, including any potential changes to the CSR adjustment 
factors for future benefit years, would be proposed through notice-and-
comment rulemaking.
    After consideration of the comments received, we are finalizing the 
CSR adjustment factors as proposed.
[GRAPHIC] [TIFF OMITTED] TR05MY21.022

g. Model Performance Statistics
    To evaluate risk adjustment 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 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.\81\ The final R-
squared statistic for each model that is shown in Table 8 reflects the 
results from each dataset used. Because we are finalizing the 2022 
benefit year coefficients from separately solved models based on 
blended data

[[Page 24182]]

from the 2016, 2017, and 2018 benefit years' enrollee-level EDGE data, 
we are publishing the R-squared statistic for each model separately to 
verify their statistical validity. The R-squared statistic for each 
model is shown in Table 8.
---------------------------------------------------------------------------

    \81\ Hileman, Geof and Spenser Steele. ``Accuracy of Claims-
Based Risk Scoring Models.'' Society of Actuaries. October 2016.
[GRAPHIC] [TIFF OMITTED] TR05MY21.023

    We received comments on the model performance statistics outlined 
in the proposed rule. The following is a summary of the comments we 
received and our responses.
    Comment: One commenter requested more information on blending the 
coefficients from separately solved models based on the 2016, 2017, and 
2018 benefit years' enrollee-level EDGE data and publishing the R-
squared statistic for each model separately to verify their statistical 
validity.
    Response: The final R-squared statistic for each model that is 
shown in Table 8 reflects the results from each dataset used in the 
separately solved models that are used to recalibrate the models for 
the 2022 benefit year, namely the 2016, 2017, and 2018 benefit years' 
enrollee-level EDGE data.\82\ As stated in the proposed rule and the 
preamble section above, because we blended the coefficients from 
separately solved models based on these 3 years of enrollee-level EDGE 
data that were available at the time of the proposed rule, we publish 
the R-squared statistic for each model separately to verify their 
statistical validity.
---------------------------------------------------------------------------

    \82\ Our approach to recalibration involves using blended, or 
averaged, coefficients from three years of separately solved models, 
which promotes stability for the risk adjustment coefficients year 
over year, particularly for conditions with small sample sizes. For 
more details, see ``March 31, 2016, HHS-Operated Risk Adjustment 
Methodology Meeting Discussion Paper,'' March 24, 2016, available at 
https://www.cms.gov/CCIIO/Resources/Forms-Reports-and-Other-Resources/Downloads/RA-March-31-White-Paper-032416.pdf.
---------------------------------------------------------------------------

    After consideration of the comments received on the model 
performance statistics and for the reasons stated in our responses, we 
are publishing the final R-squared statistic for each model above in 
Table 8.
h. Calculation of Plan Average Premium and State Average Premium 
Requirements for Extending Future Premium Credits (Sec.  153.320)
    On August 4, 2020, HHS adopted temporary policies of relaxed 
enforcement for the premium rules set forth at 45 CFR 147.102, 
155.200(f)(4), 155.400(e) and (g), 155.706(b)(6)(1)(A), 156.80(d), 
156.210(a), and 156.286(a)(2) through (4) to allow issuers in the 
individual and small group markets the flexibility, when consistent 
with state law, to temporarily offer premium credits for 2020 
coverage.\83\ HHS provided this flexibility with the intent of 
supporting continuity of coverage for individuals, families, and small 
employers who may struggle to pay premiums because of illness or loss 
of incomes or revenue resulting from the COVID-19 PHE.
---------------------------------------------------------------------------

    \83\ ``Temporary Policy on 2020 Premium Credits Associated with 
the COVID-19 Public Health Emergency,'' August 4, 2020, https://www.cms.gov/CCIIO/Programs-and-Initiatives/Health-Insurance-Marketplaces/Downloads/Premium-Credit-Guidance.pdf.
---------------------------------------------------------------------------

    In prior rulemaking,\84\ HHS finalized the calculation of plan 
average premium in the risk adjustment state payment transfer formula 
as equal to the actual premiums charged to plan enrollees, weighted by 
the number of months enrolled, and finalized the calculation of the 
state average premium as equal to the average of individual plan 
average premiums, weighted by each plan's share of statewide enrollment 
in the risk pool market, based on billable member months. In the 
interim final rule on COVID-19, HHS set forth risk adjustment reporting 
requirements for issuers offering temporary premium credits in the 2020 
benefit year. In the proposed rule, we proposed how HHS would treat 
temporary premium credits provided for purposes of applying the state 
payment transfer formula for the 2021 benefit year and beyond should 
HHS adopt a similar relaxed enforcement stance and permit such 
temporary premium credits in future benefit years during a PHE declared 
by the Secretary of HHS (declared PHE).\85\ For states where issuers of 
risk adjustment covered plans provide temporary premium credits during 
a declared PHE when permitted by HHS,

[[Page 24183]]

the plan average premium and statewide average premium used in the 
state payment transfer formula would be calculated using issuers' 
adjusted premium amounts. Thus, the actual premiums billed to plan 
enrollees would be the amounts used in the calculations under the state 
payment transfer formula. This is consistent with the general approach 
adopted in the interim final rule on COVID-19 for temporary premium 
credits in the 2020 benefit year.
---------------------------------------------------------------------------

    \84\ 2014 Payment Notice final rule, 78 FR 15409. Also see the 
2020 Payment Notice final rule, 84 FR 17454.
    \85\ The Secretary of the Department of HHS may, under section 
319 of the PHS Act determine that: (a) A disease or disorder 
presents a public health emergency; or (b) that a public health 
emergency, including significant outbreaks of infectious disease or 
bioterrorist attacks, otherwise exists.
---------------------------------------------------------------------------

    We further proposed that HHS would use adjusted plan premiums for 
all enrollees to whom the issuer has actually provided premium credits 
as a reduction to the applicable benefit year premiums, when 
calculating transfers under the state payment transfer formula for the 
2021 benefit year and beyond. This approach would also extend to the 
calculation of transfers under the state payment transfer formula in 
states that receive approval for a request to reduce transfers under 
Sec.  153.320(d)--that is, the lower actual premiums for which plan 
enrollees would be responsible would be the amounts used in the 
calculations under the state payment transfer formula to reflect these 
temporary premium credits. As such, if an issuer in a state with an 
approved 50 percent small group market reduction request for a given 
benefit year chooses to provide temporary premium credits, the state 
average premium will decrease, and HHS would apply the 50 percent 
transfer reduction to the lower PMPM payment or charge transfer amount 
calculated under the state payment transfer formula for that state's 
small group market for that benefit year. As detailed further later in 
this preamble, we also proposed that issuers providing these temporary 
premium credits must report the lower, actual premium amounts billed to 
plan enrollees to their respective EDGE servers. We explained that we 
believe that the applicable definitions of plan average premium and 
state average premium retain the meaning previously finalized by 
reflecting the actual monthly premium billed to enrollees. The proposal 
would build on lessons learned from the COVID-19 PHE and would 
establish a framework to recognize premium credits as a reduction in 
premium for purposes of the HHS-operated risk adjustment program to 
align risk adjustment charges and payments under the state payment 
transfer formula with flexibilities HHS may provide to issuers and 
states in future benefit years during a declared PHE. The proposal 
would not change any other aspect of the state payment transfer formula 
or the method for calculating payments and charges under the HHS risk 
adjustment methodology (inclusive of the state payment transfer formula 
and high-cost risk pool parameters). We are finalizing this policy as 
proposed.
    We summarize and address all the comments received on this proposal 
in the Risk Adjustment Data Requirements for Future Premium Credits 
(Sec.  153.710) preamble section below.
2. Overview of the HHS Risk Adjustment Methodology (Sec.  153.320)
    We proposed to continue to use the HHS state payment transfer 
formula that was finalized in the 2021 Payment Notice.\86\ Although the 
proposed HHS state payment transfer formula for the 2022 benefit year 
was unchanged from what was finalized for the previous benefit year, we 
republished it in the proposed rule. Additionally, we republished the 
description of the administrative cost reduction to the statewide 
average premium and high-cost risk pool factors, although this 
reduction and the factors and terms also remain unchanged from what was 
finalized for the previous benefit year.\87\ We also proposed to apply 
this state payment transfer formula, including the administrative cost 
reduction, for the 2022 benefit year and beyond, unless changed through 
notice-and-comment rulemaking. Under this proposal, we would no longer 
republish these formulas in future annual HHS notice of benefit and 
payment parameter rules unless changes are being proposed. To align 
with this proposal, we proposed to update Sec.  153.320(c) to replace 
the current language that refers to HHS specifying the applicable 
federally-certified risk adjustment methodology in the annual HHS 
notice of benefit and payment parameters for the applicable year, to 
instead require HHS to specify the applicable federally-certified risk 
adjustment methodology in notice-and-comment rulemaking that is 
published in advance of the applicable benefit year. We are finalizing 
these policies as proposed and will apply the proposed HHS risk 
adjustment methodology outlined in the proposed rule for the 2022 
benefit year and beyond. The published methodology will remain in 
effect unless it is changed through future notice-and-comment 
rulemaking. We are also finalizing the update to Sec.  153.320(c) as 
proposed.
---------------------------------------------------------------------------

    \86\ 84 FR 17454 at 17480 and 17485; and 85 FR 29164 at 29191.
    \87\ Ibid.
---------------------------------------------------------------------------

    We previously defined the calculation of plan average actuarial 
risk and the calculation of payments and charges in the Premium 
Stabilization Rule.\88\ In the 2014 Payment Notice, we combined those 
concepts into a risk adjustment state payment transfer formula.\89\ 
This 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 the plan can generate for those enrollees. These 
differences are then compared across plans in the state market risk 
pool and converted to a dollar amount via a cost scaling factor. In the 
absence of additional funding, we established, through notice-and-
comment rulemaking,\90\ the HHS-operated risk adjustment program as a 
budget-neutral program to provide certainty to issuers regarding risk 
adjustment payments and charges, which allows issuers to set rates 
based on those expectations. In light of the budget-neutral framework, 
HHS uses statewide average premium as the cost-scaling factor in the 
state payment transfer formula in the HHS-operated risk adjustment 
methodology, rather than a different parameter, such as each plan's own 
premium, which would not have automatically achieved equality between 
risk adjustment payments and charges in each benefit year.\91\
---------------------------------------------------------------------------

    \88\ 77 FR 17220 at 17246.
    \89\ The state payment transfer formula refers to the part of 
the HHS risk adjustment methodology that calculates payments and 
charges at the state market risk pool level prior to the calculation 
of the high-cost risk pool payment and charge terms that apply 
beginning with the 2018 benefit year.
    \90\ For example, see 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 the 2014 
Payment Notice, Final Rule, 78 FR 15441 (March 11, 2013). Also see 
the 2018 Payment Notice, Final Rule, 81 FR 94058 (December 22, 
2016); and the 2019 Payment Notice, Final Rule, 83 FR 16930 (April 
17, 2018). Also see the Adoption of the Methodology for the HHS-
Operated Permanent Risk Adjustment Program Under the Patient 
Protection and Affordable Care Act for the 2017 Benefit Year, Final 
Rule, 83 FR 36456 (July 30, 2018) and the Patient Protection and 
Affordable Care Act; and Adoption of the Methodology for the HHS-
Operated Permanent Risk Adjustment Program for the 2018 Benefit Year 
Final Rule, 83 FR 63419 (December 10, 2018).
    \91\ See the 2020 Payment Notice final rule for further details 
on why statewide average premium is the cost-scaling factor in the 
state payment transfer formula. See 84 FR 17454 at 17480 through 
17484.
---------------------------------------------------------------------------

    Risk adjustment transfers (total payments and charges, including 
high-cost risk pool payments and charges) are calculated after issuers 
have completed their risk adjustment EDGE data submissions for the 
applicable benefit year. Transfers (payments and charges) under the 
state payment transfer formula are calculated as the difference

[[Page 24184]]

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 
methodology follows the formula:
[GRAPHIC] [TIFF OMITTED] TR05MY21.024

    The denominators are summed across all risk adjustment covered 
plans in the risk pool in the market in the state.
    The difference between the two premium estimates in the state 
payment transfer formula 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 combination of metal level AV, 
allowable rating factor, induced demand factor, and geographic cost 
factor) exceeds the plan's predicted liability associated with risk 
selection. Risk adjustment transfers under the state payment transfer 
formula are calculated at the risk pool level, and catastrophic plans 
are treated as a separate risk pool for purposes of the risk adjustment 
state payment transfer calculations.\92\ 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. The payment or charge under the state payment 
transfer formula is thus calculated to balance the state market risk 
pool in question.
---------------------------------------------------------------------------

    \92\ As detailed elsewhere in this final rule, catastrophic 
plans are considered part of the individual market for purposes of 
the national high-cost risk pool payment and charge calculations.
---------------------------------------------------------------------------

    We previously defined the cost scaling factor, or the statewide 
average premium term, as the sum of the average premium per member 
month of each plan i (Pi) multiplied by plan i's share of 
statewide enrollment in the market risk pool (si). We also 
previously adopted a 14 percent administrative cost reduction to the 
statewide average premium \93\ and proposed maintaining it for the 2022 
benefit year and beyond, unless amended through notice-and-comment 
rulemaking. The following formula shows the calculation of the 
statewide average premium and the adjustment to remove a portion of the 
administrative costs that do not vary with claims (14 percent):
---------------------------------------------------------------------------

    \93\ See 84 FR 17454 at 17486.

= ([Sigma]i (si [middot] Pi)) * (1 
- 0.14) = ([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.

    To account for costs associated with exceptionally high-risk 
enrollees, we previously added a high-cost risk pool adjustment to the 
HHS risk adjustment methodology. As finalized in the 2020 Payment 
Notice,\94\ we intend to maintain the high-cost risk pool parameters 
with a threshold of $1 million and a coinsurance rate of 60 percent for 
benefit years 2020 and onward, unless amended through notice-and-
comment rulemaking. We did not propose any changes to the high-cost 
risk pool parameters as part of the proposed rule; therefore, we would 
maintain the threshold of $1 million and coinsurance rate of 60 percent 
for the 2022 benefit year.
---------------------------------------------------------------------------

    \94\ 84 FR 17466 through 17468.
---------------------------------------------------------------------------

    The high-cost risk pool adjustment amount is added to the state 
payment transfer formula 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 percentage 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 
(TPi). For this calculation, we use a percent of premium 
adjustment factor that is applied to each plan's total premium amount. 
The total plan transfers for a

[[Page 24185]]

given benefit year are calculated as the product of the plan's 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 methodology formula are calculated as follows:

Total transferi = (Ti [middot] Mi) + 
HRPi - (HRPCm [middot] TPi)

Where:

Total Transferi = Plan i's total HHS risk adjustment 
program transfer amount;
Ti = Plan i's PMPM transfer amount based on the state 
transfer calculation;
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; and
    TPi = Plan i's total premium amounts.

    We sought comment on the proposed HHS risk adjustment methodology 
for the 2022 benefit year and beyond and the proposed updates to Sec.  
153.320(c). We are finalizing these policies as proposed and will apply 
the proposed HHS risk adjustment methodology outlined in the proposed 
rule for the 2022 benefit year and beyond. We are also finalizing the 
update to Sec.  153.320(c) as proposed.
    We received public comments on the proposed 2022 benefit year HHS 
risk adjustment methodology, the proposal to apply the same methodology 
to future benefit years unless changed through notice-and-comment 
rulemaking, and the proposed updates to Sec.  153.320(c). The following 
is a summary of the comments we received and our responses.
    Comment: Several commenters supported the proposed HHS risk 
adjustment methodology. One commenter asked HHS to continue to publish 
the methodology in the annual Payment Notice to prevent issuers from 
having to reference previous rulemakings.
    Response: We appreciate the support for the state payment transfer 
formula and believe that maintaining the HHS risk adjustment 
methodology for the 2022 benefit year and beyond, unless changed 
through notice-and-comment rulemaking, will result in stability in the 
markets by making it easier for issuers to set rates because of the 
predictability and consistency of the methodology. We do not believe it 
is necessary to continue to publish the methodology in the annual 
Payment Notice, as we will cite to the version of the Payment Notice 
where the current methodology appears in subsequent Payment Notices. We 
are therefore finalizing the HHS risk adjustment methodology and this 
policy as proposed. As a result, for the 2023 benefit year and beyond, 
we will not republish the HHS risk adjustment methodology in the annual 
Payment Notice, unless we are proposing to make changes to the 
methodology. We are also finalizing the proposed update to Sec.  
153.320(c) to reflect this approach.
    Comment: A few commenters opposed certain aspects of the state 
payment transfer formula, such as the use of the statewide average 
premium and the 14 percent administrative cost reduction. One commenter 
suggested that HHS use statewide average claims rather than statewide 
average premium as the scaling factor in the state payment transfer 
formula, and further suggested that if HHS continues to use statewide 
average premium, HHS should increase the administrative cost reduction 
to 20 percent. A few commenters wanted HHS to reevaluate the state 
payment transfer formula, suggesting a focus on the level of the 
administrative cost reduction and an inquiry into whether the 
administrative cost reduction and the induced utilization factors 
should differ between the individual and small group markets. One 
commenter asked for more information on the administrative cost 
reduction, specifically what information HHS would find helpful in 
evaluating the sufficiency of the existing administrative cost 
reduction.
    Response: We did not propose and are not finalizing changes to the 
use of the statewide average premium in the state payment transfer 
formula. As detailed in prior rulemakings,\95\ in light of the 
program's budget neutral framework, HHS chose to use statewide average 
premium to convert required revenue and allowable premium state average 
factors in the state payment transfer formula from relative factors to 
dollar amounts so that the total calculated payment amounts equal total 
calculated charges in each state market risk pool. Thus, each plan in 
the state market risk pool receives a risk adjustment state transfer 
payment or charge that is scaled based on the determination of plan 
average risk within a state market risk pool, resulting in balanced, 
budget-neutral transfers. This approach supports the overall goal of 
the risk adjustment program to encourage issuers to rate for average 
risk and mitigates incentives for issuers to operate less efficiently, 
or to develop benefit designs or create marketing strategies to avoid 
high-risk enrollees. In addition, our analysis shows that statewide 
average claims is a volatile measure, both across states within a year 
and across years within a state, and would be sensitive to unexpected 
claims experience. Furthermore, unexpected claims experience could 
particularly cause instability for smaller issuers, thereby reducing 
the predictability of risk adjustment transfers. For these reasons, we 
are not proposing or otherwise considering the use of statewide average 
claims in the state payment transfer formula.
---------------------------------------------------------------------------

    \95\ See, for example, the Adoption of the Methodology for the 
HHS-operated Risk Adjustment Program under the Patient Protection 
and Affordable Care Act for the 2017 Benefit Year; Final Rule, 83 FR 
36456 (July 31, 2018); and the Adoption of the Methodology for the 
HHS-operated Risk Adjustment Program for the 2018 Benefit Year; 
Final Rule, 83 FR 63419 (December 10, 2018).
---------------------------------------------------------------------------

    We also did not propose and are not finalizing changes to the 14 
percent administrative cost reduction in the risk adjustment state 
payment transfer formula. As we noted in the 2018 Payment Notice,\96\ 
we analyzed administrative and other non-claims expenses, including 
quality improvement expenses, in the MLR Annual Reporting Form, and 
estimated, by category, the extent to which administrative expenses 
varied with claims.\97\ We compared those expenses to the total costs 
that issuers finance through premiums, including claims, administrative 
expenses, and taxes, to ensure that the estimated administrative cost 
percentage was not distorted by under- or over-pricing during the years 
for which MLR data were available. Using this methodology, we 
determined the mean administrative expense in both the individual and 
small group markets was 14 percent. For the 2022 benefit year, we 
engaged in the same analysis and arrived at the same conclusion. We set 
the administrative cost adjustment based on our estimate of the 
percentage of total costs that did not vary by risk, so that issuers 
with higher risk enrollees would still receive credit through risk 
adjustment for the cost of administrative activities that varied based 
on the risk of the population (for examples, discharge planning or 
preventing facility-acquired infections and reducing clinical errors). 
At this time, we have not found evidence that

[[Page 24186]]

demonstrates that a higher percentage is necessary.
---------------------------------------------------------------------------

    \96\ 81 FR 94099 through 94100.
    \97\ In 2016 and 2017, we removed the impact of the reconciled 
amount of CSRs on claims costs as part of this calculation. Payments 
through the CSR program were discontinued in October 2017 due to 
lack of a Congressional appropriation. As such, although this line 
item still exists in the MLR Annual Reporting Form, the amount 
entered by issuers for the CSR line item should be zero dollars, and 
it therefore should no longer impact the administrative cost 
reduction calculation.
---------------------------------------------------------------------------

    In response to comments, we further clarify that the MLR Annual 
Reporting Form provides all the information we use to analyze the 
sufficiency of the 14 percent administrative cost reduction, including 
administrative and other non-claims expenses like quality improvement 
activity expenses, and taxes and fees that do not vary based on 
enrollee health risk. We believe that this is a sufficient and 
reasonable source for data to calculate and analyze the administrative 
cost reduction to the statewide average premium in the risk adjustment 
state payment transfer formula.
    Furthermore, we did not propose and are not finalizing induced 
utilization factors that vary by market. We are concerned that adding 
different utilization factors based on market to the state payment 
transfer formula would make the formula much more complex, as this 
would double the number of induced utilization factors in the formula 
and make it more difficult for issuers to price for. We note that we 
intend to further consider the differences between markets and 
implications for risk adjustment, and that any related changes to the 
risk adjustment program would be proposed in notice-and-comment 
rulemaking.
    Comment: One commenter asked HHS to study the correlation between 
risk adjustment transfers and MLR rebates, stating that it appears that 
transfers are too high because a number of issuers receiving risk 
adjustment payments must pay MLR rebates to their enrollees.
    Response: While risk adjustment payments reduce the numerator of 
the MLR calculation,\98\ whether an issuer will owe MLR rebates is 
influenced by a number of factors that are unrelated to risk adjustment 
transfers. For example, an issuer's MLR and rebate position is heavily 
influenced by the degree to which its pricing assumptions accurately 
accounted for realized claims costs for the applicable benefit year. As 
such, issuers may owe MLR rebates to consumers while either receiving 
risk adjustment payments or owing risk adjustment charges for the 
applicable benefit year. Additionally, our examination of the HHS risk 
adjustment methodology and risk adjustment data for recent benefit 
years has shown the program mitigates the influence of risk selection 
on premiums and the incentive for plans to avoid sicker enrollees.\99\
---------------------------------------------------------------------------

    \98\ See 45 CFR 158.130(b)(5).
    \99\ See, for example, the Summary Report on Permanent Risk 
Adjustment Transfers for the 2019 Benefit Year (July 17, 2020), 
available at https://www.cms.gov/CCIIO/Programs-and-Initiatives/Premium-Stabilization-Programs/Downloads/RA-Report-BY2019.pdf; the 
Summary Report on Permanent Risk Adjustment Transfers for the 2018 
Benefit Year (June 28, 2019), available at https://www.cms.gov/CCIIO/Programs-and-Initiatives/Premium-Stabilization-Programs/Downloads/Summary-Report-Risk-Adjustment-2018.pdf; and the Summary 
Report on Permanent Risk Adjustment Transfers for the 2017 Benefit 
Year (July 9, 2018), available at https://downloads.cms.gov/cciio/Summary-Report-Risk-Adjustment-2017.pdf.
---------------------------------------------------------------------------

    Comment: One commenter asked that HHS reevaluate the state payment 
transfer formula and stated that it favors larger issuers over smaller 
issuers because larger issuers have the ability to dedicate resources 
to enable more robust coding practices.
    Response: We disagree that the state payment transfer formula 
favors larger issuers over small issuers. The risk adjustment program 
transfers funds from plans with lower-than-average risk enrollees to 
plans with higher-than-average risk enrollees in accordance with 
section 1343 of the ACA, and our internal analysis has found that 
smaller plans that enroll sicker than average enrollees have also 
received high payments as a percent of their premiums. Further, HHS 
conducts HHS-RADV in any state where HHS operates the risk adjustment 
program to validate the accuracy of the data submitted by issuers to 
their EDGE servers.\100\ EDGE server data are used to calculate 
issuers' plan liability risk scores for use in the state payment 
transfer formula as a part of the risk adjustment program. HHS-RADV 
establishes uniform audit standards to ensure that actuarial risk is 
accurately and consistently measured, thereby strengthening the 
integrity of the risk adjustment program.\101\ Therefore, any potential 
coding differences between plans of any size should not inappropriately 
impact risk adjustment, and to the extent there is any impact, it 
should be significantly mitigated through HHS-RADV.
---------------------------------------------------------------------------

    \100\ See 45 CFR 153.350 and 153.630.
    \101\ See, for example, the 2014 Payment Notice final rule, 78 
FR 15409 at 15436-15438; and the 2018 Benefit Year Protocols ACA HHS 
Risk Adjustment Data Validation, released June 24, 2019, available 
at https://www.regtap.info/uploads/library/HRADV_2018Protocols_070319_5CR_070519.pdf.
---------------------------------------------------------------------------

    Comment: One commenter requested that HHS adjust the state payment 
transfer formula applicable in states where HHS operates the program to 
ensure that charges for enrollees with no HCCs do not exceed premium.
    Response: We do not believe that adjusting the state payment 
transfer formula to cap or otherwise limit charges to the level of 
premiums for enrollees is appropriate. We are concerned that, given the 
budget-neutral nature of the HHS program, a cap on charges would result 
in lower payments to issuers with plans with higher-than-average 
actuarial risk.\102\ The cap may also incentivize small issuers with 
plans that attract healthier-than-average enrollees to underprice 
premiums because they would know their charges would be capped to a 
percentage of premium. Furthermore, consistent with the framework set 
forth in section 1343 of the ACA, the HHS-operated risk adjustment 
program focuses on risk differentials at the plan level, not the 
enrollee level.\103\ Risk adjustment transfers under the state payment 
transfer formula are therefore calculated based on the plan liability 
risk score and the statewide average premium, not based on individual 
enrollees' premiums. As described in a previous section of this 
rulemaking, we continue to consider future policy options to improve 
the predictive power of the risk adjustment models for certain 
subpopulations (including enrollees with no HCCs).
---------------------------------------------------------------------------

    \102\ Congress did not authorize or appropriate additional 
funding for risk adjustment beyond the amount of charges paid in, 
and did not authorize HHS to obligate itself for risk adjustment 
payments in excess of charges collected. In the absence of 
additional, independent funding or the creation of budget authority 
in advance of an appropriation, the introduction of a cap on charges 
would mean that payments would have to be reduced by a similar 
amount because HHS cannot make payments in excess of charges 
collected consistent with binding appropriations law. See New Mexico 
Health Connections v. United States Department of Health and Human 
Services, 946 F.3d 1138 (10th Cir. 2019).
    \103\ Compare 42 U.S.C. 18063 (establishing the permanent risk 
adjustment program, which involves an assessment and comparison of 
the actuarial risk in each issuer's plans in a state market risk 
pool with the average actuarial risk of all plans in the applicable 
state market risk pool) with 42 U.S.C. 18061 (establishing the 
transitional reinsurance program, which involves an assessment of 
actuarial risk of individual enrollees to identify those that 
qualify as ``high risk.'')
---------------------------------------------------------------------------

    After consideration of the comments received on these proposals, we 
are finalizing the proposed HHS risk adjustment methodology for the 
2022 benefit year and beyond, unless changed through notice-and-comment 
rulemaking. We are also finalizing the accompanying proposed update to 
Sec.  153.320(c).
3. State Flexibility Requests (Sec.  153.320(d))
    In the 2019 Payment Notice, we provided states the flexibility to 
request a reduction to the otherwise applicable risk adjustment state 
transfers calculated by HHS under the state payment transfer formula, 
which is calibrated on a national dataset, for the

[[Page 24187]]

state's individual (catastrophic or non-catastrophic risk pools), small 
group, or merged markets by up to 50 percent to more precisely account 
for differences in actuarial risk in the applicable state's 
markets.\104\ We proposed that any requests received would be published 
in the applicable benefit year's proposed HHS notice of benefit and 
payment parameters, and the supporting evidence provided by the state 
in support of its request would be made available for public 
comment.\105\
---------------------------------------------------------------------------

    \104\ 83 FR 16955 through 16960.
    \105\ 45 CFR 153.320(d)(3).
---------------------------------------------------------------------------

    If the state requests that HHS not make publicly available certain 
supporting evidence and analysis because it contains trade secrets or 
confidential commercial or financial information within the meaning of 
the HHS Freedom of Information Act (FOIA) regulations at 45 CFR 
5.31(d), HHS will only make available on the CMS website the supporting 
evidence submitted by the state that is not a trade secret or 
confidential commercial or financial information by posting a redacted 
version of the state's supporting evidence.\106\ In accordance with 
Sec.  153.320(d)(2), beginning with the 2020 benefit year, states must 
submit such requests with the supporting evidence and analysis outlined 
under Sec.  153.320(d)(1) by August 1st of the calendar year that is 2 
calendar years prior to the beginning of the applicable benefit year. 
If approved by HHS, state reduction requests will be applied to the 
plan PMPM payment or charge state payment transfer amount 
(Ti in the state payment transfer formula above). For the 
2020 and 2021 benefit years, the state of Alabama submitted a 50 
percent risk adjustment transfer reduction request for its small group 
market and HHS approved both requests.\107\
---------------------------------------------------------------------------

    \106\ See 45 CFR 153.320(d)(3).
    \107\ See 84 FR 17484 through 17485 and 85 FR 29193 through 
29194.
---------------------------------------------------------------------------

    We received several general comments on the state flexibility 
request framework outlined in Sec.  153.320(d). However, we did not 
propose any changes to that framework other than the proposal to allow 
multi-year state flexibility requests as explained below. As such, 
these general comments on the state flexibility request framework are 
out of scope of this rulemaking and will not be addressed in this rule.
a. Requests To Reduce Risk Adjustment Transfers for the 2022 Benefit 
Year
    For the 2022 benefit year, HHS received a request to reduce risk 
adjustment transfers calculated under the state payment transfer 
formula for the Alabama individual \108\ and small group markets by 50 
percent.\109\ Alabama's request states that the presence of a dominant 
carrier in the individual and small group markets precludes the HHS-
operated risk adjustment program from working as precisely as it would 
with a more balanced distribution of market share. The state regulators 
stated that their review of the risk adjustment payment issuers' 
financial data suggested that any premium increase resulting from a 
reduction to risk adjustment payments of 50 percent in the individual 
and small group markets for the 2022 benefit year would not exceed 1 
percent, the de minimis premium increase threshold set forth in Sec.  
153.320(d)(1)(iii) and (d)(4)(i)(B). We sought comment on this request 
to reduce risk adjustment state transfers in the Alabama individual and 
small group markets by 50 percent for the 2022 benefit year. The 
request and additional documentation submitted by Alabama was posted 
under the ``State Flexibility Requests'' heading at https://www.cms.gov/CCIIO/Programs-and-Initiatives/Premium-Stabilization-Programs/index.html. We are approving Alabama's requested reductions to 
2022 benefit year transfers calculated under the state payment transfer 
formula for its individual and small group markets.
---------------------------------------------------------------------------

    \108\ Alabama's individual market request is for a 50 percent 
reduction to risk adjustment transfers for its individual market 
non-catastrophic and catastrophic risk pools.
    \109\ Due to the COVID-19 PHE, we permitted states seeking to 
request a reduction in risk adjustment transfers for the 2022 
benefit year an extension until September 1, 2020 to submit such 
request.
---------------------------------------------------------------------------

    We received public comments on Alabama's requests to reduce risk 
adjustment transfers for the 2022 benefit year. The following is a 
summary of the comments we received and our responses.
    Comment: Multiple commenters supported Alabama's request to reduce 
risk adjustment transfers in its individual and small group markets for 
the 2022 benefit year, stating that the HHS-operated risk adjustment 
program has not worked properly in Alabama's markets and that states 
are best suited to decide whether an adjustment is necessary in their 
market risk pools. Several other commenters opposed Alabama's request, 
stating that the state did not meet its burden to substantiate such 
request, that state flexibility should not be permitted, and that 
states seeking a reduction in risk adjustment state transfers should 
operate their own risk adjustment program. Many commenters opposed to 
Alabama's request expressed more concern with the transfer reduction 
request for the individual market compared to the small group market. 
One commenter stated that there was no mathematical reason why the 
presence of one large issuer would preclude HHS-operated risk 
adjustment from functioning appropriately in Alabama.
    Response: In the 2019 Payment Notice, HHS provided the flexibility 
for states to request a reduction in risk adjustment state transfers 
calculated by HHS under the state payment transfer formula when a state 
elects not to operate the risk adjustment program. We reviewed 
Alabama's requests and supporting documentation regarding the state's 
individual and small group market dynamics that it believes warrant an 
adjustment to the HHS-calculated risk adjustment individual (including 
catastrophic and non-catastrophic) and small group market transfers 
under the state payment transfer formula for the 2022 benefit year. 
Alabama state regulators noted they do not assert that the HHS risk 
adjustment formula is flawed, only that it results in imprecise results 
in Alabama's markets that could further reduce competition and increase 
costs for consumers. The state regulators provided information 
demonstrating that the request would have a de minimis impact on 
necessary premium increases in both the individual and small group 
markets for payment issuers, consistent with Sec.  153.320(d)(1)(iii) 
and (d)(4)(i)(B). HHS analyzed the information provided by the state in 
support of its request, along with additional data and information 
available to HHS and the public comments submitted during the comment 
period on the proposed rule, separately by market and found that the 
request meets de minimis regulatory standard in both markets. While we 
recognize the comments expressing more concern with the reduction 
request for the individual market and questioning how the presence of 
one large issuer would impact how the HHS-operated risk adjustment 
program functions in Alabama, we did not propose and are not finalizing 
any changes to the general framework or review standards under Sec.  
153.320(d). As such, a state is permitted to pursue these reduction 
requests for the individual, small group, or merged market risk pools 
if the applicable regulatory requirements are met. In this instance, 
Alabama's individual and small group market requests both met the 
applicable regulatory requirements; therefore, HHS is approving 
Alabama's requested reductions to 2022 benefit

[[Page 24188]]

year transfers calculated under the state payment transfer formula.
    Comment: Some commenters asserted that the evidence provided by 
Alabama does not substantiate the individual market request. One 
commenter requested that HHS conduct its own comprehensive actuarial 
analysis of the evidence provided by Alabama and further noted that the 
2018 and 2019 risk adjustment results provided by Alabama in support of 
the request may not be indicative of 2022 transfers, as the past 
results do not take into account the changes to the HHS risk adjustment 
models applicable beginning with the 2020 and 2021 benefit years or the 
proposed changes outlined in the 2022 Payment Notice proposed rule. 
Another commenter stated that Alabama's suggestion that transfers were 
difficult to predict is inaccurate.
    Response: The evidence provided by Alabama in support of its 
requests to reduce risk adjustment state transfers by 50 percent in its 
individual and small group markets was sufficient to justify its 
request under the de minimis requirement for HHS approval under 45 CFR 
153.320(d)(4)(i)(B). We further note that Alabama requested that, 
consistent with 45 CFR 153.320(d), HHS not publish certain information 
in support of its request because it contained trade secrets or 
confidential commercial or financial information. If the state requests 
that HHS not make publicly available certain supporting evidence and 
analysis because it contains trade secrets or confidential commercial 
or financial information within the meaning of the HHS Freedom of 
Information Act (FOIA) regulations at 45 CFR 5.31(d), HHS will only 
make available on the CMS website the supporting evidence submitted by 
the state that is not a trade secret or confidential commercial or 
financial information by posting a redacted version of the state's 
supporting evidence.\110\ Consistent with the state's request, we 
therefore posted a redacted version of the supporting evidence for 
Alabama's request. However, we note that HHS reviewed the state's un-
redacted supporting analysis in evaluating Alabama's request, along 
with other plan-level data available to HHS and the relevant public 
comments submitted within the applicable comment period for the 
proposed rule. We conducted a comprehensive analysis of the available 
information and found the supporting evidence submitted by Alabama to 
be sufficient for us to determine the validity of Alabama's 2022 
benefit year requests. We also evaluated the comments timely submitted, 
and determined whether the state's requests met the applicable criteria 
for approval.
---------------------------------------------------------------------------

    \110\ See 45 CFR 153.320(d)(3).
---------------------------------------------------------------------------

    We recognize there is some level of uncertainty regarding future 
market dynamics, including their potential impact on future benefit 
year transfers. However, to align with the annual pricing cycle for 
health insurance coverage, the applicable risk adjustment parameters 
(including approval or denial of state flexibility reduction requests) 
must generally be finalized sufficiently in advance of the applicable 
benefit year to allow issuers to consider such information when setting 
rates. As such, there will always be an opportunity for some 
uncertainty regarding the precise impact of future methodological 
changes (such as the risk adjustment model changes applicable beginning 
with the 2020 and 2021 benefit years) or unforeseen events (such as the 
COVID-19 PHE and its impact on enrollment and utilization). With 
respect to Alabama's 2022 benefit year requests, HHS believes that the 
evidence submitted by Alabama in support of its transfer reduction 
requests was sufficient, along with other information available to HHS 
and timely submitted comments, for HHS to review and confirm that the 
requests meet the criteria for approval set forth in Sec.  
153.320(d)(4)(i)(B).
    Comment: Some commenters stated that the reduction requests would 
diminish the effectiveness of the HHS-operated risk adjustment program 
and suggested that Alabama set up its own risk adjustment program if it 
does not believe the HHS-operated risk adjustment program is 
appropriate for its markets.
    Response: We agree that states that do not believe the HHS program 
is appropriate for its markets can and should consider operating their 
own state risk adjustment program with a federally-certified alternate 
risk adjustment methodology tailored to their market risk pools. 
However, as detailed in the proposed rule and the 2019 Payment Notice, 
we adopted the state flexibility reduction request regulations in 
response to specific feedback from certain states, and under our 
current regulations, it is appropriate to extend this flexibility for 
the 2022 benefit year. In addition, the approval criteria codified in 
45 CFR 153.320(d)(4) are intended to ensure that approved adjustments 
do not diminish the effectiveness of the HHS-operated risk adjustment 
program. As part of our assessment of state flexibility requests, we 
consider the potential impact on the effectiveness of the HHS-operated 
risk adjustment program for the applicable state market risk pools. We 
also intend to continue to analyze the impact of state flexibility 
requests and may propose changes or solicit comments on potential 
changes for future benefit years.
    Comment: A few commenters stated that the approval of the requests 
would result in increased adverse selection, especially in the 
individual market. One of these commenters asserted that the reduction 
request in the individual market would result in a premium increase of 
more than 1 percent. This commenter also asserted that approval of the 
reduction request in the individual market would make it difficult for 
issuers to offer individual market plans with broad networks.
    Response: We appreciate commenters' concerns and generally agree 
that adverse selection concerns are heightened in the individual 
market, as enrollees typically have higher actuarial risk, risk 
selection, and risk segmentation in plan selection than those enrolled 
in the small group market. However, in this case, Alabama has met the 
criteria for approval at 45 CFR 153.320(d)(4)(i)(B) for both its 
individual and small group market requests.
    In addition, these commenters did not provide any data or 
supporting evidence during the public comment period to support their 
assertions. Our analysis 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 risk 
pool, showed that the transfer reduction requested by Alabama would 
have de minimis impact on the premiums to cover the difference in 
transfers for issuers that would receive reduced transfer payments. 
That is, approval of the request would not result in an increase in 
premiums of more than 1 percent. HHS does not believe that a change in 
transfers small enough to have a de minimis impact on premiums should 
affect issuers' operations, such as changes to its provider networks. 
Therefore, after consideration of the information submitted in support 
of the state's request and other data and information available to HHS, 
we find that the evidence provided substantiates the reduction request 
in both the individual and small group markets and meets the regulatory 
requirements for HHS approval under 45 CFR 153.320(d)(4)(i)(B).
    Based on our review of the comments received on the proposed state 
flexibility reduction requests within the comment period and HHS's 
analysis of the requests submitted by Alabama,

[[Page 24189]]

HHS is granting Alabama's requests to reduce risk adjustment transfers 
in the individual (including catastrophic and non-catastrophic risk 
pools) and small group markets by 50 percent for the 2022 benefit year. 
Therefore, the 50 percent reduction will be applied to the 2022 benefit 
year plan PMPM payment or charge transfer amount (Ti in the 
state payment transfer calculation above) for the Alabama individual 
and small group markets.
b. Multi-Year State Flexibility Requests
    We proposed several amendments to Sec.  153.320(d) to allow states 
to request a reduction to otherwise applicable risk adjustment 
calculations under the state payment transfer formula for up to 3 
years, beginning with the 2023 benefit year. Under current policy, 
states seeking to reduce risk adjustment state transfers in one or more 
of their market risk pools must submit a request to HHS each year 
describing the nature of their request and providing supporting 
documentation. HHS then reviews the request, sets forth the request in 
the applicable benefit year's HHS notice of benefit and payment 
parameters, and approves or denies it based on the evidence and 
analysis provided by the state in the request and the comments received 
to the applicable benefit year's proposed HHS notice of benefit and 
payment parameters.
    Under Sec.  153.320(d)(1), states must submit this request 
annually, and HHS publishes state requests in the applicable benefit 
year's proposed and final annual HHS notice of benefit and payment 
parameters. Stakeholders have requested that HHS allow states to 
request multi-year risk adjustment flexibility reductions. In 
recognition of these comments, we proposed to provide the flexibility 
for states to request a reduction to otherwise applicable risk 
adjustment state transfers under the HHS-operated risk adjustment 
methodology's state payment transfer formula for up to 3 years 
beginning with the 2023 benefit year.\111\
---------------------------------------------------------------------------

    \111\ See 85 FR at 78599-78601 for details on the proposed 
updates to Sec.  153.320(d) to permit states to seek multi-year 
state flexibility requests for up to 3 years.
---------------------------------------------------------------------------

    We are not finalizing the proposed policies or accompanying 
proposed updates to Sec.  153.320(d) to permit states to pursue multi-
year state flexibility reduction requests. We are maintaining the 
existing language and framework, which permits states to submit annual 
requests to reduce the otherwise applicable risk adjustment 
calculations under the state payment transfer formula for its 
individual and small group (or merged) markets for a given benefit year 
to more precisely account for state-specific factors or other unique 
market characteristics.
    We received public comments on the proposed policies and updates to 
Sec.  153.320(d) to permit states to seek multi-year state flexibility 
requests for up to 3 years. The following is a summary of the comments 
we received and our responses.
    Comment: Some commenters supported our proposal to permit states to 
request reductions in otherwise applicable risk adjustment state 
transfers for up to three benefit years, stating that multi-year state 
flexibility requests would promote stability and competition in the 
affected state market risk pool(s) and would reduce burden on states 
and HHS. However, several other commenters opposed this proposal, 
asserting that states would not be able to accurately or reliably 
anticipate state market risk pool conditions or market dynamics that 
far into the future in order for HHS to provide sufficient support for 
multi-year reduction requests. These commenters also raised the same 
concerns raised to the Alabama request above, including that the 
proposal would undermine the effectiveness of the HHS-operated risk 
adjustment program and result in risk selection, market 
destabilization, higher premiums, and narrow or restricted provider 
networks. These commenters noted that states can run their own risk 
adjustment program if they believe the HHS-operated program does not 
function properly in their market risk pool(s). One commenter also 
noted that inadequate advance notice of HHS's decision to terminate or 
modify the request based on new available information could disrupt 
rate setting.
    Response: We are not finalizing these proposed policies or the 
updates to Sec.  153.320(d), as we agree with commenters that there are 
concerns and barriers to multi-year state flexibility reduction 
requests. We agree that state market conditions, including enrollment 
and new entrants and exits to the market, can change significantly over 
3 years, and three-year reduction requests could destabilize the market 
if conditions significantly change during the request's approval 
period. While our proposed framework included mechanisms to address 
such situations (for example, the proposed process and authority for 
HHS to terminate or modify a previously approved multi-year request 
during any one of the subsequent years during the approval period if 
additional data or new information did not support the continuation of 
the state's reduction request and the state did not provide sufficient 
supplemental evidence to rebut such data or information), we agree that 
further consideration of these types of issues is warranted before 
pursuing these proposals to permit multi-year state flexibility 
reduction requests. We are maintaining the existing language and 
framework in Sec.  153.320(d), which currently permits states to submit 
annual requests to reduce the otherwise applicable risk adjustment 
calculations under the state payment transfer formula for its 
individual and small group (including merged) markets for a given 
benefit year to more precisely account for state-specific factors or 
other unique market characteristics.
    After consideration of the comments on the policies and changes 
related to the multi-year state flexibility reduction requests, we are 
not finalizing the proposals or changes to Sec.  153.320(d) related to 
such requests.
4. Audits and Compliance Reviews of Issuers of Reinsurance-Eligible 
Plans (Sec.  153.410(d)) and Audits and Compliance Reviews of Issuers 
of Risk Adjustment Covered Plans (Sec.  153.620(c))
a. Audits and Compliance Reviews of Issuers of Reinsurance-Eligible 
Plans (Sec.  153.410(d))
    HHS recently completed the 2014 benefit year audits of a sample of 
issuers of ACA transitional reinsurance-eligible plans. During this 
process, HHS encountered significant challenges that impeded its 
ability to efficiently administer and complete the audits. More 
specifically, HHS experienced difficulties receiving requested audit 
data and materials in a timely fashion from some issuers, and had 
difficulty obtaining data from these issuers in a format that was 
usable by HHS. HHS is of the view that codifying additional audit 
requirements and parameters is an appropriate and necessary measure to 
ensure that 2015 and 2016 benefit year audits of ACA transitional 
reinsurance-eligible plans appropriately function to protect the 
integrity of our programs.
    We proposed several amendments to Sec.  153.410(d) to provide more 
clarity around the audit requirements for issuers of reinsurance-
eligible plans. As proposed, the amendments explain the audit process, 
including what it means to properly comply with an audit and the 
consequences for failing to comply with audit requirements. We also 
proposed to expand the oversight tools available to HHS to also provide 
authority for HHS to conduct compliance reviews of issuers of

[[Page 24190]]

reinsurance-eligible plans to assess compliance with the applicable 
requirements of subparts E and H of part 153. We explained that the 
proposed HHS compliance reviews would follow the standards set forth 
for compliance review of QHP issuers participating in FFEs established 
in 45 CFR 156.715. However, compliance reviews under this section would 
only be conducted in connection with confirming reinsurance-eligible 
plans' compliance with the standards related to reinsurance payments in 
subparts E and H of part 153. A compliance review may be targeted at a 
specific potential error and conducted on an ad hoc basis.\112\ For 
example, HHS may require an issuer to submit data pertaining to a 
specific data submission (for example, capitated claims). Unlike the 
compliance review authority established in Sec.  156.715, which is 
limited to QHP issuers participating in FFEs, the compliance review 
authority we proposed to codify in the amendments to Sec.  153.410(d) 
would apply to all issuers of reinsurance-eligible plans. We believe 
this flexibility is necessary and appropriate to provide a mechanism 
for HHS to address situations in which a systematic error or issue is 
identified during the random and targeted auditing of issuers of 
reinsurance-eligible plans, and HHS suspects similarly situated issuers 
may have experienced the same systematic error or issue, but were not 
selected for audit in the year in question.
---------------------------------------------------------------------------

    \112\ For further details, please see 78 FR 65100.
---------------------------------------------------------------------------

    Specifically, we proposed to rename Sec.  153.410(d) to ``Audits 
and Compliance Reviews'' in order to clarify that the authority 
described in this section would apply to audits and the proposed HHS 
compliance reviews to evaluate issuers of reinsurance-eligible plans' 
compliance with the applicable requirements in subparts E and H of part 
153. We similarly proposed to update the introductory language in Sec.  
153.410(d) to incorporate a reference to HHS compliance reviews and to 
note that we would conduct these compliance reviews consistent with the 
standards set forth in Sec.  156.715.
    We also proposed to amend the existing introductory language in 
Sec.  153.410(d) to remove the last sentence that discusses audit 
results and the accompanying requirements that an issuer must follow if 
an audit results in a finding of material weakness or significant 
deficiency. Additionally, as detailed further below, we proposed to 
replace this with a new proposed framework that captures more details 
on the audit process and requirements for reinsurance-eligible plans. 
As amended, the introductory language at Sec.  153.410(d) would reflect 
the authority for HHS, or its designee, to audit or conduct a 
compliance review of an issuer of a reinsurance-eligible plan to assess 
its compliance with the applicable requirements of subparts E and H of 
part 153. We also proposed to move the existing introductory language 
in paragraph (d) requiring an issuer to ensure its relevant 
contractors, subcontractors, and agents cooperate with audits to a new 
proposed section, as detailed further below.
    Also at Sec.  153.410, we proposed to add new paragraph (d)(1) to 
establish notice and conference requirements for these audits. The 
introductory language in proposed paragraph (d)(1) reflects that HHS 
would provide at least 15 calendar days advance notice of its intent to 
conduct an audit of an issuer of a reinsurance-eligible plan. In 
proposed paragraph (d)(1)(i), we proposed to codify that all audits 
under this section would include an entrance conference at which the 
scope of the audit would be presented and an exit conference at which 
the initial audit findings would be discussed.
    Further, we proposed to amend Sec.  153.410(d) to add a new 
paragraph (d)(2) to capture the requirements issuers must meet to 
comply with an audit under this section. In proposed paragraph 
(d)(2)(i), we proposed to capture the requirement that currently 
appears in the introductory text of paragraph (d) for the issuer to 
ensure that its relevant contractors, subcontractors, and agents 
cooperate with any audit or compliance review under this section and 
also proposed to expand it to similarly require the issuer to ensure 
its relevant employees, downstream entities and delegated entities also 
cooperate with any audit or compliance review under this section. In 
new proposed paragraph (d)(2)(ii), we proposed to require issuers to 
submit complete and accurate data to HHS or its designees that is 
necessary to complete the audit. We explained that such data would need 
to support the appropriateness and accuracy of the reinsurance payments 
under review as part of the audit. For example, HHS may request that 
issuers of reinsurance-eligible plans provide enrollment and claims 
files, plan reference data, and associated enrollee data sufficient to 
show that reinsurance payments received were appropriate.
    HHS encountered significant challenges in the 2014 benefit year 
audits when some issuers submitted data in a format that was not 
readable by HHS. To address this issue, we proposed in new paragraph 
(d)(2)(ii) that issuers must submit audit data in the format and manner 
specified by HHS no later than 30 calendar days after the initial 
deadline communicated and established by HHS at the entrance conference 
described in proposed paragraph (d)(1)(i). For example, HHS may require 
issuers to submit the requested audit data via Electronic File 
Transfer. Additionally, under proposed paragraph (d)(2)(iii), HHS 
proposed to require that issuers respond to any audit notices, letters, 
request, and inquiries, including requests for supplemental or 
supporting information, no later than 15 calendar days after the date 
of the notice, letter, request, or inquiry. We noted that we believe 
that the proposed requirements in paragraph (d)(2) are necessary and 
appropriate to ensure the timely completion of audits and to prevent 
waste that results from repeated, fruitless attempts by HHS to obtain 
data.
    Recognizing that there may be situations that warrant an extension 
of the timeframes under Sec.  153.410(d)(2)(ii) or (iii), as 
applicable, we proposed to also add a new paragraph (d)(2)(iv) to 
establish a process for issuers to request an extension for good cause. 
To request an extension, we proposed to require the issuer to submit a 
written request to HHS within the applicable timeframe established in 
paragraphs (d)(2)(ii) or (iii). The written request would have to 
detail the reasons for the extension request and good cause in support 
of the request. For example, good cause may include an inability to 
produce information in light of unforeseen emergencies, natural 
disasters, or a lack of resources due to a PHE. If the extension is 
granted, the issuer must respond within the timeframe specified in 
HHS's notice granting the extension of time.
    Under Sec.  153.410(d)(3), HHS proposed it would share its 
preliminary audit findings with the issuer, and further proposed that 
the issuer would then have 30 calendar days to respond to such findings 
in the format and manner specified by HHS. HHS would describe the 
process, format, and manner by which an issuer can dispute the 
preliminary findings in the preliminary audit report sent to the 
issuer. For example, if the issuer disagrees with the findings set 
forth in the preliminary audit report, HHS would require the issuer to 
respond to such findings by submitting written explanations that detail 
its dispute(s) or additional rebuttal information via Electronic File 
Transfer. Additionally, we proposed at paragraph (d)(3)(i) that if the 
issuer does not dispute or otherwise respond to the

[[Page 24191]]

preliminary findings within 30 calendar days, the audit findings would 
become final. We proposed in paragraph (d)(3)(ii) that if the issuer 
timely responds and disputes any audit finding within 30 calendar days, 
HHS would review and consider such response and finalize the audit 
findings after such review. HHS would provide contact and other 
information necessary for an issuer to respond to the preliminary audit 
findings in the preliminary audit report sent to the issuer.
    We proposed to add a new paragraph Sec.  153.410(d)(4) to capture 
the process and requirements related to final audit findings and 
reports. If an audit results in the inclusion of a finding in the final 
audit report, the issuer must comply with the actions set forth in the 
final audit report in the manner and timeframe established by HHS. We 
noted that the actions set forth in the final audit report could 
require an issuer to return reinsurance payments. We maintained the 
regulatory requirements related to corrective action plans for 
reinsurance audits that currently appear in paragraph (d) in proposed 
paragraph (d)(4), which stated that (1) the issuer must provide a 
written corrective action plan to HHS for approval within 30 calendar 
days of the issuance of the final audit report; (2) the issuer must 
implement the corrective action plan; and (3) the issuer must provide 
HHS with written documentation demonstrating the adoption and 
completion of the required corrective actions.
    Lastly, if an issuer fails to comply with the audit requirements 
set forth in proposed Sec.  153.410(d), HHS proposed in paragraph 
(d)(5)(i) that HHS would notify the issuer of reinsurance payments 
received that the issuer has not adequately substantiated, and under 
proposed paragraph (d)(5)(ii), HHS would notify the issuer that HHS may 
recoup any payments identified as not adequately substantiated. We 
explained that under this framework, the continued failure to comply 
with the audit requirements and provide the necessary information to 
substantiate the payments made could result in HHS recouping up to 100 
percent of the reinsurance payments made to an issuer for the 
applicable benefit year(s) that are the subject of the audit.
    We also clarified that reinsurance payment amounts recovered by HHS 
as a result of an audit under Sec.  153.410(d) would be allocated, on a 
pro rata basis, as further payments to the U.S. Treasury under section 
1341(b)(3)(B)(iv) of the ACA and further reimbursement of 
administrative expenses related to operating the reinsurance program 
under section 1341(b)(3)(B)(ii) of the ACA.\113\
---------------------------------------------------------------------------

    \113\ See the Patient Protection and Affordable Care Act; 
Exchange and Insurance Market Standards for 2015 and Beyond, Final 
Rule, 79 FR 30240 at 30257 through 30259 (May 27, 2014).
---------------------------------------------------------------------------

    We sought comment on these proposals, including HHS's clarification 
of its compliance review authority, the proposed timeframes for issuers 
to respond to audit notices, reports, inquiries, and requests for 
supplemental information, and the process for issuers to request an 
extension to respond to such requests. We are finalizing the proposed 
updates to the audit and compliance reviews of issuers of reinsurance 
eligible plans in Sec.  153.410(d), with modifications to certain audit 
timelines in response to comments stating that issuers would need more 
time to provide complete and accurate data for an audit and respond to 
HHS requests.
    We received public comments on the proposed updates to audits and 
compliance reviews of issuers of reinsurance-eligible plans (Sec.  
153.410(d)). The majority of the comments we received to this section 
were general comments that were also applicable to the similar 
amendments proposed in the below sections regarding audits and 
compliance reviews of issuers of risk adjustment covered plans (Sec.  
153.620(c)) and audits and compliance reviews of APTC, CSRs, and user 
fees (Sec.  156.480(c)). We responded to these generally applicable 
comments in the below section on audits and compliance reviews of APTC, 
CSRs, and user fees (Sec.  156.480(c)). What follows is a summary and 
our responses to the comments we received that were specific to audits 
and compliance reviews of issuers of reinsurance-eligible plans.
    Comment: A few commenters were concerned that HHS is still 
conducting audits of issuers of reinsurance-eligible plans for monies 
received more than 5 years ago for a program that ended after the 2016 
benefit year. These commenters asked that HHS reconsider the overall 
approach and need for conducting audits of issuers of reinsurance-
eligible plans.
    Response: HHS has the authority \114\ and the responsibility to 
audit issuers of reinsurance-eligible plans to protect the integrity of 
the reinsurance program and ensure issuers received the appropriate 
reinsurance payments during the 2014 through 2016 benefit years. We 
recognize that the program ended with the 2016 benefit year, but 
activities related to the operation of the program continued for 
several years. For example, the final deadline for remittance of 2016 
benefit year reinsurance contributions was not until November 2017 
\115\ and the last payments to issuers of reinsurance eligible plans 
were made in Spring 2018. Activities, such as these audits, continue as 
HHS closes out the program. We are planning to combine reinsurance 
program audits for the 2015 and 2016 benefit years, which will help 
facilitate a more efficient audit process and allow HHS to end the 
audits of reinsurance-eligible plans more quickly. We will similarly 
look for ways to combine efforts for compliance reviews of reinsurance-
eligible plans, should we determine it is necessary or appropriate to 
pursue those additional oversight measures.
---------------------------------------------------------------------------

    \114\ 45 CFR 153.410(d).
    \115\ https://www.cms.gov/CCIIO/Programs-and-Initiatives/Premium-Stabilization-Programs/The-Transitional-Reinsurance-Program/2016-Benefit-Year-Page.
---------------------------------------------------------------------------

    After consideration of the comments related to the proposals 
regarding audits and compliance review of reinsurance-eligible plans, 
we are finalizing these provisions as proposed, with slight 
modifications to certain audit timelines in response to comments \116\ 
stating that issuers need more time during audits to provide complete 
and accurate data and respond to HHS requests. As finalized at Sec.  
153.410(d)(1), HHS will provide at least 30 calendar days advance 
notice of its intent to conduct an audit of an issuer of a reinsurance-
eligible plan, rather than the proposed 15 calendar days. Additionally, 
as finalized at Sec.  153.410(d)(4)(i), if HHS determines the need for 
a corrective action plan as the result of an audit, issuers must 
provide a written corrective action plan to HHS for approval within 45 
calendar days of the issuance of the final audit report, rather than 
the proposed 30 calendar days.
---------------------------------------------------------------------------

    \116\ These comments, along with the other general comments 
submitted on the parallel amendments to the sections on audits and 
compliance reviews of reinsurance-eligible plans, risk adjustment 
covered plans, and QHP issuer compliance with federal standards for 
APTC, CSRs, and user fees, are summarized and responded to in the 
below preamble section on audits and compliance reviews of APTC, 
CSRs, and user fees (Sec.  156.480(c)).
---------------------------------------------------------------------------

    We also clarify that we will recoup monies owed due to a finding as 
the result of an audit of a reinsurance-eligible plan using the same 
method with which we collect all debts. That is, to recoup the amount 
identified in Sec.  153.410(d)(5)(i), we will first net using the 
process set forth in 45 CFR 156.1215, and we will then invoice issuers 
for the remaining debt (if any was owed).

[[Page 24192]]

b. Audits and Compliance Reviews of Issuers of Risk Adjustment Covered 
Plans (Sec.  153.620(c))
    Although currently HHS primarily uses the HHS-RADV process to audit 
issuers of risk adjustment covered plans, Sec.  153.620(c) provides HHS 
with the authority to conduct audits of issuers of risk adjustment-
covered plans outside of the HHS-RADV process. HHS intends to begin 
audits of issuers of risk adjustment covered plans to ensure the proper 
payment of high-cost risk pool payments and confirm compliance with 
applicable requirements. As such, similar to the proposals related to 
audits and compliance reviews of issuers of reinsurance-eligible plans 
and learning from our experience with those 2014 benefit year audits, 
we proposed to provide more clarity around the audit requirements for 
issuers of risk adjustment covered plans. These proposals sought to 
explain the audit process, including what it means to properly comply 
with an audit and the consequences for failing to comply with such 
requirements.
    We also proposed to expand the oversight tools available to HHS 
beyond traditional audits to also provide authority for HHS to conduct 
compliance reviews of risk adjustment covered plans to assess 
compliance with the applicable requirements of subparts G and H of part 
153. We explained that the proposed HHS compliance reviews would follow 
the standards set forth for compliance review of QHP issuers 
participating in FFEs established in 45 CFR 156.715. However, 
compliance reviews under this section would only be conducted in 
connection with confirming risk adjustment covered plans' compliance 
with the applicable requirements related to the risk adjustment program 
in subparts G and H of part 153. A compliance review may be targeted at 
a specific potential error and conducted on an ad hoc basis.\117\ For 
example, HHS may require an issuer to submit data pertaining to a 
specific data submission (for example, capitated claims). Unlike the 
compliance review authority established in Sec.  156.715, which is 
limited to QHP issuers participating in FFEs, the compliance review 
authority we proposed to codify in the amendments to Sec.  153.620(c) 
would apply to all issuers of risk adjustment covered plans. We 
explained that we believe this flexibility is necessary and appropriate 
to provide a mechanism for HHS to address situations in which a 
systematic error or issue is identified during the random and targeted 
auditing of a sample of issuers of risk adjustment covered plans, and 
HHS suspects similarly situated issuers may have experienced the same 
systematic error or issue but were not selected for audit in the year 
in question. As noted in the proposed rule, we anticipate focusing our 
audit and compliance review activities under Sec.  153.620(c) on 
ensuring compliance with requirements applicable to the high-cost risk 
pool payments under the HHS risk adjustment methodology.
---------------------------------------------------------------------------

    \117\ For further details, please see 78 FR 65100.
---------------------------------------------------------------------------

    Specifically, we proposed to rename Sec.  153.620(c) to ``Audits 
and Compliance Reviews'' to clarify that the authority described in 
this section would apply to audits and the proposed HHS compliance 
reviews to evaluate risk adjustment covered plans' compliance with the 
applicable requirements in subparts G and H of part 153. We similarly 
proposed to update the introductory language in paragraph (c) to 
incorporate a reference to HHS compliance reviews and to note that we 
would conduct these compliance reviews consistent with the standards 
set forth in 45 CFR 156.715.
    We also proposed to amend the existing introductory language in 
Sec.  153.620(c) to remove the last sentence that discusses audit 
results and the accompanying requirements that an issuer must follow if 
an audit results in a finding of material weakness or significant 
deficiency. As detailed further below, we proposed to replace this with 
a new proposed framework that captures more details on the audit 
process and requirements for risk adjustment covered plans. As amended, 
the introductory language at paragraph (c) would reflect the authority 
for HHS or its designee to audit or conduct a compliance review of an 
issuer of a risk adjustment covered plan to assess its compliance with 
the applicable requirements of subparts G and H of part 153. We also 
proposed to move the existing introductory language in paragraph (c) 
requiring an issuer to ensure its relevant contractors, subcontractors, 
and agents cooperate with audits to a new proposed section, as 
described further below.
    We proposed to add new paragraph (c)(1) to establish notice and 
conference requirements for these audits. The introductory language in 
proposed paragraph (c)(1) reflects that HHS would provide at least 15 
calendar days advance notice of its intent to conduct an audit of an 
issuer of a risk adjustment covered plan. In proposed paragraph 
(c)(1)(i), we proposed to codify that all audits under this section 
would include an entrance conference at which the scope of the audit 
would be presented and an exit conference at which the initial audit 
findings would be discussed.
    Further, we proposed to amend Sec.  153.620(c) to add paragraph 
(c)(2) to capture the requirements issuers must meet to comply with an 
audit under this section. In proposed paragraph (c)(2)(i), we would 
capture the requirement that currently appears in the introductory text 
of paragraph (c) for the issuer to ensure that its relevant agents, 
contractors, and subcontractors cooperate with any audit or compliance 
review under this section and also proposed to expand it to similarly 
require the issuer to ensure its relevant employees, downstream 
entities and delegated entities also cooperate with any audit or 
compliance review under this section. In proposed paragraph (c)(2)(ii), 
we proposed to require issuers to submit complete and accurate data to 
HHS or its designees that is necessary to complete the audit. We 
explained that such data would need to support the appropriateness and 
accuracy of the risk adjustment transfers (including high-cost risk 
pool payments and charges) under review as part of the audit. For 
example, HHS may request that issuers of risk adjustment covered plans 
provide enrollment and claims files and plan reference data and 
associated enrollee data.
    In new paragraph (c)(2)(ii), we proposed that issuers must submit 
audit data, in the format and manner specified by HHS, no later than 30 
calendar days after the initial deadline communicated and established 
by HHS at the entrance conference described in proposed paragraph 
(c)(1)(i). For example, HHS may require issuers to submit the requested 
audit data via Electronic File Transfer. Additionally, under proposed 
paragraph (c)(2)(iii), HHS proposed to require that issuers respond to 
any audit notices, letters, and inquires, including requests for 
supplemental or supporting information, no later than 15 calendar days 
after the date of the notice, letter, request, or inquiry. We noted 
that we believe that the proposed requirements in paragraph (c)(2) are 
necessary and appropriate to ensure the timely completion of audits and 
to prevent waste that results from repeated, fruitless attempts by HHS 
to obtain necessary data.
    Recognizing that there may be situations that warrant an extension 
of the timeframes under Sec.  153.620(c)(2)(ii) or (iii), as 
applicable, we proposed to also add a new paragraph (c)(2)(iv) to 
establish a process for issuers to request an extension for good cause. 
To request an extension, we proposed to require the issuer to submit a 
written request to

[[Page 24193]]

HHS within the applicable timeframe established in paragraph (c)(2)(ii) 
or (iii). The written request would be required to detail the reasons 
for the extension request and the good cause in support of the request. 
For example, good cause may include an inability to produce information 
in light of unforeseen emergencies, natural disasters, or a lack of 
resources due to a PHE. If the extension is granted, the issuer must 
respond within the timeframe specified in HHS's notice granting the 
extension of time.
    Under Sec.  153.620(c)(3), HHS proposed that it would share its 
preliminary audit findings with the issuer, and further proposed that 
the issuer would then have 30 calendar days to respond to such findings 
in the format and manner specified by HHS. HHS would describe the 
process, format, and manner by which an issuer can dispute the 
preliminary findings in the preliminary audit report sent to the 
issuer. For example, if the issuer disagrees with the findings set 
forth in the preliminary audit report, HHS would require the issuer to 
respond to such findings by submitting written explanations that detail 
its dispute(s) or additional rebuttal information via Electronic File 
Transfer. Additionally, we proposed under paragraph (c)(3)(i) that if 
the issuer does not dispute or otherwise respond to the preliminary 
findings within 30 calendar days, the audit findings would become 
final. We proposed under paragraph (c)(3)(ii) that if the issuer timely 
responds and disputes any audit finding within 30 calendar days, HHS 
would review and consider such response and finalize the audit findings 
after such review. HHS would provide contact and other information 
necessary for an issuer to respond to the preliminary audit findings in 
the preliminary audit report sent to the issuer.
    HHS proposed to add a new Sec.  153.620(c)(4) to capture the 
process and requirements related to final audit findings and reports. 
If an audit results in the inclusion of a finding in the final audit 
report, the issuer must comply with the actions set forth in the final 
audit report in the manner and timeframe established by HHS. We noted 
that the actions set forth in the final audit reports could require an 
issuer to return risk adjustment (including high-cost risk pool) 
payments, or pay increased risk adjustment (including high-cost risk 
pool) charges. We maintained the regulatory requirements for corrective 
action plans for risk adjustment (including high-cost risk pool) audits 
that currently appear in Sec.  153.620(c) in proposed paragraph (c)(4), 
which stated that (1) the issuer must provide a written corrective 
action plan to HHS for approval within 30 calendar days of the issuance 
of the final audit report; (2) the issuer must implement the corrective 
action plan; and (3) the issuer must provide HHS with written 
documentation demonstrating the adoption and completion of the required 
corrective actions.
    Lastly, if an issuer fails to comply with the audit requirements 
set forth in proposed Sec.  153.620(c)(2), HHS proposed in paragraph 
(c)(5)(i) that HHS would notify the issuer of payments received that 
the issuer has not adequately substantiated, and in proposed paragraph 
(c)(5)(ii), HHS would notify the issuer that HHS may recoup any 
payments identified as not adequately substantiated. We explained that 
under this framework, the continued failure to comply with the audit 
requirements and provide the necessary information to substantiate the 
transfer amounts under review could result in HHS recouping up to 100 
percent of the risk adjustment (including high-cost risk pool) 
payments, or increased risk adjustment (including high-cost risk pool) 
charges, made to an issuer for the applicable benefit year(s) that are 
the subject of the audit.
    We noted that any risk adjustment payments or charges recovered by 
HHS during an audit of a risk adjustment covered plan would be paid on 
a pro rata basis similar to the process for risk adjustment default 
charge allocations to the other issuers participating in the applicable 
state market risk pool in the applicable benefit year.\118\ We noted 
that any high-cost risk pool payments or charges recovered by HHS 
during an audit of a risk adjustment covered plan would be paid on a 
pro rata basis to other issuers in the relevant national market in the 
form of a reduced high-cost risk pool charge in the applicable benefit 
year. HHS would not, however, re-run or otherwise recalculate transfers 
for the applicable benefit year if monies are recouped as a result of 
an audit under Sec.  153.620(c).
---------------------------------------------------------------------------

    \118\ See the 2016 Payment Notice final rule, 80 FR 10780-10781.
---------------------------------------------------------------------------

    We sought comment on these proposals, including HHS's clarification 
of its compliance review authority, the proposed timeframes for issuers 
to respond to audit notices, reports, and requests for supplemental 
information, and the process for issuers to request an extension to 
respond to such requests. We are finalizing the proposed updates to the 
audit and compliance reviews of issuers of risk adjustment covered 
plans in Sec.  153.620(c), with modifications to certain audit 
timelines in response to comments stating that issuers would need more 
time to provide complete and accurate data for an audit and respond to 
HHS requests. We will also adopt the approach outlined for distribution 
of risk adjustment payments or charges under the state payment transfer 
formula recovered by HHS during an audit of a risk adjustment covered 
plan would be paid on a pro rata basis similar to the process for risk 
adjustment default charge allocations to the other issuers 
participating in the applicable state market risk pool in the 
applicable benefit year.\119\ We also reaffirm that HHS would not re-
run or otherwise recalculate transfers for the applicable benefit year 
if monies are recouped as a result of an audit under Sec.  153.620(c). 
However, after consideration of comments and further evaluation, we are 
not finalizing our proposal to disburse high-cost risk pool payments or 
charges recovered by HHS during an audit of a risk adjustment covered 
plan on a pro rata basis to other issuers in the relevant national 
market in the form of a reduced high-cost risk pool charge for the same 
applicable benefit year. We are continuing to consider options and the 
best possible process to disburse such amounts and will set forth any 
proposed process in future notice-and-comment rulemaking.
---------------------------------------------------------------------------

    \119\ Ibid.
---------------------------------------------------------------------------

    We received public comments on the proposed updates to audits and 
compliance reviews of issuers of risk adjustment covered plans (Sec.  
153.620(c)). The majority of the comments we received to this section 
were general comments that were also applicable to the similar 
amendments proposed in the sections regarding audits and compliance 
reviews of issuers of reinsurance-eligible plans (Sec.  153.410(d)) and 
audits and compliance reviews of APTC, CSRs, and user fees (Sec.  
156.480(c)). We responded to these generally applicable comments in the 
below section regarding audits and compliance reviews of APTC, CSRs, 
and user fees (Sec.  156.480(c)). We received one comment specific to 
audits and compliance reviews of issuers of risk adjustment covered 
plans, and the following is a summary of this comment and our response.
    Comment: One commenter asked for clarification on the distribution 
of risk adjustment amounts that are recovered as the result of an audit 
and may be due to an issuer that is no longer in business.
    Response: As noted above, we will disburse risk adjustment payments 
or

[[Page 24194]]

charges under the state payment transfer formula recovered by HHS 
during a risk adjustment audit on a pro rata basis similar to the 
process for risk adjustment default charge allocations to the other 
issuers participating in the applicable state market risk pool benefit 
year. As such, we will allocate state payment transfer amounts 
(payments or charges) recovered by HHS during an audit under Sec.  
153.620(c) among the other plans in the impacted state market risk 
pool(s) proportional to each plan's relative revenue requirement as 
calculated under the state payment transfer formula relative to the 
market average of these products.\120\ HHS will pursue options to make 
payments to all of the appropriate issuers, including those that may no 
longer be operating in the relevant market. As for disbursing high-cost 
risk pool payments or charges recovered by HHS during an audit of a 
risk adjustment covered plan, we are continuing to consider options and 
the best possible process to disburse high-cost risk pool payments or 
charges and will set forth any proposed process in future notice-and-
comment rulemaking. For example, we may propose in future notice-and-
comment rulemaking a recoupment disbursement methodology that provides 
eligible issuers participating in the current benefit year with a 
reduction in high-cost risk pool charges.
---------------------------------------------------------------------------

    \120\ See the 2016 Payment Notice final rule, 80 FR 10780-10781.
---------------------------------------------------------------------------

    After consideration of comments on these proposals, we are 
finalizing the majority of the audit and compliance review provisions 
as proposed, with slight modifications to certain audits timelines in 
response to comments \121\ stating that issuers need more time during 
audits to provide complete and accurate data and respond to HHS 
requests. As finalized at Sec.  153.620(c)(1), HHS will provide at 
least 30 calendar days advance notice of its intent to conduct an audit 
of an issuer of a risk adjustment covered plan, rather than the 
proposed 15 calendar days. Additionally, HHS is finalizing at Sec.  
153.620(c)(4)(i) that if HHS determines the need for a corrective 
action plan as the result of an audit, issuers must provide a written 
corrective action plan to HHS for approval within 45 calendar days of 
the issuance of the final audit report, rather than the 30 calendar 
days that currently appears at Sec.  153.620(c)(1) and was proposed at 
Sec.  153.620(c)(4)(i). We adopt the proposed approach for distribution 
of risk adjustment payments or charges under the state payment transfer 
formula recovered by HHS during an audit of a risk adjustment covered 
plan and will pay those amounts on a pro rata basis similar to the 
process for risk adjustment default charge allocations to the other 
issuers participating in the applicable state market risk pool in the 
applicable benefit year.\122\ We reaffirm that HHS will not re-run or 
otherwise recalculate transfers for the applicable benefit year if 
monies are recouped as a result of an audit under Sec.  153.620(c). As 
stated above, based on comments received and after further evaluation, 
we are not finalizing our disbursement proposal for high-cost risk pool 
payments or charges recovered by HHS during an audit of a risk 
adjustment covered plan and intend to address this issue in future 
rulemaking.
---------------------------------------------------------------------------

    \121\ These comments, along with the other general comments 
submitted on the parallel amendments to the sections on audits and 
compliance reviews of reinsurance-eligible plans, risk adjustment 
covered plans, and QHP issuer compliance with federal standards for 
APTC, CSRs, and user fees, are summarized and responded to in the 
below preamble section on audits and compliance reviews of APTC, 
CSRs, and user fees (Sec.  156.480(c)).
    \122\ See the 2016 Payment Notice final rule, 80 FR 10780-10781.
---------------------------------------------------------------------------

    Finally, we clarify that we will recoup monies owed due to a 
finding as the result of an audit of a risk adjustment covered plan 
using the same method with which we collect all debts. That is, to 
recoup the amount identified in Sec.  153.620(d)(5)(i), we will first 
net using the process set forth in 45 CFR 156.1215, and we will then 
invoice issuers for the remaining debt (if any is owed).
5. EDGE Discrepancy Materiality Threshold
    As stated in Sec.  153.710(a) through (c), an issuer of a risk 
adjustment covered plan must provide to HHS, through their EDGE 
server,\123\ access to enrollee-level plan enrollment data, enrollee 
claims data, and enrollee encounter data as specified by HHS for a 
benefit year. Consistent with Sec.  153.730, to be considered for risk 
adjustment payments and charges, issuers of risk adjustment covered 
plans must submit their respective EDGE data by April 30 of the year 
following the applicable benefit year. At the end of the EDGE data 
submission process, HHS issues final EDGE server reports \124\ which 
reflect an issuer's data that was successfully submitted by the data 
submission deadline. Within 15 calendar days of the date of these final 
EDGE server reports, the issuer must confirm to HHS that the 
information in the final EDGE server reports accurately reflect the 
data to which the issuer has provided access to HHS through its EDGE 
server for the applicable benefit year by submitting an attestation; or 
the issuer must describe to HHS any discrepancies it identifies in the 
final EDGE server reports.
---------------------------------------------------------------------------

    \123\ This is also known as the dedicated distributed data 
collection environment.
    \124\ These reports are: Enrollee (Without) Claims Summary 
(ECS), Enrollee (Without) Claims Detail (ECD), Frequency Report by 
Data Element for Medical Accepted Files (FDEMAF), Frequency Report 
by Data Element for Pharmacy Accepted Files (FDEPAF), Frequency 
Report by Data Element for Supplemental Accepted Files (FDESAF), 
Frequency Report by Data Element for Enrollment Accepted Files 
(FDEEAF), Claim and Enrollee Frequency Report (CEFR), High Cost Risk 
Pool Summary (HCRPS), High Cost Risk Pool Detail Enrollee (HCRPDE), 
Risk Adjustment Claims Selection Summary (RACSS), Risk Adjustment 
Claims Selection Detail (RACSD), Risk Adjustment Transfer Elements 
Extract (RATEE), Risk Adjustment Risk Score Summary (RARSS), Risk 
Adjustment Risk Score Detail (RARSD), Risk Adjustment Data 
Validation Population Summary Statistics (RADVPS), Risk Adjustment 
Payment Hierarchical Condition Category Enrollee (RAPHCCER), Risk 
Adjustment User Fee (RAUF).
---------------------------------------------------------------------------

    HHS reviews all reported EDGE discrepancies to evaluate the 
implications of each incorrect data submission for risk adjustment 
transfers and risk adjustment data validation. For risk adjustment 
transfers calculated under the state payment transfer formula, HHS 
evaluates whether the reported EDGE discrepancy is material and has a 
process to address incorrect EDGE data submissions that have a material 
impact on risk adjustment transfers for a state market risk 
pool.125 126 Currently, HHS uses the same materiality 
threshold for reconsideration requests set forth in Sec.  
156.1220(a)(2) for determining whether the EDGE discrepancy has a 
material impact on the risk adjustment transfers calculated under the 
state payment transfer formula. Consequently, the reported EDGE 
discrepancy is considered material if the amount in dispute is equal to 
or exceeds the lower of either $10,000 or one percent of the total 
estimated transfers in the applicable state market risk pool. After 
analyzing reported EDGE discrepancies in prior benefit years, we 
proposed to codify a materiality threshold for EDGE discrepancies and 
also proposed to establish a higher materiality threshold for EDGE 
discrepancies. More specifically, we proposed the following materiality 
threshold for EDGE discrepancies: The

[[Page 24195]]

amount in dispute must equal or exceed $100,000 or one percent of the 
total estimated transfer amount in the applicable state market risk 
pool, whichever is less.\127\ Where an identified material EDGE 
discrepancy negatively affects the issuer without having a negative 
effect on other issuers within the state market risk pool, issuers 
would be required to adhere to the initial data submission and accept 
the consequences of the data submission, even when the monetary impact 
of the inaccuracy on the issuer submitting incorrect data is 
potentially substantial. Therefore, HHS would generally only take 
action on material discrepancies that harm other issuers in the same 
state market risk pool.\128\ In general we expect about half of 
discrepancies that are material under previous criteria would no longer 
be material under the new criteria.
---------------------------------------------------------------------------

    \125\ See, for example, https://www.cms.gov/CCIIO/Resources/Regulations-and-Guidance/Downloads/EDGE-2019-QQ-Guidance.pdf. Also 
see 83 FR 16970 through 16971.
    \126\ HHS may also take action on reported material EDGE 
discrepancy if the discrepancy involved a processing error by HHS, 
HHS's incorrect application of the relevant methodology, or a HHS 
mathematical error, consistent with the bases upon which an issuer 
may request reconsideration under Sec.  156.1220.
    \127\ We are not proposing any changes to the materiality 
threshold for reconsideration requests in Sec.  156.1220(a)(2).
    \128\ Consistent with the current process, HHS may also take 
action on reported material EDGE discrepancies if the discrepancy 
involved a processing error by HHS, HHS's incorrect application of 
the relevant methodology, or a HHS mathematical error, consistent 
with the bases upon which an issuer may request reconsideration 
under Sec.  156.1220.
---------------------------------------------------------------------------

    We proposed to amend Sec.  153.710, by creating new paragraph (e) 
and redesignating paragraphs (e), (f) and (g), as (f), (g) and (h) 
respectively, to capture the proposed EDGE discrepancy materiality 
threshold and proposed to apply it beginning with the 2020 benefit 
year.\129\ We explained that we believe this increased materiality 
threshold will reduce burden on issuers having to submit additional 
data to HHS when a discrepancy is determined to be potentially material 
and allow more certainty and stability for risk adjustment transfers. 
If a reported EDGE discrepancy is determined to not meet the 
materiality threshold, HHS would take no action on the discrepancy and 
the issuer's data submission would remain as submitted by the data 
submission deadline for the applicable benefit year.
---------------------------------------------------------------------------

    \129\ The deadline for submission of 2020 benefit year risk 
adjustment data is April 30, 2021. See 45 CFR 153.730. As such, the 
EDGE discrepancy reporting process for the 2020 benefit year will 
not begin until May 2021.
---------------------------------------------------------------------------

    We also explained that while HHS generally only takes action on 
reported material EDGE discrepancies that are determined to harm other 
issuers, issuers must continue to report and describe any identified 
EDGE discrepancy to HHS in a format specified by HHS for each benefit 
year. Issuers must report all data discrepancies in order to permit HHS 
to determine whether such an error is material and actionable and to 
evaluate the impact on other issuers in the state market risk pool. We 
sought comment on the proposed EDGE discrepancy materiality threshold 
and the accompanying amendments to Sec.  153.710. We are finalizing the 
EDGE discrepancy materiality threshold and the amendments to Sec.  
153.710 as proposed.
    We received public comments on the proposed updates to the EDGE 
discrepancy materiality threshold. The following is a summary of the 
comments we received and our responses.
    Comment: Most commenters supported the proposed increase to the 
EDGE discrepancy materiality threshold. These commenters noted the 
increased threshold amount would enhance program integrity by focusing 
efforts on discrepancies that negatively impact other issuers in the 
applicable market risk pool, reduce the administrative burden 
associated with these data requests, and allow more certainty and 
stability for risk adjustment transfers. A few commenters expressed the 
belief that the previous threshold had been too low. One commenter 
agreed with increasing the threshold but noted they lacked the data to 
confirm the proposed threshold was appropriate.
    Response: We appreciate the support for increasing the EDGE 
discrepancy materiality threshold. We agree with commenters that the 
increased discrepancy materiality threshold will reduce issuer burden 
and allow for more certainty and stability for risk adjustment 
transfers. We also agree that the current threshold, which was 
established to be consistent with the materiality threshold for 
reconsideration requests set forth in 45 CFR 156.1220(a)(2), is too low 
for discrepancies and most of the time required HHS to reallocate 
minimal amounts of risk adjustment monies. As such, we are finalizing 
the EDGE materiality threshold as proposed.
    In assessing different EDGE discrepancy materiality thresholds, HHS 
analyzed the 2017 benefit year EDGE discrepancies. Specifically, we 
reviewed the discrepancy amounts and impacts on affected issuers in the 
impacted state market risk pools and considered a variety of threshold 
amounts. We found that $100,000 or one percent of the total estimated 
transfer amount in the applicable state market risk pool balanced 
reducing the number of reallocations involving small amounts with 
maintaining data integrity and confidence in the risk adjustment 
program.
    After consideration of the comments on these proposals, for the 
2020 benefit year and beyond, we are finalizing the EDGE discrepancy 
materiality threshold as proposed, including the accompanying proposed 
amendments to Sec.  153.710, to reflect the amount in dispute must 
equal or exceed $100,000 or one percent of the total estimated transfer 
amount in the applicable state market risk pool, whichever is less. 
Where an identified material EDGE discrepancy negatively affects the 
issuer without having a negative effect on other issuers within the 
state market risk pool, issuers will be required to adhere to the 
initial data submission and accept the consequences of their data 
submission, even when the negative financial impact of the inaccuracy 
on the issuer submitting incorrect data is above this materiality 
threshold. Therefore, HHS will only take action on material 
discrepancies that harm other issuers in the same state market risk 
pool.\130\
---------------------------------------------------------------------------

    \130\ Consistent with the current process, HHS may also take 
action on reported material EDGE discrepancies if the discrepancy 
involved a processing error by HHS, HHS's incorrect application of 
the relevant methodology, or a HHS mathematical error, consistent 
with the bases upon which an issuer may request reconsideration 
under Sec.  156.1220.
---------------------------------------------------------------------------

6. Risk Adjustment User Fee for 2022 Benefit Year (Sec.  153.610(f))
    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. As noted previously in this final rule, for 
the 2022 benefit year, HHS will be operating the risk adjustment 
program in every state and the District of Columbia. 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.\131\ Section 
153.610(f)(2) provides that, where HHS operates a risk adjustment 
program on behalf of a state, 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 PMPM risk adjustment 
user fee specified in the annual HHS notice of benefit and payment 
parameters for the applicable benefit year.
---------------------------------------------------------------------------

    \131\ 78 FR 15416 through 15417.
---------------------------------------------------------------------------

    OMB Circular No. A-25 established federal policy regarding user 
fees, and specifies that a user charge will be assessed against each 
identifiable recipient for special benefits derived from federal 
activities beyond those received by the general public. The risk 
adjustment program will provide special

[[Page 24196]]

benefits as defined in section 6(a)(1)(B) of Circular No. A-25 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, merged, and small group markets.
    In the 2021 Payment Notice, HHS calculated the federal 
administrative expenses of operating the risk adjustment program for 
the 2021 benefit year to result in a risk adjustment user fee rate of 
$0.25 PMPM based on our estimated costs for risk adjustment operations 
and estimated billable member months for individuals enrolled in risk 
adjustment covered plans. For the 2022 benefit year, we proposed to use 
the same methodology to estimate our administrative expenses to operate 
the program. These costs cover development of the model and 
methodology, collections, payments, account management, data 
collection, data validation, program integrity and audit functions, 
operational and fraud analytics, stakeholder training, operational 
support, and administrative and personnel costs dedicated to risk 
adjustment program activities. 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 states where the HHS-
operated risk adjustment program will apply in the 2022 benefit year.
    We estimate that the total cost for HHS to operate the risk 
adjustment program on behalf of states for the 2022 benefit year will 
be approximately $60 million, and the risk adjustment user fee would be 
$0.25 PMPM. The risk adjustment user fee costs for the 2022 benefit 
year are expected to remain steady from the prior 2021 benefit year 
estimates. However, we project a small decline in billable member 
months in the individual and small group markets overall in the 2022 
benefit year based on the declines observed in the 2019 benefit year. 
We sought comment on the proposed risk adjustment user fee for the 2022 
benefit year. We also explained that we would continue to examine the 
costs and enrollment projections for the 2022 benefit year, 
particularly as we receive more information on the impact of the 
coronavirus disease 2019 (COVID-19) PHE, and proposed to incorporate 
any such newly available data to update the final 2022 benefit year 
risk adjustment user fee rate that we would announce in the final rule. 
We sought comment on these estimates and the use of any newly available 
data to update the estimates to reflect any emerging cost or enrollment 
trends for the final 2022 benefit year user fee. We are finalizing the 
2022 benefit year risk adjustment user fee as proposed.
    We received public comments on the proposed risk adjustment user 
fee for 2022 benefit year (Sec.  153.610(f)) and accompanying 
solicitation of comments. The following is a summary of the comments we 
received on the proposed 2022 benefit year user fee and our responses.
    Comment: One commenter expressed concern regarding HHS's assumption 
that overall enrollment would decline in the 2022 benefit year, which 
would result in an increased risk adjustment user fee amount. This 
commenter requested additional detail on the projected decrease in 
billable member months.
    Response: Our methodology for calculating the 2022 benefit year 
risk adjustment user fee was the same as the one used for 2021 benefit 
year. But as the commenter noted, when we proposed the rule, we 
anticipated a small decline in billable member months in the individual 
and small group markets overall based on the declines observed in 2019 
benefit year. We continue to believe that the finalized rate will 
ensure adequate funding for HHS to operate the risk adjustment program 
in all 50 states and the District of Columbia for 2022. Importantly, we 
also note that our assumption of a small decline in billable member 
months did not actually result in any increase in the risk adjustment 
user fee from the previous 2021 benefit year amount.\132\
---------------------------------------------------------------------------

    \132\ The 2021 benefit year risk adjustment user fee amount is 
also $0.25 PMPM. See 85 FR at 29194-29195.
---------------------------------------------------------------------------

    After consideration of the comments on this proposal, we are 
finalizing the risk adjustment user fee for the 2022 benefit year as 
$0.25 PMPM as proposed.
7. Risk Adjustment Data Validation Requirements When HHS Operates Risk 
Adjustment (HHS-RADV) (Sec.  153.630)
    To ensure the integrity of the HHS-operated risk adjustment 
program, HHS conducts risk adjustment data validation (HHS-RADV) under 
Sec. Sec.  153.350 and 153.630 in any state where HHS is operating risk 
adjustment on a state's behalf. The purpose of HHS-RADV is to ensure 
issuers are providing accurate and complete risk adjustment data to 
HHS, which is crucial to the purpose and proper functioning of the HHS-
operated risk adjustment program. HHS-RADV also ensures that risk 
adjustment transfers reflect verifiable actuarial risk differences 
among issuers, rather than risk score calculations that are based on 
poor data quality, thereby helping to ensure that the HHS-operated risk 
adjustment program assess charges to issuers with plans with lower-
than-average actuarial risk while making payments to issuer with plans 
with higher-than-average actuarial risk. HHS-RADV consists of an 
initial validation audit and a second validation audit.\133\ 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 the issuer's initial 
validation auditor for data validation. Each issuer's initial 
validation audit is followed by a second validation audit, which is 
conducted by an entity HHS retains to verify the accuracy of the 
findings of the initial validation audit.
---------------------------------------------------------------------------

    \133\ 45 CFR 153.630(a) through (c).
---------------------------------------------------------------------------

a. Exemptions From HHS-RADV (Sec.  153.630(g))
    In 2020 Payment Notice, we codified several exemptions from the 
HHS-RADV requirements. In this rule, we proposed to codify the 
previously established exemption \134\ for issuers who only offer 
small-group carryover coverage in the state during the benefit year 
being audited at new proposed Sec.  153.630(g)(4). As we discussed in 
the 2020 Payment Notice, under this policy, a small group market issuer 
with off-calendar year coverage who exits the market but has only 
carry-over coverage that ends in the next benefit year (that is, carry-
over of run out claims for individuals enrolled in the previous benefit 
year, with no new coverage being offered or sold in the state) would be 
considered an exiting issuer and would be exempt from HHS-RADV for the 
benefit year with the carry-over coverage.\135\
---------------------------------------------------------------------------

    \134\ 84 FR 17503 through 17504.
    \135\ Ibid.
---------------------------------------------------------------------------

    We also proposed to codify the previously established exemption 
\136\ for issuers who are the sole issuer in a state market risk pool 
during the benefit year that is being audited at new proposed Sec.  
153.630(g)(5). As we discussed in the 2020 Payment Notice, for single 
issuer market risk pool(s), there are no risk adjustment transfers 
calculated under the state payment transfer formula and thus, no 
payment or financial

[[Page 24197]]

accountability to other issuers for that risk pool.\137\ As such, a 
sole issuer in a state market risk pool is not required to participate 
in the HHS-operated risk adjustment program (except for purposes of 
high-cost risk pool payments and charges) for that state market risk 
pool. However, if the sole issuer was participating in multiple risk 
pools in the state during the year that is being audited, that issuer 
will be subject to HHS-RADV for those risk pools with other issuers 
that had risk adjustment transfers calculated under the state payment 
transfer formula.
---------------------------------------------------------------------------

    \136\ 84 FR 17504.
    \137\ Ibid.
---------------------------------------------------------------------------

    We noted that these exemptions do not introduce new policies; 
instead, the proposed amendments to Sec.  153.630(g) were simply to 
codify these previously established exemptions in regulation. We also 
clarified that any issuer that qualifies for the small group carryover 
coverage exemption in new proposed paragraph (g)(4) would not have its 
risk score and its associated risk adjustment transfers adjusted due to 
its own risk score error rate, as the issuer would not have 
participated in HHS-RADV for the benefit year in which it only offered 
the small group carryover coverage. However, that issuer's risk score 
and resulting risk adjustment transfers could be subject to HHS-RADV 
adjustments if other issuers in that state market risk pool were 
outliers and received HHS-RADV risk score error rates for that benefit 
year.
    We solicited comments on these proposals.
    We only received comments in support of codifying the HHS-RADV 
exemption for issuers who are the sole issuer in a state market risk 
pool during the benefit year being audited and are finalizing the 
amendment to Sec.  153.630(g)(5) to codify that exemption as proposed. 
We received several public comments on the codification of the HHS-RADV 
exemption for issuers providing only small group carryover coverage in 
the benefit year being audited at Sec.  153.630(g)(4), some of these 
comments restated the proposal without providing an opinion while 
others expressed opposition to the proposal. After consideration of the 
comments received, we are also finalizing the amendment to Sec.  
153.630(g)(4) to codify this exemption as proposed.
    The following is a summary of the comments we received on the 
codification of the exemption for issuers providing only small group 
carryover coverage and our responses.
    Comment: Some commenters asked HHS to reconsider the HHS-RADV 
exemption for issuers providing only small group carryover coverage in 
the benefit year being audited. These commenters expressed concern that 
an exiting issuer with only small group carryover coverage may 
potentially make up a large portion of the market for that calendar 
year. The commenters also stated that issuers providing only small 
group carryover coverage, who have not undergone HHS-RADV in the 
previous 2 years, should still be subject to HHS-RADV requirements for 
that year.
    Response: After reviewing the comments on the proposed amendments 
to Sec.  153.630(g)(4), we are finalizing, as proposed, the 
codification of the exemption from HHS-RADV for issuers providing only 
small group carryover coverage in the benefit year being audited. As 
discussed above and in the proposed rule, neither of these exemptions 
are new \138\ and the proposals were to codify the previously 
established exemptions in regulation. We continue to believe that both 
exemptions are appropriate.
---------------------------------------------------------------------------

    \138\ See 84 FR 17503 through 17504.
---------------------------------------------------------------------------

    With respect to the exemption for sole issuers, we believe it is 
appropriate because we do not calculate risk adjustment transfers for a 
benefit year in a state market risk pool in which there is only one 
issuer and thus, there is no payment or financial accountability to 
other issuers for that risk pool. With respect to the small group 
carryover coverage exemption, we believe that this exemption ensures 
that such small group carryover only issuers (who are considered 
exiting issuers) are treated the same as other exiting issuers with 
regards to HHS-RADV requirements.
    With respect to concerns that issuers seeking to use the small 
group carryover coverage exemption might make up a large portion of the 
market, based on our past experience operating HHS-RADV for the 2017 
and 2018 benefit years, we found that issuers that would qualify for 
this exemption criteria are typically very small issuers, with the 
majority having fewer than 500 billable member months statewide or 
below $15 million in total premium. As a result, we do not believe 
issuers that would qualify for this exemption would make up a large 
portion of a state's market risk pool and these issuers have generally 
had a reasonable chance of being exempted under other exemption 
categories.\139\
---------------------------------------------------------------------------

    \139\ See 45 CFR 153.630(g)(1) and (g)(2).
---------------------------------------------------------------------------

    With respect to the comment on issuers being subject to HHS-RADV 
requirements if they have not participated in HHS-RADV in the previous 
2 years, we note that generally all issuers of risk adjustment covered 
plans in a state market risk pool must participate in HHS-RADV unless 
they qualify for an exemption specified in 153.630(g). As established 
at 153.630(g)(2), it is only issuers at or below the materiality 
threshold that are subject to random and targeted sampling for HHS-RADV 
participation approximately every 3 years (barring any risk-based 
triggers based on experience that will warrant more frequent audits). 
This exemption for issuers at or below materiality threshold was 
created in response to stakeholder requests to ease the burden of 
annual audit requirements for smaller issuers of risk adjustment 
covered plans. We maintain that this exemption for issuers at or below 
materiality threshold is important given the fixed costs associated 
with hiring an initial validation auditor and submitting results to HHS 
on an annual basis; therefore, we do not intend to make changes to it 
at this time.
    After consideration of the comments received on these proposals, we 
are finalizing the codification of the sole issuer and small group 
carryover coverage issuer exemptions from HHS-RADV and the amendments 
to Sec.  153.630(g) as proposed.
b. IVA Requirements (Sec.  153.630(b)(3))
    In accordance with Sec.  153.630(b)(3), an issuer must ensure that 
its IVA Entity is reasonably free of conflicts of interest, such that 
it is able to conduct the IVA in an impartial manner and its 
impartiality is not reasonably open to question. In prior rulemaking, 
we explained that to meet this standard, the IVA Entity, among other 
things, may not have had a role in establishing any relevant internal 
controls of the issuer related to the risk adjustment data validation 
process when HHS is operating risk adjustment on behalf of a state, or 
serve in any capacity as an advisor to the issuer regarding the 
IVA.\140\ In the proposed rule, we proposed to amend this standard and 
clarify that to demonstrate that the IVA Entity is reasonably free of 
conflicts, the IVA Entity must also not have or previously have had a 
role in establishing any relevant internal controls of the issuer 
related to risk adjustment or the EDGE server data submission process 
for the applicable benefit year for which the IVA Entity is performing 
the IVA on behalf of the issuer. Additionally, the IVA Entity must also 
not have served in any capacity as an advisor to the issuer regarding 
the risk adjustment or EDGE server data submission for the

[[Page 24198]]

applicable benefit year. For example, the IVA Entity cannot serve as 
the issuer's third party administrator (TPA) for purposes of the EDGE 
data submission for HHS-operated risk adjustment in the 2020 benefit 
year and serve as the IVA Entity for that issuer for the 2020 benefit 
year. We proposed these changes because we are concerned about 
conflicts of interest that could arise if the same entity assists or 
completes the EDGE data submissions for an issuer for an applicable 
benefit year, and then also serves as the IVA Entity auditing the 
submission of that data in HHS-RADV. This proposal was in addition to 
the requirements set forth in 2014 and 2015 Payment Notices.\141\ We 
sought comment on this proposal.
---------------------------------------------------------------------------

    \140\ See 79 FR 13758.
    \141\ The 2014 Payment Notice final rule required that that 
issuers ensure that IVA Entities are reasonably capable of 
performing the audit, the audit is completed, the auditor is free 
from conflicts of interest, and the auditor submits information 
regarding the IVA to HHS in the manner and timeframe specified by 
HHS. 78 FR 15410 at 15437. The 2015 Payment Notice final rule 
established standards and guidelines regarding the qualifications of 
the IVA Entity, including further details on the conflict of 
interest standards. 79 FR 13744 at 13758-13759.
---------------------------------------------------------------------------

    The only comments we received on the proposed updates to IVA 
requirements (Sec.  153.630(b)(3)) supported the proposal noting that 
there is a potential conflict of interest if an IVA Entity for a 
company also served as the company's TPA for purposes of EDGE data 
submission or risk adjustment. These commenters were in support of the 
regulatory change. After consideration of comments on these proposals, 
we are finalizing this policy and the accompanying amendment to Sec.  
153.630(b)(3) as proposed.
c. HHS-RADV Administrative Appeals
    In the 2015 Payment Notice, we established a three-level 
administrative appeals process for issuers to seek reconsideration of 
amounts under certain ACA programs, including the calculation of risk 
adjustment charges, payments and user fees.\142\ In the 2018 Payment 
Notice final rule, we extended this three-level administrative appeal 
process to permit issuers to dispute the findings of a second 
validation audit with respect to the 2016 benefit year HHS-RADV and 
beyond.\143\ As previously explained, issuers are not permitted to use 
the discrepancy reporting or administrative appeal processes under 
Sec. Sec.  153.630(d)(2) and 156.1220, respectively, to contest the IVA 
findings, because HHS does not conduct the IVA or produce those 
results.\144\ Instead, issuers should review their IVA findings and 
discuss any concerns with its IVA Entity prior to attesting to and 
submitting those results to HHS.\145\ As explained in the 2020 Payment 
Notice, only those issuers who have insufficient pairwise agreement 
between the IVA and second validation audit will receive a Second 
Validation Audit Findings Report, and therefore, have the right to 
appeal the second validation audit findings.\146\ The existing 
regulation at Sec.  153.630(d)(2) captures this policy. In the proposed 
rule, we proposed conforming amendments to paragraph (d)(3) to 
similarly add ``if applicable'' to the reference to an issuer's ability 
to appeal the findings of the second validation audit to ensure these 
regulatory provisions also appropriately capture this limitation.\147\ 
We sought comment on these proposed amendments.
---------------------------------------------------------------------------

    \142\ 78 FR 13818 through 13820.
    \143\ 81 FR 94106.
    \144\ Ibid.
    \145\ See, for example, Sections 9.1, 9.5 and 9.7 of the ``2017 
Benefit Year Protocols ACA HHS Risk Adjustment Data Validation, 
Version 2.0,'' August 10, 2018.
    \146\ 84 FR 17495. If the pairwise means test results conclude 
there is sufficient agreement between the IVA and SVA findings, the 
IVA findings are used to adjust risk scores. Issuers with sufficient 
pairwise agreement do not receive a Second Validation Audit Findings 
Report and there are no SVA findings to appeal. See 84 FR at 17495.
    \147\ As detailed further below, we propose similar conforming 
amendments to the references to an issuer's ability to appeal the 
findings of the second validation audit in 45 CFR 156.1220(a)(1) and 
(a)(3).
---------------------------------------------------------------------------

    The only comment we received on the proposal to codify the 
previously established limits on the ability to appeal SVA findings as 
part of the HHS-RADV administrative appeals process was in support of 
the proposed clarifications. After consideration of the comments on 
this proposal, we are finalizing the conforming amendments to Sec.  
153.630(d)(3) as proposed.
d. Timeline for Collection of HHS-RADV Payments and Charges
    In the 2020 Payment Notice,\148\ we finalized an updated timeline 
for the publication, collection, and distribution of HHS-RADV 
adjustments to transfers. This timeline was adopted to allow issuers to 
report HHS-RADV adjustments in a later MLR reporting year and to 
consider, in accordance with any guidance from the state DOIs, these 
adjustments in rate setting during a later benefit year (specifically, 
the year in which the HHS-RADV adjustments are collected and paid). We 
proposed, beginning with 2019 benefit year HHS-RADV, to revert to the 
previous schedule \149\ for the collection of HHS-RADV charges and 
disbursement of payments in the calendar year in which HHS-RADV results 
are released (for example, collection and disbursement of 2021 benefit 
year HHS-RADV adjustments would begin in summer or fall of 2023). We 
are finalizing the change in the HHS-RADV adjustment timeline as 
proposed.
---------------------------------------------------------------------------

    \148\ 84 FR 17506 through 17507.
    \149\ See 79 FR 13768 and 13769. Also see, for example, Table 3 
in the document entitled ``Proposed Key Dates for Calendar Year 
2019: Qualified Health Plan (QHP) Certification in the Federally-
facilitated Exchanges (FFEs); Rate Review; and Risk Adjustment.'' 
Available at https://www.cms.gov/CCIIO/Resources/Regulations-and-Guidance/Downloads/Key-Dates-Table-for-CY2019.pdf.
---------------------------------------------------------------------------

    HHS publishes the final summary report of risk adjustment transfers 
(without HHS-RADV adjustments) and information on risk adjustment 
default charges for the applicable benefit year in the summer of the 
year after the applicable benefit year (typically June 30th of the year 
after the applicable benefit year), and issuers report those risk 
adjustment amounts in their MLR reports by July 31st of the year after 
the applicable benefit year.\150\ Payment and collection of these risk 
adjustment transfer and default charge amounts generally occurs in 
August and September of the year after the applicable benefit year. We 
separately report the HHS-RADV adjustments and information on default 
data validation charges for the applicable benefit year approximately 
one year after the final summary report of risk adjustment transfers 
for that benefit year is published (typically 2 years after the 
applicable benefit year in August \151\).
---------------------------------------------------------------------------

    \150\ The one exception is for the rare circumstances that HHS 
is unable to collect full risk adjustment charges in a state market 
risk pool or high-cost risk pool charges in a national market risk 
pool. In such situations, issuers receiving lesser payments can 
reflect the reductions in their MLR reports.
    \151\ HHS-RADV adjustments for the 2019 benefit year will be 
published under a different timeline due to the COVID-19-related 
delay in HHS-RADV activities for the 2019 benefit year. See https://www.cms.gov/files/document/2019-HHS-RADV-Postponement-Memo.pdf.
---------------------------------------------------------------------------

    Under the HHS-RADV timeline effective prior to the publication of 
this rule, HHS begins collection and disbursement of HHS-RADV 
adjustments and default data validation charges and allocations 2 years 
after announcing the HHS-RADV adjustments (for example, collection and 
disbursement of 2017 benefit year HHS-RADV adjustments will begin in 
2021 \152\). For MLR reporting purposes, under the 2020 Payment Notice 
approach applicable through 2018 benefit year HHS-RADV, issuers will

[[Page 24199]]

reflect the HHS-RADV adjustment amounts and default data validation 
charges and allocations in the MLR reporting year in which collections 
and payments of those amounts occur. Subject to approval by state DOIs, 
issuers are also permitted to reflect these amounts in rate setting for 
the same benefit year in which those amounts are paid or collected. For 
example, 2017 benefit year HHS-RADV adjustments and default data 
validation charges and allocations were announced in August 2019 and 
issuers will report these amounts in the 2021 MLR reporting year (MLR 
reports filed in 2022), the same year that the adjustments and default 
data validation charges will be collected and paid. Additionally, 
subject to permission by state DOIs, issuers were permitted to account 
for the impacts of those 2017 benefit year HHS-RADV adjustments in rate 
setting for the 2021 benefit year.
---------------------------------------------------------------------------

    \152\ https://www.cms.gov/CCIIO/Programs-and-Initiatives/Premium-Stabilization-Programs/Downloads/BY2017-HHSRADV-Adjustments-to-RA-Transfers-Summary-Report.pdf.
---------------------------------------------------------------------------

    The 2020 Payment Notice timeline was intended to address 
stakeholder concerns regarding the predictability of HHS-RADV 
adjustments, especially for the initial payment year. However, since 
the publication of the 2020 Payment Notice, we have received feedback 
stating that the extended timeline has not provided the increased 
flexibility intended by the policy and instead has introduced undue 
complexity. Specifically, stakeholders have expressed concern that this 
policy conflicts with state requirements for financial accounting, and 
can negatively impact their MLR rebate position, particularly if the 
issuer experiences substantial changes in enrollment over the 3-year 
MLR calculation period.\153\ Additionally, in the 2020 HHS-RADV 
Amendments Rule, we finalized a transition from the prospective 
application of HHS-RADV adjustments \154\ to a concurrent application 
beginning with 2020 benefit year HHS-RADV.\155\ More specifically, we 
finalized a policy to transition to applying HHS-RADV adjustments to 
the risk scores and transfers of the same benefit year being audited 
for all issuers (for example, 2021 benefit year HHS-RADV adjustments 
will apply to 2021 benefit year risk scores and risk adjustment 
transfers, rather than to 2022 benefit year risk scores and risk 
adjustment transfers, as would have taken place prior to the 
finalization of the 2020 HHS-RADV Amendments Rule).\156\ To transition 
to this policy, HHS will average the 2019 and 2020 benefit year HHS-
RADV results of non-exiting issuers who participated in risk adjustment 
for both benefit years \157\ to calculate the HHS-RADV adjustment to 
2020 benefit year risk scores and transfers, and will publish the HHS-
RADV adjustments to transfers along with information on any default 
data validation charges imposed for both benefit years.\158\ Beginning 
with the 2021 benefit year of HHS-RADV, risk scores and transfers will 
only be adjusted once based on the same benefit year's HHS-RADV results 
(that is, 2021 benefit year HHS-RADV results would adjust 2021 benefit 
year plan liability risk scores).
---------------------------------------------------------------------------

    \153\ Issuer MLRs are calculated using a 3-year average. See 
section 2718(b)(1)(B)(ii) of the Act and 45 CFR 158.220(b).
    \154\ The exception to the prospective application of HHS-RADV 
adjustments is for exiting issuers, whose HHS-RADV results are 
currently used to adjust risk scores and transfers for the benefit 
year being audited (rather than the following benefit year's 
transfers). See 83 FR 16965 through 16966 and 84 FR 17503 through 
17504.
    \155\ 85 FR 77002-77005.
    \156\ Ibid.
    \157\ Exiting and new issuers who participate in only one of the 
two benefit years will not have their results for 2019 and 2020 
averaged before being applied to the relevant benefit year's 
transfers. For exiting issuers, positive error rate outlier issuers' 
2019 and 2020 HHS-RADV results will be applied to the risk scores 
and risk adjustment transfers for the benefit year being audited. If 
a new issuer entered a state market risk pool in 2020, its plan 
liability risk score(s) and risk adjustment transfer for the 2020 
benefit year could be impacted by the new issuer's own 2020 HHS-RADV 
results, the combined 2019 and 2020 HHS-RADV results of other non-
exiting issuers in the same state market risk pool, as well as the 
2020 HHS-RADV results of exiting positive error rate outlier issuers 
in the same state market risk pool.
    \158\ We note that we intend to publish a separate 2019 benefit 
year HHS-RADV results memo that will provide an overview of the 2019 
benefit year error rate results. We also plan to release a separate 
2019 benefit year HHS-RADV Summary Report that details adjustments 
to 2019 benefit year risk scores and transfers if there are any 
exiting positive error rate outlier issuers in the 2019 benefit year 
of HHS-RADV. The average error rate approach is not applicable for 
these issuers because exiting issuers who participated in 2019 HHS-
RADV will not have 2020 benefit year risk scores or transfers to 
adjust.
---------------------------------------------------------------------------

    Although the operational timelines of the risk adjustment program 
and the nature of HHS-RADV causes HHS-RADV results to always be at 
least a year behind the associated risk adjustment transfers report, we 
have continued to consider these issues. The above referenced changes 
to the benefit year to which HHS-RADV adjustments are applied also lead 
us to revisit these issues. We adopted the 2020 Payment Notice timeline 
to provide issuers (and states) with more options on how and when to 
account for the financial impacts from HHS-RADV. However, as noted 
above, stakeholder feedback has indicated that the approach did not 
achieve its policy goal and instead introduced unnecessary complexity. 
Therefore, we proposed to revert to the previous schedule for 
collection and disbursement of HHS-RADV adjustments and default data 
validation charges and begin such activities in the summer or fall of 
the calendar year in which HHS-RADV results are released. For example, 
collection of 2021 benefit year HHS-RADV adjustments and default data 
validation charges and disbursement of such amounts would begin in 
summer or fall of 2023. In support of the new proposed timeline for 
collection and disbursement of HHS-RADV adjustments and default data 
validation charges, we explained that HHS would need to release the 
applicable benefit year's report on HHS-RADV adjustments and default 
data validation charges earlier in the year so the amounts are 
available for issuers to use for MLR reporting purposes. We therefore 
also proposed to release the applicable benefit year's HHS-RADV summary 
report no later than early summer, and require issuers to report those 
amounts in the MLR reports submitted by July 31st of the same calendar 
year in which the results are released. For example, as proposed, the 
summary report on 2021 benefit year HHS-RADV adjustments and default 
data validation charges and allocations would be released no later than 
early summer 2023, and issuers would be instructed to report these 
amounts in the 2022 MLR reporting year (MLR reports that include 2022 
benefit year data that are submitted by July 31, 2023; See Table 9). We 
would then collect and disburse HHS-RADV adjustments and default data 
validation charges and allocations in summer or fall of the calendar 
year in which HHS-RADV results are released (for example, collection 
and disbursement of 2021 benefit year HHS-RADV adjustments and default 
data validation charges would begin in summer or fall of 2023). We 
noted that the Unified Rate Review Template (URRT) instructions 
currently permit issuers and states to consider HHS-RADV impacts in 
rates for the year when these amounts will be collected and disbursed 
and specified, as an example, that as 2017 RADV adjustments will be 
collected in the 2021 calendar year, a state may allow issuers to 
consider these adjustments in their 2021 rate setting. Therefore, in 
the proposed rule, we proposed to remove this flexibility from the URRT 
instructions.
    We further explained that the proposed timeline would help mitigate 
concerns regarding the incongruity with state financial accounting 
requirements, as well as potential undue impacts of HHS-RADV 
adjustments on MLR rebate liability, which could result from the

[[Page 24200]]

HHS-RADV adjustments being reported outside the 3-year MLR aggregation 
window and thus potentially distorting the MLR experience of the 
benefit year to which HHS-RADV adjustments apply. Additionally, we 
noted this proposed change may also help mitigate the impact of any 
substantial changes in enrollment between benefit years.
    We proposed to begin this policy with the collection and 
disbursement of HHS-RADV adjustments and default data validation 
charges for the 2019 benefit year and noted that due to the delay in 
the 2019 benefit year HHS-RADV,\159\ the timing of collections and 
disbursements is different for the 2019 benefit year. We sought comment 
on this proposal and whether any consideration should be made in the 
transition to this policy to account for 2017 and 2018 benefit year 
HHS-RADV collection and disbursement of payments and charges (under the 
2020 Payment Notice timeline) also occurring in 2021 and 2022.
---------------------------------------------------------------------------

    \159\ HHS-RADV adjustments for the 2019 benefit year will be 
published under a different timeline due to the COVID-19-related 
delay in HHS-RADV activities for the 2019 benefit year. See https://www.cms.gov/files/document/2019-HHS-RADV-Postponement-Memo.pdf.
---------------------------------------------------------------------------

    We are finalizing the updates to the timeline for collection of 
HHS-RADV payments and charges, as proposed. As such, HHS will publish 
the 2019 and 2020 benefit year HHS-RADV Summary Report for non-exiting 
issuers in early summer of 2022.160 161 Issuers will also be 
required to include any payments and charges reflected on this report, 
along with risk adjustment transfers for the 2021 benefit year, in 
their 2021 MLR reports, which must be filed by July 31, 2022. Issuers 
will be required to report the 2019 and 2020 benefit year HHS-RADV 
adjustments to transfers (including default data validation charge and 
allocation amounts) in their MLR reports for the 2021 MLR reporting 
year (MLR reports that include 2021 benefit year data that are 
submitted by July 31, 2022). Finally, HHS will begin collecting both 
2019 \162\ and 2020 HHS-RADV adjustments to transfers for non-exiting 
issuers along with any default data validation charges imposed for 
these 2 benefit years and disbursing related payments in late summer or 
early fall of 2022.
---------------------------------------------------------------------------

    \160\ In the proposed rule, we proposed to publish separate 2019 
and 2020 summary reports in early summer of 2022. However, as noted 
earlier in this preamble, in the 2020 HHS-RADV Amendments Rule (85 
FR 77002-77005), we finalized a transition from the prospective 
application of HHS-RADV adjustments to a concurrent application 
beginning with 2020 benefit year HHS-RADV. To effectuate this 
transition, HHS-RADV adjustments for issuers who participated in 
both the 2019 and 2020 benefit years will be averaged together and 
applied to 2020 risk adjustment risk scores. As a result, we will be 
publishing a single HHS-RADV summary report in calendar year 2022 
that details transfer information from both the 2019 and 2020 
benefit years of HHS-RADV.
    \161\ Consistent with the current application of HHS-RADV 
results for exiting issuers identified as positive error rate 
outliers, issuers who fit this description for 2019 HHS-RADV will 
have their results applied to the risk scores and transfer amounts 
for the benefit year being audited, that is, the 2019 benefit year. 
See the 2020 Payment Notice, 84 FR at 17503-17504. We will publish 
the 2019 HHS-RADV Summary Report for these issuers (if any) in the 
2022 calendar year. Additionally, as finalized in the 2020 Payment 
Notice, for HHS-RADV benefit years beginning with 2018, HHS only 
adjusts exiting issuers if they are positive error rate outliers. 
This policy remains unchanged for the 2019 benefit year and beyond. 
See the 2020 HHS-RADV Amendments Rule (85 FR at 77003).
    \162\ See https://www.cms.gov/files/document/2019-HHS-RADV-Postponement-Memo.
---------------------------------------------------------------------------

    We received public comments on the proposed updates to the timeline 
for collection of HHS-RADV payments and charges. The following is a 
summary of the comments we received on the proposed updated timeline 
and our responses.
    Comment: Many commenters expressed general support for reverting to 
the original schedule for the collection and disbursement of HHS-RADV 
payments and charges. Commenters largely concurred with HHS that these 
changes would help resolve incongruities with state financial 
accounting requirements and potential undue impacts of HHS-RADV 
adjustments on MLR rebate liability for issuers whose enrollment 
experiences substantially change over a 3-year period. However, other 
commenters were concerned about the overlap that would occur during the 
transition period as issuers would be required to report 2017 benefit 
year HHS-RADV impacts alongside 2019 and 2020 benefit years HHS-RADV 
impacts \163\ during 2021 MLR reports (filed in summer 2022) and would 
be required to report 2018 and 2021 HHS-RADV impacts in their 2022 MLR 
reports (filed in summer 2023). Some of these commenters requested 
clarification about how the proposed policy affects reporting of 2017 
and 2018 HHS-RADV adjustments, while one commenter suggested that 2017 
HHS-RADV be reported in 2020 MLR filings and 2018 HHS-RADV adjustments 
be reported in 2021 filings. Another commenter noted the overlap in 
timelines, but did not see the need to account for 2017 and 2018 HHS-
RADV adjustments differently than was proposed.
---------------------------------------------------------------------------

    \163\ 2019 HHS-RADV is delayed due to COVID-19 and, as such, 
results are scheduled to be released in late spring/early summer 
2022 (See https://www.cms.gov/files/document/2019-HHS-RADV-Postponement-Memo.pdf). Furthermore, we finalized in the 2020 RADV 
Amendments Rule (85 FR 77002-77005) that 2019 and 2020 error rates 
for non-exiting issuers will be averaged together at the issuer 
level and will be applied to 2020 risk adjustment transfers. 
Positive error rate exiting issuer HHS-RADV adjustments for the 2019 
and 2020 benefit years will continue to be applied separately to the 
risk scores and transfers for the respective benefit year being 
audited.
---------------------------------------------------------------------------

    Finally, we received a few comments requesting that we retain the 
allowance in the URRT for states to determine whether an adjustment for 
HHS-RADV in the URRT would be reasonable and justifiable in any 
particular benefit year.
    Response: After considering all comments on the proposed updated 
timeline, we are finalizing the changes to the timeline for collection 
and disbursement of HHS-RADV results as proposed, beginning with the 
2019 benefit year of HHS-RADV.\164\ In response to comments concerning 
the transition period between the current HHS-RADV timeline (applicable 
for the 2017 and 2018 benefit years) and the timeline finalized in this 
rule (applicable beginning with the 2019 benefit year), we considered 
whether accommodations would be needed during the transition period as 
we recognize that the transition years will result in 2 years of HHS-
RADV being reported during one MLR reporting period.
---------------------------------------------------------------------------

    \164\ Ibid.
---------------------------------------------------------------------------

    This included consideration of the options from the commenter 
suggesting that 2017 HHS-RADV be reported in 2020 MLR filings and 2018 
HHS-RADV adjustments be reported in 2021 filings. However, we did not 
propose and are not making any changes with respect to the timeline for 
collection and disbursement of HHS-RADV results for the 2017 or 2018 
benefit year of HHS-RADV. We also do not believe these alternative 
options would appropriately address 2017 and 2018 HHS-RADV for MLR 
reporting purposes. First, the current timeline for 2017 and 2018 HHS-
RADV were established in notice-and-comment rulemaking,\165\ and as 
such, issuers have expected and are preparing to report these amounts 
on their 2021 and 2022 MLR reports, respectively, since the 
finalization of the 2020 Payment Notice. Second, we note that the 
suggested option would require that 2018 HHS-RADV be reported alongside 
the combined results for 2019 and 2020 RADV, which would create--rather 
than eliminate or mitigate--the same concerns the commenter was trying 
to address through their alternative suggestions. The alternative would 
just shift the overlap to a different MLR reporting year. We further 
note this type of overlap during a transition period is a natural 
result of

[[Page 24201]]

implementing this type of policy change.
---------------------------------------------------------------------------

    \165\ 84 FR 17454 at 17506-17507.
---------------------------------------------------------------------------

    As outlined elsewhere in this rule and in the proposed rule, after 
further consideration of stakeholder concerns regarding the timeline 
established in the 2020 Payment Notice, we proposed and are finalizing 
the proposed update to revert to the prior schedule for collection and 
disbursement of HHS-RADV results beginning with the 2019 benefit year. 
This update responds to stakeholder concerns about the potential 
conflicts with certain state accounting requirements and the potential 
negative impact on certain issuers' MLR rebate position. It also aligns 
with other recently finalized changes to HHS-RADV program requirements. 
We intend to monitor implementation of the collection and disbursement 
of HHS-RADV payments and charges, including feedback on lessons learned 
from stakeholders, and will consider whether further guidance or 
consideration of these issues is warranted.
    To assist stakeholders in understanding the MLR reporting period 
associated with each benefit year of risk adjustment and HHS-RADV, 
incorporating the updated timeline that is finalized in this rule, we 
have created the following table that explains which benefit years of 
risk adjustment and HHS-RADV adjustments should be reported in which 
MLR reporting years for the 2020-2025 MLR Reporting Years:
[GRAPHIC] [TIFF OMITTED] TR05MY21.025

    Finally, we disagree with commenters who suggest retaining portions 
of the URRT instructions pertaining to reporting HHS-RADV adjustments 
that allowed states the option to allow issuers to take into 
consideration the impact of HHS-RADV from another benefit year in 
rating for the upcoming benefit year. Without the 2-year delay between 
the release of HHS-RADV results and the collections of HHS-RADV 
adjustments, we are concerned that the continued inclusion of these 
instructions would be confusing. Further, there is no longer a 
connection between the collection and disbursement of HHS-RADV 
adjustments and the applicable upcoming benefit year to support 
continuing to provide the flexibility in the URRT instructions. We 
intend to monitor implementation of the collection and disbursement of 
HHS-RADV payments and charges and will consider whether further 
guidance is needed.
e. Second Validation Audit and Error Rate Discrepancy Reporting Windows
    Under Sec.  153.630(d)(2), issuers have 30 calendar days to confirm 
the findings of the SVA (if applicable) or the calculation of the risk 
score error rate, or file a discrepancy report, in the manner set forth 
by HHS, to dispute the foregoing. As explained in the 2020 Payment 
Notice, only those issuers who have insufficient pairwise agreement 
between the IVA and SVA receive SVA findings.\166\ We proposed to amend 
paragraph (d)(2) to shorten the window to confirm the findings of the 
SVA (if applicable) or the calculation of the risk score error rate, or 
file a discrepancy, to within 15 calendar days of the notification by 
HHS, beginning with the 2020 benefit year HHS-RADV. The proposed 
shorter discrepancy reporting timeframes were intended to ensure that 
we can resolve as many issues as possible in advance of publication of 
the Summary Report of Risk Adjustment Data Validation Adjustments to 
Risk Adjustment Transfers for the applicable benefit year. Based on the 
first 2 payment years of HHS-RADV, we explained that HHS believes that 
this shortened window would not be overly burdensome to issuers, and 
that any disadvantages of this shortened window would be outweighed by 
the benefits of timely resolution of as many discrepancies as possible 
prior to the release of the Summary Report of Risk Adjustment Data 
Validation Adjustments to Risk Adjustment Transfers for the applicable 
benefit year. We further noted that a 15 calendar day discrepancy 
reporting window is consistent with the IVA sample and EDGE discrepancy 
reporting windows at Sec. Sec.  153.630(d)(1) and 153.710(d), 
respectively. We proposed shortening the discrepancy window in the 2020 
Payment Notice, but did not finalize the proposal in response to 
comments suggesting that we revisit this proposal once we had completed 
a payment year of HHS-RADV.
---------------------------------------------------------------------------

    \166\ 84 FR 17495.
---------------------------------------------------------------------------

    We are not finalizing the proposal to shorten the discrepancy 
reporting windows under Sec.  153.630(d)(2) for issuers to confirm the 
findings of the

[[Page 24202]]

SVA (if applicable) or the calculation of the risk score error rate, or 
file a discrepancy report to dispute the foregoing from 30 to 15 
calendar days and will instead maintain the existing 30 calendar day 
discrepancy reporting windows.
    We received public comments on the proposed updates to the SVA and 
error rate discrepancy reporting windows. The following is a summary of 
the comments we received and our responses.
    Comment: Commenters were opposed to the proposal to shorten the SVA 
and risk score error rate attestation and discrepancy reporting 
timeframe from 30 to 15 days and instead recommended maintaining the 
existing 30 calendar day reporting window. Several commenters stated 
that they believed that the proposed 15-day timeline would not provide 
adequate time for issuers to complete a thorough review of the SVA 
findings or the calculation of the risk score error rate. Another 
commenter suggested that the timeframes could be shortened elsewhere in 
the HHS-RADV process in order to keep the 30-day reporting timeframes, 
noting that it would be helpful for issuers to receive their HHS-RADV 
error rates sooner for use in pricing.
    Response: After consideration of the comments received, we are not 
finalizing the proposal to shorten the attestation and discrepancy 
reporting window under Sec.  153.630(d)(2) from 30 to 15 calendar days 
and will instead maintain the existing 30 day attestation and 
discrepancy reporting window. Issuers will continue to have 30 calendar 
days to confirm the findings of the SVA (if applicable) or the 
calculation of the risk score error rate, or file a discrepancy report.
    As a result of these comments, we are not finalizing the proposal 
to shorten the SVA and risk score error rate attestation and 
discrepancy reporting timeframes from 30 calendar days to 15 calendar 
days.
8. Risk Adjustment Data Reporting Requirements for Future Premium 
Credits (Sec.  153.710)
    As detailed earlier in this preamble, on September 2, 2020, we 
issued an interim final rule (IFR) on COVID-19 wherein we set forth 
risk adjustment reporting requirements for issuers offering temporary 
premium credits in the 2020 benefit year to align with the relaxed 
enforcement policy announced in guidance.\167\ For the 2021 benefit 
year and beyond, we proposed to permanently adopt these risk adjustment 
reporting requirements for all health insurance issuers in the 
individual and small group markets who elect to offer premium credits 
during a public health emergency declared by the Secretary of HHS 
(declared PHE) \168\ if the premium credits are permitted by HHS in 
future benefit years. Specifically, we proposed that issuers of risk 
adjustment covered plans that provide temporary premium credits during 
a declared PHE when permitted by HHS in future benefit years must 
report to their EDGE servers adjusted plan premiums that reflect actual 
premiums billed to enrollees, taking the premium credits into account 
as a reduction in premiums. In the proposed rule, we also proposed to 
clarify that HHS's calculation of risk adjustment payment and charges 
for the 2021 benefit year and beyond under the state payment transfer 
formula would be calculated using the statewide average premium 
reflecting actual premiums billed, which takes into account any 
temporary premium credits provided as a reduction in premium for the 
applicable months of coverage during a declared PHE when permitted by 
HHS in future benefit years.\169\
---------------------------------------------------------------------------

    \167\ See, for example, ``Temporary Policy on 2020 Premium 
Credits Associated with the COVID-19 Public Health Emergency,'' 
August 4, 2020. Available at https://www.cms.gov/CCIIO/Programs-and-Initiatives/Health-Insurance-Marketplaces/Downloads/Premium-Credit-Guidance.pdf.
    \168\ The Secretary of the Department of HHS may, under section 
319 of the PHS Act determine that: (a) A disease or disorder 
presents a public health emergency; or (b) that a public health 
emergency, including significant outbreaks of infectious disease or 
bioterrorist attacks, otherwise exists.
    \169\ As noted above, we are finalizing this clarification and 
will calculate transfers under the state payment transfer for the 
2021 benefit year and beyond using the statewide average premium, 
reflecting actual premiums billed, taking into account any temporary 
premium credits provided during a declared PHE when permitted by 
HHS.
---------------------------------------------------------------------------

    As noted in the September 2020 IFR on COVID-19, we believe that 
these requirements are necessary and appropriate because if HHS 
permitted issuers that provided premium credits to submit unadjusted 
premiums for the purposes of calculating risk adjustment, distortions 
could occur that financially impact individual issuers. For example, 
absent the requirement that issuers offering premium credits report the 
adjusted, lower premium amount for risk adjustment purposes, an issuer 
with a large market share with higher-than-average risk enrollees that 
provides temporary premium credits would inflate the statewide average 
premium by submitting the higher, unadjusted premium amount, thereby 
increasing its risk adjustment payment. In such a scenario, a smaller 
issuer in the same state market risk pool that owes a risk adjustment 
charge, and also provides premium credits to enrollees, would pay a 
risk adjustment charge that is relatively higher than it would have 
been if it were calculated based on a statewide average that reflected 
the actual, reduced premium charged to enrollees by issuers in the 
state market risk pool.
    Therefore, we believe that requiring issuers that offer temporary 
premium credits during a declared PHE, when permitted by HHS, to 
accurately report to the EDGE server the adjusted, lower premium 
amounts actually billed to enrollees is most consistent with existing 
risk adjustment program requirements and mitigates the distortions that 
would occur if issuers that offer these temporary premium credits did 
not report the actual amounts billed to enrollees, while not imposing 
additional financial burdens on issuers, as compared to an approach 
that would permit issuers to report unadjusted premium amounts. We 
requested comment on this proposal. We are finalizing this policy as 
proposed. Issuers of risk adjustment covered plans that provide 
temporary premium credits when permitted by HHS in the 2021 benefit 
year and beyond during a declared PHE must report to their EDGE servers 
adjusted plan premiums that reflect actual premiums billed to 
enrollees, taking the premium credits into account as a reduction in 
premiums for the applicable months of coverage.
    We received public comments on the proposals related to risk 
adjustment data reporting requirements for future premium credits 
(Sec.  153.710) and the accompanying proposed policies related to the 
calculation of plan average premium and state average premium 
requirements for extending future premium credits (Sec.  153.320). The 
following is a summary of the comments we received and our responses.
    Comment: Several commenters stated that they supported the policies 
related to the adoption of the flexibility to allow issuers to grant 
temporary premium credits to beneficiaries should a future PHE be 
declared as this supports beneficiary access to care. One commenter 
expressed concern that allowing plans to change their premiums with 
knowledge of their competitors' premiums in the state market risk pool 
gives them an unfair advantage in risk adjustment. This commenter was 
concerned that a plan that initially offered too high a premium 
relative to its risk could offer a premium reduction to lower its risk 
adjustment

[[Page 24203]]

payout after knowing its competitors pricing structure.
    Response: We believe that it is important to require issuers that 
choose to offer temporary premium credits during a declared PHE to 
report the actual reduced amount of premium billed to enrollees in the 
state market risk pool. If HHS permitted issuers that provided premium 
credits to submit unadjusted premiums for the purposes of calculating 
risk adjustment, distortions could occur that financially impact other 
issuers. For example, absent the requirement that issuers that offer 
premium credits report the adjusted, lower premium amount for risk 
adjustment purposes, an issuer with a large market share with higher-
than-average risk enrollees that provides temporary premium credits 
would inflate the statewide average premium by submitting the higher, 
unadjusted premium amount, thereby increasing its risk adjustment 
payment. In such a scenario, a smaller issuer in the same state market 
risk pool that owes a risk adjustment charge, would pay a risk 
adjustment charge that is relatively higher than it would have been if 
it were calculated based on a statewide average that reflected the 
actual, reduced premium billed to enrollees by the issuer in the state 
market risk pool. Therefore, the finalized approach is most consistent 
with existing risk adjustment program requirements and mitigates the 
distortions that would occur if issuers that offer these temporary 
premium credits did not report the actual amounts billed to enrollees, 
while not imposing additional financial burdens on issuers, as compared 
to an approach that would permit issuers to report unadjusted premium 
amounts.
    We also note that this proposal does not seek to extend or expand 
issuer ability to offer temporary premium credits. Rather, we proposed 
to permanently adopt policies to guide risk adjustment calculations and 
reporting if issuers of risk adjustment covered plans elect to offer 
premium credits during a declared PHE when permitted by HHS in future 
benefit years. By limiting this policy to future declared PHEs, the 
potential creation of incentives for issuers to adjust premiums with 
knowledge of their competitors' premiums in an attempt to achieve a 
more favorable risk adjustment transfer (that is, a higher payment or 
lower charge) is limited. Further, we believe the benefits associated 
with encouraging issuers to provide temporary premium credits to help 
consumers maintain continuous health coverage during a declared PHE 
outweigh these potential risks and is an appropriate approach to 
balancing the different equities involved during declared PHEs.
    Comment: A few commenters expressed concern as to how small group 
market plans will be able submit the actual premium amount billed to 
plan enrollees through EDGE data, as small group market premium 
reporting is completed at a subscriber level. These commenters 
requested that HHS clarify the intended approach for issuers facing 
this operational challenge.
    Response: We understand the importance of clarifying this process 
for all issuers in the individual and small group markets (including 
merged markets) who offer temporary premium credits during a declared 
PHE, when permitted by HHS for future benefit years, may fulfill the 
data reporting requirements to offer premium credits during a declared 
PHE if the premium credits are permitted by HHS in future benefit 
years. Issuers of small group plans should apply the premium credit or 
discount provided in the small group market uniformly to all enrollees 
in the policy eligible for the credit for the applicable month, 
ensuring that the aggregate premium reflected in their internal system 
and EDGE is the lower, reduced amount for that month, including any 
premium changes that result from retro-active enrollment changes. If 
these premium credits are permitted in the 2021 benefit year or beyond, 
we intend to continue to work closely with issuers to implement this 
policy and will consider whether further guidance is warranted.
    Comment: Several commenters supported the proposed approach to use 
the actual premium amount billed to enrollees, reflective of permitted 
temporary premium credits, when calculating the plan average premium 
and statewide average premium for their application in the risk 
adjustment program. A few of these commenters also mentioned that they 
supported our proposal to follow this approach when calculating the 
plan average premium and state average premium calculation in states 
with approved state flexibility requests under Sec.  153.320(d).
    Response: We appreciate these comments and agree with commenters. 
We are finalizing this policy as proposed. This policy ensures that the 
plan average premium and statewide average premium used in the state 
payment transfer formula is calculated using the actual premiums billed 
to plan enrollees, and also applies this methodology to the calculation 
of transfers under the state payment transfer formula in states that 
receive approval for a request to reduce transfers under Sec.  
153.320(d).
    After consideration of comments on these proposals, we are 
finalizing as proposed the policy to permanently adopt these risk 
adjustment reporting requirements for the 2021 benefit year and beyond, 
for all issuers of risk adjustment covered plans who elect to offer 
premium credits during a PHE declared by the Secretary of HHS (declared 
PHE) if the premium credits are permitted by HHS in future benefit 
years. We are also finalizing, as proposed, the permanent adoption of 
the accompanying policy for HHS to calculate the plan average premium 
and statewide average premium under the state payment transfer formula 
using issuers' adjusted premium amounts, reflective of temporary 
premium credits provided by issuers during a declared PHE when such 
credits are permitted by HHS. That is, the lower actual premiums for 
which plan enrollees would be responsible would be the amounts used in 
the calculations under the state payment transfer formula to reflect 
these temporary premium credits. This approach will also extend to 
calculations under the state payment transfer formula in states that 
receive approval for a request to reduce transfers under Sec.  
153.320(d).

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

1. Definitions (Sec.  155.20)
a. Definitions of QHP Issuer Direct Enrollment Technology Provider and 
Agent or Broker Direct Enrollment Technology Provider
    We proposed to amend Sec.  155.20 to add a definition of QHP issuer 
direct enrollment technology provider, which we proposed to mean a 
business entity that provides technology services or provides access to 
an information technology platform to QHP issuers to facilitate 
participation in direct enrollment under Sec. Sec.  155.221 and 
156.1230. We also proposed that this definition of QHP issuer direct 
enrollment technology provider explicitly acknowledge that a web-broker 
may also provide services to QHP issuers as a QHP issuer direct 
enrollment technology provider to clarify that being a web-broker does 
not preclude that entity from providing technology services or an 
information technology platform to QHP issuers to facilitate QHP 
issuers' participation in direct enrollment. In addition, we proposed 
to modify the current definition of direct enrollment technology 
provider in Sec.  155.20 to

[[Page 24204]]

distinguish it from the new proposed definition of QHP issuer direct 
enrollment technology provider by renaming the term agent or broker 
direct enrollment technology provider. We proposed these new and 
modified definitions to capture the full array of potential 
arrangements between technology companies and entities seeking to use 
the direct enrollment pathways to facilitate enrollments in QHPs 
offered in an FFE or SBE-FP in a manner that constitutes enrollment in 
the Exchange. To align with these proposed new and modified 
definitions, we further proposed to modify the definition of web-broker 
to replace the last sentence, which stated that the term includes a 
direct enrollment technology provider, to instead indicate that the 
term web-broker includes an agent or broker direct enrollment 
technology provider.
    In the 2020 Payment Notice final rule, we amended Sec.  155.20 to 
define ``direct enrollment technology provider'' to mean ``a type of 
web-broker business entity that is not a licensed agent, broker, or 
producer under [s]tate law and has been engaged or created by, or is 
owned by an agent or broker, to provide technology services to 
facilitate participation in direct enrollment under Sec. Sec.  
155.220(c)(3) and 155.221.'' \170\ This definition captures instances 
in which an individual agent or broker, a group of agents or brokers, 
or an agent or broker business entity, engages the services of or 
creates a technology company that is not licensed as an agent, broker, 
or producer to assist with the development and maintenance of a non-
Exchange website that interfaces with an Exchange to assist consumers 
with direct enrollment in QHPs offered through the Exchanges as 
described in Sec. Sec.  155.220(c)(3) and 155.221. When the technology 
company is not itself licensed as an insurance agency or brokerage, the 
current framework establishes that these technology companies are a 
type of web-broker that must comply with applicable web-broker 
requirements under Sec. Sec.  155.220 and 155.221, unless indicated 
otherwise.\171\
---------------------------------------------------------------------------

    \170\ See Patient Protection and Affordable Care Act; HHS Notice 
of Benefit and Payment Parameters; Final rule, 84 FR 17454 at 17562 
(April 25, 2019).
    \171\ For example, Sec.  155.220(d)(2) exempts direct enrollment 
technology providers from the training requirement that is part of 
the annual FFE registration process for agents and brokers.
---------------------------------------------------------------------------

    As the FFE direct enrollment program has evolved, particularly with 
the introduction and increased utilization of the enhanced direct 
enrollment (EDE) pathway, the technical requirements and expertise 
needed to participate in direct enrollment have become substantially 
more complex. As a result, technology companies are increasingly relied 
upon to develop, host, manage, and customize the technical platforms 
that underpin direct enrollment entity non-Exchange websites. 
Technology companies have emerged to support the participation of QHP 
issuers in direct enrollment, as well as agents, brokers, and web-
brokers. In the context of EDE, some of these technology companies 
build technical platforms prior to finalizing contractual relationships 
with agents, brokers, web-brokers, or QHP issuers and some of these 
technology companies provide platforms that are used to host direct 
enrollment websites for both QHP issuers and agents, brokers, or web-
brokers. Under the current framework, the technology company is itself 
a web-broker and often provides direct enrollment services under its 
own branding while also wanting to offer its technology platform and 
accompanying services to other agents, brokers, web-brokers, or QHP 
issuers to facilitate their respective participation in direct 
enrollment. As part of the services it provides as a technology 
company, it may offer customized direct enrollment websites that 
leverage its technical platform to other entities that allows for 
additional systems or functionality or the use of the other entity's 
branding. Because the current regulatory definition does not include a 
reference to QHP issuers, questions have arisen regarding the ability 
and accompanying requirements for QHP issuers to engage such entities 
to assist with the development and hosting of a non-Exchange website to 
facilitate the QHP issuer's participation in direct enrollment. For 
these reasons we proposed to create a new definition of QHP issuer 
direct enrollment technology provider and update the definitions of 
direct enrollment technology provider and web-broker as described 
above, to clarify that QHP issuers can also engage the services of 
these technology companies and better align with the evolving business 
models of entities involved in the FFE direct enrollment program. We 
also proposed to include language in the new definition of QHP issuer 
direct enrollment technology provider to clarify that when such 
entities partner with QHP issuers, they are downstream or delegated 
entities of the QHP issuer. This is similar to the approach adopted in 
Sec.  155.221(e) for third-party auditors hired by QHP issuers or web-
brokers to perform operational readiness audits. By including this 
language, we intended to clarify and ensure that these QHP issuer 
direct enrollment technology providers would be subject to HHS 
oversight as the delegated or downstream entity of the QHP issuer, and 
the QHP issuer would be responsible for compliance with all applicable 
requirements. This approach was also intended to clarify that when 
providing its technology services and support, or providing access to 
an information technology platform, to a QHP issuer, QHP issuer direct 
enrollment technology providers would be subject to the rules 
applicable to the QHP issuer with whom they are partnering to the 
extent they are performing activities on behalf of the QHP issuer 
implicating those rules. For example, if a QHP issuer direct enrollment 
technology provider is assisting with the development of a non-Exchange 
website for a QHP issuer, the QHP issuer display requirements captured 
at Sec.  156.1230(a)(1)(ii) would apply.
    We sought comment on this proposal.
    We did not receive public comments on the proposal to update the 
definition of web-broker, and are finalizing that proposal as proposed. 
We received public comments on the proposed addition of a definition of 
QHP issuer direct enrollment technology provider and updates to the 
definition of direct enrollment technology provider. The following is a 
summary of the comments we received and our responses.
    Comment: Several commenters supported the proposal to define QHP 
issuer direct enrollment technology provider and agent or broker direct 
enrollment technology provider. One commenter noted that technology 
providers play an important role in shaping the experience of consumers 
and supported making regulations more clearly applicable to them. 
Another commenter supported the proposed definitions, but requested 
clarification that a single entity could serve as both types of 
technology provider and as a web-broker.
    Response: We appreciate the comments in support of this proposal 
and are finalizing the proposal as proposed. To clarify, a single 
entity may serve as a QHP issuer direct enrollment technology provider, 
an agent or broker direct enrollment technology provider, and as a web-
broker. However, we note that an entity that functions in multiple 
capacities must comply with the applicable rules for the context in 
which they are operating. For example, if a web-broker is hosting a 
direct enrollment website for a QHP issuer and therefore is operating 
as a QHP issuer direct enrollment technology provider, the QHP issuer 
display requirements

[[Page 24205]]

captured at Sec.  156.1230(a)(1)(ii) would apply to the website the 
web-broker is hosting on behalf of the QHP issuer while the web-broker 
display requirements in Sec.  155.220 would remain applicable to the 
website the web-broker is hosting with its own branding.
2. Consumer Assistance Tools and Programs of an Exchange (Sec.  
155.205)
    To continue our efforts to standardize regulatory references to 
web-brokers, we proposed to replace all references in Sec.  155.205(c) 
to ``an agent or broker subject to Sec.  155.220(c)(3)(i)'' with the 
term ``web-broker.'' In the 2020 Payment Notice final rule, we amended 
Sec.  155.20 to define the term ``web-broker'' \172\ to mean an 
individual agent or broker, a group of agents or brokers, or an agent 
or broker business entity, that is registered with an Exchange under 
Sec.  155.220(d)(1) and develops and hosts a non-Exchange website that 
interfaces with an Exchange to assist consumers with the selection of 
and enrollment in QHPs offered through the Exchange (a process referred 
to as direct enrollment). We also amended Sec. Sec.  155.220 and 
155.221 to incorporate the term web-broker as newly defined, where 
applicable. However, at the time, we overlooked the fact that Sec.  
155.205(c) also contains several of these general references to agents 
and brokers subject to Sec.  155.220(c)(3)(i) that should have been 
updated as part of this earlier effort to use the term web-broker as 
newly defined. Such references appear in Sec.  155.205 paragraphs 
(c)(2)(i)(B), (c)(2)(iii)(B), (c)(2)(iv) introductory text, and 
(c)(2)(iv)(C). To avoid confusion and correct this oversight, we 
proposed to standardize regulatory references to web-brokers by 
replacing all references in Sec.  155.205(c) to ``an agent or broker 
subject to Sec.  155.220(c)(3)(i)'' with the term ``web-broker.'' We 
sought comment on this proposal.
---------------------------------------------------------------------------

    \172\ See 84 FR 17563.
---------------------------------------------------------------------------

    In addition, we proposed to revise a requirement related to website 
content translations for QHP issuers and web-brokers participating in 
the FFE EDE program that are subject to Sec. Sec.  155.205(c)(2)(iv)(B) 
and 155.205(c)(2)(iv)(C) respectively. Currently under Sec. Sec.  
155.205(c)(2)(iv)(B) and (C), QHP issuers and web-brokers are required 
to translate website content into any non-English language that is 
spoken by a limited English proficient (LEP) population that makes up 
10 percent or more of the total population of the relevant state. Web-
brokers are currently required to translate website content within 1 
year of registering with the Exchange, while QHP issuers are currently 
required to translate website content beginning no later than the first 
day of the individual market open enrollment period for the 2017 
benefit year.
    In the proposed rule, we proposed to allow QHP issuers and web-
brokers participating in the FFE EDE program additional time to come 
into compliance with the website content translation requirements. 
Specifically, we proposed that a QHP issuer or web-broker participating 
in the FFE EDE program would have 12 months from the date the QHP 
issuer or web-broker begins operating its FFE-approved EDE website in 
the relevant state to comply with website content translation 
requirements under Sec. Sec.  155.205(c)(2)(iv)(B) and (C) for website 
content added to their websites as a condition of participation in the 
FFE EDE program. We noted this proposed flexibility would not absolve 
QHP issuers and web-brokers from complying with website content 
translation requirements under paragraphs (c)(2)(iv)(B) and (C) that 
are unrelated to their participation in the FFE EDE program within the 
applicable timeframes.\173\
---------------------------------------------------------------------------

    \173\ See also ``Guidance and Population Data for Exchange, 
Qualified Health Plan Issuers, and Web-Brokers to Ensure Meaningful 
Access by Limited-English Proficient Speakers Under 45 CFR 
155.205(c) and Sec.  156.250,'' March 30, 2016. Available at https://www.cms.gov/CCIIO/Resources/Regulations-and-Guidance/Downloads/Language-access-guidance.pdf.
---------------------------------------------------------------------------

    We sought comment on whether this proposed flexibility for QHP 
issuers and web-brokers participating in the FFE EDE program in 
relevant states would have impacted accessibility to Exchange coverage 
for LEP communities, or otherwise would have negatively impacted the 
operation of and consumer access to Exchanges. In addition, we sought 
comment from QHP issuers and web-brokers as to whether this proposed 
change would have fostered investment in states where there is a 
significant LEP community and provide additional incentives for such 
entities to expand into relevant states. Lastly, we sought comment from 
assisters about any impacts this proposed change would have had on 
their proposed ability to work with web-brokers and use EDE websites as 
described in the proposed rule (and below) when assisting members of 
the LEP community with Exchange enrollment.
    We did not receive public comments on the proposal to replace all 
references in Sec.  155.205(c) to ``an agent or broker subject to Sec.  
155.220(c)(3)(i)'' with the term ``web-broker.'' We are finalizing that 
proposal as proposed. We did receive public comments on the proposal to 
provide additional time to entities participating in EDE to translate 
website content added to their websites as a condition of participation 
in the FFE EDE program. The following is a summary of the comments we 
received and our responses.
    Comment: The vast majority of comments received opposed finalizing 
the proposal to provide EDE entities up to 12 months to translate EDE-
specific website content. Generally, commenters expressed concerns 
about possible conflicts between the proposal and statutory non-
discrimination requirements or asserted that the proposal would create 
or exacerbate racial or ethnic disparities. Some commenters stated that 
allowing EDE entities to delay the translation of their website content 
could deprive LEP populations of meaningful access in violation of the 
non-discrimination provisions in Section 1557 of the ACA. One commenter 
pointed out this could allow an EDE entity to go through an entire open 
enrollment period without translating its website content, potentially 
leaving significant numbers of LEP consumers without information in 
their languages. The same commenter acknowledged the significant 
resources involved in developing an EDE website, but did not believe it 
should take 12 more months to have it translated. Another commenter 
stated this proposal would limit coverage received by LEP populations, 
creating racial and ethnic disparities that raise serious concerns 
under both the ACA and broader federal civil rights laws. Another 
commenter stated the existing translation requirements are already 
inadequate and should not be weakened at the expense of LEP consumers. 
Two commenters supported the proposal. One stated the proposed rule 
struck an appropriate balance between affording EDE entities additional 
implementation flexibility and maintaining the language accessibility 
standards.
    Response: While we appreciate the comments in support of this 
proposal, we are not finalizing this proposal given the concerns 
expressed by the majority of commenters, and the fact that no QHP 
issuers or web-brokers (small or otherwise) commented to specifically 
indicate this proposal would incentivize their participation in states 
where there is a significant LEP population and where translation of 
their websites would have eventually been required. Almost all 
commenters stated that this proposal could reduce access to coverage 
for LEP populations, create further health inequities among this 
population, or possibly violate statutory

[[Page 24206]]

non-discrimination requirements. We acknowledge these concerns are 
worth careful consideration and outweigh any argument to finalize this 
proposal at this time.
3. Navigator Program Standards (Sec.  155.210)
    Sections 1311(d)(4)(K) and 1311(i) of the ACA require the Secretary 
to establish a Navigator program under which HHS awards grants to 
entities to 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 APTC and CSRs, 
and facilitate enrollment in QHPs; provide referrals to any applicable 
office of health insurance consumer assistance or health insurance 
ombudsman established under section 2793 of the PHS Act, or any other 
appropriate state agency or agencies for any enrollee with a grievance, 
complaint, or question regarding their health plan, coverage, or a 
determination under such plan or coverage; and provide information in a 
manner that is culturally and linguistically appropriate to the needs 
of the population being served by the Exchange. The statute also 
requires the Secretary, in collaboration with states, to develop 
standards to ensure that information made available by Navigators is 
fair, accurate, and impartial. We have implemented the statutorily 
required Navigator duties through regulations at Sec. Sec.  155.210 
(for all Exchanges) and 155.215 (for Navigators in FFEs). Certified 
Application Counselors (CACs) duties have been implemented through 
regulations at Sec.  155.225.
    We proposed allowing, but not requiring, Navigators and CACs in 
FFEs and SBE-FPs to use web-broker non-Exchange websites to assist 
consumers with applying for insurance affordability programs and QHP 
enrollment under certain circumstances and to the extent permitted by 
state law. For a discussion of the proposal to allow Navigators and 
CACs to use web-broker non-Exchange websites to assist consumers with 
applying for insurance affordability programs and QHP enrollment, along 
with a summary of comments received and our responses to these 
comments, please see the preamble to Sec.  155.220.
4. Ability of States To Permit Agents and Brokers To Assist Qualified 
Individuals, Qualified Employers, or Qualified Employees Enrolling in 
QHPs (Sec.  155.220)
a. Navigator and Certified Application Counselor Use of Web-Broker 
Websites
    In the 2020 Payment Notice, we proposed, but did not finalize, a 
modification of our policy that prohibits Navigators and CACs (together 
referred to here as ``assisters'') from using web-broker websites to 
assist with QHP selection and enrollment.\174\ At the time, adoption of 
EDE functionality by web-brokers was still limited, and we decided to 
focus on the implementation and oversight of the EDE pathway before 
revisiting the current policy regarding assister use of web-broker 
websites. Since then, EDE functionality has become more user-friendly 
and increasingly more consumers are using the EDE pathway to enroll in 
Exchange coverage.
---------------------------------------------------------------------------

    \174\ See 84 FR 17515 through 17521.
---------------------------------------------------------------------------

    In the proposed rule, we proposed permitting but not requiring, 
assisters in FFEs and SBE-FPs to use web-broker non-Exchange websites 
to assist consumers with QHP selection and enrollment, provided the 
non-Exchange website met certain conditions. We proposed to provide 
states with a State Exchange that does not rely on HealthCare.gov the 
discretion to permit their assisters to use web-broker non-Exchange 
websites.
    We proposed several amendments to Sec.  155.220 to capture this 
flexibility for assisters in FFE and SBE-FP states to use web-broker 
non-Exchange websites to assist consumers and sought comment on all of 
these proposals.
    We received public comments on the proposal to allow, but not 
require, Navigators and CACs in FFEs and SBE-FPs to use web-broker non-
Exchange websites to assist consumers with applying for insurance 
affordability programs and QHP enrollment under certain circumstances 
and to the extent permitted by state law. The following is a summary of 
the comments we received and our responses.
    Comment: The majority of commenters opposed the proposal to allow 
assisters to use web-broker non-Exchange websites to assist consumers 
with applying for insurance affordability programs and QHP enrollment. 
Commenters were concerned about whether assisters could remain fair and 
impartial if they were assisting consumers using web-broker non-
Exchange websites that did not offer enrollment into all QHPs offered 
through the Exchange, or that included QHP recommendations. Some 
commenters highlighted the confusion assisters and consumers may 
encounter when using web-broker non-Exchange websites that include 
marketing for non-QHP products. Several commenters also expressed 
concerns regarding the cost of providing adequate training to assisters 
to understand multiple platforms for enrollment. They noted that this 
may take critical time away from assisters serving consumers. Many 
commenters expressed concern that assister use of web-broker non-
Exchange websites to assist with QHP selection and enrollment would 
reduce or not facilitate enrollment in Medicaid and CHIP. Also, many 
commenters suggested that CMS invest resources to improve and expand 
the functionality of HealthCare.gov and expand assister programs 
instead of dedicating resources to implement this proposal.
    Response: After consideration of the comments received in response 
to this proposal, we agree with the commenters that there are concerns 
related to assister use of web-broker non-Exchange websites to assist 
with QHP selection and enrollment that warrant further consideration. 
Therefore, we are not finalizing the proposed modification to the 
current policy that prohibits assisters from using web-broker non-
Exchange websites to assist with QHP selection and enrollment or the 
accompanying proposals to amend and replace Sec.  155.220(c)(3)(i)(D). 
The current policy, which prohibits the use of web-broker non-Exchange 
websites by assisters to assist with QHP selection and enrollment, 
remains in effect.
b. QHP Information Display on Web-Broker Websites
    We proposed to provide flexibility to web-brokers regarding the 
information they are required to display on their non-Exchange websites 
for QHPs in certain circumstances. Currently, Sec.  155.220(c)(3)(i)(A) 
requires that a web-broker non-Exchange website must disclose and 
display all QHP information provided by the Exchange or directly by QHP 
issuers consistent with the requirements of Sec.  155.205(b)(1) and 
(c). To the extent that not all information required under Sec.  
155.205(b)(1) is displayed on the web-broker's website for a QHP, the 
web-broker's website must prominently display a standardized disclaimer 
provided by HHS stating that information required under Sec.  
155.205(b)(1) for the QHP is available on the Exchange website, and 
provide a link to the Exchange website. The preamble in the proposed 
and final

[[Page 24207]]

rules that established the current text in Sec.  155.220(c)(3)(i)(A) 
explained the intent of this requirement was that a web-broker website 
must display all information required under Sec.  155.205(b)(1) unless 
the information was not available to the web-broker, in which case the 
web-broker website must display the standardized disclaimer.\175\ 
Section 155.220(c)(3)(i)(D) similarly currently requires web-brokers to 
display all QHP data provided by an Exchange on its non-Exchange 
website used to participate in the FFE direct enrollment program 
(whether Classic DE or EDE). In the early years of Exchange operations, 
we released a data file with limited QHP details (the QHP limited file) 
that provided web-brokers with a basic set of QHP data that could be 
used to satisfy the display requirements. Display of the data elements 
from the QHP limited file data, in combination with a standardized 
disclaimer (the plan detail disclaimer), became the de facto minimum 
required to satisfy the web-broker's obligation to display QHP 
information on its non-Exchange website. In adopting this approach, we 
recognized that the Exchange may not have been able to provide web-
brokers with certain data elements necessary to meet the Sec.  
155.205(b)(1) requirements, such as premium information, due to 
confidentiality requirements, web-broker appointments with QHP issuers, 
and state law. We also recognized some of the data elements, such as 
quality rating information, were not going to be available in the 
initial years of the Exchanges' operation.\176\
---------------------------------------------------------------------------

    \175\ See 78 FR at 37046 and 78 FR at 54077.
    \176\ See Patient Protection and Affordable Care Act; Program 
Integrity: Exchange, SHOP, and Eligibility Appeals; Final Rule, 78 
FR 54069 at 54077 (August 30, 2013).
---------------------------------------------------------------------------

    In new proposed Sec.  155.220(n), we proposed to establish an 
exception to the web-broker display requirements captured at paragraphs 
(c)(3)(i)(A) and (D). We proposed to revise paragraph (c)(3)(i)(A) to 
require a web-broker non-Exchange website to disclose and display all 
QHP information provided by the Exchange or directly by QHP issuers 
consistent with the requirements of Sec.  155.205(b)(1) and (c), except 
as permitted under Sec.  155.220(n). We proposed a similar revision to 
Sec.  155.220(c)(3)(i)(D). At new proposed paragraph (n), we proposed 
certain flexibilities regarding display of QHP information if a web-
broker's non-Exchange website does not support enrollment in a QHP, 
except in cases where the web-broker's website is intended to be 
available for use by assisters consistent with proposed paragraph 
(c)(3)(iii)(A). In that case, the flexibility at new proposed paragraph 
(n) would not be available. A web-broker's non-Exchange website may not 
support enrollment in a QHP if the web-broker does not have an 
appointment with a QHP issuer and therefore is not permitted under 
state law to enroll consumers in the coverage offered by that QHP 
issuer. In such circumstances, we proposed that the web-broker's non-
Exchange website would not be required to provide all the information 
identified under Sec.  155.205(b)(1). Instead, web-brokers would be 
required to display the following limited, minimum information for such 
QHPs: Issuer marketing name, plan marketing name, plan type, metal 
level, and premium and cost-sharing information. To take advantage of 
this new proposed flexibility, we also proposed that the web-broker's 
non-Exchange website would be required to identify to consumers the 
QHPs, if any, for which the web-broker's website does not facilitate 
enrollment by prominently displaying the plan detail disclaimer 
provided by the Exchange. The plan detail disclaimer explains that the 
consumer can get more information about such QHPs on the Exchange 
website, and includes a link to the Exchange website. We noted that we 
believed this proposal struck an appropriate balance by recognizing 
that web-brokers may not be permitted to assist with enrollments in 
QHPs for which they do not have an appointment while still providing 
key information about all QHPs on web-broker non-Exchange websites to 
allow consumers to window shop and identify whether they may want to 
explore other QHP options. It also would minimize burdens for web-
brokers by not requiring them to build functionality and processes to 
display all of the required comparative information listed in Sec.  
155.205(b)(1) for those QHPs for which they do not have an appointment 
to sell.
    To more closely align the plan detail disclaimer text \177\ with 
the intent of this proposal, we noted that we planned to issue further 
guidance revising the text of the disclaimer so that it can be clearly 
associated with any QHPs for which the web-broker website does not 
facilitate enrollment. For example, the current disclaimer text states, 
in relevant part, the web-broker ``isn't able to display all required 
plan information about this Qualified Health Plan at this time.'' We 
noted that we were considering modifying this text so that it states, 
in relevant part, the web-broker ``doesn't display all plan information 
about, and doesn't facilitate enrollment in, this Qualified Health Plan 
at this time.''
---------------------------------------------------------------------------

    \177\ The current plan detail disclaimer states: ``[Name of 
Company] isn't able to display all required plan information about 
this Qualified Health Plan at this time. To get more information 
about this Qualified Health Plan, visit the Health Insurance 
Marketplace[supreg] website at HealthCare.gov.'' See also Section 
5.3.2 of the ``Federally-Facilitated Exchanges (FFEs) and Federally-
Facilitated Small Business Health Options Program (FF-SHOP) 
Enrollment Manual.'' Available at https://www.regtap.info/uploads/library/ENR_FFEFFSHOPEnrollmentManual2020_5CR_090220.pdf.
---------------------------------------------------------------------------

    We invited comments on the proposed required limited, minimum QHP 
details that must be displayed for those QHPs that the web-broker does 
not facilitate enrollment in through its non-Exchange website and the 
proposed edits to the plan detail disclaimer text. We also sought 
comment on whether to require display of any additional elements 
identified under Sec.  155.205(b)(1) among the limited, minimum 
information, such as summaries of benefits and coverage.\178\
---------------------------------------------------------------------------

    \178\ Section 155.205(b)(1) references the following comparative 
QHP information: Premium and cost-sharing information, the summary 
of benefits and coverage, metal level, results of enrollee 
satisfaction surveys, quality ratings, medical loss ratio 
information, transparency of coverage measures, and the provider 
directory.
---------------------------------------------------------------------------

    We received public comments on the proposed updates to requirements 
regarding QHP information display on web-broker non-Exchange websites. 
The following is a summary of the comments we received and our 
responses.
    Comment: Almost all commenters advocated for requiring that web-
broker non-Exchange websites display more QHP information than the 
proposed rule proposed to require, even in cases when the web-broker 
non-Exchange website does not support enrollment in a QHP. The vast 
majority of commenters either advocated for requiring web-broker non-
Exchange websites to display all available QHP information for all 
available QHPs, or generally supported making it easier for consumers 
to obtain comparative information for all available QHPs when consumers 
are using web-broker non-Exchange websites. One commenter acknowledged 
that the proposal (including the proposed updates to the plan detail 
disclaimer) represented a significant improvement over the status quo 
and would allow consumers to make more educated comparisons between 
QHPs when using web-broker non-Exchange websites, but still expressed a 
preference for requiring that all information for all available QHPs be 
displayed. Another commenter stated that the ``no wrong door'' intent 
of the ACA would be best met by requiring the display of all available 
QHP information

[[Page 24208]]

for all available QHPs on web-broker non-Exchange websites. Another 
commenter asserted that there is no consumer-oriented rationale for 
web-broker non-Exchange websites to display limited QHP information now 
that there is access to APIs that provide the information. One 
commenter specifically noted that the proposal did not require display 
of summaries of benefits and coverage and quality information when a 
web-broker non-Exchange website does not support enrollment in a 
particular QHP, and that that information is critical for consumers to 
evaluate and compare QHP options. Two commenters supported the proposal 
as proposed.
    Response: After consideration of the comments received, we are not 
finalizing the proposed amendments to Sec.  155.220(c)(3)(i)(A), 
(c)(3)(i)(D), or (n). We agree that the display of more QHP information 
on web-broker non-Exchange websites is in the best interest of 
consumers to aid them in comparing QHP options without having to 
potentially navigate to multiple websites, and understand why the 
majority of commenters advocated for web-broker non-Exchange websites 
displaying all of the comparative information listed in Sec.  
155.205(b)(1), including summaries of benefits and coverage and quality 
information. We also believe requiring web-broker non-Exchange websites 
to display additional QHP information is reasonable given that QHP 
information has been more readily accessible for some time, both 
through public use files and the Marketplace API. In addition, we note 
that the specific suggestions made by commenters regarding some of the 
QHP information that should be displayed on web-broker non-Exchange 
websites (that is, summaries of benefits and coverage and quality 
information) are part of the QHP information display requirements in 
Sec.  155.220(c)(3)(i)(A) through its cross-reference to Sec.  
155.205(b)(1).\179\
---------------------------------------------------------------------------

    \179\ See 45 CFR 155.205(b)(1)(ii), (iv), and (v).
---------------------------------------------------------------------------

    Thus, we intend to further consider these issues and clarify the 
display requirements for web-broker non-Exchange websites in future 
rulemaking. In the interim, we also intend to limit our current use of 
enforcement discretion that permits web-brokers to only display issuer 
marketing name, plan marketing name, plan type, and metal level for all 
available QHPs,\180\ so that web-broker non-Exchange websites will be 
required to display all QHP information consistent with Sec.  
155.205(b)(1) and (c), with the exception of medical loss ratio 
information and transparency of coverage measures under Sec.  
155.205(b)(1)(vi) and (vii), for all available QHPs. As such, until 
these issues are addressed in future rulemaking, beginning at the start 
of the open enrollment period for plan year 2022, web-broker non-
Exchange websites will be required to display all QHP information 
received from the Exchange or directly from QHP issuers, consistent 
with the requirements of Sec.  155.205(b)(1) and (c).\181\ During this 
time, we will exercise enforcement discretion and not deem a web-broker 
non-Exchange website out of compliance with Sec.  155.220(c)(3)(i)(A) 
and (D) with respect to the display of medical loss ratio information 
and transparency of coverage measures if the web-broker non-Exchange 
website displays the other required standardized comparative 
information consistent with Sec.  155.205(b)(1) and (c). Prior to the 
start of the open enrollment period for plan year 2022, if a web-
broker's non-Exchange website does not display all QHP information 
consistent with the requirements of Sec.  155.205(b)(1) and (c), other 
than medical loss ratio information and transparency of coverage 
measures, it must prominently display the standardized disclaimer 
provided by HHS and provide a link to the Exchange website. We note 
that this interim approach applicable beginning with the start of the 
plan year 2022 open enrollment period does not establish new 
requirements and instead represents a change in the exercise of 
enforcement discretion regarding the standardized comparative 
information web-brokers are required to display under existing 
regulations following our consideration of comments on the proposed 
changes to the web-broker QHP display requirements.\182\ We intend to 
continue our collaborative approach of working with web-broker and 
other enrollment partners to ensure consumers have information to make 
informed coverage choices while balancing the burdens and costs imposed 
on our partners.
---------------------------------------------------------------------------

    \180\ ``Processes and Guidelines for Becoming a Web-broker in 
the Federally-facilitated Exchanges: An Overview for New and 
Existing Web-brokers,'' October 2017, available at https://www.cms.gov/files/document/processes-becoming-web-broker.pdf.
    \181\ HHS makes QHP information available, including the 
standardized comparative information under Sec.  155.205(b)(1)(i)--
(v) and (viii), through public use files and the Marketplace API.
    \182\ See 45 CFR 155.220(c)(3)(i)(A) and (D).
---------------------------------------------------------------------------

c. Web-Broker Operational Readiness Review Requirements
    We proposed amendments to further clarify the operational readiness 
requirements applicable to web-brokers by adding a new proposed Sec.  
155.220(c)(6). In the 2018 Payment Notice final rule, we adopted rules 
to require web-brokers to demonstrate operational readiness, including 
compliance with applicable privacy and security requirements, prior to 
participating in the FFE direct enrollment program.\183\ Our intent in 
codifying this requirement was to build on the onboarding and testing 
processes for a web-broker to be approved to use the direct enrollment 
pathways. We noted the expectation that additional operational 
readiness requirements would be established specific to EDE to account 
for the additional functionality associated with that pathway.\184\ At 
the same time, we established similar requirements for QHP issuers to 
demonstrate operational readiness and compliance with applicable 
requirements prior to their use of the direct enrollment pathway.\185\ 
In the 2020 Payment Notice final rule, we consolidated these similar 
requirements from their prior locations at Sec. Sec.  
155.220(c)(3)(i)(K) and 156.1230(b)(2) into Sec.  155.221(b)(4) as part 
of our effort to streamline requirements applicable to all direct 
enrollment entities.\186\ In the proposed rule, we proposed to create a 
new Sec.  155.220(c)(6) to capture operational readiness requirements 
applicable to web-brokers that host non-Exchange websites to complete 
QHP selection or the Exchange eligibility application. In proposed 
paragraph (c)(6), we proposed to include introductory language that 
reflects the requirement for a web-broker to demonstrate operational 
readiness and compliance with applicable requirements prior to the web-
broker's non-Exchange website being used to complete an Exchange 
eligibility application or a QHP selection, which may include 
submission or completion, in a form and manner specified by HHS, of 
certain information or testing processes. As reflected in proposed 
paragraphs (c)(6)(i) through (v), HHS may request a web-broker submit a 
number of artifacts or documents or complete certain testing processes 
to demonstrate the operational readiness of its non-Exchange website. 
The required documentation may include operational data including 
licensure information, points of contact, and third-party 
relationships; security and privacy assessment documentation, including 
penetration testing results, security and privacy assessment reports,

[[Page 24209]]

vulnerability scan results, plans of action and milestones, and system 
security and privacy plans; and an agreement between the web-broker and 
HHS documenting the requirements for participating in the applicable 
direct enrollment program. The required testing processes may include 
enrollment testing, prior to approval or at the time of renewal, and 
website reviews performed by HHS to evaluate prospective web-brokers' 
compliance with applicable website display requirements prior to 
approval. To facilitate testing, prospective and approved web-brokers 
would have to maintain and provide access to testing environments that 
reflect their prospective or actual production environments. We 
proposed these amendments to codify in regulation existing program 
requirements that apply to web-brokers that participate in the FFE 
direct enrollment program and are captured in the agreements executed 
with participating web-broker direct enrollment entities and related 
technical guidance.\187\ We did not propose to extend the same 
requirements to QHP issuers participating in the FFE direct enrollment 
program, because QHP issuers, as HIPAA-covered entities, are subject to 
longstanding federal requirements and oversight related to the 
protection of PII and PHI that are not necessarily applicable to web-
brokers. With HIPAA privacy and security regulations and oversight in 
place and applicable to QHP issuers, HHS has adopted a risk acceptance 
approach for QHP issuers allowing them to participate in the FFE direct 
enrollment program, in some cases, without imposing certain 
requirements that are in place for web-brokers. In addition, QHP 
issuers are subject to more extensive oversight by state regulators 
than web-brokers.
---------------------------------------------------------------------------

    \183\ See 81 FR 94176.
    \184\ See 81 FR 94120.
    \185\ See 81 FR 94152.
    \186\ See 84 FR 17524.
    \187\ See, for example, ``Updated Web-broker Direct Enrollment 
Program Participation Minimum Requirements,'' May 21, 2020. 
Available at https://www.cms.gov/CCIIO/Programs-and-Initiatives/Health-Insurance-Marketplaces/Downloads/2020-WB-Program-Guidance-052120-Final.pdf.
---------------------------------------------------------------------------

    We sought comment on this proposal.
    We received one public comment on the proposed updates to web-
broker operational readiness review requirements. The following is a 
summary of the comment we received and our response.
    Comment: One commenter indicated they did not object to this 
proposal because it primarily codifies existing guidelines to which 
web-brokers are already subject. While acknowledging that similar 
requirements may not apply to QHP issuers, based in part on their 
status as HIPAA-covered entities, the commenter recommended similar 
requirements apply to non-web-broker QHP issuer direct enrollment 
technology providers. The commenter went on to state that though these 
entities may also be subject to HIPAA as issuers' business associates, 
issuers may not apply the same type of security and privacy oversight 
that HHS applies to web-brokers.
    Response: We are finalizing this proposal as proposed. We 
appreciate the recommendation to extend similar or identical 
requirements to non-web-broker QHP issuer direct enrollment technology 
providers, and may consider proposing such requirements in the future. 
However, we did not propose and are not finalizing the extension of the 
same additional operational readiness review requirements to QHP 
issuers participating in the FFE direct enrollment program. As noted 
above and explained in the proposed rule, we did not propose to extend 
the same requirements to QHP issuers because, as HIPAA-covered 
entities, issuers are subject to longstanding federal privacy and 
security requirements that are not necessarily applicable to all web-
brokers. In recognition of the applicability of the HIPAA privacy and 
security framework and extensive oversight of issuers by state 
regulators, HHS adopted a different approach for QHP issuer operational 
readiness reviews, which includes not imposing certain requirements 
applicable to web-broker direct enrollment entities. While we 
continuously review our approach and regularly evaluate whether to 
enhance program requirements for all direct enrollment entities, we 
believe the current approach strikes the appropriate balance between 
the burden associated with program requirements for different types of 
direct enrollment entities and the risks posed by those entities' 
participation in the program. In addition, our experience to date has 
shown that most direct enrollment technology providers that develop 
technology platforms for purposes of facilitating QHP issuer use of 
direct enrollment are either facilitating participation in the EDE 
program or are also web-brokers, and therefore would be subject to the 
more rigorous EDE operational readiness review requirements or the 
operational readiness review requirements applicable to web-brokers. To 
the extent a small number of QHP issuer direct enrollment technology 
providers are not also web-brokers and are not subject to the more 
rigorous EDE operational readiness review requirements, those entities 
are likely subject to HIPAA as issuers' business associates as the 
commenter acknowledged. As part of our continuous review and evaluation 
of direct enrollment requirements, we intend to monitor the types of 
entities QHP issuers engage with as direct enrollment technology 
providers and may propose changes to the operational readiness review 
requirements for QHP issuer direct enrollment technology providers in 
future rulemaking.
5. Standards for Direct Enrollment Entities and for Third Parties To 
Perform Audits of Direct Enrollment Entities (Sec.  155.221)
a. Direct Enrollment Entity Plan Display Requirements
    We proposed to revise Sec.  155.221(b)(1) to clarify the 
requirements that apply when direct enrollment entities want to display 
and market QHPs \188\ and non-QHPs. We proposed that in such 
circumstances, the web-broker or QHP issuer must display and market 
QHPs offered through the Exchange, individual health insurance coverage 
as defined in Sec.  144.103 offered outside the Exchange (including 
QHPs and non-QHPs other than excepted benefits), and all other 
products, such as excepted benefits, on at least three separate website 
pages, with certain proposed exceptions described below.
---------------------------------------------------------------------------

    \188\ As detailed in prior rulemaking, with some limited 
exceptions, stand-alone dental plans certified for sale on an 
Exchange are considered a type of QHP. See 77 FR 18315. CMS expects 
direct enrollment entities to follow the same requirements for 
stand-alone dental plan QHPs as for medical QHPs, including the 
applicable display and marketing requirements captured in Sec. Sec.  
155.220, 155.221, and 156.1230, except as proposed and finalized at 
new Sec.  155.221(c)(2) in the context of off-Exchange stand-alone 
dental plan shopping.
---------------------------------------------------------------------------

    In the 2020 Payment Notice final rule, we amended Sec.  
155.221(b)(1) to require direct enrollment entities to display and 
market QHPs and non-QHPs on separate website pages on their respective 
non-Exchange websites.\189\ Similarly, we amended paragraph (b)(3) to 
require direct enrollment entities to limit the marketing of non-QHPs 
during the Exchange eligibility application and QHP selection process 
in a manner that will minimize the likelihood that consumers will be 
confused as to what products are available through the Exchange and 
what products are not.\190\ Under the existing display standards 
captured at paragraphs (b)(1) and (3), direct enrollment entities are 
required to offer an Exchange eligibility application and QHP selection 
process that is free from advertisements or information about non-QHPs 
and sponsored links promoting health insurance related

[[Page 24210]]

products. However, under the current framework, it is permissible for a 
direct enrollment entity to market or display non-QHP health plans and 
other off-Exchange products in a section of the entity's website that 
is separate from the QHP web pages if the entity otherwise complies 
with the applicable requirements. We explained in the 2020 Payment 
Notice that we believe marketing some products in conjunction with QHPs 
may cause consumer confusion, especially as it relates to the 
availability of financial assistance for QHPs purchased through the 
Exchanges.\191\ We acknowledged at that time that we may need to update 
these standards as new products come to market and as technologies 
evolve that can assist with differentiating between QHPs offered 
through the Exchange and other products consumers may be interested in. 
We also noted our belief that the convenience of being able to purchase 
additional products as part of a single shopping experience outweighs 
potential consumer confusion, if proper safeguards are in place.\192\
---------------------------------------------------------------------------

    \189\ See 84 FR 17523 and 17524.
    \190\ Id.
    \191\ Id.
    \192\ Id.
---------------------------------------------------------------------------

    In the proposed rule, we proposed to amend paragraph (b)(1) to 
refine the previously adopted policy, consistent with the original 
intent of minimizing consumer confusion about distinct products with 
substantially different characteristics, while providing direct 
enrollment entities with more marketing flexibility and opportunities 
for innovation. QHPs are required to be offered on- and off-Exchange 
under the guaranteed availability requirements at Sec.  147.104. The 
current framework allows for direct enrollment entities to display on- 
and off-Exchange QHPs on the same website pages, as long as the direct 
enrollment entity's website makes clear that APTC and CSRs are only 
available for QHPs offered through the Exchange.\193\ We noted that we 
have observed various attempts by direct enrollment entities to 
distinguish between on- and off-Exchange QHPs displayed on the same 
website pages, but believed that even good faith efforts to inform 
consumers about this distinction have the potential to cause confusion 
about which QHP a consumer should select if APTC-eligible when two 
instances of otherwise identical plans (that is, the on- and off-
Exchange versions of the QHP) are displayed on a single website page, 
but only one is available with APTC. In addition, paragraph (b)(1) 
currently prohibits the display of off-Exchange QHPs on the same 
website pages as comparable non-QHP individual health insurance 
coverage. This creates a segmented off-Exchange plan shopping 
experience on direct enrollment entity websites that does not allow 
consumers to easily comparison shop among comparable major medical 
health insurance products. As described in the proposed rule and 
further below, the recent introduction of individual coverage health 
reimbursement arrangements (HRAs) increases the importance of 
individual health insurance coverage offered outside of the Exchange 
for employees whose employers offer such arrangements and also offer 
the opportunity to make salary reduction contributions through a 
cafeteria plan under section 125 of the Code, and this is part of the 
reason we proposed to amend the current display requirements for direct 
enrollment entities.
---------------------------------------------------------------------------

    \193\ See, for example, 45 CFR 155.220(j)(2)(i) and 
156.1230(a)(1)(iii).
---------------------------------------------------------------------------

    We proposed to revise Sec.  155.221(b)(1) to require that direct 
enrollment entities display and market QHPs offered through the 
Exchange, individual health insurance coverage as defined in Sec.  
144.103 offered outside the Exchange (including QHPs and non-QHPs other 
than excepted benefits), and all other products, such as excepted 
benefits, on at least three separate website pages, with certain 
exceptions. Requiring that these three categories of products be 
displayed and marketed on separate website pages provides a more 
precise delineation between the three categories of products with 
substantially different characteristics, either in the way they can be 
purchased or the types of benefits they offer, while still allowing 
substantial flexibility in website design to facilitate the consumer's 
shopping experience. We proposed the first product category, QHPs 
offered through the Exchange, must be isolated from the other 
categories of products to distinguish for consumers the products for 
which APTC and CSRs are available (if eligible). We proposed the second 
product category, individual health insurance coverage offered outside 
the Exchange (including QHPs and non-QHPs other than excepted 
benefits), must be similarly distinguished from other products, because 
those plans represent major medical coverage that is subject to the 
same ACA market-wide requirements as QHPs offered through the Exchange, 
but that is not available with APTC and CSRs. Therefore, distinguishing 
between these two categories of products by requiring that they be 
displayed and marketed on separate website pages would allow consumers 
to more easily shop for comparable major medical insurance subject to 
ACA market-wide rules while maintaining the clear distinction between 
plans for which APTC and CSRs are and are not available. We proposed 
that the third product category, which encompasses types of products 
not in the first two categories, including excepted benefits, must be 
displayed and marketed on one or more website pages separate from the 
website pages used for displaying and marketing the first two 
categories of products to assist consumers in distinguishing them from 
major medical plans. The range of products in the third category are 
not subject to ACA market-wide rules and APTC and CSRs are not 
available for such products, and therefore they are substantially 
different from the plans that fall into the first two categories.
    We also proposed to amend Sec.  155.221(b)(3) to include clarifying 
edits and to include the same exceptions detailed in this final rule as 
we proposed for paragraph (b)(1). We proposed to revise paragraph 
(b)(3) to limit marketing of non-QHPs during the Exchange eligibility 
application and QHP selection process in a manner that minimizes the 
likelihood that consumers would be confused as to which products and 
plans are available through the Exchange and which products and plans 
are not, except as permitted under new proposed paragraph (c)(1). The 
proposal also removed a redundant reference to ``plan'' that was 
included after ``QHP,'' and added references to ``plans'' after the 
references to ``products'' to use consistent language throughout 
paragraphs (b)(1) and (3). We proposed the same exceptions for 
paragraph (b)(3) to align with the proposed changes to paragraph (b)(1) 
to clarify that displaying QHPs and non-QHPs on the same website page, 
as would be permitted under the proposed exceptions in certain 
circumstances, would not constitute a violation of paragraphs (b)(1) or 
(3).
    We proposed certain exceptions in new Sec.  155.221(c) to the 
proposed updates to paragraphs (b)(1) and (3), because we recognized 
that, in some limited scenarios, consumers may be best served by being 
able to directly and easily compare plans offered on- and off-Exchange. 
As of January 1, 2020, employers may offer employees an individual 
coverage HRA instead of offering traditional group health 
coverage.\194\ An individual coverage HRA may reimburse employees for 
medical expenses, including monthly

[[Page 24211]]

health insurance premiums. To use the individual coverage HRA, an 
employee (and any eligible household members) must enroll in individual 
health insurance coverage, other than excepted benefits, or Medicare 
parts A and B or C. To satisfy this requirement, employees (and any 
eligible household members) can enroll in individual health insurance 
coverage through the Exchange or outside the Exchange. An employee and 
any household members offered an individual coverage HRA will be 
ineligible for APTC if the individual coverage HRA is affordable or if 
the employee and household members accept the individual coverage HRA 
even if it is unaffordable. If an employee and any household members 
offered an individual coverage HRA that is unaffordable decline the 
individual coverage HRA benefit, they may qualify for APTC (if 
otherwise eligible) if they enroll in a QHP through the Exchange. Some 
employees who are offered an individual coverage HRA may also be 
eligible, through a cafeteria plan under section 125 of the Code, to 
pay a portion of their health insurance premiums through tax-preferred 
salary reduction contributions. This type of cafeteria plan benefit may 
only be used in combination with off-Exchange individual health 
insurance coverage. Employers have flexibility to offer an employee 
both the individual coverage HRA and the cafeteria plan benefit instead 
of providing traditional tax-preferred group health coverage. However, 
employers may not offer employees a choice of an individual coverage 
HRA or traditional group health coverage.
---------------------------------------------------------------------------

    \194\ See Health Reimbursement Arrangements and Other Account-
Based Group Health Plans; Final rule, 84 FR 28888 (June 20, 2019).
---------------------------------------------------------------------------

    Consumers shopping and enrolling in coverage through direct 
enrollment entity websites may therefore wish to see and consider 
additional non-QHP individual health insurance coverage (other than 
excepted benefits) options that are only available off-Exchange. We 
also noted that we believed consumers may find it difficult to 
determine their best option, especially when they are part of a tax 
household with members that may have varying eligibility for APTC, 
CSRs, Medicaid, CHIP, individual coverage HRAs, and cafeteria plans. 
For this reason, we proposed to provide an exception to the new 
proposed display standards in Sec.  155.221(b)(1) and (b)(3) to support 
the development of innovative and consumer-friendly plan comparison 
tools by direct enrollment entities to assist consumers in making the 
best choices among individual health insurance coverage options subject 
to ACA market-wide rules for themselves and their families in these 
complex situations.
    In proposed new paragraph (c)(1), we proposed to allow direct 
enrollment entities to display and market QHPs offered through the 
Exchange and individual health insurance coverage offered outside the 
Exchange (including QHPs and non-QHPs other than excepted benefits) on 
the same website pages when assisting individuals who have 
communicated, within the website user interface or by communicating to 
an agent or broker assisting them, they have received an offer of an 
individual coverage HRA, as a standalone benefit or in addition to an 
offer of an arrangement under which the individual may pay the portion 
of the premium for individual health insurance coverage that is not 
covered by an individual coverage HRA using a salary reduction 
arrangement under a cafeteria plan, so long as certain conditions are 
met. As reflected in the new proposed Sec.  155.221(c)(1), the 
conditions we proposed to adopt included clearly distinguishing between 
the QHPs offered through the Exchange and the individual health 
insurance coverage offered outside the Exchange (including QHPs and 
non-QHPs other than excepted benefits), and prominently communicating 
that APTC and CSRs are available only for QHPs purchased through the 
Exchange, that APTC is not available to an individual who accepts an 
offer of an individual coverage HRA or who opts out of an affordable 
individual coverage HRA, and that a salary reduction arrangement under 
a cafeteria plan may only be used toward the cost of premiums for plans 
purchased outside the Exchange.
    We noted that we wished to reduce incentives that may lead to 
routing consumer households to off-Exchange plan shopping experiences 
based on overly simplistic factors such as a single member of a multi-
member household having an individual coverage HRA and a cafeteria plan 
offer. Instead we sought to encourage direct enrollment entities to 
develop blended plan selection user interfaces that incorporate on- and 
off-Exchange plan options when assisting consumers who have 
communicated receipt of an offer of an individual coverage HRA while 
incorporating the proposed conditions that are designed to minimize the 
chance for consumer confusion about the differences between the 
different coverage options. For example, a direct enrollment entity 
exercising the flexibility under the proposed exception in Sec.  
155.221(c)(1) could clearly distinguish between on- and off-Exchange 
plan options by using frames, columns, different color schemes, 
prominent headings, icons, help text, and other visual aids to increase 
the chance that consumers are aware of the distinctions between the 
plan options. We emphasized the proposal's intent was to distinguish 
and clarify user interface elements to be clear, prominent, and 
difficult to ignore, and therefore the use of an obscure disclaimer in 
small text at the bottom of the page or behind a link would not be 
sufficient, for example. We noted that in addition to the safeguards 
proposed in the proposed rule, direct enrollment entities in the FFEs 
are subject to standards of conduct that require they provide consumers 
with correct information, without omission of material fact, regarding 
QHPs and insurance affordability programs, and refrain from marketing 
or conduct that is misleading.\195\ We solicited comment on these 
proposals, as well as comments on alternative approaches through which 
direct enrollment entities may assist consumers with individual 
coverage enrollment when they have an offer of an individual coverage 
HRA.
---------------------------------------------------------------------------

    \195\ See 45 CFR 155.220(j)(2)(i), applicable to web-brokers, 
and 156.1230(b)(2), applicable to QHP issuers participating in 
direct enrollment. Also see ``Guidance Regarding website Display for 
Direct Enrollment (DE) Entities Assisting Consumers in States with 
Federally-facilitated Exchanges (FFEs) and State Exchanges on the 
Federal platform (SBE-FPs).'' Available at https://www.cms.gov/CCIIO/Programs-and-Initiatives/Health-Insurance-Marketplaces/Downloads/DE-Entity-Standards-of-Conduct-website-Display.pdf.
---------------------------------------------------------------------------

    We proposed an additional exception to Sec.  155.221(b)(1) at 
proposed paragraph (c)(2) to allow direct enrollment entities to 
display and market stand-alone dental plans certified by an Exchange 
but offered outside the Exchange and non-certified stand-alone dental 
plans on the same off-Exchange dental plan shopping website pages. 
Stand-alone dental plans certified by an Exchange and non-certified 
stand-alone dental plans should be largely comparable products among 
which consumers looking for dental coverage off-Exchange may wish to 
comparison shop. Since the proposed change at paragraph (b)(1) to allow 
display of all individual health insurance coverage offered outside the 
Exchange on the same website pages (including QHPs and non-QHPs other 
than excepted benefits) excludes stand-alone dental plans (since stand-
alone dental plans are excepted benefits), we proposed this additional 
exception to allow direct enrollment entities to provide a consumer-
friendly off-Exchange stand-alone dental plan shopping experience where 
consumers can compare the full range of stand-alone dental plans on a 
single website page.

[[Page 24212]]

    We proposed conforming amendments to redesignate paragraphs (c) 
through (h) in Sec.  155.221 as paragraphs (d) through (i) and related 
updates to internal cross references. As detailed in the proposed rule 
and this final rule, we also proposed certain amendments to the direct 
enrollment entity operational readiness review requirements in Sec.  
155.221(b)(4).
    We requested comment on these proposals.
    We received numerous public comments on the proposed amendments to 
the direct enrollment entity plan display requirements. The following 
is a summary of the comments we received and our responses.
    Comment: Most commenters supported the proposal to require direct 
enrollment entities to display and market QHPs offered through the 
Exchange, individual health insurance coverage as defined in Sec.  
144.103 offered outside the Exchange (including QHPs and non-QHPs other 
than excepted benefits), and all other products, such as excepted 
benefits, on at least three separate website pages. One commenter 
stated that guardrails should limit opportunities for consumers to 
accidentally enroll in or be steered toward a non-subsidized QHP or 
non-QHP; and therefore, at a minimum, substantially different coverage 
types should be listed on separate website pages (as proposed) to 
ensure consumers compare apples-to-apples. Other commenters expressed 
similar sentiments, and in some cases advocated for the inclusion of 
additional safeguards to help consumers understand the different 
products that might be displayed to them (for example, requiring that 
different products be clearly labeled to aid in differentiation). A few 
commenters requested clarification about which of the categories would 
include products or services such as health care sharing ministries, 
direct primary care arrangements, group association plans, and short-
term limited duration insurance, or requested confirmation that such 
products or services would have to be displayed on the one or more 
website pages that included excepted benefits and not on the website 
pages that display on- or off-Exchange QHPs and non-QHPs other than 
excepted benefits. Several commenters expressed opposition to the 
proposal. Generally these commenters cited concerns about consumer 
confusion if and when consumers are presented with numerous 
substantially different product options, regardless of how those 
products are displayed and even if they are displayed on separate 
website pages.
    Response: We are finalizing the proposal as proposed, but hope to 
clarify several issues raised by commenters. We intend to carefully 
monitor how direct enrollment entities modify their websites in 
accordance with these requirements and anticipate making updates in 
future rulemaking if we believe such updates are necessary to mitigate 
the risk that consumers are confused by how different products are 
being displayed or marketed to them on direct enrollment entity 
websites. We agree that guardrails are necessary to help consumers 
understand their options and minimize the chance they inadvertently 
choose to enroll in a plan or product that they did not intend to 
enroll in or that does not meet their needs. As we monitor direct 
enrollment websites, we will evaluate whether the user interface 
options direct enrollment entities choose (for example, how they convey 
to consumers the characteristics of different products or services on 
different website pages) are adequate in terms of helping consumers 
distinguish between and understand the advantages and disadvantages of 
different products or services. When designing their websites, we 
encourage direct enrollment entities to incorporate clear labels or 
descriptions of different products or services they offer to assist 
consumers, and we may require specific labeling or description 
requirements in future rulemaking if we determine such standardization 
would be helpful for consumers or if we identify other opportunities to 
improve the consumer experience and better inform consumers about the 
important differences between substantially different products or 
services marketed or displayed on direct enrollment entity websites. We 
also clarify and confirm that, as applied to the other non-QHP products 
and services identified by commenters, Sec.  155.221(b)(1) requires 
that any marketing or display of health care sharing ministries, direct 
primary care arrangements, group association plans, and short-term 
limited duration insurance not occur on the same website pages as on- 
or off-Exchange QHPs and non-QHPs other than excepted benefits. When 
marketed or displayed on direct enrollment entity websites, those 
products and services should instead be displayed on the separate 
website page or pages reserved for all other products, such as excepted 
benefits. The intent of these amendments is to provide additional 
clarity to direct enrollment entities regarding the display and 
marketing of products or services that are not subject to ACA market-
wide rules and on- and off-Exchange QHPs, as well as non-QHP major 
medical coverage that is subject to ACA market-wide rules. We 
appreciate the concerns expressed by some commenters that consumers may 
still be confused when presented with numerous substantially different 
options for products or services, even if those products or services 
are displayed on separate website pages in a clear manner. As described 
in the proposed rule and the preamble above, a significant motivation 
for adopting this policy was to reduce consumer confusion about 
distinct products with substantially different characteristics. We 
acknowledge that this approach may not eliminate all consumer confusion 
or other risks that may exist for consumers when they use direct 
enrollment and other non-Exchange websites. We intend to carefully 
monitor direct enrollment websites and may pursue refinements to these 
website display requirements in future rulemaking. We are also broadly 
considering options for future rulemaking intended to address risks to 
consumers that use direct enrollment websites not addressed by this 
policy, including evaluating consumer protections adopted by State 
Exchanges.
    Comment: There were several comments received related specifically 
to the portion of the proposed rule that would allow direct enrollment 
entities to display and market QHPs offered through the Exchange and 
individual health insurance coverage offered outside the Exchange 
(including QHPs and non-QHPs other than excepted benefits) on the same 
website pages when assisting individuals who have communicated they 
have received an offer of an individual coverage HRA. Several 
commenters supported the flexibility provided by this exception. One 
commenter recognized the need to provide consumers with individual 
coverage HRA offers information about all relevant coverage options, 
but expressed concern about consumers being misled or confused about 
those options and urged HHS to strictly enforce requirements related to 
the proposed exception. Another commenter acknowledged that consumers 
offered individual coverage HRAs will need access to information for 
both on- and off-Exchange options, but opposed the proposed exception, 
stating that allowing on- and off-Exchange options to be commingled on 
the same website page would lead to substantial confusion, even with 
smart design choices to differentiate the plans. One commenter 
recommended that the exception be modified so that it is available 
generally (without respect to

[[Page 24213]]

whether a specific consumer the entity is assisting has been offered an 
individual coverage HRA) to entities approved to use EDE that have 
implemented eligibility application functionality supporting individual 
coverage HRA offers. The commenter stated this alternative approach 
would be less burdensome to implement than accounting for specific 
consumers' situations. One commenter noted this exception as proposed 
does not apply to consumers provided QSEHRAs, and that if it is 
modified to account for such plans, a requirement should be included 
that direct enrollment entities communicate to consumers the need to 
reduce APTC by any employer contribution.
    Response: We appreciate the comments and are finalizing this 
exception as proposed. We note that the individual coverage HRA market 
is relatively new and still evolving, and recognize that the 
flexibility and requirements associated with this exception should be 
monitored closely and evaluated regularly for potential modifications 
in future rulemaking. We further recognize there is the potential for 
confusion, even with strict compliance with the safeguards we are 
finalizing. We believe this exception and the other related direct 
enrollment entity plan display requirement proposals finalized in this 
rule represent a reasonable balance at this time and appropriately take 
into account the need to also support consumers who may be offered new 
types of coverage arrangements (for example, individual coverage HRAs). 
Additionally, we intend to closely monitor implementation of the 
exception and the accompanying display requirement proposals finalized 
in this rule through website reviews and will strictly enforce the 
limitations and requirements related to leveraging this exception, and 
will make adjustments through future rulemaking if deemed necessary. We 
further note that most consumers using direct enrollment websites are 
assisted by agents or brokers who can help their clients understand 
their options. To help consumers offered individual coverage HRAs 
navigate their different options and to support agents and brokers 
providing assistance to these consumers, HHS has developed various 
education, training, and other materials on individual coverage 
HRAs.\196\ As stated in the proposed rule, we hope that this exception 
will lead direct enrollment entities to design and implement innovative 
and consumer-friendly plan comparison tools to assist consumers offered 
individual coverage HRAs in making the best choices for themselves and 
their families in these complex situations. In addition, we sought to 
reduce incentives that may lead direct enrollment entities to route 
consumer households to off-Exchange plan shopping experiences based on 
overly simplistic factors such as a single member of a multi-member 
household having an individual coverage HRA and a cafeteria plan 
offer.\197\ As a result of the comments received expressing concerns 
about consumer confusion due to this exception, we encourage any direct 
enrollment entity considering updates to its website design to leverage 
this exception to contact us before implementing any updates (by 
emailing [email protected]). We are interested in working 
collaboratively with direct enrollment entities to ensure their planned 
website designs meet applicable regulatory requirements and intend to 
carefully monitor implementation under this exception. We would pursue 
any refinements through rulemaking, and if we deem necessary or 
appropriate may also consider adopting a mandatory review and approval 
process before direct enrollment entities could leverage this exception 
in a future rulemaking.
---------------------------------------------------------------------------

    \196\ See, for example, https://www.cms.gov/CCIIO/Programs-and-Initiatives/Health-Insurance-Market-Reforms/Health-Reimbursement-Arrangements.
    \197\ There are additional complexities for APTC-eligible 
consumers who receive an offer of an individual coverage HRA that is 
unaffordable in addition to a salary reduction arrangement under a 
cafeteria plan. See, for example, 85 FR at 78617.
---------------------------------------------------------------------------

    We do not agree with the one commenter that suggested this 
exception be made broadly available to EDE entities, without respect to 
whether a specific consumer the entity is assisting has been offered an 
individual coverage HRA. This exception is intended to be a targeted 
measure focused on supporting consumers offered individual coverage 
HRAs who use direct enrollment entity websites to shop for 
coverage.\198\ In those instances, it would be appropriate to inform 
consumers about the broader range of individual health insurance 
coverage options. The same considerations do not exist for consumers 
who do not receive individual coverage HRA offers. Direct enrollment 
entities already design different plan shopping interfaces for their 
websites and route consumers to them based on screening questions 
intended to evaluate specific consumers' needs and circumstances. For 
entities assisting consumers with individual coverage HRA offers, 
leveraging the flexibility afforded by the exception finalized in this 
rule could be accomplished using a similar approach of asking consumers 
questions about whether they have received an individual coverage HRA 
offer and routing them to different website pages based on their 
responses. Finally, we note that we did not propose and are not 
finalizing an extension of the proposed exception to consumers provided 
QSEHRAs at this time, in part because we have not noted the same 
interest in serving such consumers from direct enrollment entities. We 
may consider creating such an exception in a future rulemaking if 
necessary or appropriate.
---------------------------------------------------------------------------

    \198\ As detailed in the proposed rule, the recent introduction 
of individual coverage HRAs increases the importance of individual 
health insurance coverage offered outside of the Exchange for 
employees offered such arrangements alongside the opportunity to 
make salary reduction contributions through a cafeteria plan under 
section 125 of the Code. See 85 FR 78616.
---------------------------------------------------------------------------

    Comment: We received a small number of comments related to the 
proposed exception to Sec.  155.221(b)(1) at proposed paragraph (c)(2) 
to allow direct enrollment entities to display and market stand-alone 
dental plans certified by an Exchange but offered outside the Exchange 
and non-certified stand-alone dental plans on the same off-Exchange 
dental plan shopping website pages. One commenter stated that dental 
plans offer a wide variety of plan designs, and suggested that if the 
proposed stand-alone dental plan exception is finalized, it should 
include a requirement that direct enrollment entities clearly label 
different types of dental plans. The commenter also expressed concern 
that consumers may not be able to differentiate between stand-alone 
dental plans for which APTC may be used and stand-alone dental plans 
only available off-Exchange. Another commenter requested implementation 
of the proposed stand-alone dental plan exception be delayed until 
testing the approach with consumer focus groups and evaluating its 
impact based on that testing.
    Response: We appreciate the comments and are finalizing this 
proposal as proposed. As mentioned above, when designing their 
websites, we encourage direct enrollment entities to incorporate clear 
labels or descriptions of different plans, products, or services they 
offer to assist consumers, whether major medical or stand-alone dental 
plans. We may require specific labeling or description requirements in 
future rulemaking if we determine such standardization would be helpful 
for consumers or if we identify other opportunities to improve the 
consumer experience and better inform consumers about the important 
differences between substantially

[[Page 24214]]

different plans, products, or services. We also clarify that since the 
stand-alone dental plan exception is only available to direct 
enrollment entities with regard to their off-Exchange stand-alone 
dental plan shopping websites, the risk that a consumer may 
inadvertently choose a stand-alone dental plan for which APTC is not 
available is not relevant since APTC is not available for any off-
Exchange stand-alone dental plans. Stated differently, an APTC-eligible 
consumer seeking to enroll in a stand-alone dental plan on-Exchange 
that has wound up shopping for stand-alone dental plans on an off-
Exchange website has encountered a problem unrelated to the stand-alone 
dental plan exception in this rule. While we understand the request to 
delay implementation of the stand-alone dental plan exception until 
consumer focus group testing can be conducted, we consider multiple 
factors when developing rules, including risk of consumer harm, impact 
to the operations of the private business entities we are regulating, 
and the availability of government resources to conduct testing and 
oversight, among other factors. We also believe this exception is 
sufficiently narrow for the proposal to be finalized as part of this 
rule because it is limited to website pages marketing and facilitating 
enrollment in off-Exchange plans, products, and services. In addition, 
until the current rule at Sec.  155.221(b)(1) was finalized in 2019, 
this exception would not have been required for entities to display 
stand-alone dental plans in this manner and we suspect many entities 
were doing so at the time. As mentioned above, we will be closely 
monitoring and evaluating how direct enrollment entities modify their 
websites based on these updated rules and will pursue future rulemaking 
if we believe that is necessary or appropriate. We may also engage in 
consumer focus group testing in the future, if deemed necessary or 
appropriate.
b. Direct Enrollment Entity Operational Readiness Review Requirements
    We proposed to revise Sec.  155.221(b)(4) to add additional detail 
on the operational readiness requirements for direct enrollment 
entities. Similar to the proposed web-broker operational readiness 
requirement at new proposed Sec.  155.220(c)(6), we proposed these 
amendments to codify in Sec.  155.221(b)(4) more details about the 
existing program requirements that apply to direct enrollment entities 
and are captured in the agreements executed with participating web-
broker and QHP issuer direct enrollment entities. We noted that these 
proposed requirements are in addition to the operational readiness 
requirements for web-brokers at new proposed Sec.  155.220(c)(6), 
although web-brokers may not be required to submit the documentation 
required under this proposal to revise Sec.  155.221(b)(4) or they may 
be permitted to use the same documentation to satisfy the requirements 
of both operational readiness reviews depending on the specific 
circumstances of their participation in the direct enrollment program 
and the source and type of documentation. For example, a web-broker 
seeking to participate only in the Classic DE program would only be 
required to meet the operational readiness requirements at new proposed 
Sec.  155.220(c)(6), whereas a web-broker seeking to participate in the 
EDE program may be permitted to use its third-party security and 
privacy audit documentation for EDE to satisfy the security and privacy 
audit documentation requirements of Sec. Sec.  155.220(c)(6) and 
155.221(b)(4) assuming the Classic DE and EDE systems and functionality 
were hosted in the same environments subject to the third-party audit.
    In paragraph (b)(4), we proposed to continue to require a direct 
enrollment entity to demonstrate operational readiness and compliance 
with applicable requirements prior to the direct enrollment entity's 
website being used to complete an Exchange eligibility application or a 
QHP selection. We added new proposed paragraphs (b)(4)(i) through (v) 
to reflect that direct enrollment entities may need to submit or 
complete, in the form and manner specified by HHS, a number of 
artifacts, documentation, or various testing or training processes. The 
documentation may include business audit documentation, including: 
Notices of intent to participate including auditor information; 
documentation packages including privacy questionnaires, privacy policy 
statements, and terms of service; and business audit reports including 
testing results. The required documentation may also include security 
and privacy audit documentation including: Interconnection security 
agreements; security and privacy controls assessment test plans; 
security and privacy assessment reports; plans of action and 
milestones; privacy impact assessments; system security and privacy 
plans; incident response plans; and vulnerability scan results. 
Submission of agreements between the direct enrollment entity and HHS 
documenting the requirements for participating in the applicable direct 
enrollment program may also be required. Required testing may include 
eligibility application audits performed by HHS. The direct enrollment 
entity may also be required to complete online training modules 
developed by HHS related to the requirements to participate in the 
direct enrollment program.
    We requested comment on this proposal.
    We received one public comment on the proposed updates to direct 
enrollment entity operational readiness review requirements. The 
following is a summary of the comment we received and our response.
    Comment: One commenter expressed support for the proposed updates 
to the direct enrollment entity operational readiness review 
requirements.
    Response: We appreciate the commenter's support of the proposed 
updates to the direct enrollment entity operational readiness review 
requirements and are finalizing this proposal as proposed.
6. Certified Applications Counselors (Sec.  155.225)
    In the proposed rule, we proposed to allow, but not require, CACs 
to assist consumers with applying for insurance affordability programs 
and QHP enrollment through web-broker non-Exchange websites under 
certain circumstances and to the extent permitted by state law. For a 
discussion of this proposal, along with a summary of comments received 
and our responses to these comments, please see the preamble for Sec.  
155.220.
7. Verification Process Related to Eligibility for Insurance 
Affordability Programs (Sec.  155.320)
a. Verification of Eligibility for Employer Sponsored Coverage
    Exchanges must verify whether an applicant is eligible for or 
enrolled in an eligible employer sponsored plan for the benefit year 
for which coverage and premium assistance (APTC or CSR) are requested 
using available data sources, if applicable, as described in Sec.  
155.320(d)(2). For any coverage year that an Exchange does not 
reasonably expect to obtain sufficient verification data as described 
in paragraph (d)(2)(i) through (iii), an alternate procedure applies. 
Specifically, Exchanges must select a statistically significant random 
sample of applicants and meet the requirements under paragraph 
(d)(4)(i). For benefit years 2016 through 2019, Exchanges also could 
use an alternative process approved by HHS. We are

[[Page 24215]]

continuing to explore a new alternative approach to replace the current 
procedures in paragraph (d)(4)(i), under which an Exchange may design 
its verification process to confirm that qualified individuals are not 
eligible for or enrolled in an eligible employer sponsored plan, 
disqualifying them from receiving APTC or CSRs.
    HHS's experience conducting random sampling revealed that employer 
response rates to HHS's request for information were low. The manual 
verification process described in Sec.  155.320(d)(4)(i) requires 
significant resources and government funds, and the value of the 
results ultimately does not appear to outweigh the costs of conducting 
the work because only a small percentage of sample enrollees have been 
determined by HHS to have received APTC or CSRs inappropriately. We 
believe an approach to verifying an applicant's attestation regarding 
access to eligible employer sponsored coverage should be rigorous, 
while posing the least amount of burden on states, employers, 
consumers, and taxpayers. Based on our experiences with random sampling 
methodology under paragraph (d)(4)(i), HHS is of the view that this 
methodology may not be the best approach for all Exchanges to assess 
the associated risk for inappropriate payment of APTC and CSRs. As 
such, in 2019, HHS conducted a study to (1) determine the unique 
characteristics of the population with offers of employer-sponsored 
coverage that meets minimum value and affordability standards, (2) 
compare premium and out-of-pocket costs for consumers enrolled in 
affordable employer-sponsored coverage to Exchange coverage, and (3) 
identify the incentives, if any, that drive consumers to enroll in 
Exchange coverage rather than coverage offered through their current 
employer. We are still evaluating the results of this study to ensure 
the best verification process to ensure that consumers with offers of 
affordable coverage that meets affordability and minimum value 
standards through their employer are identified and do not receive APTC 
or CSRs inappropriately. HHS will consider changes to the verification 
process outlined under paragraph (d)(4) as part of future rulemaking.
    As HHS continues to explore the best options for verification of 
employer sponsored coverage, we proposed that HHS will continue to 
refrain from taking enforcement action against Exchanges that do not 
perform random sampling as required by paragraph (d)(4), as an 
alternative to performing this verification against the data sources 
required under Sec.  155.320(d)(2)(i) through (iii), and will extend 
this non-enforcement posture from plan year 2021 through plan year 
2022. We also proposed that HHS will continue to exercise such 
discretion as HHS continues to evaluate the results of the employer 
verification study described in the proposed rule and of the futures 
changes also discussed.
    Comment: The majority of commenters on this topic agreed with HHS's 
proposal to refrain from taking enforcement action against Exchanges 
that do not conduct random sampling to verify whether an applicant has 
access to or received an offer of affordable coverage that meets the 
minimum value standard through their employer. The commenters agreed 
with HHS's prior study findings that the random sampling process 
requires significant resources with little return on investment. 
Commenters also agreed with HHS that an employer-sponsored coverage 
verification approach should provide State Exchanges with flexibility 
and more opportunities to use verification processes that are evidence-
based, while imposing the least amount of burden on consumers, states, 
employers, and taxpayers and ensures that only consumers who are 
eligible for APTC/CSRs continue to receive them; commenters noted that 
this is especially important during the current COVID-19 public health 
emergency and allows states to shift resources to help consumers retain 
or enroll in QHP coverage. One commenter further noted that an 
efficient verification process to verify whether an applicant has an 
offer of affordable coverage through their employer also provided an 
added benefit as it reduces the employer shared responsibility payment 
(ESRP) burden for both the Internal Revenue Service (IRS) and employers 
nationwide. One commenter supported the proposal, but proposed that HHS 
allow State Exchanges to select their own verification method that 
would not add significant administrative burden on states and stated 
that the current proposal does not provide State Exchanges with enough 
flexibility to make any necessary changes that may result from future 
rulemaking.
    Finally, another commenter suggested that, as HHS reviews the 
results of the study discussed in the preamble to the proposed rule, we 
should consider releasing the results of the 2019 study in an effort to 
provide transparency regarding the demographic patterns that HHS 
discovered as a result of this research.
    Response: We agree that the current random sampling process 
required under Sec.  155.320(d)(4)(i) is not only burdensome for 
states, employers, consumers, and taxpayers, but it also does not 
provide enough flexibility to all Exchanges to develop a process for 
employer-sponsored coverage verification that more accurately reflects 
their respective enrolled Exchange populations. As discussed in the 
preamble above and in the proposed rule, HHS shares the same concerns 
regarding the feasibility and effectiveness of random sampling, 
including the effectiveness of employer and employee notices, and the 
impact that such a verification process has on Exchanges' appeals 
processes. We also agree that a verification process should be 
evidence-based and informed by certain risk-factors for inappropriate 
payment of APTC/CSRs and that additional flexibilities are important to 
help states better serve their populations during the current COVID-19 
public health emergency. Finally, as HHS continues to evaluate the 
results of the 2019 study, we will explore the possibility of releasing 
the results of the study at a later date.
    We disagree with the comment that the proposal to extend 
enforcement discretion to plan year 2022 provides State Exchanges with 
less flexibility to implement any future process changes for employer-
sponsored coverage verification. State Exchanges have existing 
flexibility under Sec. Sec.  155.320(a)(2) and 155.315(h) to propose an 
alternative approach to using the verification procedures under Sec.  
155.320(d)(2), or an alternative to using the random sampling process 
described under Sec.  155.320(d)(4), in order to verify whether 
applicants have received an offer of affordable coverage. We continue 
to encourage states to use this flexibility to explore evidence or 
risk-based approaches to conducting this verification. Finally, these 
changes do not impact State Exchanges that currently verify offers of 
employer-sponsored coverage using approved data sources under Sec.  
155.320(d)(2)(i) through (iii) or use the random sampling procedures 
under Sec.  155.320(d)(4), and have determined these methods are the 
appropriate approaches for their Exchanges to meet requirements under 
Sec.  155.320(d).
    Comment: Two commenters supported the proposal but expressed their 
ongoing concerns regarding employer-sponsored verification, 
specifically that the lack of a centralized website or database for 
employers to provide contact information and other information 
Exchanges would need to verify whether an employer offers coverage that 
meets minimum value standards is problematic and has led to

[[Page 24216]]

many of the ongoing challenges Exchanges have experienced. These 
commenters suggested that HHS and IRS should work together to develop a 
single, streamlined verification process that could be achieved in one 
of two ways: (1) By establishing a simple, web-based platform or 
database where employers could provide Exchanges with their contact 
information which Exchanges could query as part of their verification 
attempts or (2) provide employers with the option to report their 
information to IRS well in advance of Open Enrollment so that Exchanges 
could query this information to verify whether that employer offers 
coverage that meets the employer shared responsibility affordability 
and minimum value tests. Commenters also urged IRS and Treasury to 
allow employers to provide real-time employer coverage data on 
HealthCare.gov to help consumers compare coverage offered through their 
employers with options offered on Exchanges to make the best coverage 
decisions based on their needs and budgets.
    Response: We did not propose policies or requirements related to 
future verification processes as HHS is still evaluating the results of 
the 2019 study to determine the best path forward. HHS appreciates the 
suggested approaches for consideration and agrees with the commenters 
that having accurate, up-to-date contact information for employers 
presents a significant challenge for Exchanges attempting to verify an 
applicant's attestation that they do not have access to affordable 
coverage through their employer as outlined under Sec.  
155.320(d)(4)(i)(D). HHS will continue to explore all options to 
implement a verification process for employer-sponsored coverage that 
is evidence-based and will continue to work with our federal partners 
to assess the feasibility of creating such a web-based platform or 
database to collect employer contact information as outlined above.
b. Verification Process Related to Eligibility for Insurance 
Affordability Programs
    As noted in section IV of the preamble, on March 4, 2021, the 
United States District Court for the District of Maryland decided City 
of Columbus, et al. v. Cochran, No. 18-2364, 2021 WL 825973 (D. Md. 
Mar. 4, 2021), vacating certain requirements under 45 CFR 155.320, 
which provides Exchange income verification requirements for resolving 
data matching issues related to eligibility for advance payments of 
premium tax credits. Under the current regulation, an individual who 
attests to a household income within 100 percent to 400 percent of the 
federal poverty level (FPL), but whose income according to trusted 
electronic data sources is below 100 percent FPL, must submit 
additional documentation supporting the attested to household 
income.\199\ Given the court's order invalidating this policy, we are 
finalizing revisions to Sec.  155.320 in this final rule to rescind 
text implementing the policy.
---------------------------------------------------------------------------

    \199\ See 83 FR 16985-16987 (discussing finalization of new 
paragraphs Sec.  155.320(c)(3)(iii)(D) and (E), and modifications to 
paragraphs (c)(3)(vi)(C), (D), (F), and (G)).
---------------------------------------------------------------------------

    As explained below in the Implementation of the Decision in City of 
Columbus, et al. v. Cochran section, HHS's systems automatically 
generate requests for income verification information for those with 
income data matching issues, and it will take some time to redesign 
this function. Until that redesign is complete and implemented, 
however, HHS will be able to identify consumers who receive requests 
for income verification information as a result of current system 
logic. We have established a manual process to notify those consumers 
that they need not provide the requested information.
8. Special Enrollment Periods (Sec.  155.420)
a. Exchange Enrollees Newly Ineligible for APTC
    We proposed to add new flexibility to allow current Exchange 
enrollees and their dependents to enroll in a new QHP of a lower metal 
level \200\ if they qualify for a special enrollment period due to 
becoming newly ineligible for APTC. We are finalizing a modified 
version of this policy to permit Exchange enrollees who qualify for a 
special enrollment period based on a loss of APTC eligibility to change 
to a new plan at any metal level, and to require that Exchanges 
implement this change no later than January 1, 2024.
---------------------------------------------------------------------------

    \200\ Section 1302(d) of the ACA describes the various metal 
levels of coverage based on AV, and section 2707(a) of the PHS Act 
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 includes the 
requirement to offer coverage at the metal levels of coverage 
described in section 1302(d) of the ACA. Consumer-facing 
HealthCare.gov content explains that metal levels serve as an 
indicator of ``how you and your plan split the costs of your health 
care,'' noting that lower levels such as bronze plans have lower 
monthly premiums but higher out of pocket costs, while higher levels 
such as gold plans have higher monthly premiums but lower out of 
pocket costs. See https://www.healthcare.gov/choose-a-plan/plans-categories/.
---------------------------------------------------------------------------

    In 2017, the Market Stabilization Rule addressed concerns that 
Exchange enrollees were utilizing special enrollment periods to change 
plan metal levels based on ongoing health needs during the coverage 
year, negatively affecting the individual market risk pool. The Market 
Stabilization Rule set forth requirements at Sec.  155.420(a)(4) to 
limit Exchange enrollees' ability to change to a QHP of a different 
metal level when they qualify for, or when a dependent(s) newly enrolls 
in Exchange coverage through, most types of special enrollment 
periods.\201\
---------------------------------------------------------------------------

    \201\ These limitations do not apply to enrollees who qualify 
for certain types of special enrollment periods, including those 
under Sec.  155.420(d)(4), (8), (9), (10), (12), and (14). While 
special enrollment periods under paragraphs (d)(2)(i) and (d)(6)(i) 
and (ii) are excepted from Sec.  155.420(a)(4)(iii), Sec.  
155.420(a)(4)(i) and (ii) apply other plan category limitations to 
them.
---------------------------------------------------------------------------

    Generally, Sec.  155.420(a)(4) provides that enrollees who newly 
add a household member through most types of special enrollment periods 
may add the household member to their current QHP or enroll them in a 
separate QHP,\202\ and that if an enrollee qualifies for certain 
special enrollment periods, 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). However, even prior to the 
change that we are finalizing in this rule, Sec.  155.420(a)(4) 
included certain flexibilities to permit enrollees to change metal 
levels through a special enrollment period related to a change in 
financial assistance for coverage through the Exchange. For example, 
Sec.  155.420(a)(4)(ii)(B) provides that beginning January 2022, if an 
enrollee and his or her dependents become newly ineligible for cost-
sharing reductions in accordance with paragraph (d)(6)(i) or (ii) of 
this section and are enrolled in a silver-level QHP, the Exchange must 
allow the enrollee and his or her dependents to change to a QHP one 
metal level higher or lower, if they elect to change their QHP 
enrollment, which they may wish to do based on loss of previously-
available financial assistance.
---------------------------------------------------------------------------

    \202\ Section 155.420(a)(4)(i), (a)(4)(iii)(B), and 
(a)(4)(iii)(C) also provide that alternatively, if the QHP's 
business rules do not allow the newly-enrolling household member 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).
---------------------------------------------------------------------------

    Similarly, we proposed to add a new flexibility at Sec.  
155.420(a)(4)(ii)(C) to allow enrollees and their dependents who become 
newly ineligible for APTC in accordance with paragraph (d)(6)(i) or 
(ii) of this section to enroll in a QHP of

[[Page 24217]]

a lower metal level. Under this proposal, these special enrollment 
periods in paragraph (d)(6)(i) and (ii) for becoming newly ineligible 
for APTC would be addressed in paragraph (a)(4)(ii)(C), and so they 
will no longer be subject to the separate rules in paragraph 
(a)(4)(iii). Therefore, we further proposed to revise paragraph 
(a)(4)(iii) to include them in the list of triggering events excepted 
from the limitations at paragraph (a)(4)(iii). We are finalizing a 
modified version of this policy to permit Exchange enrollees who 
qualify for a special enrollment period based on a loss of APTC 
eligibility to change to a new plan at any metal level, and to require 
that Exchanges implement this change no later than January 1, 2024. We 
expect that that providing Exchanges with more time to implement the 
change and exempting this special enrollment period from limitations 
entirely will reduce Exchanges' implementation burden and that this 
policy will help impacted enrollees' ability to maintain continuous 
coverage for themselves and for their dependents in spite of a 
potentially significant change to their out of pocket costs.
    We proposed this new flexibility in part because of concerns from 
agents and brokers that some consumers who qualify for the special 
enrollment period in accordance with Sec.  155.420(d)(6)(i) or (ii) 
because they lose eligibility for APTC based on an income increase may 
lose a significant amount of financial assistance without having gained 
enough income to continue to afford the coverage they selected when 
APTC was available to them. In the proposed rule, we provided an 
example of a qualified individual whose estimated annual household 
income increases to more than 400 percent FPL due to an income increase 
of less than $2,000.\203\ In this example, the individual's loss of 
APTC would require them to pay over $7,000 more annually for their 
current plan.\204\ While this individual would qualify for a special 
enrollment period due to a loss of eligibility for APTC per paragraph 
(d)(6)(i), under the previous rule they would not be able to change 
from a gold plan to a silver or bronze plan (or to a catastrophic plan, 
if they were eligible) to pay a lower monthly premium, because 
paragraph (a)(4)(iii)(A) provided that these enrollees may only change 
to another QHP within their current plan's metal level. The American 
Rescue Plan Act of 2021 will help some individuals in the situation 
described above because it allows individuals whose household income 
exceeds 400 percent FPL to qualify for a premium tax credit if they are 
otherwise eligible. The new law will make premium tax credits available 
to these families and caps the amount of household income the family is 
expected to contribute to their premiums for purposes of calculating 
the credit at 8.5 percent, based on the cost of their second lowest 
cost silver benchmark plan. However, this flexibility is also necessary 
to ensure access to coverage by those who experience circumstances 
other than a household income increase that may cause consumers to 
become ineligible for APTC. For example, in the proposed rule, we also 
noted that Exchange enrollees can lose eligibility for APTC due to a 
change in tax household size, without experiencing any change in 
income, and we provided an example of a family of two parents and a 20-
year old child with no income and who is not a full-time student. We 
are updating the example to reflect the changes made for 2021 and 2022 
by the American Rescue Plan Act of 2021. If the family applies during 
open enrollment in 2022 and qualifies for APTC based on a household of 
three, and during 2023 the child becomes employed and earns enough 
income so that the parents no longer plan to claim the child as a tax 
dependent for 2023, their decrease in household size could cause them 
to lose eligibility for APTC. Loss of eligibility for APTC based on not 
being permitted to claim as a tax dependent an individual projected at 
open enrollment to be a tax dependent (loss of a projected tax 
dependent) is likely a less common challenge, because loss of a 
projected tax dependent who was previously enrolled in the same plan as 
other household members may also result in a lower premium for 
remaining household members. However, in some cases the decrease in 
premium may not be enough to make up for the loss of APTC.
---------------------------------------------------------------------------

    \203\ See 85 FR 78623.
    \204\ 26 CFR 1.36B-2(b)(1) provides that to be eligible for a 
premium tax credit, the taxpayer's household income must be at least 
100 percent but not more than 400 percent of the FPL for the 
taxpayer's family size for the taxable year. Per the HHS Poverty 
Guidelines for 2020, 400 percent of the FPL for 2020 for an 
individual in the contiguous 48 states and DC is $51,040. However, 
under the American Rescue Plan Act of 2021, for taxable years 2021 
and 2022, the upper limit on household income at 400 percent of the 
FPL has been removed.
---------------------------------------------------------------------------

    As discussed in the proposed rule, in many cases individuals 
enrolling in Exchange coverage during open enrollment will not 
anticipate experiencing a situation in the middle of the plan year like 
those described in this final rule. Even if they are aware that they 
could have a small increase in household income or lose a projected tax 
dependent, they may not realize that these changes could make them 
newly ineligible for APTC. Furthermore, sometimes these changes are not 
foreseeable. Additionally, it is reasonable for individuals who 
complete an application and then shop for coverage on HealthCare.gov to 
select a QHP based on premiums that are reduced by the APTC amount for 
which they are eligible at the time of plan selection, particularly if 
they do not realize that their financial assistance could change based 
on loss of a projected tax dependent or a small household income change 
during the coming year.
    While this proposal was designed to provide Exchange enrollees who 
lose APTC with the chance to select lower-cost coverage, we recognized 
that changing to a new QHP mid-plan year may cause enrollees to incur 
additional out of pocket costs as a new QHP selection typically resets 
the deductible and other accumulators. We believe that Exchange 
enrollees who lose APTC eligibility are best able to weigh the trade-
off between reset accumulators or maintaining an affordable monthly 
premium. As discussed in the proposed rule, a change may benefit some 
consumers because price differences between QHPs of different metal 
levels can be significant. For example, in states using the federal 
enrollment platform, on average, silver plan premiums are 34 percent 
more expensive than bronze plan premiums, and gold plan premiums are 14 
percent more expensive than silver plan premiums.\205\ Further, 
enrollees who qualify to make a new plan selection for an applicable 
special enrollment period already must consider this question.
---------------------------------------------------------------------------

    \205\ Calculated based on information in the ``Plan Year 2020 
Qualified Health Plan Choice and Premiums in HealthCare.gov States'' 
report. Available at https://www.cms.gov/CCIIO/Resources/Data-Resources/Downloads/2020QHPPremiumsChoiceReport.pdf.
---------------------------------------------------------------------------

    Finally, in the proposed rule we acknowledged that enrollees may 
lose APTC eligibility and qualify for a special enrollment period due 
to their APTC loss for a reason other than a change in household income 
or tax family size. For example, a currently-enrolled individual or 
household could lose APTC and qualify for the related special 
enrollment period due to an expired inconsistency regarding projected 
annual household income, or because the Exchange has information that 
they are eligible for or enrolled in other qualifying coverage that is 
considered MEC such as most Medicaid coverage, CHIP, or the Basic 
Health

[[Page 24218]]

Program (BHP), through the periodic data matching process described in 
Sec.  155.330(d), and therefore are ineligible for APTC. We sought 
comment on whether stakeholders had concerns with this possibility, and 
on how HHS can help ensure that enrollees who lose eligibility for APTC 
because of failure to provide information to the Exchange to confirm 
their APTC eligibility can understand and take action on steps needed 
to do so. Relatedly, we sought comment on whether Exchanges should 
limit the flexibility proposed in this rule only to enrollees who 
qualify for a special enrollment period because they lost APTC 
eligibility due to a change in household income or tax family size, and 
continue to apply the current rule at 155.420(a)(4)(iii)(A) to 
enrollees who qualify for a special enrollment period because they lost 
APTC for any other reason. We also sought comment on whether such a 
policy would impose significant additional burdens on Exchanges.
    HHS believed that this proposal is unlikely to result in adverse 
selection, and may improve the risk pool by supporting continued health 
insurance enrollment by healthy individuals who would be forced to end 
coverage in response to an increase in premium. However, we requested 
comment on whether there are concerns with permitting newly 
unsubsidized enrollees to change to any plan of a lower metal level to 
help them maintain coverage (for example, permitting an individual to 
change from a gold plan to a bronze plan), or whether we should instead 
only permit an enrollee to change to a plan one metal level lower than 
their current QHP. We also requested comment from issuers on whether 
there are concerns about impacts such as experiencing a decrease in 
premium receipt from enrollees who opt to change to a lower-cost plan, 
or whether they view adverse selection as a possibility. We requested 
comment from Exchanges, in particular, on implementation burden 
associated with this change to current plan category limitations rules, 
including on whether we should instead, to reduce this burden, permit 
current enrollees and currently enrolled dependents who qualify for 
this SEP to change to a plan of any metal level--that is, simply exempt 
the special enrollment periods at Sec.  155.420(d)(6)(i) and (ii) due 
to becoming newly ineligible for APTC from plan category limitations 
altogether. We also requested comment from all stakeholders, including 
those who have or represent individuals with preexisting conditions, on 
whether such a change would significantly increase risk for adverse 
selection.
    Finally, we also considered whether to propose additional 
flexibility to allow enrollees and their dependents who become newly 
eligible for APTC in accordance with paragraph (d)(6)(i) or (ii) to 
change to a QHP of a higher metal level, but we did not propose 
additional plan flexibility for enrollees who become newly eligible for 
APTC. We invited comment on whether we should consider additional 
flexibilities for this population in the future and the anticipated 
impact of such a policy.
    We received public comments on the proposed updates to Exchange 
enrollees newly ineligible for APTC. The following is a summary of the 
comments we received and our responses.
    Comment: Almost all comments on this proposal were supportive of 
this change, explaining that allowing enrollees the flexibility to 
change to a plan of a lower metal level based on a loss of APTC would 
allow more individuals to maintain coverage. Some commenters also noted 
that this proposal could improve the on-Exchange risk pool by 
increasing the likelihood that individuals would maintain coverage in 
spite of losing financial assistance. One commenter requested a 2021 
effective date for this proposal instead of 2022, and two commenters 
requested that HHS implement this proposal as soon as possible. One 
commenter opposed the proposal because they preferred that HHS promote 
continuous coverage by making more financial assistance available to 
consumers rather than by providing certain consumers with the 
flexibility to change to a lower metal level plan. One commenter 
encouraged HHS to bear in mind the risks of adverse selection in 
general, but did not oppose this proposal and noted that it would help 
consumers; this commenter and several others also misunderstood the 
proposal to be for a new special enrollment period for individuals who 
lose financial assistance rather than a change to plan category 
limitations that currently apply to an existing special enrollment 
period.
    No commenters raised the concern that this proposal specifically 
would increase the risk of adverse selection. Several commenters 
supported also allowing enrollees who newly become APTC eligible to 
change to a plan of a higher metal level. Many commenters supported 
allowing individuals who qualify for a special enrollment period based 
on a loss of APTC eligibility to change to a plan of any metal level, 
either to provide enrollees with flexibility to change to the best plan 
for themselves and their families, to make implementation easier for 
State Exchanges, or both. One of these commenters requested that 
instead of applying plan category limitations, HHS require Exchange 
enrollees to provide documents to confirm their SEP eligibility. Some 
commenters supported allowing individuals who lose APTC eligibility to 
change to a plan of a higher or lower metal level rather than just to a 
plan of a lower metal level. Finally, many commenters disagreed with 
the need to require plan category limitations in general, and requested 
that HHS provide Exchanges with flexibility in terms of when or whether 
to implement plan category limitations at all based on considerations 
related to their specific State Exchange's market.
    Response: We are finalizing a modified version of this policy to 
permit Exchange enrollees who lose APTC eligibility to change to a new 
plan at any metal level, and to require that Exchanges implement this 
change no later than January 1, 2024. We agree with commenters that 
allowing enrollees to access a plan at any metal level through the 
existing special enrollment period for those who lose eligibility for 
APTC will significantly decrease Exchange implementation complexity and 
cost, and believe that providing Exchanges with the flexibility to 
implement this change no later than 2024 provides Exchanges with 
sufficient time to account for this change in their operational 
planning. We also agree with commenters who stated that providing more 
flexibility for enrollees who qualify for a special enrollment period 
due to losing APTC will help consumers who lose eligibility for APTC 
during the plan year to stay enrolled in coverage by switching to a new 
QHP that better suits their changed financial situation. While we 
understand general concerns related to adverse selection, we agree with 
commenters that this specific policy does not pose this risk because 
enrollees are likely to access it based on a financial change as 
opposed to a change in their health care needs. We also clarify that 
this policy does not create a new special enrollment period qualifying 
event, but rather is a change to limitations on plan selection that 
apply to an already-existing special enrollment period for Exchange 
enrollees who become newly ineligible for APTC per 45 CFR 
155.420(d)(6)(i) and (ii).
    Additionally, we do not believe that it is necessary to require 
eligible consumers to submit documentation of the change that resulted 
in their loss of APTC eligibility, in part because this special 
enrollment period is triggered

[[Page 24219]]

automatically when consumers attest to the related income or household 
change in the application. That is, there is no separate question 
asking consumers to attest to no longer being APTC eligible. Further, 
as discussed in the 2017 Market Stabilization Rule, we have concerns 
about pending a new enrollment until pre-enrollment verification is 
conducted for current Exchange enrollees; because they would still have 
an active policy, the potential overlap of current, active policies and 
pended new enrollments would cause significant confusion for consumers 
and create burdens on issuers with respect to managing potential 
operational issues.\206\
---------------------------------------------------------------------------

    \206\ 82 FR 18359, https://www.federalregister.gov/d/2017-07712/p-149.
---------------------------------------------------------------------------

    We did not propose removing plan category limitations; however, we 
continue to study potential policies to promote continuous coverage and 
provide consumers with flexibility. Finally, we acknowledge the 
potential benefit of requiring Exchanges to implement this change 
quickly, but we believe that providing Exchanges with flexibility to 
implement it no later than January 1, 2024 strikes an appropriate 
balance between allowing early implementation if possible and providing 
Exchanges with necessary flexibility to plan related system updates 
based on Exchange-specific competing priorities and resources. While 
some Exchanges may be able to implement this new flexibility sooner 
than January 1, 2024, in light of competing priorities such as the need 
to implement changes to calculating financial assistance established in 
the American Rescue Plan Act of 2021, we believe that substantial 
flexibility for Exchanges is appropriate.
    Comment: Several commenters supported the proposal but responded to 
our request for comment on the risk that enrollees changing plans mid-
coverage year might not realize that their out of pocket costs could 
increase if their deductible and other accumulators are re-set by 
noting this is a concern. Some of these commenters requested that HHS 
provide additional education and outreach to help enrollees to make an 
informed decision on whether to change to a less expensive plan even 
though it could require them to meet a new deductible and out-of-pocket 
maximum without taking into account progress they had made towards 
these accumulators in their prior coverage. Specific suggestions from 
commenters included adding pop-up text in the HealthCare.gov 
application for enrollees changing plans through a special enrollment 
period, additional notice content, including in the form of 
infographics, to illustrate the trade-off between a lower cost plan and 
re-set accumulators, and adding help text to encourage special 
enrollment period-eligible enrollees to seek out assistance through 
Find Local Help for assistance with understanding their options. One 
commenter suggested that related help text should appear at the time of 
an APTC-ineligibility determination and should also provide these 
enrollees with the basis for the determination. One commenter asked 
that HHS reiterate in the final rule that issuers have the flexibility 
to waive deductibles for consumers who change mid-year to a plan of a 
different metal level, and one commenter asked that HHS consider 
requiring issuers to transfer progress toward accumulators for 
consumers who change plans through a special enrollment period.
    Response: As discussed in the proposed rule, HHS acknowledges these 
concerns, and will take commenters' suggestions into consideration in 
our efforts to improve the consumer experience through outreach and 
education. We also reiterate here that Marketplace issuers have the 
flexibility to carry over progress towards a previous plan's 
accumulators for enrollees who change to a different plan mid-year with 
the same issuer. However, HHS does not have the authority to require 
that issuers carry over this progress. Issuers must comply with any 
applicable state requirements regarding accumulators.
    Comment: One commenter recommended continuing to apply plan 
category limitations to enrollees who lose APTC due to a failure to 
submit documents to confirm their household income, but to provide the 
additional flexibility to enrollees who lose APTC eligibility for any 
other reason, citing the difficulties of implementing changes to plan 
category limitations for different sub-groups of special enrollment 
period eligible consumers. However, several commenters recommended 
extending the new flexibility to all enrollees who lose APTC 
eligibility, including to those who lose APTC due to failure to resolve 
an inconsistency related to household income. One of these commenters 
noted that, in addition to a change in household income or a mid-year 
decision to no longer claim a household member as a tax dependent, 
enrollees may lose APTC eligibility if a family member is offered 
employer-sponsored coverage that is considered affordable and the 
household loses APTC eligibility as a result. Commenters did not 
express concerns about the possibility, as discussed in the proposed 
rule, that this policy would allow or encourage individuals to change 
to a plan of a lower metal level instead of submitting documentation to 
resolve an inconsistency to maintain or re-gain their APTC eligibility. 
However, several commenters expressed concerns about the challenges 
consumers may face related to submitting documents to resolve an 
inconsistency and provided recommendations for HHS to improve education 
and outreach related to document submission. One commenter asked that 
HHS provide more direct outreach, such as outbound calls and referrals 
to an enrollment assister, to consumers who fail to resolve 
inconsistencies and then select lower cost plans to ensure that these 
enrollees understand their options. Another commenter stated that 
individuals who lose APTC based on incorrect or out-of-date income 
information must have a chance to challenge their determination, and 
suggested that their special enrollment period not expire until 60 days 
after they receive notice of a final determination of APTC 
ineligibility. One commenter suggested that in addition to reminding 
enrollees of the requirement to update their application with changes 
including to household income, that HHS proactively notify enrollees 
whose income may have changed based on information from a data source 
that HHS uses to verify income information.
    Response: We agree with commenters that limiting this change in 
plan category limitations based on reasons why existing enrollees lose 
APTC eligibility would be burdensome to implement, and may prevent some 
enrollees from benefitting from the ability to change to a new plan 
based on a change in their financial situation. We also agree that 
individuals who lose APTC eligibility due to a family member's offer of 
employer-sponsored coverage may benefit from being able to change to a 
plan of a different metal level if it would be difficult for them to 
afford to enroll in the employer coverage along with their family 
member. Further, we believe that for most enrollees, the benefit of 
receiving APTC combined with extensive outreach that HHS conducts for 
individuals who must submit documentation to confirm their household 
income sufficiently motivates these individuals to submit necessary 
documentation. Additionally, we clarify that applicants to Exchanges on 
the Federal platform who must submit documentation to confirm their 
household income are first notified of

[[Page 24220]]

this requirement in the eligibility notice they receive upon completing 
their application, and that individuals who do not submit documents, or 
who submit documents that do not provide enough information to confirm 
the household income that they attested to on their application, 
receive a series of reminder notices, calls, and emails.\207\ We 
continue to investigate opportunities to improve this outreach.
---------------------------------------------------------------------------

    \207\ Sample eligibility and reminder notices can be found at 
https://marketplace.cms.gov/applications-and-forms/notices, and an 
overview of HHS outreach to individuals who must submit 
documentation to confirm their household income or other information 
can be found starting on slide 15 of this presentation: https://marketplace.cms.gov/technical-assistance-resources/complex-cases-data-matching.pdf.
---------------------------------------------------------------------------

b. Special Enrollment Periods--Untimely Notice of Triggering Event
    We proposed to allow a qualified individual, enrollee, or dependent 
who did not receive timely notice of a triggering event and was 
otherwise reasonably unaware that a triggering event occurred to select 
a new plan within 60 days of the date that he or she knew, or 
reasonably should have known, of the occurrence of the triggering 
event. We also proposed to allow such persons to choose the earliest 
effective date that would have been available if he or she had received 
timely notice of the triggering event. Finally, we proposed conforming 
amendments to Sec.  147.104(b)(2)(ii) so that these proposals would 
also apply to off-Exchange individual health insurance coverage. We are 
finalizing this policy as proposed.
    In accordance with Sec.  155.410(a)(2), an Exchange may allow 
qualified individuals and enrollees to enroll in or change coverage 
only during the annual open enrollment period as specified in Sec.  
155.410(e), and during special enrollment periods as specified in Sec.  
155.420. An Exchange must allow a qualified individual or enrollee to 
enroll in or change from one qualified health plan to another if one of 
the triggering events described in Sec.  155.420(d) occurs. 
Furthermore, under Sec.  155.420(c)(1), a qualified individual or 
enrollee generally has until 60 days after the date of the triggering 
event to select a qualified health plan. Section 155.420(c)(2) and (3), 
provide exceptions to this general rule under which a qualified 
individual or enrollee may enroll prior to the date of a triggering 
event. Section 155.420(c)(4) provides a final exception under which a 
qualified individual or enrollee may have less than 60 days to enroll. 
Coverage effective dates are outlined in Sec.  155.420(b) and vary 
depending on the special enrollment period triggering event, but in all 
cases are either on or after the date of the triggering event.
    Because the time period during which a qualified individual may 
enroll through a special enrollment period is determined by the 
triggering event, a qualified individual who does not know the 
triggering event has occurred may not have sufficient time to enroll in 
coverage. Generally, the triggering events described in Sec.  
155.420(d) and related plan selection timelines under Sec.  155.420(c) 
are premised on the assumption that an individual will become aware of 
a triggering event in time to make a plan selection within the time 
allotted under Sec.  155.420(c). For example, the rules anticipate that 
qualified individuals or enrollees will receive timely notice of the 
day they will lose employer-sponsored coverage or the day they will 
gain a dependent such that 60 days is ample time for the individual to 
apply for enrollment through an applicable special enrollment period 
and select a plan. However, our experience operating the Federally-
facilitated Exchange has shown that there are circumstances in which an 
individual reasonably may not be aware of an event that triggers 
special enrollment period eligibility until after the triggering event 
has occurred. This change will allow a qualified individual, enrollee, 
or dependent who did not receive timely notice of a triggering event or 
was otherwise reasonably unaware that a triggering event occurred, to 
qualify for an applicable special enrollment period and select a new 
plan within 60 days of the date that he or she knew, or reasonably 
should have known, of the occurrence of the triggering event. This 
proposal will also allow the qualified individual, enrollee, or 
dependent to choose the earliest effective date that would have been 
available if he or she had received timely notice of the triggering 
event.
    For example, an employer fails to pay its share of premium for an 
insured employer-sponsored health plan and enters a grace period 
beginning April 1st, which will expire on May 31st. Because the 
employer intends to satisfy its premium liability before the end of the 
grace period, the employer does not notify participants and 
beneficiaries in the plan of the non-payment or the risk of termination 
of its employer-sponsored coverage retroactive to April 1st. The 
employer is does not timely satisfy the premium debt, and the issuer of 
the employer-sponsored health coverage terminates coverage for the 
participants and beneficiaries retroactively to April 1st. Neither the 
employer nor the issuer of the employer-sponsored health plan notify 
the participants and beneficiaries of the beginning of the grace period 
or that coverage would be terminated as of April 1st. On July 10th, the 
participants and beneficiaries first receive notice from the issuer 
that their coverage terminated as of April 1st. In accordance with the 
circumstances described in 26 CFR 54.9801-6(a)(3)(i), due to the 
employer's failure to timely pay premiums, the participants and 
beneficiaries of the employer-sponsored health plan lost eligibility 
for the coverage and are eligible for the special enrollment period 
provided in Sec.  155.420(d)(1)(i). Per paragraph (d)(1)(i), the 
triggering event for special enrollment periods due to loss of minimum 
essential coverage is the last day the consumer would have coverage 
under his or her previous plan or coverage. But in this scenario, 
affected participants and beneficiaries, through no fault of their own, 
were not aware of their loss of minimum essential coverage until more 
than 60 days following the last day they had coverage. Thus, without 
the measure we proposed here, the participants and beneficiaries in 
this example would not be able to use the special enrollment period at 
paragraph (d)(1)(i), because more than 60 days had passed since the 
relevant triggering event without their having selected a new plan. 
Some participants and beneficiaries of employer-sponsored health plans 
are experiencing similar circumstances during the COVID-19 public 
health emergency and sought or seek individual health insurance 
coverage through the FFEs, exposing a perceived gap in current special 
enrollment period rules.
    Another circumstance in which an individual may not be aware that a 
triggering event occurred involves technical errors that block an 
individual from enrolling in coverage through an Exchange. Section 
155.420(d)(4) specifies that an individual is eligible for a special 
enrollment period if, among other things, their erroneous non-
enrollment in a qualified health plan was due to an error on the part 
of the Exchange or one of its agents. In this case, the error itself is 
the triggering event, and the date it occurs serves as the beginning of 
the special enrollment period. However, as in the case of the loss of 
employer-sponsored coverage discussed above, an individual may not be 
aware that an error has occurred. In some cases, the Exchange may not 
be aware that a technical error has

[[Page 24221]]

occurred which prevented individuals from enrolling until a subsequent 
investigation is conducted. This process may take several weeks, during 
which time an impacted individual may not be aware that they were 
unable to enroll due to an error and therefore qualify for a special 
enrollment period. There may even be cases in which an Exchange does 
not identify the issue and the impacted population and notify them 
until more than 60 days after the triggering event occurred.
    Therefore we proposed to amend Sec.  155.420 by adding paragraph 
(c)(5) to specifically provide that if a qualified individual, 
enrollee, or dependent does not receive timely notice of an event that 
triggers eligibility for a special enrollment period under this 
section, and otherwise was reasonably unaware that a triggering event 
occurred, the Exchange must allow them to select a new plan within 60 
days of the date that they knew, or reasonably should have known, of 
the occurrence of the triggering event. Additionally, we proposed to 
add paragraph (b)(5) to clarify that when a qualified individual, 
enrollee, or dependent did not receive timely notice of an event that 
triggers eligibility for a special enrollment period, the Exchange must 
allow the such persons the option to choose the earliest coverage 
effective date for the triggering event under paragraph (b) that would 
have been available if they had received timely notice of the 
triggering event. In addition, we proposed that the Exchange must also 
provide the qualified individual, enrollee or dependent the option to 
choose the effective date that would otherwise be available under the 
other provisions in paragraph (b).
    Lastly, we proposed a conforming edit to Sec.  147.104(b)(2) that 
would incorporate these amendments by reference in the regulations 
governing limited open enrollment periods for off-Exchange coverage, so 
that these proposed special enrollment rules would apply to issuers of 
non-grandfathered individual health insurance, both on and off-
Exchange. We also separately proposed a change to Sec.  
147.104(b)(2)(ii) to clarify how the special enrollment period in Sec.  
155.420(d)(4) applies off-Exchange. This change is discussed in further 
detail in the preamble to part 147.
    We sought comment on these proposals.
    We received public comments on the proposed updates to Special 
Enrollment Periods--Untimely Notice of Triggering Event. The following 
is a summary of the comments we received and our responses.
    Comment: All commenters, except for one, expressed support for the 
proposal, explaining that it provides flexibility for situations in 
which a consumer was reasonably unaware that a special enrollment 
period triggering event occurred. Several commenters stated that this 
proposal is especially appropriate given the ongoing economic downturn 
and COVID-19 pandemic, which will increase the number of consumers 
without coverage. Others stated that it will help promote continuity of 
coverage, and reduce the uninsured population. Several commenters 
stated that the proposal would help reduce challenges with special 
enrollment period enrollment, such as a lack of clear messaging and 
insufficient time to select an appropriate plan. A few commenter stated 
that the proposal will allow more people to enroll in special 
enrollment periods.
    Response: We agree that this proposal will have a positive impact 
by providing consumers who were reasonably unaware of a special 
enrollment period triggering event with an opportunity to enroll, as 
well as the other benefits noted by commenters. As a result, we are 
finalizing this policy as proposed.
    Comment: One commenter opposed the proposal, which they 
characterized as establishing a new special enrollment period, absent a 
requirement that enrollees provide evidence of the lack of timely 
notice of a special enrollment period triggering event. This commenter 
expressed concern that there are insufficient mechanisms currently to 
verify the lack of timely notice, and that the proposal would create an 
open-ended, year-round opportunity to enroll in coverage, thus 
increasing the likelihood of adverse selection.
    Response: We clarify that the proposed rule does not establish new 
circumstances through which a special enrollment period would be 
available, but simply provides additional flexibility regarding when 
existing special enrollment periods can be accessed in the relatively 
rare circumstances in which a consumer was reasonably unaware that a 
triggering event occurred. The proposed rule thus would not create an 
open-ended special enrollment period through which anyone could enroll, 
and only consumers who attest to being reasonably unaware that they 
experienced a special enrollment period triggering event would be 
eligible to avail themselves of this opportunity. We also note that, 
for Exchanges on the Federal platform, some enrollments under this 
authority will be subject to special enrollment period verification, 
though there may be others that require caseworker review. Finally, we 
note that we will continue to monitor the implementation of this 
provision and propose additional policy and operational updates, 
including expanding the use of special enrollment period verification, 
if necessary.
    Comment: A few commenters expressed support for the proposed rule, 
but requested that HHS limit enrollments under this authority to 
prospective coverage effective dates, and not allow retroactive 
coverage effective dates. These commenters stated that if retroactive 
coverage effective dates are permitted, the risk of adverse selection 
and higher premiums for all enrollees will increase. One of these 
commenters additionally stated that allowing retroactive coverage 
effective dates makes it more difficult for issuers to contest improper 
claims. Another commenter expressed concern regarding the burden of 
providing retroactive coverage for State Exchanges, and about whether 
consumers enrolling with a retroactive coverage effective date would be 
required to pay all past due premiums at once, and whether this would 
lead to a gap in coverage if they were unable to do so. This commenter 
requested that we clarify the options available to consumers in this 
scenario if they are unable to pay all past due premiums. Several other 
commenters expressed support for providing consumers with the earliest 
effective date that would otherwise have been available to them had 
they been aware of the triggering event, stating that this will help 
maintain continuity of coverage.
    Response: While we acknowledge the concerns raised by commenters 
related to potential adverse selection and increased premiums, we 
believe this risk to be low due to the rare circumstances in which a 
consumer would not be notified or become reasonably aware of a 
triggering event until after it has occurred. We further anticipate 
that instances of consumers experiencing significant delays in 
notification or awareness of a triggering event are even rarer, thus 
minimizing the overall risk of adverse selection and burden on State 
Exchanges to implement. Regarding the concern of one commenter that 
consumers may not be able to afford to pay all past due premiums if 
they choose a retroactive coverage effective date, we note that 
consumers have the option of choosing a prospective coverage effective 
date instead.
    Comment: Several commenters expressed support for the proposal, but 
requested that, to prevent abuse by consumers and agents and brokers 
and

[[Page 24222]]

to avoid establishing an open-ended opportunity for enrollment, HHS 
narrow the scope of the proposal to only cover certain special 
enrollment periods. A few of these commenters requested that HHS limit 
the proposal to scenarios in which an individual with employer-
sponsored coverage was not informed by their employer of the loss of 
coverage, such as the first example discussed in the preamble of the 
proposed rule. These commenters also stated that HHS already has the 
authority to provide flexible effective dates for special enrollment 
periods due to error of the Exchange, and so the flexibility provided 
by the proposal rule is unnecessary for these situations. One commenter 
requested that HHS limit the proposal to situations in which an 
individual with employer-sponsored coverage was not informed by their 
employer of the loss of coverage, plus scenarios in which an individual 
is unaware of the date they gained a dependent. Another commenter 
requested that HHS apply parameters to the proposal, such as limiting 
the duration to a specific time period such as a public health 
emergency, or limiting it to the examples discussed in the preamble of 
the proposed rule.
    Response: Although we appreciate the concerns raised by commenters, 
we are finalizing the rule as proposed. Although some commenters state 
that HHS already has authority under the exceptional circumstances or 
error of Exchange special enrollment periods to provide enrollees with 
flexible effective dates, we note that there are other special 
enrollment period triggering events, not explicitly discussed as 
examples in the proposed rule, of which an enrollee may be reasonably 
unaware, and for which there is no current authority to provide for an 
enrollment outside the normal window of availability. Furthermore, the 
exceptional circumstances special enrollment period authority noted by 
commenters is subject to each Exchange's reasonable interpretation 
regarding what qualifies as ``exceptional.'' The proposed rule, by 
contrast, establishes a clear mandate to allow enrollees who were 
reasonably unaware that a special enrollment period triggering event 
occurred to use the date they became aware as the triggering event, 
which will provide transparency and consistency in implementation of 
this rule across Exchanges and for individual health insurance 
coverage. Finally, we note that, because the proposal was intended to 
establish a way to make whole consumers who have been harmed through no 
fault of their own, limiting its availability to certain special 
enrollment period types would be inconsistent with the purpose of this 
proposed rule.
    Comment: A few commenters expressed support for the proposal, but 
requested that enrollments under this authority be subject to document-
based verification to prevent abuse by consumers and agents and 
brokers.
    Response: On Exchanges on the Federal platform, some enrollments 
under this authority will be subject to special enrollment period 
verification, though others will likely require caseworker review. 
Because many State Exchanges and off-Exchange issuers already conduct 
special enrollment period verification, HHS did not set explicit 
requirements for State Exchanges or off-Exchange issuers regarding 
special enrollment period verification for enrollments under this 
provision. Therefore, we cannot say with certainty whether these 
entities would subject such enrollments to verification.
    Comment: Two commenters requested that HHS implement this proposal 
sooner than the scheduled January 1, 2022 implementation date.
    Response: We note that this provision will become effective on the 
effective date of this rule, and thus the proposal will be implemented 
sooner than January 1, 2022.
    Comment: Two commenters, noting the difficulties that some 
consumers face in understanding special enrollment period eligibility 
and gathering supporting documentation within the 60-day window, 
expressed support for providing consumers with a window of 60 days from 
the date they are notified of special enrollment period eligibility to 
enroll.
    Response: Although we appreciate the concerns raised regarding the 
ability of consumers to understand and comply with the process for 
enrolling in a special enrollment period within the 60-day window, 
establishing a policy of providing consumers with a 60-day window from 
the date they become aware of special enrollment period eligibility 
would be inconsistent with existing rules for special enrollment period 
eligibility. Currently, eligibility for special enrollment periods on 
Exchanges on the Federal platform and many State Exchanges is based on 
the occurrence of a triggering event, such as a loss of minimum 
essential coverage, rather than the date an enrollee becomes aware of 
their special enrollment period eligibility. Therefore, to maintain 
consistency in special enrollment period operations across these 
Exchanges, we believe it is appropriate to establish the date an 
enrollee becomes aware of the occurrence of a triggering event as the 
triggering event, rather than the date they become aware of their 
eligibility for a special enrollment period.
    Comment: One commenter requested that HHS broadly interpret the 
phrase ``reasonably unaware'' in the regulation text for this proposed 
rule, and stated that HHS should not second-guess a consumer's 
statement that they were unaware of a special enrollment period 
triggering event. Another commenter requested that HHS explain the 
meaning of this phrase, noting that if interpretation is left up to 
those providing enrollment assistance, it would be burdensome for State 
Exchange operations and require processes to individually advise 
consumers on the date that they should have known about a special 
enrollment period triggering event.
    Response: HHS appreciates the concerns raised regarding how the 
phrase ``reasonably unaware'' in the regulation text will be 
interpreted. Although we do not provide an exact definition of this 
phrase, we note the two examples included in the preamble of the 
proposed rule, which describe scenarios in which an individual was 
reasonably unaware that a special enrollment period triggering event 
had occurred. In addition, to provide further clarity we include the 
following example, which illustrates a situation in which a consumer 
would not have been reasonably unaware that a special enrollment period 
triggering event occurred. The examples in the preamble to the proposed 
rule make clear that interpretation of the phrase ``reasonably 
unaware'' is not entirely up to individuals providing enrollment 
assistance. In addition, we also note that the legal standard of what 
constitutes a reasonable person provides objectivity to whether a 
consumer in this scenario would be reasonably unaware.
    Example: A consumer visits HealthCare.gov on December 1 (during the 
annual open enrollment period), and while filling out an application, 
is informed that they may be eligible for Medicaid. The consumer then 
fills out an application with their state Medicaid office. On February 
3 of the following year, they receive a letter from the state Medicaid 
office informing them that they are ineligible for Medicaid, but fail 
to open the letter. On April 1 the consumer finds the unopened letter 
and reads it, and then attempts to enroll in a qualified health plan on 
HealthCare.gov, attesting to eligibility for the Medicaid denial 
special

[[Page 24223]]

enrollment period based on the February 3 letter informing them of 
their ineligibility for Medicaid. The consumer failed to enroll in the 
special enrollment period they would have been eligible for under 45 
CFR 155.420(d)(11)(i) within the allotted 60-day window because they 
were unaware of the triggering event, in this case the determination of 
ineligibility for Medicaid on February 3, when it occurred. However, 
they are not eligible to avail themselves of the provision in Sec.  
155.420(c)(5) because, had they opened the letter informing them of 
their ineligibility for Medicaid within a reasonable period of time 
after receiving it, they would have been made aware of the occurrence 
of a special enrollment period triggering event, and thus they were not 
reasonably unaware that one had occurred.
    Comment: One commenter requested that HHS discuss whether consumers 
will be able to access this special enrollment period through 
HealthCare.gov, which they note would be preferable to enrollments 
through the call center.
    Response: Although enrollees under this authority may be able to 
enroll using the application on HealthCare.gov, there are likely to be 
cases in which enrollees must access the special enrollment period they 
are eligible for through the Marketplace Call Center or a caseworker.
    Comment: One commenter expressed support for the proposal, and also 
asked that the Department of Labor consider implementing this proposal 
for the group insurance market as well.
    Response: HHS does not have the authority to change Department of 
Labor regulations, and so we are unable to finalize such changes. We 
note that the Department of Labor regulates group health plans under 
the Employee Retirement Income Security Act of 1974 (ERISA), and that 
HHS regulates the group health insurance market. We did not propose to 
apply this provision to the group health insurance market, and will 
therefore not finalize such a provision here. However, we will continue 
to monitor this issue and propose changes related to HHS regulations 
for the group health insurance market in the future, if appropriate.
    Comment: One commenter expressed support for the proposal, but also 
expressed concern regarding the potential for unintentional loss of 
dental coverage as a result of changes in other health coverage, for 
example if a consumer enrolls in both a qualified health plan and 
stand-alone dental plan, but due to an error of the Exchange was 
prevented from enrolling in the stand-alone dental plan. They request 
that HHS allow consumers enrolling under the authority in the proposed 
rule to also select a dental plan, and suggest that this could be 
accomplished by removing the link between qualified health plans and 
stand-alone dental plans on the Federally-facilitated Exchanges.
    Response: We appreciate the concern raised regarding the potential 
impact of the proposed rule on dental insurance, and note that nothing 
would prevent a consumer from enrolling in a stand-alone dental plan 
under the authority in the proposed rule. For this reason we believe 
that removing the link between qualified health plans and stand-alone 
dental plans on the Federally-facilitated Exchanges is not necessary, 
but we will continue to monitor this issue and propose changes in the 
future if necessary.
    Following review of the comments, we are finalizing this policy as 
proposed.
c. Cessation of Employer Contributions or Government Subsidies to COBRA 
as Special Enrollment Period Trigger
    The Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA) 
\208\ (Pub. L. 99-272, April 7, 1986) provides for a temporary 
continuation of group health coverage following, among other 
circumstances, employees' separation from an employer, for reasons 
other than gross misconduct, in instances where such separation would 
otherwise cause termination of coverage. Although employees who elect 
to receive COBRA continuation coverage may be required by their former 
employer to pay their former employer's share of the premiums as well 
as their own,\209\ some employers pay all or a portion of their former 
employee's premium for part or all of the COBRA coverage period. In 
addition, government entities will sometimes subsidize COBRA 
continuation coverage premiums, whether as a direct payment or via a 
third party such as an employer.
---------------------------------------------------------------------------

    \208\ https://www.dol.gov/sites/dolgov/files/EBSA/about-ebsa/our-activities/resource-center/faqs/cobra-continuation-health-coverage-consumer.pdf.
    \209\ Individuals electing COBRA may also be required by their 
former employer to pay a 2 percent administrative fee. See https://www.dol.gov/sites/dolgov/files/EBSA/about-ebsa/our-activities/resource-center/faqs/cobra-continuation-health-coverage-consumer.pdf.
---------------------------------------------------------------------------

    In accordance with the policy currently in place on the Exchanges 
on the Federal platform, we proposed to amend Sec.  155.420(d)(1) to 
state that the complete cessation of employer contributions for COBRA 
continuation coverage serves as a triggering event for special 
enrollment period eligibility. We are instead finalizing this policy 
under new paragraph (d)(15), rather than in paragraph (d)(1)(v) as we 
proposed. We are also finalizing text providing that the special 
enrollment period will be available when subsidies from a government 
entity completely cease.\210\ The triggering event for this special 
enrollment period is the last day of the period for which COBRA 
continuation coverage was paid for or subsidized, in whole or in part, 
by an employer or a government entity.
---------------------------------------------------------------------------

    \210\ Because employers are not required to charge a 2 percent 
administrative fee to individuals who elect COBRA, we do not include 
this fee in the definition of ``employer contributions.'' For 
purposes of this section, if an individual enrolled in COBRA 
continuation coverage without employer contributions (so that the 
individual was responsible for 100 percent of the premiums) was not 
required to pay a 2 percent administrative fee, this would not be 
considered an employer contribution for the purposes of the proposed 
special enrollment period.
---------------------------------------------------------------------------

    Exchange regulations at Sec.  155.420(d)(1)(i) provide that when a 
qualified individual or his or her dependent loses minimum essential 
coverage as defined by Sec.  155.20, they gain eligibility for a 
special enrollment period, during which they can enroll in a qualified 
health plan. Paragraph (e) of Sec.  155.420 states that loss of minimum 
essential coverage as described in paragraph (d)(1) includes the 
circumstances listed at 26 CFR 54.9801-6(a)(3)(i) through (iii). These 
provisions describe conditions under which someone may qualify for a 
special enrollment period for group health plan coverage, including 
paragraphs (a)(3)(i), ``Loss of eligibility for coverage,'' and 
(a)(3)(iii), ``exhaustion of COBRA continuation coverage.'' Exhaustion 
of COBRA coverage is defined in 26 CFR 54.9801-2(4) as cessation of 
COBRA coverage for reasons other than failure of the individual to 
timely pay premiums, and includes coverage ceasing due to ``failure of 
the employer or other responsible entity to remit premiums on a timely 
basis.''
    In implementing special enrollment periods for Exchanges on the 
Federal platform, HHS has provided a loss of minimum essential coverage 
special enrollment period under Sec.  155.420(d)(1)(i) for individuals 
whose COBRA costs change because their former employer completely 
ceases contributions and as a result they must pay the full cost of 
premiums. However, loss of coverage based on complete cessation of 
employer contributions for COBRA coverage might not have been treated 
as a triggering event by issuers of individual health insurance 
coverage off-Exchange or by State Exchanges.

[[Page 24224]]

HHS believes it is important that individuals have access to a special 
enrollment period in the individual market when their former employer 
or a government entity completely ceases contributions or subsidies to 
COBRA continuation coverage, because the cost of COBRA continuation 
coverage premiums can be substantial, rendering this type of coverage 
unaffordable for many people to whom it would be available.\211\ 
Ensuring that this special enrollment period is widely available will 
help promote continuity of coverage for those who cannot maintain their 
COBRA continuation coverage without contributions or subsidies from 
their employer or a government entity. HHS therefore proposed to make 
this special enrollment period available throughout the individual 
market.
---------------------------------------------------------------------------

    \211\ https://www.kff.org/private-insurance/issue-brief/key-issues-related-to-cobra-subsidies/.
---------------------------------------------------------------------------

    We proposed to amend Sec.  155.420 by adding paragraph (d)(1)(v) 
stating that a special enrollment period is triggered when a qualified 
individual or his or her dependent is enrolled in COBRA continuation 
coverage for which an employer is paying all or part of the premiums, 
and the employer completely ceases its contributions, with the 
triggering event being the last day of the period for which COBRA 
continuation coverage is paid for, in whole or in part, by the 
employer. We are instead finalizing proposed paragraph (d)(1)(v) as 
(d)(15), and in addition we are also finalizing a change to (e)(1) to 
explicitly exclude (d)(15). In the preamble to the proposed rule, we 
clarified that the triggering event for this special enrollment period 
would be based on loss of employer contributions to COBRA continuation 
coverage, rather than the loss of coverage itself. Thus, eligibility 
for this special enrollment period does not depend on loss of COBRA 
coverage, as illustrated by the examples we included. However, proposed 
paragraph (d)(1)(v), like the rest of paragraph (d)(1), would have been 
subject to paragraph (e), which states that loss of coverage excludes 
voluntary termination of coverage, and (e)(1), which states that loss 
of coverage does not include failure to pay premiums on a timely basis, 
including COBRA premiums. Although new paragraph (d)(15) will not be 
subject to the provisions in (e), we are concerned that stakeholders 
may still be uncertain about whether individuals who voluntarily end 
COBRA continuation coverage or have such coverage terminated following 
a loss of employer contributions or government subsidies would still be 
eligible for this special enrollment period, given the limitations 
imposed by paragraph (e)(1). Therefore, we are finalizing proposed 
paragraph (d)(1)(v) as (d)(15), which is not subject to paragraph (e). 
In addition, we are also finalizing a change to paragraph (e)(1) to 
explicitly exclude the special enrollment period trigger in paragraph 
(d)(15), making clear that individuals who voluntarily end COBRA 
continuation coverage or have such coverage terminated following a loss 
of employer contributions or government subsidies are still eligible 
for this special enrollment period, and to use the term ``COBRA 
continuation coverage'' consistently.
    Similar to the special enrollment period for termination of 
employer contributions to employer-sponsored coverage at 26 CFR 
54.9801-6(a)(3)(ii), we proposed that the triggering event is the last 
day of the period for which COBRA continuation coverage is paid for, in 
part or in full, by an employer. Furthermore, we proposed to clarify 
that complete cessation of employer contributions toward employer-
sponsored continuation coverage under state mini-COBRA laws \212\ also 
serves as a special enrollment period triggering event. These changes 
would make explicit HHS's current policy with regard to the Exchanges 
on the Federal platform, and would ensure that individual health 
insurance coverage sold off-Exchange and through State Exchanges align 
with it. In addition, establishing paragraph (d)(15) to explicitly 
include complete cessation of employer contributions and government 
subsidies to COBRA continuation coverage as a special enrollment period 
triggering event will mitigate confusion among employers and employees, 
as well as other stakeholders, about their options regarding COBRA 
continuation coverage and special enrollment period eligibility.
---------------------------------------------------------------------------

    \212\ https://www.dol.gov/sites/dolgov/files/EBSA/about-ebsa/our-activities/resource-center/faqs/cobra-continuation-health-coverage-consumer.pdf.
---------------------------------------------------------------------------

    Similar to other special enrollment periods based on loss of 
minimum essential coverage, in the Exchanges, this special enrollment 
period would be subject to the provisions in paragraph (a)(4)(iii)(B) 
and (C), which allow dependents and non-dependent qualified individuals 
who qualify for a special enrollment period to be added to the QHP of a 
household member who is already enrolled in Exchange coverage, or to 
enroll separately in a plan of any metal level. We also proposed that 
the Exchange must provide the qualified individual, enrollee, or 
dependent the effective date that would otherwise be available pursuant 
to the other provisions at paragraph (b)(2)(iv). To ensure that this 
provision applies to new paragraph (d)(15), we are also finalizing 
changes to paragraph (b)(2)(iv) to include paragraph (d)(15) in the 
list of special enrollment periods that are subject to the paragraph. 
In addition, we proposed that an individual eligible for this special 
enrollment period would have 60 days before or after the triggering 
event (in this case, the last day for which the qualified individual or 
dependent has COBRA continuation coverage to which an employer or 
governmental entity is contributing) to select a qualified health plan. 
Therefore we are also finalizing changes to paragraph (c)(2) to include 
new paragraph (d)(15). We also proposed that this special enrollment 
period, which would be incorporated by reference in the guaranteed 
availability regulations at Sec.  147.104(b)(2), apply with respect to 
individual health insurance coverage offered through and outside of an 
Exchange.
    To help clarify the circumstances that would trigger the proposed 
special enrollment period, we included the following example:
    Example 1: An individual is laid off from a job on June 1, and 5 
days later enrolls in COBRA continuation coverage for which the 
employer pays 100 percent of the premiums (the employer does not 
require payment of a 2 percent administrative fee). On September 3 of 
that year, the employer informs the individual that it is completely 
terminating contributions to the individual's COBRA continuation 
coverage as of September 30, and beginning on October 1, the individual 
will be responsible for 100 percent of the COBRA continuation coverage 
premiums. As a result, the individual decides to end COBRA coverage 
effective October 1. Because September 30 is the last day for which the 
individual had COBRA continuation coverage for which the employer was 
contributing, the individual has 60 days before and after September 30 
(in this case, through November 29) to select an individual market plan 
through a special enrollment period.
    In addition to this proposal, HHS also considered addressing 
situations in which an employer reduces, but does not completely cease, 
its contributions for COBRA continuation coverage. In particular, we 
considered adding to proposed paragraph Sec.  155.420(d)(1)(v) a 
provision that a reduction of employer contributions to COBRA 
continuation coverage would also serve as a special enrollment period 
trigger. We also sought comment on whether HHS

[[Page 24225]]

should also adopt a threshold for the level of reduction of employer 
contributions to COBRA continuation coverage that would be necessary to 
trigger the special enrollment period. However, we are not finalizing 
this policy.
    Lastly, we note that in addition to employer contributions to COBRA 
continuation coverage, COBRA coverage is sometimes subsidized by 
government entities as well, either directly or through a third party 
such as an employer.\213\ As noted in the preamble to the proposed rule 
and earlier in this preamble, HHS believes it is important that 
individuals have access to a special enrollment period in the 
individual market when contributions to COBRA continuation coverage 
cease, because the cost of COBRA continuation coverage premiums are 
substantial, rendering this type of coverage unaffordable for many 
people to whom it would be available. This issue applies equally to 
cessation of employer contributions and cessation of government 
subsidies. As with employer contributions to COBRA continuation 
coverage, providing individuals with a special enrollment period when 
subsidies from a government entity completely cease will promote 
continuity of coverage among those who could not maintain their 
coverage without such subsidies. Therefore, we are also finalizing in 
new paragraph Sec.  155.420(d)(15) the provision that a special 
enrollment period is triggered when subsidies from a governmental 
entity to COBRA continuation coverage, whether paid directly or through 
a third party, completely cease. The triggering event is the last day 
of the period for which COBRA continuation coverage is paid for or 
subsidized, in whole or in part, by an employer or government entity.
---------------------------------------------------------------------------

    \213\ For example, the American Rescue Plan Act of 2021 provides 
individuals enrolled in COBRA continuation coverage with subsidies 
that cover 100 percent of premiums through September 30, 2021.
---------------------------------------------------------------------------

    We also provide the following example to illustrate how the special 
enrollment period would work with regard to government subsidies of 
COBRA continuation coverage premiums.
    Example 2: Same scenario as in the first example, except that, as 
under the American Rescue Plan Act of 2021, the COBRA continuation 
coverage the individual is receiving is fully subsidized by the federal 
government, so that the individual does not have to pay any portion of 
the COBRA premium. The federal subsidy is set to expire on September 
30, and as a result, beginning October 1 the individual will be 
responsible for the full amount of the COBRA continuation coverage 
premiums. The individual decides to end their coverage effective 
October 1, and as a result will have 60 days before and after the last 
day for which they have COBRA continuation coverage with federal 
subsidies (in this case, through November 29) to enroll in individual 
health insurance coverage through a special enrollment period.
    We received public comments on the proposed updates to cessation of 
employer contributions to COBRA as special enrollment period trigger. 
The following is a summary of the comments we received and our 
responses.
    Comment: No commenters opposed this proposal, and many supported 
it, explaining that codifying this special enrollment period in 
regulation would enhance transparency regarding the availability of 
this special enrollment period on Exchanges on the Federal platform, 
and mitigate confusion among employers and employees about their 
options regarding COBRA continuation coverage and special enrollment 
period eligibility. Several commenters agreed that, since consumers who 
lose employer contributions to COBRA continuation coverage face a 
financial calculation that is different than the one they made when 
originally enrolling in COBRA coverage, a special enrollment period is 
appropriate. Several others stated that this proposal is especially 
appropriate given the ongoing economic downturn and COVID-19 pandemic. 
Other commenters stated that this proposal will help promote continuity 
of coverage, and noted that this is especially important given that 
individuals with COBRA are more likely to have higher medical expenses. 
A few commenters stated that this special enrollment period is 
especially appropriate given the limited options faced by consumers who 
choose to maintain their COBRA continuation coverage once employer 
contributions end. Another agreed that it is important to provide 
flexibility for consumers who are in a situation over which they have 
no control. One commenter stated that this special enrollment period is 
especially important for individuals with chronic health conditions, 
such as HIV. Another commenter noted that special enrollment periods 
such as this provide a critical safety net for consumers outside of the 
annual open enrollment period. Another stated that the proposed rule 
would likely encourage employers to assist laid-off workers with 
contributions to COBRA. Finally, one commenter stated that the proposal 
will have the beneficial effect of allowing more individuals to enroll 
through special enrollment periods.
    Response: We agree that the proposed changes would enhance 
transparency and mitigate confusion regarding an existing policy of the 
Exchanges on the Federal platform and options for consumers regarding 
special enrollment period eligibility, in addition to the other 
benefits noted by commenters. Accordingly, we are finalizing this 
policy as proposed (but with the additional provision regarding 
government subsidies).
    Comment: Several commenters expressed support for the proposal, and 
in addition supported designating partial reductions in employer 
contributions to COBRA continuation coverage as a special enrollment 
period triggering event. These commenters noted that due to the high 
cost of COBRA continuation coverage, even a partial reduction in 
employer contributions could make such coverage unaffordable for many 
consumers. In addition, they noted that including partial reduction of 
employer contributions as a special enrollment period trigger would 
promote access to health insurance by providing another pathway by 
which individuals can enroll in coverage. Several commenters also 
expressed support for establishing a threshold amount by which employer 
contributions must decrease in order to trigger special enrollment 
period eligibility. A few of these commenters expressed support for 
defining a threshold based on affordability to the consumer. One 
commenter suggested using a threshold of 10 percent as an approximation 
of a material reduction in employer contributions. Another commenter 
noted the IRS' threshold for evaluating affordability of employer-
sponsored coverage of 9.83 percent, which they are concerned may be too 
high for the purposes of COBRA coverage given the financial challenges 
faced by consumers following a loss of employment. Finally, a few other 
commenters opposed establishing a threshold, arguing that it would be 
unnecessarily burdensome to consumers and noting that even partial 
reductions can render COBRA coverage unaffordable. These commenters 
instead supported designating a reduction in employer contributions to 
COBRA of any amount as a special enrollment period triggering event.
    Response: HHS recognizes the concerns raised by commenters 
regarding the high cost of COBRA continuation coverage, even with 
partial employer contributions. However, because the number of COBRA 
enrollees with employer subsidies is already low

[[Page 24226]]

relative to the rest of the individual insurance market,\214\ we 
believe it is likely that situations in which employer contributions to 
COBRA continuation coverage are reduced significantly enough to render 
such coverage unaffordable affect only a very small number of 
consumers. Accordingly, we are not finalizing reduction of employer 
contributions to COBRA continuation coverage as a special enrollment 
period trigger, but will continue to monitor this situation in the 
future.
---------------------------------------------------------------------------

    \214\ https://www.cbo.gov/system/files/2021-02/hEdandLaborreconciliationestimate.pdf.
---------------------------------------------------------------------------

    Comment: Two commenters requested that HHS implement this special 
enrollment period sooner than the scheduled 2022 implementation date.
    Response: We note that the requirement to provide this special 
enrollment period goes into effect on the effective date of this rule, 
which is sooner than the 2022 implementation date.
    Comment: Two commenters expressed support for applying this special 
enrollment period to off-Exchange individual health insurance coverage 
and on State Exchanges. One of these commenters noted that establishing 
more consistent special enrollment period rules on and off-Exchange 
would help reduce the on-Exchange disadvantage.
    Response: We agree that it is appropriate to apply this special 
enrollment period market-wide to individual health insurance coverage, 
including for coverage offered off-Exchange and on State Exchanges, and 
thus we are finalizing this policy as proposed (but with the additional 
provision regarding government subsidies).
    Comment: Two commenters expressed support for the proposal, and 
also suggested that HHS establish a special enrollment period for 
individuals, and their dependents, who voluntarily terminate their 
COBRA coverage, regardless of whether they are receiving employer 
contributions. These commenters also added that not doing so would 
penalize an enrollee who chooses to enroll in COBRA in an effort to 
maintain their coverage. One of the commenters suggested this policy as 
a way of expanding the number of ways in which consumers can enroll in 
Exchange coverage.
    Response: Although we appreciate the concerns raised regarding the 
availability of a special enrollment period for individuals who are not 
receiving employer contributions to COBRA coverage, we do not believe 
that establishing such a special enrollment period is necessary. In 
general, when a consumer has the opportunity to elect COBRA 
continuation coverage, they also will have the opportunity to enroll in 
a qualified health plan on the Exchanges on the Federal platform or a 
State Exchange as well as off-Exchange, as they will likely be eligible 
for a loss of minimum essential coverage special enrollment period. In 
addition, special enrollment periods are generally based on triggering 
events that do not include voluntary termination of coverage, which 
would introduce concerns regarding adverse selection in the individual 
market.
    Comment: One commenter expressed support for the proposal, but 
requested that HHS implement stronger verification mechanisms, such as 
provision of a letter indicating the termination of employer 
contributions to COBRA. This commenter also noted that verification 
would benefit the enrollee by ensuring they do not pay out-of-pocket 
for coverage already covered through employer contributions.
    Response: This special enrollment period has been subject to 
special enrollment period verification on Exchanges on the Federal 
platform, subject to the loss of minimum essential coverage special 
enrollment period attestation. Similarly, many State Exchanges already 
conduct special enrollment period verification. With respect to off-
Exchange enrollments using special enrollment periods, subject to 
applicable state law, issuers may implement reasonable procedures to 
verify eligibility for special enrollment periods, and because these 
Exchanges and issuers are able to determine for themselves whether 
verification is needed, we do not believe it is necessary to require 
them to establish specific verification procedures for this special 
enrollment period.
    Comment: One commenter requested that HHS discuss whether consumers 
will be able to access this special enrollment period through 
HealthCare.gov, which they note would be preferable to enrollments 
through the call center.
    Response: This special enrollment period has been, and will 
continue to be, available to enrollees on Exchanges on the Federal 
platform through the application on HealthCare.gov.
    Comment: One commenter expressed support for the proposal, and 
requested that HHS allow enrollees through this special enrollment 
period to select a plan of any metal level when they enroll.
    Response: Enrollments through this special enrollment period on 
Exchanges on the Federal platform and State Exchanges are subject to 
plan category limitations, including metal level restrictions, under 45 
CFR 155.420(a)(4)(iii). We note, however, that because plan category 
limitations apply only to current Exchange enrollees, consumers 
enrolling through this special enrollment period on an Exchange would 
only be subject to them in situations where they were added to an 
existing policy. Although we appreciate the concern raised regarding 
allowing enrollees to select a plan of any metal level, because we did 
not propose to exempt enrollments through this special enrollment 
period from plan category limitations in the proposed rule, we are not 
finalizing such a change here. However, we will continue to monitor 
this issue in the future. We also note that enrollments in off-Exchange 
coverage are not subject to plan category limitations, and thus 
consumers enrolling through this special enrollment period off-Exchange 
could select a plan of any metal level.
    Comment: One commenter requested that HHS provide resources to make 
the public aware of the opportunity to enroll during a special 
enrollment period when employer contributions to COBRA coverage cease.
    Response: HHS will leverage existing HealthCare.gov content to 
ensure that enrollees are aware of their options regarding cessation of 
employer contributions to COBRA coverage and special enrollment period 
eligibility.
    Comment: One commenter requested that HHS also establish a special 
enrollment period for enrollees who experience a decrease in APTC that 
renders coverage unaffordable to them.
    Response: We appreciate the concerns raised regarding individuals 
who experience a decrease in APTC that renders their coverage 
unaffordable. As described earlier in this section of the preamble, in 
this rule we decided not to finalize a special enrollment period where 
employer contributions to or government subsidies of COBRA coverage are 
reduced but do not completely cease. We will continue to monitor this 
situation in the future, and will consider it for future rulemaking.
    As a result of the comments, we are finalizing this policy as 
proposed, except that we are finalizing proposed paragraph (d)(1)(v) as 
paragraph (d)(15), with the additional provision that cessation of 
government subsidies to COBRA continuation coverage will also result in 
a special enrollment period trigger, and with other conforming changes 
discussed in this section of the

[[Page 24227]]

preamble. However, we are not finalizing the proposal to include 
reduction of employer contributions to COBRA continuation coverage as a 
special enrollment period trigger.
d. Special Enrollment Period Verification
    In 2017, the HHS Market Stabilization Rule preamble explained that 
HHS would implement pre-enrollment verification of eligibility for 
certain special enrollment periods in all FFEs and SBE-FPs and 
encouraged states to do the same in State Exchanges.
    Since 2017, Exchanges on the Federal platform have implemented pre-
enrollment special enrollment period verification for special 
enrollment period types commonly used by consumers to enroll in 
coverage. Consumers who are not already enrolled through the Exchange 
and who apply for coverage through a special enrollment period type 
that requires pre-enrollment verification by the Exchange must have 
their eligibility electronically verified using available data sources, 
or they must submit supporting documentation to verify their 
eligibility for the special enrollment period before their enrollment 
can become effective. As stated in the HHS Marketplace Stabilization 
Rule, special enrollment period verification is only conducted for new 
enrollees due to the potential for additional burden on issuers and 
confusion for consumers if required for existing enrollees.
    In implementing pre-enrollment verifications for special enrollment 
periods in the Market Stabilization Rule, HHS did not establish a 
regulatory requirement that all Exchanges conduct special enrollment 
period verifications, in order to allow State Exchanges with 
flexibility to adopt policies that fit the needs of their state.\215\ 
Currently, all State Exchanges now conduct either pre- or post-
enrollment verification of at least one special enrollment type.
---------------------------------------------------------------------------

    \215\ 82 FR at 18356.
---------------------------------------------------------------------------

    We proposed to amend Sec.  155.420 to add paragraph (f) to require 
all Exchanges to conduct eligibility verification for special 
enrollment periods. Specifically, we proposed to require that Exchanges 
conduct special enrollment period verification for at least 75 percent 
of new enrollments through special enrollment periods for consumers not 
already enrolled in coverage through the applicable Exchange.
    We also proposed that under Sec.  155.315(h), State Exchanges would 
have the flexibility to propose alternative methods for conducting 
required verifications to determine eligibility for enrollment in a QHP 
under subpart D, and to allow State Exchanges to request HHS approval 
for use of alternative processes for verifying eligibility for special 
enrollment periods as part of determining eligibility for special 
enrollment periods under Sec.  155.305(b).
    We sought comment on these proposals. With respect to Special 
Enrollment Period Verification, we sought comment from States about the 
75 percent verification threshold and whether it should be based on 
past year or current year special enrollment period enrollments, 
understanding that unforeseen events may occur that may drive up or 
down enrollments from year-to-year.
    We received public comments on the proposed updates to require 
Exchanges to conduct Special Enrollment Period verification. The 
following is a summary of the comments we received and our responses.
    Comment: Several commenters supported the proposed policy. However, 
the majority of commenters opposed the policy due to the administrative 
burden to consumers and the financial and administrative burden on 
State Exchanges. Several commenters stated that State Exchanges have 
the best understanding of their needs around special enrollment period 
verification and are best able to determine their SEP verification 
strategy and thresholds. Several commenters did not think that CMS 
provided justification for the 75 percent threshold or the policy 
change by citing evidence of a negative risk pool impact, abuse of 
SEPs, or ongoing problems with Exchanges' current practices. A few 
commenters expressed concern that the proposal could negatively affect 
the risk pool by deterring younger and healthier enrollees from 
completing enrollment. One commenter asked for further guidance on the 
flexibility for states and what constitutes alternative means. One 
commenter suggested to waive this requirement until additional research 
can be conducted to ensure that the policy does not create an undue 
burden on individuals. One commenter noted that stricter SEP 
enforcement mechanisms have the potential to improve the risk profile, 
but any requirements regarding SEP enrollment should not be onerous 
enough to reduce participation among those legitimately eligible.
    Response: We agree with commenters who expressed concerns about 
imposing administrative or financial burden on State Exchanges or 
administrative burden on consumers at this time with additional new 
requirements. We estimate that there are only four State Exchanges that 
conduct more limited special enrollment period verification than the 
Exchanges on the Federal platform, but these State Exchanges still 
conduct some form of special enrollment period verification. These also 
include the 3 smallest State Exchanges in terms of numbers enrolled and 
issuer participation. These State Exchanges have reported to HHS that, 
based on regular communications they have with their issuers about 
special enrollment periods, they do not have evidence to suggest there 
is misuse of special enrollment periods occurring.
    Following review of the comments, we are not finalizing this 
proposal.
9. Required Contribution Percentage (Sec.  155.605(d)(2))
    HHS calculates the required contribution percentage for each 
benefit year using the most recent projections and estimates of premium 
growth and income growth over the period from 2013 to the preceding 
calendar year. Accordingly, we proposed the required contribution 
percentage for the 2022 benefit year, calculated using income and 
premium growth data for the 2013 and 2021 calendar years.
    Under section 5000A of the Code, an individual must have MEC for 
each month, qualify for an exemption, or make an individual shared 
responsibility payment. Under Sec.  155.605(d)(2), an individual is 
exempt from the requirement to have MEC if the amount that he or she 
would be required to pay for MEC (the required contribution) exceeds a 
particular percentage (the required contribution percentage) of his or 
her projected household income for a year. Although the Tax Cuts and 
Jobs Act reduced the individual shared responsibility payment to $0 for 
months beginning after December 31, 2018, the required contribution 
percentage is still used to determine whether individuals above the age 
of 30 qualify for an affordability exemption that would enable them to 
enroll in catastrophic coverage under Sec.  155.305(h).
    The initial 2014 required contribution percentage under section 
5000A of the Code was 8 percent. For plan years after 2014, section 
5000A(e)(1)(D) of the Code and Treasury regulations at 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

[[Page 24228]]

period. The excess of the rate of premium growth over the rate of 
income growth is also 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 discussed elsewhere in this preamble, we are finalizing as the 
measure for premium growth the 2022 premium adjustment percentage of 
1.3760126457 (or an increase of about 37.6 percent over the period from 
2013 to 2021). This reflects an increase of about 1.6 percent over the 
2021 premium adjustment percentage (1.3760126457/1.3542376277).
    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 
proposed for use in the 2022 Payment Notice, the rate of income growth 
for 2022 is the percentage (if any) by which the NHEA Projections 2019-
2028 value for per capita PI for the preceding calendar year ($61,156 
for 2021) exceeds the NHEA Projections 2019-2028 value for per capita 
PI for 2013 ($44,948), carried out to ten significant digits. The ratio 
of per capita PI for 2021 over the per capita PI for 2013 is estimated 
to be 1.3605944647 (that is, per capita income growth of about 36.1. 
percent).\216\ This rate of income growth between 2013 and 2021 
reflects an increase of approximately 3.9 percent over the rate of 
income growth for 2013 to 2020 (1.3605944647 / 1.3094029651) that was 
used in the 2021 Payment Notice. Per capita PI includes government 
transfers, which refers to benefits individuals receive from federal, 
state, and local governments (for example, Social Security, Medicare, 
unemployment insurance, workers' compensation, etc.).\217\
---------------------------------------------------------------------------

    \216\ The 2013 and 2021 per capita personal income figures used 
for this calculation reflect the NHE Projections 2019-2028, 
published on March 24, 2020. The series used in the determinations 
of the adjustment percentages can be found in Tables 1 and 17 on the 
CMS website, which can be accessed by clicking the ``NHE Projections 
2019-2028--Tables'' link located in the Downloads section at http://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/NationalHealthExpendData/NationalHealthAccountsProjected.html. A detailed description of the 
NHE projection methodology is available at https://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/NationalHealthExpendData/Downloads/ProjectionsMethodology.pdf.
    \217\ U.S. Department of Commerce Bureau of Economic Analysis 
(BEA) Table 3.12 Government Social Benefits. Available at https://apps.bea.gov/iTable/iTable.cfm?reqid=19&step=3&isuri=1&categories=survey&nipa_table_list=110.
---------------------------------------------------------------------------

    Using the 2022 premium adjustment percentage finalized in this 
rule, the excess of the rate of premium growth over the rate of income 
growth for 2013 to 2021 is 1.3760126457 / 1.3605944647, or 
1.0113319445. This results in the 2022 required contribution percentage 
under section 5000A of the Code of 8.00 x 1.0113319445 or 8.09 percent, 
when rounded to the nearest one-hundredth of one percent, a decrease of 
0.18 percentage points from 2021 (8.09066-8.27392).
    Finally, beginning with the 2023 benefit year, we proposed to 
publish the required contribution percentage, along with the premium 
adjustment percentage and the annual cost-sharing limitation 
parameters, in guidance separate from the annual notice of benefit and 
payment parameters, unless HHS were to propose a change to the 
methodology for calculating the parameters, in which case, we would do 
so through notice-and-comment rulemaking. For a discussion of that 
proposal, please see the preamble for Publication of the Premium 
Adjustment Percentage, Maximum Annual Limitation on Cost Sharing, 
Reduced Maximum Annual Limitation on Cost Sharing, and Required 
Contribution Percentage (Sec.  156.130).
    We received public comments on the proposed updates to the required 
contribution percentage (Sec.  155.605(d)(2)) for plan year 2022. 
Please see our summary of comments on the premium adjustment percentage 
(Sec.  156.130(e)) for a summary of comments on the required 
contribution percentage.
10. Excluding the Special Enrollment Period Trigger in Sec.  
155.420(d)(1)(v) From Applying to SHOP Plans (Sec.  155.726)
    Special enrollment periods due to cessation of employer 
contributions to COBRA continuation coverage are generally not 
available in the group insurance market. Therefore, to maintain 
consistency between SHOP and the rest of the group insurance market, we 
proposed to amend Sec.  155.726(c)(2)(i) to exclude the special 
enrollment period trigger in proposed paragraph Sec.  155.420(d)(1)(v) 
from applying to SHOP plans. However, because proposed paragraph 
(d)(1)(v) is instead being finalized as paragraph (d)(15), which is not 
included in Sec.  155.726(c)(2)(i), SHOP plans would no longer be 
subject to the requirement to offer this special enrollment period. 
Therefore, there is no need to finalize this provision.
    We sought comment on this proposal.
    We did not receive public comments on this provision, but are not 
finalizing this policy as changes to the final regulation at Sec.  
155.420 make this unnecessary.

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

1. User Fee Rates for the 2022 Benefit Year (Sec.  156.50)
    The user fee rates for the 2022 benefit year for issuers on the FFE 
and SBE-FPs were initially finalized in the final rule published on 
January 19, 2021 (86 FR 6138 at 6152). However, as a result of a change 
in administration priorities, enrollment increases due to legislation 
and emergency action, and technical improvements we expect increases in 
the costs of activities related to consumer outreach and Navigators for 
2022. Therefore, upon review, we now estimate that the user fees rates 
established in the January 19, 2021 final rule (86 FR 6138 at 6152) 
will need to be slightly increased to sustain essential Exchange-
related activities and ensure robust outreach to support long-term 
operational health. HHS intends to propose to increase FFE and SBE-FP 
user fee rates for the 2022 benefit year through future notice-and-
comment rulemaking. HHS intends to propose a 2022 benefit year user fee 
rate for all participating FFE issuers at 2.75 percent of total monthly 
premiums, and a 2022 benefit year user fee rate for all participating 
SBE-FP issuers at 2.25 percent of total monthly premiums. These user 
fee rates continue to be lower than the 2021 user fee rates of 3.0 
percent of total monthly premiums for all participating FFE issuers and 
2.5 percent of total monthly premiums for all participating SBE-FP 
issuers, but higher than the recently finalized rates of 2.25 percent 
of total monthly premiums for FFE issuers and 1.75 percent of total 
monthly premiums for SBE-FP issuers.
a. State User Fee Collection Administration (Sec.  156.50(c)(2))
    We proposed to eliminate the state user fee collection flexibility 
that HHS had previously offered to states in the 2017 Payment Notice. 
We proposed that HHS would not collect an additional user fee, if a 
state so requests, from issuers at a rate specified by the state to 
cover costs incurred by the state for the functions the state retains. 
HHS previously provided this flexibility to states to help reduce the 
administrative burden on states of collecting additional user fees. 
However, our subsequent

[[Page 24229]]

internal analysis demonstrated that the process of collecting the state 
portion of the user fee and remitting it to the state, would increase 
the operational burden and cost incurred by HHS and no states currently 
rely on this mechanism. Therefore, we are amending Sec.  156.50(c)(2) 
to remove this alternate user fee collection mechanism. We noted that 
this proposal does not change the ability of an SBE-FP to request that 
HHS collect from the SBE-FP state regulatory entity the total amount 
that would result from the percent of monthly premiums charged for 
enrollment through the Federal platform, instead of HHS collecting the 
fee directly from SBE-FP issuers.
    We did not receive public comments on this provision, and 
therefore, we are finalizing it as proposed.
b. Eligibility for User Fee Adjustments for Issuers Participating 
Through SBE-FPs (Sec.  156.50(d))
    We proposed to amend Sec.  156.50(d) to clarify that issuers 
participating through SBE-FPs are eligible to receive adjustments to 
their federal user fee amounts that reflect the value of contraceptive 
claims they have reimbursed to third-party administrators (TPAs) that 
have provided contraceptive coverage on behalf of an eligible employer. 
In the final rules ``Coverage of Certain Preventative Services Under 
the Affordable Care Act,'' \218\ these relationships were established 
as a method of both providing contraceptives for women and 
accommodating the religious beliefs of employers. In the 2017 Payment 
Notice,\219\ we allowed State Exchanges to enter into agreements to 
rely on the Federal platform for certain Exchange functions to enhance 
efficiency and coordination between the state and federal programs, and 
to leverage the systems established by the FFEs to perform certain 
Exchange functions. Although we recognized that issuers participating 
in these types of Exchanges were subject to a federal user fee, Sec.  
156.50(d) was not amended to reflect the SBE-FP Exchange model. As 
such, we proposed to amend Sec.  156.50(d) to explicitly include the 
issuers offering QHPs through SBE-FPs. We also proposed to make 
conforming changes throughout the regulation text at Sec.  156.50(d) to 
reflect the user fees applicable to FFEs and SBEs that adopt the DE 
option, as further discussed elsewhere in this rulemaking.
---------------------------------------------------------------------------

    \218\ 78 FR 39870 (July 2, 2013); 80 FR 41318 (July 14, 2015).
    \219\ 81 FR 12203 at 12293 (March 8, 2016).
---------------------------------------------------------------------------

    We sought comment on these proposals.
    We received public comments on the proposed updates to eligibility 
for user fee adjustments for issuers participating through SBE-FPs 
(Sec.  156.50(d)). The following is a summary of the comments we 
received and our responses.
    Comment: All commenters supported the proposal for SBE-FP issuers 
to be eligible to receive adjustments to their user fee amounts for 
contraceptive claims reimbursed to third-party administrators. 
Specifically, a commenter noted their approval of the proposed change 
because it ensures that issuers in SBE-FP states are not treated less 
advantageously than issuers in FFE states.
    Response: We appreciate the supportive comments on this proposal 
and are finalizing the policy to amend Sec.  156.50(d) to explicitly 
include the issuers offering QHPs through SBE-FPs as proposed.
c. Request for Comments on Alternatives to Exchange User Fees (Sec.  
156.50)
    In the proposed 2022 Payment Notice, we solicited comment on the 
appropriateness of an alternative revenue source to Exchange user fees 
to ensure Exchanges can cover the costs of the Exchange in an 
effective, appropriate, and fair manner. We appreciate the comments 
received on this issue, but are not taking any action at this time in 
relation to Exchange revenue sources. Should we propose future 
administrative action on this topic, we will review and consider 
responsive comments at that time.
2. State Selection of EHB-Benchmark Plan for Plan Years Beginning on or 
After January 1, 2020 (Sec.  156.111)
a. Annual Reporting of State-Required Benefits
    We proposed July 1, 2022 as the deadline for states to submit to 
HHS their annual reports on state-required benefits pursuant to Sec.  
156.111(d) and (f). We are finalizing this deadline as proposed for 
2022.
    We also intend to exercise enforcement discretion with regard to 
the first annual reporting submission deadline of July 1, 2021 under 
current regulation. Pursuant to this enforcement posture, we will not 
take enforcement action against states that do not submit an annual 
report in 2021. Rather, we will begin enforcing the annual reporting 
requirement on July 1, 2022, when states must notify HHS in the manner 
specified by HHS, of any benefits in addition to EHB and any benefits 
the state has identified as not in addition to EHB and not subject to 
defrayal, describing the basis for the state's determination, that QHPs 
in the individual or small group market are required to cover in plan 
year 2022 or after plan year 2022 by state action taken by May 2, 2022 
(60 days prior to the annual submission deadline).
    In the 2021 Payment Notice, we amended Sec.  156.111(d) and added 
paragraph (f) to require states to annually notify HHS in a form and 
manner specified by HHS, and by a date determined by HHS, of any state-
required benefits applicable to QHPs in the individual or small group 
market that are considered to be ``in addition to EHB'' in accordance 
with Sec.  155.170(a)(3) and any benefits the state has identified as 
not in addition to EHB and not subject to defrayal, describing the 
basis for the state's determination. Under this requirement, a state's 
submission must describe all benefits requirements under state mandates 
applicable to QHPs in the individual or small group market that were 
imposed on or before December 31, 2011, and that were not withdrawn or 
otherwise no longer effective before December 31, 2011, as well as all 
benefits requirements under state mandates that were imposed any time 
after December 31, 2011, applicable to the individual or small group 
market. The state's report is also required to describe whether any of 
the state benefit requirements in the report were amended or repealed 
after December 31, 2011. Information in the state's report is required 
to be accurate as of the day that is at least 60 days prior to the 
annual reporting submission deadline set by HHS.
    We also finalized Sec.  156.111(d)(2) to specify that if the state 
does not notify HHS of its required benefits considered to be in 
addition to EHB by the annual reporting submission deadline, or does 
not do so in the form and manner specified by HHS, HHS will identify 
which benefits are in addition to EHB for the state for the applicable 
plan year. HHS's identification of which benefits are in addition to 
EHB will become part of the definition of EHB for the applicable state 
for the applicable plan year. In the 2021 Payment Notice, we finalized 
that we would begin implementation of the annual reporting policy in 
2021. Specifically, we finalized that states would be required to 
notify HHS by July 1, 2021, of any benefits in addition to EHB and any 
benefits the state has identified as not in addition to EHB and not 
subject to defrayal, describing the basis for the state's 
determination, that QHPs in the individual or small-group market are

[[Page 24230]]

required to cover in plan year 2021 or after plan year 2021 by state 
action taken by May 2, 2021 (60 days prior to the annual submission 
deadline).
    We are finalizing as proposed a July 1, 2022 deadline for states to 
submit to HHS a complete reporting package for the second year of 
annual reporting. As finalized, states are required to notify HHS in 
the manner specified by HHS by July 1, 2022, of any benefits in 
addition to EHB and any benefits the state has identified as not in 
addition to EHB and not subject to defrayal, describing the basis for 
the state's determination, that QHPs are required to cover in plan year 
2022 or after plan year 2022 by state action taken by May 2, 2022 (60 
days prior to the annual submission deadline). However, as noted 
earlier in this section, we also intend to exercise enforcement 
discretion with regard to the first annual reporting submission 
deadline of July 1, 2021. Pursuant to this enforcement posture, we will 
not be actively collecting or requiring submission of annual reports in 
2021.
    Comment: Many commenters objected to the proposed reporting 
deadline and asked for a delay in implementation of this policy. Many 
commenters were against implementation of the annual reporting 
requirement during the COVID-19 PHE. Commenters explained that imposing 
this new reporting requirement during a time when states are already 
required to expend substantial resources to respond to the COVID-19 PHE 
would add unnecessary burden on states and require states to divert 
already limited resources away from addressing the COVID-19 PHE. 
Commenters requested that HHS eliminate the burdensome reporting 
requirement or, at a minimum, delay reporting until 2023 assuming the 
end of the COVID-19 PHE in 2021 and economic recovery in 2022.
    Other commenters also urged HHS to delay the reporting requirement, 
arguing that HHS should not implement the annual reporting requirement 
until HHS releases additional guidance clarifying its defrayal policies 
as HHS promised it would in the 2021 Payment Notice. These commenters 
requested that any implementation of the annual reporting policy only 
occur after states have an opportunity to review the annual reporting 
process and associated templates in more depth that HHS will be 
requiring states to use for annually reporting state mandates to HHS. 
These commenters noted that states have not yet seen or had an 
opportunity to review or comment on the proposed annual reporting 
templates, reiterating the request for HHS to specify with more clarity 
the reporting and determination mechanisms required of states. 
Commenters urged HHS to immediately make available the proposed 
templates that states are expected to use when submitting annual 
reports.
    Commenters also expressed concern about the lack of transparency 
around the annual reporting and review process, requesting that HHS 
delay the reporting requirement until HHS provides further 
clarification. These commenters specifically requested that HHS clarify 
whether HHS will accept a state's determination as to whether a state 
mandate is in addition to EHB, who will be the final arbiter of such 
determinations, and whether there will be any avenue for states to 
appeal HHS's decisions in situations where there is disagreement 
between HHS and a state surrounding the scope of a benefit mandate or 
its status as being in an addition to EHB.
    Response: Section 1311(d)(3)(B) of the ACA permits a state to 
require QHPs offered in the state to cover benefits in addition to the 
EHB, but requires the 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. Further, section 
36B(b)(3)(D) of the Code specifies that the portion of the premium 
allocable to state-required benefits in addition to EHB shall not be 
taken into account in determining premium tax credits. We continue to 
believe that requiring states to annually notify HHS of state-required 
benefits in the manner specified at Sec.  156.111(d) and (f) will 
promote compliance with section 1311(d)(3)(B) of the ACA and its 
implementing regulations at Sec.  155.170. We also believe it will 
enhance program integrity and potentially reduce improper federal 
expenditures by supporting HHS efforts to ensure that APTC is paid in 
accordance with federal law. We also believe the annual reporting 
policy will increase transparency for issuers, enrollees, and other 
stakeholders as to which state-required benefits are in addition to 
EHB. We are proceeding with implementation of the annual reporting 
policy and finalizing the second annual reporting deadline of July 1, 
2022 as proposed. As finalized, states are required to notify HHS in 
the manner specified by HHS by July 1, 2022, of any benefits in 
addition to EHB and any benefits the State has identified as not in 
addition to EHB and not subject to defrayal, describing the basis for 
the state's determination, that QHPs are required to cover in plan year 
2022 or after plan year 2022 by state action taken by May 2, 2022 (60 
days prior to the annual submission deadline).
    Although we continue to support implementation of the annual 
reporting policy, we also acknowledge the validity of commenters' 
concerns regarding the timing and implementation of annual reporting of 
state-required benefits as planned in 2021. Therefore, although we are 
finalizing the second annual reporting deadline of July 1, 2022 as 
proposed, we also intend to exercise enforcement discretion in relation 
to the upcoming first annual reporting submission deadline of July 1, 
2021. Specifically, HHS will not take enforcement action against states 
that do not submit an annual report on state-required benefits by the 
July 1, 2021 submission deadline; and HHS will not identify state-
required benefits in addition to EHB for states that do not submit a 
report to HHS by the July 1, 2021 submission deadline. Accordingly, 
because HHS is not enforcing the collection of state-required benefits 
reports in 2021, HHS will not publish on the CMS website in 2021 any 
annual reports on state-required benefits. We note that the obligation 
for a state to defray the cost of QHP coverage of state-required 
benefits in addition to EHB is an independent statutory requirement 
from the annual reporting policy finalized at Sec.  156.111(d) and (f). 
Therefore, although this enforcement posture effectively relieves 
states of state-required benefit reporting requirements until July 1, 
2022, it does not pend or otherwise impact the defrayal requirements 
under section 1311(d)(3)(B) of the ACA, as implemented at Sec.  
155.170. Under this enforcement posture, states remain responsible for 
making payments to defray the cost of additional required benefits and 
issuers are still responsible for quantifying the cost of these 
benefits and reporting the cost to the state.
    Under this enforcement posture, HHS will begin enforcing the annual 
reporting requirement on states in 2022. States are required to notify 
HHS in the manner specified by HHS by July 1, 2022, of any benefits in 
addition to EHB that QHPs are required to cover in plan year 2022 or 
after plan year 2022 by state action taken by May 2, 2022 (60 days 
prior to the annual submission deadline). As part of this reporting, 
states must also identify which state-required benefits are not in 
addition to EHB and do not require defrayal in accordance with Sec.  
155.170, and provide the basis for the state's determination, by the 
July 1, 2022 reporting submission deadline. States are permitted to 
submit their annual report at any time during the May 2-July 1, 2022, 
submission window.

[[Page 24231]]

    In the 2021 Payment Notice, we indicated that we would continue 
engaging in technical assistance with states to help ensure state 
understanding of when a state-benefit requirement is in addition to EHB 
and requires defrayal. We continue to work on additional technical 
assistance that we believe will further assist states with their 
defrayal analyses and believe such technical assistance will bolster 
state compliance with defrayal requirements, as well as result in a 
smoother annual reporting process for states and review process for 
HHS. However, we also believe these additional technical assistance 
documents will best serve state needs if made available to states far 
enough in advance of the first annual reporting deadline. It is 
important that states have an opportunity to ask HHS any clarifying 
questions after reviewing these technical assistance documents and make 
any necessary adjustments to state policy. We believe that exercising 
enforcement discretion for the first year of annual reporting in the 
manner we described will ensure that states have these opportunities 
before the July 1, 2022 submission deadline. We also believe our 
enforcement posture will promote a smoother annual reporting process 
overall in 2022 and beyond as states will be able to utilize the 
additional technical assistance documents as a tool to identify which 
state mandates are in addition to EHB in a manner that reflects federal 
policy.
    We also believe the additional technical assistance efforts will 
help address commenter concerns around potential disagreements between 
HHS and states as to which state-required benefits are in addition to 
EHB and require defrayal. The purpose of this additional technical 
assistance and outreach is to clarify the defrayal policy more 
generally and to provide states with a more precise understanding of 
how HHS analyzes and expects states to analyze whether a state-required 
benefit is in addition to EHB pursuant to Sec.  155.170. We encourage 
states to review state-required benefits in the context of this 
additional technical assistance and take the appropriate steps to 
update policy decisions regarding which state-required benefits are in 
addition to EHB and require defrayal ahead of the July 1, 2022 annual 
reporting deadline.
    We also acknowledge that states continue to express concern 
regarding how HHS plans to enforce Sec.  155.170 after reviewing state 
reports or identifying mandates in a non-reporting state that are in 
addition to EHB for which the non-reporting state is not defraying. We 
stated in the 2021 Payment Notice that we would not be adopting any 
policy with regard to whether enforcement of the defrayal requirement 
will be retrospective or prospective in relation to the submission of 
Sec.  156.111 reports. However, we are concerned that declining to 
adopt an enforcement policy has caused unnecessary confusion and 
concern for states. We are therefore clarifying that HHS does not 
intend to retroactively enforce the defrayal requirement against states 
for plan years prior to 2022 in relation to the submission of Sec.  
156.111 reports. With regards to resolving any disagreements that may 
arise between a state and HHS as to whether a mandated benefit is in 
addition to EHB, we intend to work closely with the state to address 
the disagreement without engaging in a formal appeals process. We also 
intend to provide non-reporting states with an opportunity to review 
our identifications of state-required benefits that are in addition to 
EHB prior to releasing the annual reports on the CMS website an effort 
to mitigate the potential for disagreement between the state and HHS.
    As stated in the 2021 Payment Notice, HHS will provide the 
templates that states are required to use for annually reporting the 
information required pursuant to Sec.  156.111(f)(1) through (6). We 
continue to believe that the descriptions of the required data elements 
at Sec.  156.111(f)(1) through (6) provide sufficient detail to states 
regarding the types of information states will be required to include 
in the annual reports. States and other stakeholders reviewing those 
requirements should be able to review Sec.  156.111(f)(1) through (6) 
to better understand the scope of the information states are required 
to include in their annual reports without reviewing the actual 
reporting templates. However, we also believe it is important to 
provide states with ample time to review the precise format, 
instructions, and content of the annual reporting templates for state-
required benefits ahead of submission. As stated in the 2021 Payment 
Notice, the precise templates that HHS will require states to use are 
available for review as part of the information collection amended 
under OMB control number: 0938-1174 (Essential Health Benefits 
Benchmark Plans (CMS-10448)). Although OMB approved that information 
collection on February 25, 2021, this approval took longer than 
anticipated and we agree with commenters that this delay resulted in 
increasingly limited time for states to review the templates ahead of 
the July 1, 2021 deadline for the first year of annual reporting of 
state-required benefits. By exercising enforcement discretion in the 
manner described, we would provide states that are concerned about 
having ample time to review the templates ahead of submitting an annual 
report the option to choose to delay submitting their first annual 
report until July 1, 2022 without HHS identifying which state-required 
benefits are in addition to EHB for the applicable plan year in the 
state.
    We also understand that states have an immediate need to devote 
limited resources to responding to the COVID-19 PHE and that commenters 
feel that preparing an annual report on state-required benefits in 2021 
is competing with that urgent priority. We continue to believe that the 
information we are requiring that states report to HHS as part of this 
annual reporting requirement should already be readily accessible to 
states, as every state should already be defraying the costs of state-
required benefits in addition to EHB. Thus, states should already have 
ready access to the information the annual reports require and the 
reporting itself should therefore be complementary to the process the 
state already has in place for tracking and analyzing state-required 
benefits. Moreover, states need not report to HHS if they choose not 
to. Specifically, Sec.  156.111(d)(2) provides that, HHS will identify 
the state-required benefits it believes are in addition to EHB for the 
applicable plan year for any state that does not submit an annual 
report by the annual submission deadline, or does not do so in the form 
and manner specified by HHS. However, when coupled with the delays in 
finalizing the reporting templates and issuing additional technical 
assistance, we believe the added burden of the COVID-19 PHE on states 
is yet an additional factor that supports exercising enforcement 
discretion. We believe our enforcement posture for 2021 will allow 
states that have concerns about the upcoming July 1, 2021 deadline in 
the context of the COVID-19 PHE sufficient time to prepare their annual 
reports on state-required benefits before the July 1, 2022 submission 
deadline.
    Comment: Many commenters continue to oppose or be concerned about 
the annual reporting policy overall and asked HHS for clarity on why 
HHS has placed a burdensome reporting requirement on states. Commenters 
stated that HHS has not defined the scope of the problem the reporting 
seeks to address and asked HHS to provide additional transparency 
regarding the value that HHS seeks to add in requiring this additional

[[Page 24232]]

reporting, especially given that some states already conduct defrayal 
analyses of their own and posts these publicly. Commenters again 
expressed that the annual reporting requirement is unnecessary, as 
existing regulation has already established robust requirements for 
insurers to, in coordination with states and marketplaces, perform 
actuarially sound analyses of costs associated with state-mandated 
benefits for use when calculating federal tax credits. Commenters also 
noted the importance of setting a deadline that allows issuers time to 
make changes to rate filings. For example, one commenter supported the 
overall annual reporting policy but requested that HHS adjust the 
timing and deadlines for the annual reporting to ensure that issuers 
are aware of any state-mandated benefits that states must defray in 
advance of rate-setting timelines. This commenter specifically noted 
that requiring states to file reports by July 1 of the same benefit 
year does not provide plans with the time necessary to work such 
benefits and defrayals into premium calculations for that year.
    Response: We disagree with commenters that we have not yet provided 
adequate justification for why HHS is implementing the annual reporting 
requirement. When finalizing the annual reporting requirement in the 
2021 Payment Notice, we explained the reasoning for the new policy in 
detail. We also explained that, although we acknowledge that some 
states may already be appropriately identifying which state-required 
benefits are in addition to EHB and require defrayal, we believe that 
many other states may not be doing so. In such states, QHP issuers may 
be covering benefits as EHB that actually require state defrayal under 
federal requirements, but for which the state is not actively defraying 
costs, resulting in improper expenditures of APTC paid by the federal 
government. Furthermore, requiring states to provide information 
regarding their state benefit requirements to HHS properly aligns with 
federal requirements for defraying the cost of state-required benefits; 
improves transparency with regard to the types of benefit requirements 
states are enacting; and that it provides the necessary information to 
HHS for increased oversight over whether states are appropriately 
identifying which state-required benefits require defrayal and whether 
QHP issuers are properly allocating the portion of premiums 
attributable to EHB for purposes of calculating PTCs. For a more 
detailed discussion of why the annual reporting policy is justified, 
please refer to the 2021 Payment Notice.
    With regards to the timing of the annual reporting submission 
deadline, we acknowledge that a July 1 deadline of any given reporting 
year may not perfectly align with other state and issuer deadlines, 
such as issuer rate-setting deadlines. However, we remind commenters 
that states must defray benefits in addition to EHB in accordance with 
Sec.  155.170 independent of any reporting requirement or reporting 
timeline and regardless of whether the state benefit requirement is 
included in that plan year's annual reporting submission. We therefore 
also conclude that states newly identifying state-required benefits as 
being in addition to EHB after rate-setting has concluded is likely not 
a new issue. In the event that a state newly identifies a state-
required benefit as being in addition to EHB and this determination 
affects issuer rates for the plan year during which the reporting is 
taking place or for a future plan year, we will work with the state on 
how to address that situation on a state-by-state basis. We believe 
that our additional technical assistance and outreach to states will 
assist in preventing such situations from arising by ensuring that 
states can analyze pending legislation and state-required benefits in a 
manner consistent with federal defrayal policy and in advance of rate 
filing deadlines. However, states that have still concerns about such a 
situation arising are encouraged to ask HHS in advance of annual 
reporting submission deadlines for input on whether a state-required 
benefit is in addition to EHB.
b. States' EHB-Benchmark Plan Options
    The 2019 Payment Notice stated that we would propose EHB-benchmark 
plan submission deadlines in the HHS annual Notice of Benefit and 
Payment Parameters. In the proposed 2022 Payment Notice, we proposed 
May 6, 2022, as the deadline for states to submit the required 
documents for the state's EHB-benchmark plan selection for the 2023 
plan year and as the deadline for states to notify HHS that they wish 
to permit between-category substitution for the 2023 plan year. A 
typographical error appeared in the proposed rule related to these 
deadlines. Both proposed deadlines should have read May 6, 2022, for 
the 2024 plan year, not for the 2023 plan year. The correct meaning of 
the proposed rule as applying to the 2024 plan year should have been 
clear from the context of the rulemaking, and the prior rulemaking in 
the 2021 Payment Notice establishing deadlines for this purpose.
    We are finalizing these deadlines with minor revisions to correct 
the typographical error such that May 6, 2022, is the deadline for 
states submitting EHB-benchmark plan selections for the 2024 plan year 
and May 6, 2022, is the deadline for states to permit between-category 
substitution for the 2024 plan year.
    Comment: Commenters requested clarification regarding the proposed 
submission deadlines. These commenters noted that issuers need 
sufficient time to review and respond to changes a state may make to 
its EHB-benchmark plan, and expressed concern that the proposed 
deadline would occur when issuers are filing plans for 2023. One 
commenter noted that the proposed reporting deadline is earlier than in 
prior years and, out of concern for public notice, urged CMS to require 
states to provide a significant amount of time for the public to 
comment on any changes that states are planning to make to their EHB-
benchmark plans. Another commenter objected to the proposed reporting 
deadline because it permits EHB-benchmark plan selections to occur on 
an annual cycle, arguing that by granting states expansive power to 
alter their EHB-benchmark plans so dramatically every year, the EHB-
benchmark plan selection flexibility threatens any hope of 
predictability of coverage for consumers from year-to-year and state-
to-state. We also received several out of scope comments.
    Response: We are finalizing as proposed May 6, 2022 as the deadline 
for states to submit the required documents for the state's EHB-
benchmark plan selection for the 2024 plan year and as the deadline for 
states to notify HHS that they wish to permit between-category 
substitution for the 2024 plan year, with minor revisions to correct 
the typographical error that referred to plan year 2023 in the proposed 
rule. Fixing this typographical error aligns the deadlines with those 
finalized in prior years and addresses the concerns commenters raised 
regarding providing issuers sufficient time to review changes states 
make to the EHB-benchmark plan and providing the public advance notice 
of such changes. As in prior years, states are required to 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. As finalized, the deadlines 
also allow issuers sufficient time to develop plans that adhere to 
their state's new EHB-benchmark plan.

[[Page 24233]]

    As discussed in more detail in the 2019 Payment Notice, the purpose 
of this policy is to allow for state flexibility in selecting an EHB-
benchmark plan, which is why we allow states to make such changes on an 
annual basis. Furthermore, 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, a scenario that has not 
yet occurred since finalizing the EHB-benchmark plan selection 
flexibility. 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 continue to emphasize that the deadlines for EHB-benchmark plan 
selection and permitting between-category substitution are firm, and 
that states should optimally have one of their points of contact who 
has been predesignated to use the EHB Plan Management Community reach 
out to us using the EHB Plan Management Community well in advance of 
the deadlines with any questions. Although not a requirement, we 
recommend states submit applications for EHB-benchmark plan selections 
at least 30 days prior to the submission deadline to ensure completion 
of their documents by the proposed deadline. We also remind states that 
they must complete the required public comment period for EHB-benchmark 
plan selection and submit a complete application by the finalized 
deadline.
3. Premium Adjustment Percentage (Sec.  156.130(e))
    We proposed the 2022 benefit year annual premium adjustment 
percentage using the most recent estimates and projections of per 
enrollee premiums for private health insurance (excluding Medigap and 
property and casualty insurance) from the NHEA, which are calculated by 
CMS' Office of the Actuary. For the 2022 benefit year, the premium 
adjustment percentage will represent the percentage by which this 
measure for 2021 exceeds that for 2013. However, in light of the 
overwhelming comments received, we are readopting as the measure of 
premium growth for the 2022 benefit year and beyond the NHEA 
projections of average per enrollee employer-sponsored insurance (ESI) 
premium, which was the measure used for benefit years 2015 through 
2019.
    Section 1302(c)(4) of the ACA directs the Secretary to determine an 
annual premium adjustment percentage, a measure of premium growth that 
is used to set three other parameters detailed in the ACA: (1) The 
maximum annual limitation on cost sharing (defined at Sec.  
156.130(a)); (2) the required contribution percentage used to determine 
eligibility for certain exemptions under section 5000A of the Code 
(defined at Sec.  155.605(d)(2)); and (3) the employer shared 
responsibility payment amounts under section 4980H(a) and (b) of the 
Code (see section 4980H(c)(5) of the Code). Section 1302(c)(4) of the 
ACA and Sec.  156.130(e) provide 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 the 
regulations provide that this percentage will be published in the 
annual HHS notice of benefit and payment parameters.
    The 2015 Payment Notice final rule and 2015 Market Standards Rule 
established a methodology for estimating the average per capita premium 
for purposes of calculating the premium adjustment percentage for the 
2015 benefit year and beyond. In those rules, HHS used the NHEA ESI 
premium measure to estimate premium growth. As noted in the 2022 
Payment Notice proposed rule, the 2020 Payment Notice final rule 
changed this methodology and, for benefit years 2020 and 2021, we 
instead calculated the average per capita premium as private health 
insurance premiums minus premiums paid for Medicare supplement 
(Medigap) insurance and property and casualty insurance, divided by the 
unrounded number of unique private health insurance enrollees, 
excluding all Medigap enrollees. Additionally, as finalized in the 2021 
Payment Notice final rule, we finalized that we would calculate the 
payment parameters that depend on NHEA data based on the NHEA data 
available at the time of the applicable proposed rule.
    As such, we proposed that the premium adjustment percentage for 
2022 would be the percentage (if any) by which the most recent NHEA 
projection available at the time of the applicable proposed rule of per 
enrollee premiums for private health insurance (excluding Medigap and 
property and casualty insurance) for 2021 ($7,036) exceeds the most 
recent NHEA estimate available at the time of the applicable proposed 
rule of per enrollee premiums for private health insurance (excluding 
Medigap and property and casualty insurance) for 2013 ($4,883).\220\ 
Using this formula, the proposed premium adjustment percentage for the 
2022 benefit year was 1.4409174688 ($7,036/$4,883), which represents an 
increase in private health insurance (excluding Medigap and property 
and casualty insurance) premiums of approximately 44.1 percent over the 
period from 2013 to 2021.
---------------------------------------------------------------------------

    \220\ 79 FR 13743.
---------------------------------------------------------------------------

    We received numerous public comments on the proposed updates to 
premium adjustment percentage (Sec.  156.130(e)). Many comments on the 
premium adjustment percentage were presented alongside comments on 
related parameters such as the required contribution percentage, 
maximum annual limitation on cost sharing, and reduced annual 
limitation on cost sharing. As such, we address comments on all of 
these parameters in this section. The following is a summary of the 
comments we received and our responses.
    Comment: As has been typical since the change to the methodology 
was adopted in the 2020 Payment Notice, the majority of commenters 
requested that we not implement the annual increase to the premium 
adjustment percentage, or at least one of the parameters derived from 
this value (for example, the maximum annual limitation on cost sharing, 
the reduced maximum annual limitations on cost sharing, the required 
contribution percentage published by HHS), or that the IRS not increase 
the applicable percentage used to determine premium tax credits, or 
required contribution percentage for purposes of determining 
affordability of employer-sponsored minimum essential coverage for 
determining eligibility for premium tax credits for the 2022 benefit 
year, and instead requested that HHS revert to the use of the NHEA ESI 
premium measure to estimate premium growth. Numerous commenters 
expressed concern with the rate of increase in the premium adjustment 
percentage and related payment parameters. These commenters 
specifically opposed the changes made to the premium adjustment 
percentage calculation in the 2020 Payment Notice, which based this 
parameter and the maximum annual limitation on cost sharing, reduced 
maximum annual limitations on cost sharing, and required contribution 
percentage on a premium measure that includes individual market premium 
changes, instead of maintaining the methodology established in the 2015 
Payment Notice \221\ and 2015 Market Standards

[[Page 24234]]

Rule.\222\ These commenters were concerned that the use of a measure 
that includes individual market premiums has led to more rapid 
increases in consumer costs than would have occurred had HHS retained 
the NHEA ESI-only premium measure utilized to calculate the premium 
adjustment percentage and related parameters prior to the 2020 benefit 
year.
---------------------------------------------------------------------------

    \222\ 79 FR 30240.
---------------------------------------------------------------------------

    Commenters also expressed concerns that more rapid increases in the 
premium adjustment percentage would lead to higher costs to consumers 
and lower enrollment. A significant majority of these commenters 
requested that HHS reverse the policy finalized in the 2020 Payment 
Notice. A few commenters suggested alternatives, including a cap on 
increases to the maximum annual limitation on cost sharing of 3 percent 
year-to-year, or a hybrid approach between the pre-2020 and current 
methodologies. Under the suggested hybrid policy, ESI premiums would be 
used to calculate the growth in premiums between 2013 and 2019, while 
all private health insurance premiums minus Medigap and the medical 
portion of property and casualty insurance would be used to calculate 
the growth in premiums between 2019 and the current benefit year. These 
two growth estimates would be multiplied to arrive at the premium 
adjustment percentage.
    Some of these commenters suggested that consumer burden connected 
to the increases in these parameters has been exacerbated by the COVID-
19 PHE and its economic implications. These commenters maintained that 
these parameters should not be raised during the COVID-19 PHE. However, 
one commenter specified that they support the flexibility provided by 
the increase in the maximum annual limitation on cost sharing, which is 
a result of the increase in the premium adjustment percentage.
    Response: After considering the overwhelming comments received, we 
are reverting to using the NHEA ESI premium measure previously used for 
the 2015 through 2019 benefit years to estimate premium growth for the 
2022 benefit year and beyond. We believe using the NHEA ESI premium 
measure aligns with the statutory language at section 1302(c)(4) of the 
ACA, as ESI meets the definition of ``health insurance coverage'' and 
represents the vast majority of the market, overlapping very 
significantly with the private health insurance data used for benefit 
years 2020 and 2021.\223\
---------------------------------------------------------------------------

    \223\ The data used to calculate per capita ESI premiums 
overlaps significantly with the data used to calculate the current 
measure--according to the CMS Office of the Actuary, approximately 
86 percent of enrollees in 2022 will be covered by employer-
sponsored insurance.
---------------------------------------------------------------------------

    With these considerations, we believe this change is consistent 
with the will and interest of stakeholders and will mitigate the 
uncertainty regarding premium growth during the COVID-19 PHE. Reverting 
to the NHEA ESI premium measure also aligns with the policy objectives 
in the January 28, 2021 Executive Order on Strengthening the Affordable 
Care Act and Medicaid \224\ and the American Rescue Plan Act of 
2021,\225\ which both emphasize making health coverage accessible and 
affordable for consumers of all income levels. Moreover, this policy is 
consistent with reducing premium growth so that consumers are not 
required to pay high premiums or cost-sharing that is subsequently 
rebated pursuant to MLR requirements, particularly since we have seen 
record high MLR rebates in recent years.\226\ ESI premiums have grown 
at a slower rate from 2013 through 2019 as compared to the private 
insurance premium growth rate, and when used as a measure of premium 
growth, ESI premium growth will make more individuals eligible for an 
affordability exemption that will enable them to enroll in catastrophic 
coverage under Sec.  155.305(h), will decrease the rate of growth of 
cost sharing parameters such as the annual maximum limitation on cost 
sharing, and, if the IRS adopts this measure of premium growth for 
purposes of indexing under the premium tax credit provision in section 
36B of the Code going forward, also will increase consumer eligibility 
for premium tax credits.\227\
---------------------------------------------------------------------------

    \224\ 86 FR 7793 (February 2, 2021).
    \225\ American Rescue Plan Act of 2021, Public Law 117-2.
    \226\ See https://www.cms.gov/CCIIO/Resources/Data-Resources/Downloads/2019-Rebates-by-State.pdf.
    \227\ Section 36B(b)(3)(A)(ii) of the Code generally provides 
that the applicable percentages are to be adjusted after 2014 to 
reflect the excess of the rate of premium growth over the rate of 
income growth for the preceding year. Section 36B(c)(2)(C) of the 
Code provides that the required contribution percentage is to be 
adjusted after 2014 in the same manner as the applicable percentages 
are adjusted in section 36B(b)(3)(A)(ii) of the Code. Following 
HHS's establishment of the methodology for calculating premium 
growth for purposes of the premium adjustment percentage using NHEA 
ESI for benefit years 2015-2019, and NHEA private health insurance 
(excluding Medigap and property and casualty insurance), the 
Department of the Treasury and the IRS issued guidance providing 
that the rate of premium growth for purposes of the section 36B 
provisions would be based on the same measures HHS selected. 
Following this rulemaking, we expect the Department of the Treasury 
and the IRS to issue additional guidance to adopt the same premium 
measure for purposes of future indexing of the applicable percentage 
and required contribution percentage under section 36B of the Code. 
The effects of this change would not be seen in 2022, as the 
American Rescue Plan Act of 2021 amends the Code to temporarily 
supersede the indexing for 2021 and 2022, but if the same premium 
measure was adopted in future tax years, this would result in more 
individuals being eligible for premium tax credits than would be the 
case if the current premium measure were maintained.
---------------------------------------------------------------------------

    In addition to aligning with the policy priorities expressed in the 
recent executive order and statute, reverting to NHEA ESI data as a 
measure of premium was an explicit interest expressed by commenters to 
the proposed rule. As noted earlier in this section, the overwhelming 
majority of commenters specifically opposed the changes made to the 
premium adjustment percentage calculation in the 2020 Payment Notice 
and asked HHS to revert to the NHEA ESI premium. We agree with these 
commenters' concerns.
    Furthermore, reverting to NHEA ESI premium data is consistent with 
changing circumstances related to the potential uncertainty of the 
private health insurance premium measure that includes the individual 
market. Private health insurance premiums are more likely to be 
influenced by risk premium pricing, or premium pricing based on changes 
in benefit design and market composition in the individual market. 
Particularly during times of economic uncertainty, such as that 
experienced as a result of the COVID-19 PHE, private health insurance 
premium growth could reflect issuer uncertainty in market developments 
and could be reflected in the NHEA private insurance premium measure 
(excluding Medigap and property and casualty insurance). NHEA ESI 
premium data provides a more stable premium measure because it will 
exclude premiums from the individual market, which are likely to be 
most affected by the significant changes in benefit design, or risk 
premium pricing. By using the NHEA ESI premium measure for the 2022 
benefit year and beyond, we will provide a more appropriate and fair 
measure of average per capita premiums for health insurance coverage 
when considering the goal of consumer protection.
    As such, using the NHEA Projections 2019-2028 ESI data available at 
the time of the proposed rule, the premium adjustment percentage for 
2022 is the percentage (if any) by which the NHEA Projections 2019-2028 
value for per enrollee ESI premiums for 2021 ($6,964) exceeds the NHEA 
Projections 2019-2028 value for per enrollee ESI

[[Page 24235]]

premiums for 2013 ($5,061). Using this formula, the premium adjustment 
percentage for the 2022 benefit year is 1.3760126457 ($6,964/$5,061) 
which represents an increase in ESI premiums of approximately 37.6 
percent over the period from 2013 to 2021. As described in further 
detail elsewhere in this preamble, this premium adjustment percentage 
will be used to index the maximum annual limitation on cost sharing and 
the required contribution percentage used to determine eligibility for 
certain exemptions under section 5000A of the Code. It will also be 
used to index the employer shared responsibility payment amounts under 
section 4980H(a) and (b) of the Code.
    Comment: A few commenters asked HHS to coordinate with the Internal 
Revenue Service (IRS) in setting the maximum annual limitation on cost 
sharing for high deductible health plans (HDHPs) that would allow 
enrollees to be eligible to contribute to a Health Savings Account 
(HSA) so the IRS values match those set in the annual HHS notice of 
benefit and payment parameters. These commenters were concerned that 
the differences in these values were confusing to consumers and would 
lead to an inability for issuers to offer HSA-eligible plans in the 
bronze metal level.
    Response: The Department of the Treasury and the IRS have 
jurisdiction over HSAs and HSA-eligible HDHPs and the applicable 
maximum out-of-pocket under section 223 of the Code. Annual adjustments 
to the maximum annual limitation on cost sharing for HSA-eligible HDHPs 
are determined under section 223(g) of the Code, which by statute 
provides for a different annual adjustment than the premium adjustment 
percentage provided under section 1302(c) of the ACA. As both of these 
adjustments are defined in statute, it is not within the authority of 
HHS to align the premium adjustment percentage with the index used by 
the IRS for HSA-eligible HDHPs.
    Comment: One commenter requested that we reverse the policy we 
finalized in the 2016 Payment Notice,\228\ which clarified that the 
maximum annual limitation on cost sharing for self-only coverage 
applies to all individuals regardless of whether the individual is 
covered by a self-only plan or is covered by a plan that is other than 
self-only.
---------------------------------------------------------------------------

    \228\ See 80 FR 10749 at 10824-10825
---------------------------------------------------------------------------

    Response: We did not propose and are not finalizing any changes to 
the policy that the maximum annual limitation on cost sharing for self-
only coverage applies to all individuals regardless of whether the 
individual is covered by a self-only plan or is covered by a plan that 
is other than self-only. As we stated in the 2016 Payment Notice,\229\ 
we believe that this policy is an important consumer protection, as we 
were aware that some consumers were confused by the applicability of 
the annual limitation on cost sharing in other than self-only plans. As 
such, for all benefit years since 2016, an individual's cost sharing 
for EHB may never exceed the self-only annual limitation on cost 
sharing.
---------------------------------------------------------------------------

    \229\ Ibid.
---------------------------------------------------------------------------

    Based on the comments received, we are finalizing the premium 
adjustment percentage for the 2022 benefit year as 1.3760126457 
($6,964/$5,061) which represents an increase in ESI premiums of 
approximately 37.6 percent over the period from 2013 to 2021.
a. Maximum Annual Limitation on Cost Sharing for Plan Year 2022
    We proposed to increase the maximum annual limitation on cost 
sharing for the 2022 benefit year based on the proposed value 
calculated for the premium adjustment percentage for the 2022 benefit 
year. As finalized in the EHB final rule \230\ at Sec.  156.130(a)(2), 
for the 2022 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 2022. 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.
---------------------------------------------------------------------------

    \230\ See 78 FR 12847 through 12848.
---------------------------------------------------------------------------

    Using the proposed premium adjustment percentage, 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,\231\ we 
proposed that the 2022 benefit year maximum annual limitation on cost 
sharing would be $9,100 for self-only coverage and $18,200 for other 
than self-only coverage. This would have represented an approximately 
6.4 percent ($9,100 / $8,550) increase above the 2021 parameters of 
$8,550 for self-only coverage and $17,100 for other than self-only 
coverage.
---------------------------------------------------------------------------

    \231\ See Revenue Procedure 2013-25, 2013-21 IRB 1110. http://www.irs.gov/pub/irs-drop/rp-13-25.pdf.
---------------------------------------------------------------------------

    We received public comments on the proposed updates to the maximum 
annual limitation on cost sharing for plan year 2022. Please see our 
summary of comments on the premium adjustment percentage (Sec.  
156.130(e)) for a summary of comments on the maximum annual limitation 
on cost sharing.
    We are not finalizing the 2022 maximum annual limitation on cost 
sharing as proposed. Based on the comments received and as explained 
above, we are finalizing a 2022 maximum annual limitation on cost 
sharing of $8,700 for self-only coverage and $17,400 for other than 
self-only coverage. Using the premium adjustment percentage of 
1.3760126457 for 2022 finalized in this rule, 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,\232\ the 2022 maximum 
annual limitation on cost sharing is $8,700 for self-only coverage and 
$17,400 for other than self-only coverage. This represents an 
approximately 1.8 percent ($8,700 / $8,550) increase above the 2021 
parameters of $8,550 for self-only coverage and $17,100 for other than 
self-only coverage.
---------------------------------------------------------------------------

    \232\ See Revenue Procedure 2013-25, 2013-21 IRB 1110. http://www.irs.gov/pub/irs-drop/rp-13-25.pdf.
---------------------------------------------------------------------------

b. Reduced Maximum Annual Limitation on Cost Sharing (Sec.  156.130)
    We proposed for the 2022 benefit year and beyond, unless changed 
through notice-and-comment rulemaking, to use the reductions in the 
maximum annual limitation on cost sharing for cost-sharing plan 
variations determined by the methodology we established beginning with 
the 2014 benefit year, as further described later in this section of 
the preamble.
    Sections 1402(a) through (c) of the ACA 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 CSRs. Specifically, in part 156 subpart E, we 
specified that QHP issuers must provide CSRs by developing plan 
variations, which are separate cost-sharing structures for each 
eligibility category that change how the cost sharing required under 
the QHP is to be shared between the enrollee and the federal 
government. At Sec.  156.420(a), we detailed the structure of these 
plan variations and specified that QHP issuers must ensure that each 
silver-plan variation has an annual limitation on cost sharing no 
greater than the applicable reduced maximum annual limitation on cost 
sharing specified in the annual HHS notice of benefit and payment 
parameters. Although the amount of the reduction in the maximum annual 
limitation on cost sharing is specified in section

[[Page 24236]]

1402(c)(1)(A) of the ACA, section 1402(c)(1)(B)(ii) of the ACA states 
that the Secretary may adjust the cost-sharing limits to ensure that 
the resulting limits do not cause the AV of the health plans to exceed 
the levels specified in section 1402(c)(1)(B)(i) of the ACA (that is, 
73 percent, 87 percent, or 94 percent, depending on the income of the 
enrollee).
    As we stated earlier in this final rule, the proposed 2022 maximum 
annual limitation on cost sharing was $9,100 for self-only coverage and 
$18,200 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 2022 
plan year and our proposed results.
    Consistent with our analysis for the 2014 through 2021 benefit 
years' reduced maximum annual limitation on cost sharing, we developed 
three test silver level QHPs, and analyzed the impact on AV of the 
reductions described in the ACA to the proposed estimated 2022 maximum 
annual limitation on cost sharing for self-only coverage ($9,100). The 
test plan designs are based on data collected for 2021 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 2022, the test silver level QHPs included a PPO with 
typical cost-sharing structure ($9,100 annual limitation on cost 
sharing, $2,775 deductible, and 20 percent in-network coinsurance 
rate); a PPO with a lower annual limitation on cost sharing ($7,400 
annual limitation on cost sharing, $3,050 deductible, and 20 percent 
in-network coinsurance rate); and an HMO ($9,100 annual limitation on 
cost sharing, $4,800 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, $30 primary care office visit, and $55 
specialist office visit). Based on the parameters in the proposed rule, 
all three test QHPs meet the AV requirements for silver level health 
plans.
    We then entered these test plans into a draft version of the 2022 
benefit year AV Calculator \233\ and observed how the reductions in the 
maximum annual limitation on cost sharing specified in the ACA affected 
the AVs of the plans. As with prior years, we found that the reduction 
in the maximum annual limitation on cost sharing specified in the ACA 
for enrollees with a household income between 100 and 150 percent of 
FPL (\2/3\ reduction in the maximum annual limitation on cost sharing), 
and 150 and 200 percent of 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).
---------------------------------------------------------------------------

    \233\ Available at https://www.cms.gov/cciio/resources/regulations-and-guidance/index.
---------------------------------------------------------------------------

    However, as with prior years, we continue to find that the 
reduction in the maximum annual limitation on cost sharing specified in 
the ACA 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. Furthermore, 
as with prior years, for individuals with household incomes of 250 to 
400 percent of FPL, without any change in other forms of cost sharing, 
the statutory reductions in the maximum annual limitation on cost 
sharing would cause an increase in AV that exceeds the maximum 70 
percent level in the statute.
    The calculation of the reduced maximum annual limitation on cost 
sharing has remained consistent since the 2014 Payment Notice due to 
year-over-year consistency of the results of our analysis regarding the 
effects of the reduced maximum annual limitation on cost sharing on the 
AV of silver plan variations. Therefore, as a result of the apparent 
stability of those results, and consistent with prior Payment Notices, 
we proposed to continue to use the maximum annual limitation on cost 
sharing reductions of \2/3\ for enrollees with a household income 
between 100 and 200 percent of FPL, \1/5\ for enrollees with a 
household income between 200 and 250 percent of FPL, and no reduction 
for individuals with household incomes of 250 to 400 percent of FPL for 
the 2022 benefit year and beyond. We would continue to review the 
effects of these reductions annually, and should we determine that this 
approach should be changed to better reflect the statutorily specified 
AVs for silver plan variations, we would propose to change these 
reductions through notice-and-comment rulemaking.
    Specifically, we proposed to continue to use the methodology 
described above for analyzing the effects of the reduced maximum annual 
limitations on cost sharing on the AV of silver plan variations to 
verify that the reductions do not result in unacceptably high AVs 
before we publish these values in guidance for a given benefit year. 
Subsequently, if a future analysis using this methodology supports a 
modification to the reduced maximum annual limitation for any of the 
household income bands for a future benefit year, we would propose 
those modifications to the reduced maximum annual limitations through 
notice-and-comment rulemaking, as appropriate.
    We noted 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 the 
aggregate. This is because QHP issuers are required to meet specified 
AV levels that require the plan's cost-sharing to be within a limited 
range.
    We sought comment on this analysis and the proposed reductions in 
the maximum annual limitation on cost sharing calculation methodology 
for the 2022 benefit year and beyond. We also sought comment on the 
proposed reduced annual limitations on cost sharing for the 2022 
benefit year.
    We noted that for 2022, as described in Sec.  156.135(d), states 
are permitted to request HHS's approval for state-specific datasets for 
use as the standard population to calculate AV. No state submitted a 
dataset by the September 1, 2020 deadline.
    We received no comments on the reductions in the maximum 
limitations on cost sharing apart from those already discussed in the 
preamble to the premium adjustment percentage (Sec.  156.130(e)). In 
this regard, please see our summary of comments on the premium 
adjustment percentage (Sec.  156.130(e)) for a summary of comments 
pertaining to the reduced maximum annual limitation on cost sharing.
    In light of our decision to finalize the 2022 premium adjustment 
percentage using the NHEA ESI premium measure to estimate premium 
growth, we are not finalizing the 2022 reduced maximum annual 
limitation on cost sharing parameters as proposed (in Table 9 of the 
proposed rule \234\).
---------------------------------------------------------------------------

    \234\ 85 FR 78572 at 78635.
---------------------------------------------------------------------------

    To confirm consistency with the analysis for the reduced maximum 
annual limitation on cost sharing, we tested the reductions to the 
maximum annual limitation for cost sharing which we are finalizing in 
this rule, and we analyzed the impact on AV of the reductions described 
in the ACA to the 2022 maximum annual limitation on cost sharing that 
we are finalizing ($8,700). For 2022, the test silver level

[[Page 24237]]

QHPs included a PPO with typical cost-sharing structure ($8,700 annual 
limitation on cost sharing, $2,600 deductible, and 20 percent in-
network coinsurance rate); a PPO with a lower annual limitation on cost 
sharing ($7,700 annual limitation on cost sharing, $2,800 deductible, 
and 20 percent in-network coinsurance rate); and an HMO ($8,700 annual 
limitation on cost sharing, $4,100 deductible, 20 percent in-network 
coinsurance rate, and the following services with copayments that are 
not subject to the deductible or coinsurance: $1200 inpatient stay per 
day, $500 emergency department visit, $30 primary care office visit, 
and $60 specialist office visit). All three test QHPs meet the AV 
requirements for silver level health plans based on the parameters that 
we are finalizing in this rule.
    We then entered these test plans into a draft version of the 2022 
benefit year AV Calculator \235\ and observed how the reductions in the 
maximum annual limitation on cost sharing specified in the ACA affected 
the AVs of the plans. We found that the reduction in the maximum annual 
limitation on cost sharing specified in the ACA for enrollees with a 
household income between 100 and 150 percent of FPL (\2/3\ reduction in 
the maximum annual limitation on cost sharing), and 150 and 200 percent 
of FPL (\2/3\ reduction), would not cause the AV of any of the model 
QHPs to exceed the statutorily specified AV levels.
---------------------------------------------------------------------------

    \235\ Available at https://www.cms.gov/cciio/resources/regulations-and-guidance/index.
---------------------------------------------------------------------------

    Therefore, we are finalizing as proposed the reductions of \2/3\ 
for enrollees with a household income between 100 and 200 percent of 
FPL, \1/5\ for enrollees with a household income between 200 and 250 
percent of FPL, and no reduction for individuals with household incomes 
of 250 to 400 percent of FPL for the 2022 benefit year and beyond, as 
well as the methodology we use to ensure that these reductions do not 
result in unacceptably high AVs. The resulting final 2022 reduced 
maximum annual limitations on cost sharing are available in Table 10 
below.
[GRAPHIC] [TIFF OMITTED] TR05MY21.026

c. Publication of the Premium Adjustment Percentage, Maximum Annual 
Limitation on Cost Sharing, Reduced Maximum Annual Limitation on Cost 
Sharing, and Required Contribution Percentage (Sec.  156.130)
    Since the 2014 benefit year, HHS has published the premium 
adjustment percentage, maximum annual limitation on cost sharing, 
reduced maximum annual limitation on cost sharing, and required 
contribution percentage parameters through notice-and-comment 
rulemaking. Beginning with the 2023 benefit year, we proposed to 
publish these parameters in guidance by January of the year preceding 
the applicable benefit year, unless HHS is changing the methodology for 
calculating the parameters, in which case, we would do so through 
notice-and-comment rulemaking. We additionally proposed to publish in 
guidance the premium adjustment percentage and related parameters using 
the most recent NHEA income and premium data that is available at the 
time these values are published in guidance or, if HHS is changing the 
methodology for calculating these parameters, at the time these values 
are proposed in notice-and-comment rulemaking. Publication of these 
parameters prior to the release of updates to the NHEA data, which 
typically (but not always) occurs in February or March, is consistent 
with the 2021 Payment Notice policy to finalize the premium adjustment 
percentage, maximum limitation on cost sharing, reduced maximum 
limitation on cost sharing, and required contribution percentage using 
NHEA data that would be available at the time that the proposed rule 
would have been published.
    In the EHB final rule,\236\ HHS established at Sec.  156.130(e) 
that HHS will publish the annual premium adjustment percentage in the 
annual HHS notice of benefit and payment parameters. Additionally, in 
the 2014 Payment Notice final rule,\237\ HHS established at Sec.  
156.420(a)(1)(i), (2)(i), and (3)(i), that the reduced annual 
limitations on cost sharing would be published in the applicable 
benefit year's annual HHS notice of benefit and payment parameters. Due 
to the timing of publication of the annual HHS notice of benefit and 
payment parameters final rule in past years, stakeholders have 
suggested that when HHS is not changing the calculation methodology for 
these parameters, HHS should publish earlier the premium adjustment 
percentage, maximum limitation on cost sharing, reduced maximum 
limitation on cost sharing, and required contribution percentage. These 
stakeholders asserted that an earlier publication would allow issuers 
to incorporate these parameters for rate setting and the submission of 
QHP benefit templates earlier than would be possible if the parameters 
were published in the applicable benefit year's notice of benefit and 
payment parameters.
---------------------------------------------------------------------------

    \236\ 78 FR 12834 through 12833.
    \237\ 78 FR 15409.
---------------------------------------------------------------------------

    In addition, once the methodologies used to calculate the premium 
adjustment percentage, required contribution percentage, and maximum 
annual limitation on cost sharing have been established through 
rulemaking, the calculation of these amounts is a function of entering 
the applicable figures into the established equations, and therefore, 
does not require rulemaking to establish in subsequent benefit years. 
Furthermore, the methodology used to calculate the reduced maximum 
annual limitation on

[[Page 24238]]

cost sharing has remained consistent since the 2014 Payment Notice 
final rule. Therefore, as discussed earlier in this final rule, we are 
finalizing for the 2022 benefit year and beyond the reduction rates for 
the reduced maximum annual limitation on cost sharing as well as the 
methodology for determining whether these reductions raise plan AVs 
above acceptable levels for the 2022 benefit year and beyond.
    With these methodologies in place we proposed to amend Sec. Sec.  
156.130(e) and 156.420(a) to reflect that, beginning with the 2023 
benefit year, we would publish the premium adjustment percentage, along 
with the maximum annual limitation on cost sharing, the reduced maximum 
annual limitation on cost sharing, and the required contribution 
percentage, in guidance by January of the year preceding the applicable 
benefit year (for example, the 2023 premium adjustment percentage would 
be published in guidance no later than January 2022), unless HHS is 
amending the methodology to calculate these parameters, in which case 
HHS would amend the methodology and publish the parameters through 
notice-and-comment rulemaking.
    We believed that publishing the final premium adjustment percentage 
and associated final parameters in guidance annually instead of through 
notice-and-comment rulemaking is consistent with our efforts to provide 
information to stakeholders in a timely manner.
    We received public comments on the proposal to publish the premium 
adjustment percentage, maximum annual limitation on cost sharing, 
reduced maximum annual limitation on cost sharing (Sec.  156.130), and 
required contribution percentage (Sec.  155.605(d)(2)) in guidance. The 
following is a summary of the comments we received and our responses.
    Comment: We received multiple comments expressing general support 
for publishing the premium adjustment percentage, maximum annual 
limitation on cost sharing, reduced maximum annual limitation on cost 
sharing, and required contribution percentage in guidance by January of 
the year proceeding the applicable benefit year, when we are not 
proposing any changes to the methodologies used to calculate these 
values. Commenters largely agreed that this publication timeline would 
reduce confusion and would provide information to stakeholders in a 
more timely manner.
    However, a few commenters expressed concern that publication in 
guidance would reduce their opportunities to review and comment on 
these parameters. Some of these commenters pointed out that their 
concerns regarding the 2020 Payment Notice change in the premium 
adjustment percentage calculation \238\ have not been addressed and 
feared that publishing these parameters in guidance would remove 
opportunity to comment on the current methodology. For this reason, one 
commenter asked that we publish the parameters in guidance in draft 
form seeking public comment prior to finalizing the parameters for the 
applicable benefit year.
---------------------------------------------------------------------------

    \238\ In the 2020 Payment Notice, HHS changed the methodology 
for calculating the premium adjustment percentage from using ESI 
premiums to using all individual health insurance premiums minus 
Medigap and the medical portion of property and casualty insurance. 
See 84 FR 17454.
---------------------------------------------------------------------------

    Response: We are finalizing our ability to publish the premium 
adjustment percentage, maximum annual limitation on cost sharing, 
reduced maximum annual limitation on cost sharing and required 
contribution percentage in guidance. Therefore, for the 2023 benefit 
year and beyond, the values calculated based on the methodologies 
established in rulemaking will generally be published in guidance by 
January of the year preceding the benefit year to which they apply, 
unless we are proposing changes to the methodology used to calculate 
these values or otherwise wish to discuss or obtain significant 
feedback on the methodology. As a general matter, we do not believe 
that comments to such guidance will be necessary since the methodology 
will have been set pursuant to statute and through notice-and-comment 
rulemaking, and the guidance would merely be announcing the published 
measures and showing the calculations based on the established 
methodology and published measures. We reiterate that if we do propose 
changes to the methodology, we will propose the values of these 
parameters alongside the changes in methodology through notice-and-
comment rulemaking.
    As mentioned in previous sections of this final rule, we have 
addressed comments concerned about the methodology change for 
calculating the premium adjustment percentage that was finalized in the 
2020 Payment Notice, and are reverting back to the methodology used 
prior to 2020 Payment Notice. Therefore, we are relying on NHEA ESI 
premium data, not premium data from other private health insurance 
markets, in our calculation of premium growth and the premium 
adjustment percentage, maximum annual limitation on cost sharing, 
reduced maximum annual limitation on cost sharing, and required 
contribution percentage for the 2022 benefit year and beyond.
4. Termination of Coverage or Enrollment for Qualified Individuals 
(Sec.  156.270)
    In the 2021 Payment Notice, we finalized a requirement that under 
Sec.  156.270(b)(1), QHP issuers must send termination notices with 
effective dates and reason for the termination to enrollees for all 
termination events. We finalized this policy as proposed, noting that 
all commenters who weighed in on this topic supported our proposal. 
This policy became effective July 13, 2020. In the 2022 Payment Notice 
proposed rule, we did not propose, and we are not finalizing, any 
changes to paragraph (b)(1) beyond what we finalized in the 2021 
Payment Notice for the reasons discussed below.
    In finalizing the change to Sec.  156.270(b)(1) in the 2021 Payment 
Notice, we inadvertently omitted discussion of two comments opposing 
the proposal. These comments raised concerns about unnecessary 
additional administrative costs and IT builds, and noted that a 
termination notice could be confusing in certain scenarios--for 
example, if the enrollee switches between QHPs offered by the same 
issuer, a termination notice from their issuer could cause confusion. 
These commenters proposed instead that Exchanges should be required to 
clearly convey the eligibility termination reason and effective date in 
the Exchange's own eligibility notices, consistent with the data 
conveyed to issuers on 834 termination transactions.
    We are sensitive to commenters' concerns that issuers need 
sufficient time to build IT systems to implement this policy. In 
response, we issued guidance allowing issuers using the Federal 
platform enforcement discretion until February 1, 2021 to implement the 
new termination notice requirement.\239\
---------------------------------------------------------------------------

    \239\ ``Enforcement Safe Harbor for Qualified Health Plan 
Termination Notices During the 2019 Benefit Year,'' August 26, 2020. 
Available at https://www.cms.gov/CCIIO/Programs-and-Initiatives/Health-Insurance-Marketplaces/Downloads/Termination-Notices-Enforcement-Discretion.pdf.
---------------------------------------------------------------------------

    However, the comments in opposition to the proposal do not change 
our policy goals underlying our decision to finalize the rule as 
proposed. FFEs do not send termination notices for any termination 
scenario other than citizenship data-matching issue expirations and 
terminations associated with Medicare PDM when the enrollee has elected 
at plan selection to terminate Exchange coverage when found dually 
enrolled. FFEs also do not send termination notices in enrollee-
initiated

[[Page 24239]]

terminations which must be requested at the Exchange. Similarly, FFEs 
do not send termination notices when an enrollee switches QHPs within 
the same issuer. This is all appropriate, because the issuer is the 
primary communicator to the enrollee about their coverage. We still 
believe that termination notices would be helpful in these scenarios, 
even in plan selection changes, because an enrollee switching QHPs 
could have their premium, cost sharing, and provider network affected. 
As one of the comments in support of the new termination notice 
requirement in the 2021 Payment Notice noted, it is important for the 
enrollee to have in writing the actual termination date for their 
records, in case of miscommunication with the issuer about the 
preferred date or to later dispute an inaccurate Form 1095-A. Another 
commenter agreed that issuers should send termination notices during 
voluntary terminations associated with Medicare PDM as it would help 
the enrollee confidently transition to Medicare.
    Complaints about terminations are one of the largest sources of 
casework. More consistent communication is part of the solution. We 
believed consumers should be notified of these changes, even if they 
initiated them, so that enrollees have a record that the issuer 
completed the request. Issuers are the proper messenger of termination 
noticing for many reasons. For example, Exchange issuers historically 
are the senders of termination notices, and some issuers acknowledged 
in their comments on the 2021 Payment Notice that they already do send 
termination notices in all scenarios. Furthermore, the issuer has 
record of the termination date needed for the termination notice before 
the Exchange in some cases, such as some retroactive termination 
requests handled through casework, and State Exchange issuer 
terminations described in Sec.  155.430(d)(iv). One reason we regulated 
in this area is that we were receiving detailed questions from issuers 
about which termination scenarios required issuer notices; we believe 
requiring issuer termination notices for all scenarios in the long run 
makes the requirement simpler.
    Therefore, we did not propose, and are not finalizing, any changes 
to Sec.  156.270(b)(1) beyond what we finalized in the 2021 Payment 
Notice.
    Comment: One commenter appreciated that we did not propose any 
changes beyond what we finalized in the 2021 Payment Notice. Another 
commenter supported our 2021 Payment Notice provision requiring issuers 
to send termination notices to consumers in all termination scenarios, 
but suggested that HHS work with consumer advocates to provide simpler, 
more easily understandable termination templates that could help with 
readability for individuals with low literacy.
    Response: HHS does not proscribe language that issuers must use in 
their termination notices. We believe that issuers, as the primary 
communicators to enrollees about their coverage, are in the best 
position to decide the appropriate termination notice content and 
wording for their enrollees, as long as they comply with applicable 
requirements, including those in Sec. Sec.  156.270 and 156.250. Under 
those regulations, because issuers are required to send these 
termination notices to enrollees, issuers must use plain language in 
any such notices they send to consumers, so that the information can 
easily be understood and is useful to consumers with low literacy, low 
health literacy, or limited English proficiency.
    Comment: One commenter said that FFEs, as the systems of record, 
should be responsible for sending termination notices, particularly 
because FFEs already send eligibility notices, 1095-A forms, and other 
documentation.
    Response: As we explained in the preamble to the proposed rule, 
issuers are the proper messenger of termination noticing for many 
reasons. Exchange issuers historically are the senders of termination 
notices, and some issuers acknowledged in their comments on the 2021 
Payment Notice that they already do send termination notices in all 
scenarios. Furthermore, the issuer has record of the termination date 
needed for the termination notice before the Exchange in some cases, 
such as some retroactive termination requests handled through casework, 
and State Exchange issuer terminations described in Sec.  
155.430(d)(iv).
5. Prescription Drug Distribution and Cost Reporting by QHP Issuers 
(Sec.  156.295)
    Section 6005 of the ACA added section 1150A(a)(2) of the Act to 
require a PBM under a contract with a Medicare Part D plan sponsor or 
Medicare Advantage plan that offers a Medicare Part D plan, or with a 
QHP offered through an Exchange established by a state under section 
1311 of the ACA \240\ to provide certain prescription drug information 
to the Secretary, at such times, and in such form and manner, as the 
Secretary shall specify. Section 1150A(b) of the Act addresses the 
information that a QHP issuer or their PBM must report.\241\ Section 
1150A(c) of the Act requires the information reported to be kept 
confidential and not to be disclosed by the Secretary or by a plan 
receiving the information, except that the Secretary may disclose the 
information in a form which does not disclose the identity of a 
specific PBM, plan, or prices charged for drugs for certain 
purposes.\242\
---------------------------------------------------------------------------

    \240\ This includes an FFE, as a Federal Exchange may be 
considered an Exchange established under section 1311 of the ACA. 
King v. Burwell, 576 U.S. 988 (2015).
    \241\ This information is: The percentage of all prescriptions 
that were provided through retail pharmacies compared to mail order 
pharmacies, and the percentage of prescriptions for which a generic 
drug was available and dispensed (generic dispensing rate), by 
pharmacy type (which includes an independent pharmacy, chain 
pharmacy, supermarket pharmacy, or mass merchandiser pharmacy that 
is licensed as a pharmacy by the state and that dispenses medication 
to the general public), that is paid by the health benefits plan or 
PBM under the contract; the aggregate amount, and the type of 
rebates, discounts, or price concessions (excluding bona fide 
service fees, which include but are not limited to distribution 
service fees, inventory management fees, product stocking 
allowances, and fees associated with administrative services 
agreements and patient care programs (such as medication compliance 
programs and patient education programs)) that the PBM negotiates 
that are attributable to patient utilization under the plan, and the 
aggregate amount of the rebates, discounts, or price concessions 
that are passed through to the plan sponsor, and the total number of 
prescriptions that were dispensed; and, the aggregate amount of the 
difference between the amount the health benefits plan pays the PBM 
and the amount that the PBM pays retail pharmacies, and mail order 
pharmacies, and the total number of prescriptions that were 
dispensed.
    \242\ The purposes are: As the Secretary determines to be 
necessary to carry out Section 1150A or part D of title XVIII; to 
permit the Comptroller General to review the information provided; 
to permit the Director of the Congressional Budget Office to review 
the information provided; and, to States to carry out section 1311 
of the ACA.
---------------------------------------------------------------------------

    In the 2012 Exchange Final Rule, we codified the requirements 
contained in section 1150A of the Act with regard to QHPs at Sec.  
156.295. In that rule, we interpreted section 1150A of the Act to 
require QHP issuers to report the information described in section 
1150A(b) of the Act and did not specify the responsibilities of PBMs 
that contract with QHP issuers to report this information. On January 
28, 2020 \243\ and on September 11, 2020,\244\ we published notices in 
the Federal Register and solicited public comment on collection of 
information requirements detailing the proposed collection envisioned 
by section 1150A of the Act to HHS.\245\
---------------------------------------------------------------------------

    \243\ 85 FR 4993 through 4994.
    \244\ 85 FR 56227 through 56229.
    \245\ Pharmacy Benefit Manager Transparency. CMS-10725. 
Available at https://www.cms.gov/regulations-and-guidancelegislationpaperworkreductionactof1995pra-listing/cms-10725.

---------------------------------------------------------------------------

[[Page 24240]]

a. QHP Issuer Responsibilities
    In the proposed rule, we proposed to add new part 184 to address 
the responsibilities of PBMs under the ACA and to add Sec.  184.50 to 
codify in regulation the statutory requirement that PBMs that are under 
contract with an issuer of one or more QHPs report the data required by 
section 1150A of the Act. Accordingly, we proposed to revise Sec.  
156.295(a) to state that where a QHP issuer does not contract with a 
PBM to administer the prescription drug benefit for QHPs, the QHP 
issuer will report the data required by section 1150A of the Act to 
HHS. We proposed corresponding revisions throughout Sec.  156.295 to 
remove the applicability of the reporting requirement for PBMs under 
this section and propose revising the title to ``Prescription drug 
distribution and cost reporting by QHP issuers''.
    As explained in the proposed rule and in the preamble for Sec.  
184.50 in this final rule, we acknowledge that section 1150A places 
responsibility on both the QHP issuer and their PBMs to report this 
prescription drug data. Generally, where a QHP issuer contracts with a 
PBM, the PBM is more likely to be the source of the data that must be 
reported. Therefore, to reduce overall burden, rather than requiring 
the QHP issuer to serve as a conduit between its PBM and HHS, or 
unnecessarily requiring both the PBM and the QHP issuer to submit 
duplicated data, we proposed to implement section 1150A to make QHP 
issuers responsible for reporting this data directly to the Secretary 
only when the QHP issuer does not contract with a PBM to administer the 
prescription drug benefit for their QHPs. Where a QHP contracts with a 
PBM, the PBM is responsible for reporting data to the Secretary as 
required by Sec.  184.50.
    We stated that although we were unaware of any QHP issuer that does 
not currently utilize a PBM, we believed that, together, the proposals 
to revise Sec.  156.295 and to add Sec.  184.50 would ensure the 
collection of data required by section 1150A of the Act in all 
circumstances, including when a QHP issuer does not use a PBM to 
administer its prescription drug benefit. Retaining the requirement for 
QHP issuers to report data at Sec.  156.295 when they do not contract 
with a PBM would ensure that the data is consistently collected every 
plan year.
    We also proposed to remove Sec.  156.295(a)(3) to remove the 
requirement for QHP issuers to report spread pricing amounts when the 
QHP issuer does not contract with a PBM to administer the prescription 
drug benefit for their QHPs. Spread pricing amounts are only present 
where a PBM acts as an intermediary between the QHP issuer and a drug 
manufacturer. If a QHP issuer does not contract with a PBM, no such 
intermediary exists and it is not possible for QHP issuers to report 
this data.
    We sought comment on these proposals.
    We received public comments on these proposals. The following is a 
summary of the comments we received and our responses.
    Comment: Many commenters supported the proposal to collect this 
data directly from the PBMs that QHP issuers contract with to 
administer the drug benefit for their QHPs, as PBMs are best positioned 
to report the data with the least amount of burden. A few commenters 
asserted that section 1150A(a)(2) of the Act does not grant HHS the 
authority to collect this data directly from PBMs.
    Response: We agree with commenters that where QHP issuers utilize 
PBMs to administer their prescription drug benefit, PBMs are best 
suited to report this data. Section 1150A(a)(2) of the Act grants the 
Secretary the authority to specify the time, form, and manner of this 
collection. We exercise this authority to specify the manner of this 
collection by finalizing this policy as proposed: PBMs will submit this 
data to HHS when a QHP issuer contracts with the PBM to administer the 
drug benefit for their QHPs. If a QHP issuer does not contract with a 
PBM to administer the drug benefit for their QHPs, the QHP issuer will 
submit the data to HHS. However, given our understanding that all QHP 
issuers currently use a PBM, with the limited exception of QHP issuers 
with integrated delivery systems as discussed below, we believe that it 
is reasonable to expect that PBMs are best suited to report this data 
given their contractual role in the primary administration of 
prescription drug benefits.
    Comment: Citing the burden to make contractual modification and 
operational upgrades, many commenters requested that we delay 
implementation of the collection until 2022 or later.
    Response: We are aware of the timing concerns expressed by 
commenters in response to the policies finalized here and at part 184 
below, as well as those expressed in response to the collection of 
information requirement notices displayed in 2020. However, this 
collection is statutorily required, and, as noted in the collection of 
information requirement notices, we have previously delayed its 
implementation in order to accommodate concerns regarding burden. We 
are sensitive to commenters' concerns about burden and timing, and, 
this data collection is not imposed lightly; we understand that the 
implementation of a new data collection during a pandemic may impose 
additional challenges on the industry. However, its disclosure has 
never been more vital, as all aspects of the prescription drug delivery 
chain continue to contribute to rising prescription drug costs in this 
country. Additionally, we believe that this data is essential for the 
implementation of policies that seek to improve the coverage landscape 
of prescription drugs. We therefore intend to begin collection as soon 
as reasonably possible. However, to minimize burden during a pandemic, 
and to allow for additional time to provide technical assistance to 
reporting entities for a new collection, we do not intend to require 
submission sooner than December 31, 2021.
    Comment: Multiple commenters asserted that section 1150A(a)(2) of 
the Act does not grant HHS the authority to collect some of this data 
at the National Drug Code (NDC) level of detail. Commenters also 
expressed concern that HHS did not describe the level of detail for 
this collection in regulation.
    Response: Section 1150A(a)(2) of the Act grants the Secretary the 
authority to specify the time, form, and manner of this collection. We 
have specified the form and manner of this collection as part of the 
collection of information requirement notices displayed in 2020. In 
collecting some of this data at the NDC level of detail, we are 
interpreting section 1150A in a manner consistent with previous 
rulemaking by CMS.\246\ Additionally, we sought comment on the form and 
manner of the collection twice in the collection of information 
requirement notices displayed in 2020,

[[Page 24241]]

including the level of detail of the collection.
---------------------------------------------------------------------------

    \246\ See ``Medicare Program; Changes to the Medicare Advantage 
and the Medicare Prescription Drug Benefit Programs for Contract 
Year 2013 and Other Changes; Final Rule'' at 77 FR 22094. In that 
final rule, CMS interpreted section 1150A of the Act to impose no 
additional reporting requirements for entities subject to Direct and 
Indirect Remuneration (DIR) reporting, except for PBM spread amount 
aggregated to the plan benefit package level. The existing DIR 
reporting required data reporting at the NDC. As such, CMS has 
previously interpreted that section 1150A authorizes collection at 
an NDC level of reporting. For consistency with previous rulemaking 
by CMS and to reduce the burden of creating different CMS, 
collection requirements, we will collect some of this data at the 
NDC level. We recognize that DIR reporting requirements under Part D 
are partly based on statutory authority that is not applicable to 
this collection, and we do not claim to rely on any authority other 
than section 1150A of the Act as the basis for this collection. We 
do, however, rely on that final rule insofar as CMS strives to 
interpret the same statute consistently.
---------------------------------------------------------------------------

    Comment: Some commenters expressed concern that a federal 
requirement to report prescription drug data for QHPs may conflict or 
overlap with state requirements to collect similar data. One commenter 
voiced concern that this collection is unduly similar to the 
Transparency in Coverage final rule,\247\ a rule for which the 
commenter seeks regulatory clarifications.
---------------------------------------------------------------------------

    \247\ 85 FR 72158.
---------------------------------------------------------------------------

    Response: While we agree with commenters that we should endeavor to 
minimize burden and avoid conflict or duplication of efforts with state 
reporting requirements, we have conducted research and held discussions 
with states to understand existing state reporting requirements. In 
addition, no state submitted comments to the collection of information 
requirement notices displayed in 2020 or to this proposal indicating 
any concern about conflict or overlap with this reporting requirement. 
As a result, we believe that there is no significant conflict or 
duplication between this collection and any state reporting 
requirement.
    We also note that, after the proposed rule displayed, Congress 
passed the Consolidated Appropriations Act, 2021,\248\ which includes 
certain reporting requirements on pharmacy benefits and drug 
costs.\249\ We are aware that some of the data envisioned for reporting 
under the Consolidated Appropriations Act may, to an extent, be similar 
to some of the data sought by collection under Sec.  1150A of the Act. 
While we are finalizing this collection as proposed, we, along with the 
Departments of Treasury and Labor, intend to issue future guidance that 
will explain the interaction between this collection and the future 
collection envisioned by the Consolidated Appropriations Act, if 
necessary.
---------------------------------------------------------------------------

    \248\ Public Law 116-260, enacted on December 27, 2020.
    \249\ See section 2799A-10.
---------------------------------------------------------------------------

    Comment: One commenter requested clarification whether the 
collection applies to QHP issuers with integrated delivery systems; 
that is, QHP issuers that do not use a network of outside providers and 
do not use outside PBMs to manage their prescription drug benefits. 
This commenter asserted that there is limited rationale to collect data 
from such plans, as Sec.  1150A is intended to increase transparency on 
relationships and transactions across the prescription drug supply 
chain, particularly between health plans, PBMs, and pharmacies.
    Response: We recognize that not all data elements that must be 
reported under this requirement would apply equally to integrated 
delivery systems. Nonetheless, we believe that it is important for 
these QHP issuers with integrated delivery systems to report the data 
elements that are applicable, since these issuers are also part of the 
drug supply chain and their different model provides an important point 
of comparison. In this instance, the QHP issuer would be responsible 
for reporting this data, as they do not utilize a PBM to administer 
their prescription drug benefit. We plan to provide technical 
assistance to all reporting entities to minimize the burden of this 
collection.
    Comment: One commenter requested clarification regarding the 
collection's applicability to off-Exchange plans.
    Response: This collection applies to QHPs only. We interpret the 
statute as requiring reporting for QHPs, regardless of whether the QHPs 
are sold on-Exchange or off-Exchange. The collection does not apply to 
any other plans.
    Comment: A few commenters addressed the confidentiality provision 
of section 1150A and their codification in regulation. A few commenters 
requested that the data be released to the public in Public Use Files 
(PUFs). A few commenters noted that we should share this data with 
states upon their request to bolster their transparency efforts. One 
commenter asserted that the confidentiality restrictions required by 
statute may be too limiting to have an appreciable impact on reducing 
health care costs for patients, employers and other purchasers.
    Response: Section 1150A of the Code, codified previously at Sec.  
156.295 and also finalized below at Sec.  184.50 states that 
information disclosed by a plan or PBM under this collection is 
confidential and shall not be disclosed by the Secretary or by a plan 
receiving the information, except that the Secretary may disclose the 
information in a form which does not disclose the identity of a 
specific PBM, plan, or prices charged for drugs, for certain purposes, 
including to states to carry out section 1311 of the ACA.\250\
---------------------------------------------------------------------------

    \250\ The other purposes described in statute are: As the 
Secretary determines to be necessary to carry out section 1150A or 
part D of title XVIII; to permit the Comptroller General to review 
the information provided; and, to permit the Director of the 
Congressional Budget Office to review the information provided.
---------------------------------------------------------------------------

    Comment: We received a number of comments that were out-of-scope of 
the two specific proposals in the proposed rule, including suggestions 
for improving the definition of ``bona fide service fees'' used in the 
appendices of the previously posted ICRs, suggestions on how we might 
automate the reporting mechanisms, and comments regarding the 
transparency in coverage requirement under PHS Act section 1311(e)(3).
    Response: We appreciate these suggestions and will consider them 
for future action for this collection and its associated regulations. 
However, as they are out-of-scope with regards to these specific 
proposals, we decline to comment further on them at this time.
    As a result of the comments, we are finalizing this policy as 
proposed.
b. Reporting of Data by Pharmacy Type
    Section 1150A(b)(1) of the Act requires the Secretary to collect 
certain QHP prescription drug data \251\ by pharmacy type (which 
includes an independent pharmacy, chain pharmacy, supermarket pharmacy, 
or mass merchandiser pharmacy that is licensed as a pharmacy by the 
state and that dispenses medication to the general public). This 
requirement was previously codified at Sec.  156.295(a)(1). In the 
Medicare Program; Changes to the Medicare Advantage and the Medicare 
Prescription Drug Benefit Programs for Contract Year 2013 and Other 
Changes final rule, we recognized that it is not currently possible to 
report such data by pharmacy type because pharmacy type is not a 
standard classification currently captured in industry databases or 
files.\252\ We understand that these types continue not to be standard 
classifications currently captured in industry databases or files, as 
indicated by comments submitted in response to the January 28, 2020 
notice in the Federal Register soliciting public comment on the 
collection of information requirements of this collection.\253\ To 
reduce the burden of this collection, we proposed to revise Sec.  
156.295(a)(1) to remove the requirement to report the data described at 
section 1150A(b)(1) of the Act by pharmacy type. We intended to collect 
this information at a time when this requirement would impose 
reasonable burden. We sought comment on ways that we may collect the 
data by pharmacy type without creating

[[Page 24242]]

unreasonable burden and any existing definitions that may exist that 
could be leveraged for this purpose. We also sought comment on the time 
and costs required for PBMs to begin reporting by pharmacy type, if 
definitions were finalized.
---------------------------------------------------------------------------

    \251\ Section 1150A(b)(1) requires the reporting of the 
percentage of all prescriptions that were provided through retail 
pharmacies compared to mail order pharmacies, and the percentage of 
prescriptions for which a generic drug was available and dispensed.
    \252\ See 77 FR 22072 at 22093.
    \253\ See 85 FR 4993 through 4994.
---------------------------------------------------------------------------

    We received public comments on the proposed updates to reporting of 
data by pharmacy type. The following is a summary of the comments we 
received and our responses.
    Comment: Nearly all commenters supported the proposal to remove the 
requirement to report the data described at section 1150A(b)(1) of the 
Act by pharmacy type, agreeing that it is not a data point that is 
collected on a widespread basis by the industry and that the 
implementation would cause unreasonable burden. One commenter 
disagreed, explaining that that industry is currently capable of 
reporting this data.
    Response: We agree with the majority of commenters that pharmacy 
type data is currently not readily collected by industry. While we will 
continue to consider ways to implement its collection, we agree that 
removal of this requirement from the regulation is warranted at this 
time.
    Following review of the comments, we are finalizing this policy as 
proposed.
6. Oversight of the Administration of the Advance Payments of the 
Premium Tax Credit, Cost-Sharing Reductions, and User Fee Programs 
(Sec.  156.480)
a. Application of Requirements to Issuers in State Exchanges and SBE-
FPs
    In the second Program Integrity Rule, we finalized general 
provisions related to the oversight of QHP issuers in relation to APTC 
and CSRs.\254\ We explained that since APTC and CSR payments are 
federal funds which pass from HHS directly to QHP issuers, it is 
necessary for HHS to oversee QHP issuer compliance in these areas, 
regardless of whether the QHP is offered through a State Exchange or an 
FFE. As such, to effectively oversee the payment of APTC and CSRs by 
QHP issuers, HHS established standards in part 156, subpart E for QHP 
issuers participating in FFEs and State Exchanges. We also noted that 
in states with State Exchanges, the state would have primary 
enforcement authority over QHP issuers participating in the state's 
individual market exchange that were not in compliance with the 
standards set forth in part 156, subpart E.\255\ However, if the State 
Exchange does not enforce such standards, HHS would enforce compliance 
with these requirements, including the imposition of CMPs on QHP 
issuers participating in State Exchanges using the same standards and 
processes for QHP issuers participating in FFEs set forth in part 156, 
subpart I.\256\ In the second Program Integrity Rule, we also finalized 
general provisions that require issuers offering QHPs in an FFE 
maintain all documents and records and other evidence of accounting 
procedures and practices, which are critical for HHS to conduct 
activities necessary to safeguard the financial and programmatic 
integrity of the FFEs.\257\ As finalized in 45 CFR 156.705(a)(1), this 
includes the authority for HHS to include periodic auditing of the QHP 
issuer's financial records related to the participation in an FFE. To 
date, we have leveraged this authority to conduct user fee audits of 
QHP issuers participating in an FFE.
---------------------------------------------------------------------------

    \254\ See 78 FR 65077 and 65078.
    \255\ See the proposed Program Integrity Rule, 78 FR 37058. Also 
see 78 FR 65077 and 65078.
    \256\ Ibid.
    \257\ See 78 FR 65078 and 65079.
---------------------------------------------------------------------------

    In the proposed rule, we proposed amendments to consolidate HHS 
audit authority regarding APTC, CSR, and user fee audits by expanding 
the audit authority under Sec.  156.480(c) to also capture user fees 
audits by HHS, or its designee, of QHP issuers participating in an FFE. 
Additionally, as part of determining whether APTC and CSR amounts were 
properly paid to issuers, and whether user fee amounts were properly 
collected, we explained that HHS regularly identifies discrepancies in 
issuer records caused by issuer non-compliance with other applicable 
Exchange operational standards. Examples include failure to correctly 
effectuate or terminate coverage, or to correctly calculate premiums. 
In addition, we proposed to apply the same framework to QHP issuers 
participating in SBE-FP states. As such, QHP issuers in SBE-FP states 
would be required to comply with HHS audits under Sec.  156.480(c) to 
confirm compliance with the applicable standards established in part 
156, subpart E for APTC and CSRs and Sec.  156.50 for user fees.
    We further proposed that in situations where the state fails to 
substantially enforce such standards, HHS would enforce compliance, 
including imposing CMPs using the same standards set forth in part 156, 
subpart I. Based on our experience conducting audits of APTC, CSRs, and 
user fees, we also proposed several amendments to Sec.  156.480(c) to 
ensure we can effectively oversee the payment of these amounts by QHP 
issuers, regardless of Exchange type (for example, FFE, State Exchange, 
or SBE-FP).
    As detailed below, to further support our program integrity efforts 
in these areas, we proposed to amend Sec.  156.480(c) to codify 
additional details regarding HHS audits and to capture authority for 
HHS to conduct compliance reviews of QHP issuer compliance with the 
applicable federal APTC, CSR, and user fee standards,\258\ including 
the consequences for the failure to comply with an audit. In addition, 
we proposed amendments to Sec. Sec.  156.800 and 156.805 to set forth 
the framework for HHS enforcement of the applicable federal APTC, CSR, 
and user fee standards in situations where state authorities fail to 
substantially enforce those standards with respect to the QHP issuers 
participating in State Exchanges and SBE-FPs.
---------------------------------------------------------------------------

    \258\ The applicable federal standards for APTC and CSRs are 
found in part 156, subpart E, which apply to QHP issuers 
participating in all Exchanges types (FFEs, State Exchanges, and 
SBE-FPs). The applicable federal standards for user fees are found 
in 45 CFR 156.50, which apply to QHP issuers in FFEs and SBE-FPs.
---------------------------------------------------------------------------

    We sought comment on these proposals, including with respect to how 
HHS could coordinate with State Exchanges and SBE-FPs to address non-
compliance by QHP issuers with applicable federal APTC, CSRs, and user 
fee standards. We sought comment on ways to balance enforcement by 
State Exchanges and SBE-FPs and the protection and oversight of federal 
funds by HHS. We are finalizing the proposal to apply the same audit 
requirements to QHP issuers participating in SBE-FP states as for QHP 
issuers participating in FFE states. As such, QHP issuers in SBE-FP 
states will be required to comply with HHS audits under Sec.  
156.480(c) to confirm compliance with the applicable standards 
established in part 156, subpart E for APTC and CSRs and Sec.  156.50 
for user fees. We are also finalizing the APTC, CSR, and user fee audit 
requirements at Sec.  156.480(c) with slight modifications to certain 
audit timeframes, as well as HHS's authority to impose CMPs on issuers 
in State Exchanges and SBE-FPs when the State Exchange or SBE-FP fails 
to substantially enforce the applicable federal APTC, CSR, and user fee 
standards at Sec. Sec.  156.800 and 156.805. We are also finalizing the 
accompanying amendments to establish authority for HHS to conduct 
compliance reviews to confirm QHP issuer compliance with the federal 
APTC, CSR, and user fee standards.
    We received public comments on the proposed updates and policies 
regarding

[[Page 24243]]

the application of federal APTC, CSR, and user fee requirements to 
issuers in State Exchanges and SBE-FPs. The majority of the comments we 
received to this section were also made to the sections regarding HHS's 
enforcement of the applicable federal APTC, CSR, and user fee standards 
if a State Exchange or SBE-FP is not enforcing or fails to 
substantially enforce one or more of these requirements (Sec.  
156.480(c)(6)); subpart I--enforcement remedies in the Exchanges, 
available remedies, and scope (Sec.  156.800); and the bases and 
process for imposing CMPs in the Exchanges (Sec.  156.805).We respond 
to these parallel comments in the bases and process for imposing CMPs 
in the Exchanges (Sec.  156.805) preamble section below. However, we 
received some comments that were specific to this section, suggesting 
ways for HHS to coordinate with State Exchanges and SBE-FPs to address 
non-compliance by QHP issuers with applicable federal APTC, CSRs, and 
user fee standards. The following is a summary of these comments and 
our responses.
    Comment: Commenters emphasized that HHS should collaborate with 
State Exchanges and SBE-FPs and keep them informed of and involved in 
HHS's audits of QHP issuers that operate in their respective State 
Exchange or SBE-FP. They noted that State Exchanges and SBE-FPs should 
also be informed of upcoming issuer audits and compliance reviews, as 
well as audit and compliance review findings, including any amounts 
recouped by HHS and any enforcement action taken against issuers in 
their states. These commenters offered specific suggestions for how HHS 
could collaborate with State Exchanges and SBE-FPs. One commenter 
stated that HHS should provide technical assistance to the state and 
coordinate with the state on corrective action required of any issuers 
in the state, if necessary. Another commenter asked that HHS reconsider 
the role of State Exchanges in audits and revise the audit process 
accordingly. This commenter suggested creating one audit process for 
FFE issuers and a different one for State Exchange and SBE-FP issuers, 
and further suggested HHS could consider creating different processes 
for State Exchange and SBE-FP issuers, as well as different processes 
among State Exchanges, as necessary.
    Response: HHS generally intends its approach to audits, compliance 
reviews, and enforcement activities of issuers to be collaborative 
processes with issuers, states, State Exchanges, and SBE-FPs. HHS will 
continue to coordinate with State Exchanges and SBE-FPs, including 
notifying State Exchanges and SBE-FPs when an audit or compliance 
review involves an issuer in their state. Additionally, HHS will also 
consider taking a different approach for conducting APTC, CSR, and user 
fee audits and compliance reviews for State Exchange issuers, such that 
HHS more closely involves State Exchanges in the process, to the extent 
possible and appropriate based on the specific State Exchange and the 
circumstances involved. This includes HHS considering how best to 
coordinate APTC, CSR, and user fee audits for State Exchange issuers 
with existing independent external audit activities that State 
Exchanges are required to conduct annually, under 45 CFR 155.1200, that 
cover similar or related Exchange functions such as eligibility 
determinations, enrollments, and the reporting of eligibility and 
enrollment data to HHS. State Exchanges are required to report the 
results of these external audits to HHS and establish corrective action 
plans for findings, which are jointly monitored by the State Exchange 
and HHS. In addition, HHS will continue to work with State Exchanges 
and SBE-FPs to enforce the applicable federal APTC, CSR, and user fee 
standards, as detailed in the below section on bases and process for 
imposing CMPs in the Exchanges (Sec.  156.805).
    We appreciate commenters' suggestions and agree that HHS may 
provide technical assistance to the state and coordinate with the state 
on corrective action required of any issuers in the state, if 
necessary, to help guide collaboration efforts with State Exchanges and 
SBE-FPs with respect to ensuring issuer compliance with federal APTC, 
CSR, and user fee standards and audits. We intend to consider the 
various recommendations for potential enhancements to the process for 
HHS audits and compliance reviews of federal APTC, CSR, and user fee 
standards, including potential ways to further enhance the 
collaboration with state regulators, State Exchanges, and SBE-FPs. 
However, as explained in the proposed rule, the proposed updates were 
intended to build on the existing framework established in the second 
Program Integrity Rule and clarify HHS's authority with respect to 
oversight and enforcement of compliance with federal APTC, CSR, and 
user fee standards in State Exchange and SBE-FP states.\259\ We also 
remind stakeholders that the APTC, CSR,\260\ and user fee programs are 
federal funds, and the focus of these audits will be on issuer 
compliance with applicable federal standards.
---------------------------------------------------------------------------

    \259\ See 78 FR 65077 and 65078.
    \260\ The CSR program was 100 percent federal funds prior to 
October 2017, when CSR payments to issuers were discontinued due to 
lack of a Congressional appropriation.
---------------------------------------------------------------------------

    HHS will consider recommendations to enhance the QHP issuer audit 
and compliance review processes to take into consideration existing 
audit activities that HHS requires State Exchanges to conduct annually 
under Sec.  155.1200, the variation between FFE, SBE-FP, and State 
Exchange issuers, as well as the variation among issuers participating 
in the different State Exchanges. In all cases, HHS will continue to 
collaborate with the State Exchange or SBE-FP to enforce the applicable 
federal APTC, CSR, and user fee standards. Further, one of the goals of 
these amendments is to ensure the timely and accurate completion of 
audits of federal funds under the APTC, CSR, and user fee programs. 
Therefore, based on our experience to date conducting 2014 benefit year 
CSR audits, to ensure the protection of federal funds and compliance 
with applicable federal requirements, HHS will generally lead the 
efforts to audit compliance with federal APTC, CSR, and user fee 
standards (where applicable) under Sec.  156.480(c).
    After consideration of the comments received on these proposals, we 
are finalizing the provision to apply the same audit requirements to 
QHP issuers participating in SBE-FP states as for QHP issuers 
participating in FFE and State Exchange states as proposed. As such, 
QHP issuers in SBE-FP states will be required to comply with HHS audits 
and compliance reviews under Sec.  156.480(c) to confirm compliance 
with the applicable standards established in part 156, subpart E for 
APTC and CSRs and Sec.  156.50 for user fees. We are also finalizing 
the APTC, CSR, and user fee audit requirements at Sec.  156.480(c), as 
well as HHS's authority to impose CMPs on issuers in State Exchanges 
and SBE-FPs when the State Exchange or SBE-FP fails to substantially 
enforce the applicable federal APTC, CSR, and user fee standards at 
Sec. Sec.  156.800 and 156.805.
b. Audits and Compliance Reviews of APTC, CSRs, and User Fees (Sec.  
156.480(c))
    In prior rulemaking, we codified authority for HHS to audit an 
issuer that offers a QHP in the individual market through an Exchange 
to assess compliance with the requirements of part 156, subpart E.\261\ 
We also previously codified general authority for HHS to periodically 
audit a QHP

[[Page 24244]]

issuer's financial records related to its participation in an FFE.\262\ 
Recently, HHS completed the audits for the 2014 benefit year CSR 
payments. During these audits, HHS encountered challenges working with 
some issuers. Specifically, HHS experienced difficulties receiving 
requested audit data and materials in a timely fashion and receiving 
data in a format that is readily usable for purposes of conducting the 
audit. As such, similar to the proposals related to audits of issuers 
of reinsurance-eligible plans and risk adjustment covered plans 
discussed earlier in the proposed rule, we proposed to amend Sec.  
156.480(c) to provide more clarity around the issuer requirements for 
APTC, CSR, and user fee audits. The proposed amendments codify more 
details about the audit process and clarify issuer obligations with 
respect to these audits, including what it means to comply with an 
audit and the consequences for failing to comply with such 
requirements. Additionally, we proposed to amend Sec.  156.480(c) to 
also capture and clarify HHS's ability to audit FFE and SBE-FP user 
fees and the accompanying issuer requirements for such audits. As such, 
we proposed to rename Sec.  156.480, ``Oversight of the Administration 
of the Advance Payments of the Premium Tax Credit, Cost-sharing 
Reductions, and User Fee Programs.'' HHS currently reviews compliance 
with applicable federal user fee standards when conducting APTC audits 
because the same data is used for both purposes; as such, we explained, 
there would be minimal increased burden as a result of these proposals.
---------------------------------------------------------------------------

    \261\ 78 FR 65077 and 65078.
    \262\ See 45 CFR 156.705(a)(1). Also see 78 FR 65078 and 65079.
---------------------------------------------------------------------------

    We also proposed several amendments to Sec.  156.480(c) to expand 
the oversight tools available to HHS beyond traditional audits to also 
provide authority for HHS to conduct compliance reviews of QHP issuers 
to assess compliance with the applicable federal APTC, CSR, and user 
fee standards. We explained that these proposed HHS compliance reviews 
would follow the standards set forth for compliance review of QHP 
issuers participating in FFEs established in 45 CFR 156.715. However, 
compliance reviews under this section would be conducted to confirm QHP 
issuer compliance with the federal APTC, CSR, and user fee standards in 
subpart E of part 156 and 45 CFR 156.50 for user fees, as applicable, 
and they would generally extend to QHP issuers participating in all 
Exchanges.\263\ A compliance review may be targeted at a specific 
potential error and conducted on an ad hoc basis.\264\ For example, HHS 
may require an issuer to submit data pertaining to specific data 
submissions. We explained that we believed this flexibility is 
necessary and appropriate to provide HHS a mechanism to address 
situations in which a systematic error or issue is identified during 
the random and targeted auditing of a sample of QHP issuers, and HHS 
suspects similarly situated issuers may have experienced the same 
systematic error or issue but were not selected for audit in the year 
in question. We further noted that we intend to continue our 
collaborative oversight approach and coordinate with State Exchanges 
and SBE-FPs to ensure QHP issuer compliance with the applicable 
standards in part 156, subpart E and 45 CFR 156.50.
---------------------------------------------------------------------------

    \263\ HHS does not intend to conduct user fee compliance reviews 
of QHP issuers participating in State Exchanges that do not rely on 
the Federal platform. Such reviews would be limited to QHP issuers 
participating in FFE and SBE-FP states.
    \264\ See 78 FR 65100.
---------------------------------------------------------------------------

    First, we proposed to rename Sec.  156.480(c) to ``Audits and 
Compliance Reviews'' to clarify that the authority described in this 
section would apply to audits and the proposed HHS compliance reviews 
to evaluate QHP issuer compliance with the applicable federal APTC, 
CSR, and user fee standards. We similarly proposed to update the 
introductory language in Sec.  156.480(c) to incorporate a reference to 
HHS compliance reviews. As amended, Sec.  156.480(c) would provide that 
HHS or its designee may audit and perform compliance reviews to assess 
whether an issuer that offers a QHP in the individual market through an 
Exchange is in compliance with the applicable requirements of subpart 
E, part 156, and 45 CFR 156.50. We proposed to capture in a new 
sentence in the amended Sec.  156.480(c) that HHS would conduct these 
compliance reviews consistent with the standards set forth in 45 CFR 
156.715. As detailed earlier in this preamble, these oversight tools 
would be available to HHS to evaluate compliance by QHP issuers 
participating in all Exchanges with the applicable federal APTC, CSR, 
and user fee standards.
    Second, we proposed to add new Sec.  156.480(c)(1) to establish 
notice and conference requirements for these audits. Proposed new 
paragraph (c)(1) states that HHS would provide at least 15 calendar 
days advance notice of its intent to conduct an audit of an QHP issuer 
under Sec.  156.480(c). Under proposed paragraph (c)(1)(i), HHS 
proposed to codify that all audits would include an entrance conference 
at which the scope of the audit would be presented and an exit 
conference at which the initial audit findings would be discussed.
    Third, HHS proposed to add new paragraph (c)(2) to capture the 
requirements issuers must meet to comply with an audit under this 
section. Under the proposed paragraph (c)(2)(i), we proposed to require 
the issuer to ensure that its relevant employees, agents, contractors, 
subcontractors, downstream entities, and delegated entities cooperate 
with any audit or compliance review under this section. In new proposed 
paragraph (c)(2)(ii), we proposed to require issuers to submit complete 
and accurate data to HHS or its designees that is necessary to complete 
the audit, in the format and manner specified by HHS, no later than 30 
calendar days after the initial deadline communicated and established 
by HHS at the entrance conference described in proposed paragraph 
(c)(1)(i). For example, for CSR audits, HHS may request that QHP 
issuers provide a re-adjudicated claims data extract for the selected 
sample of policies to verify accuracy of the re-adjudication process 
and reported amounts (this would include verification of all elements 
necessary to perform accurate re-adjudication) and a data extract 
containing incurred claims for the selected sample of policies to 
verify accuracy of actual amount the enrollee(s) paid for EHBs via an 
Electronic File Transfer. As another example, for APTC audits, issuers 
may be asked to provide data to validate and support APTC payments 
received for the applicable benefit year.
    Fourth, under proposed Sec.  156.480(c)(2)(iii), HHS proposed to 
require that issuers respond to any audit notices, letters, and 
inquires, including requests for supplemental or supporting 
information, no later than 15 calendar days after the date of the 
notice, letter, request, or inquiry. We explained that we believe that 
the proposed requirements in paragraph (c)(2) are necessary and 
appropriate to ensure the timely completion of audits and to protect 
the integrity of the APTC, CSR, and user fee programs and the payments 
made thereunder.
    Fifth, recognizing that there may be situations that warrant an 
extension of the timeframes under paragraph (c)(2)(ii) or (iii), as 
applicable, we proposed to also add a new paragraph (c)(2)(iv) to 
establish a process for an issuer to request an extension. To request 
an extension, we proposed to

[[Page 24245]]

require the issuer to submit a written request to HHS within the 
applicable timeframe established in paragraph (c)(2)(ii) or (iii). The 
written request would have to detail the reasons for the extension 
request and the good cause in support of the request. For example, good 
cause may include an inability to produce information in light of 
unforeseen emergencies, natural disasters, or a lack of resources due 
to a PHE. If the extension is granted, the issuer must respond within 
the timeframe specified in HHS's notice granting the extension of time.
    Sixth, under Sec.  156.480(c)(3), HHS proposed that it would share 
its preliminary audit findings with the issuer, and further proposed 
that the issuer would then have 30 calendar days to respond to such 
findings in the format and manner as specified by HHS. HHS would 
describe the process, format, and manner by which an issuer can dispute 
the preliminary audit findings in the preliminary audit report sent to 
the issuer. For example, if the issuer disagrees with the findings set 
forth in the preliminary audit report, HHS would require the issuer to 
respond to such findings by submitting written explanations that detail 
its dispute(s) or additional rebuttal information via Electronic File 
Transfer. HHS proposed under paragraph (c)(3)(i) that if the issuer 
does not dispute or otherwise respond to the preliminary findings 
within 30 calendar days, the audit findings would become final. In new 
proposed paragraph (c)(3)(ii), if the issuer timely responds and 
disputes the preliminary audit findings within 30 calendar days, HHS 
would review and consider such response and finalize the audit findings 
after such review. HHS would provide contact and other information 
necessary for an issuer to respond to the preliminary audit findings in 
the preliminary audit report sent to the issuer.
    Seventh, HHS proposed to add a new section at Sec.  156.480(c)(4) 
to capture the process and requirements related to final audit findings 
and reports. If an audit results in the inclusion of a finding in the 
final audit report, the issuer would be required to comply with the 
actions set forth in the final audit report in the manner and timeframe 
established by HHS. We noted that the actions set forth in the final 
audit report could require an issuer to return APTC or CSRs or make 
additional user fee payments. HHS further proposed that (1) the issuer 
must provide a written corrective action plan to HHS for approval 
within 30 calendar days of the issuance of the final audit report; (2) 
the issuer must implement the corrective action plan; and (3) the 
issuer must provide HHS with written documentation demonstrating the 
adoption and completion of the required corrective actions.
    If an issuer fails to comply with the audit requirements set forth 
in new proposed Sec.  156.480(c), HHS proposed in paragraph (c)(5)(i) 
that HHS would notify the issuer of payments received that the issuer 
has not adequately substantiated, and in new proposed paragraph 
(c)(5)(ii), HHS would notify the issuer that HHS may recoup any 
payments identified as not adequately substantiated. Therefore, the 
continued failure to respond to or cooperate with an audit under 
paragraph (c) and provide the necessary information to substantiate the 
payments made could result in HHS recouping up to 100 percent of the 
APTC or CSR payments made to an issuer for the benefit year(s) that are 
the subject of the audit.
    We clarified in the proposed rule that APTC and CSR amounts 
recovered by HHS as a result of an audit under Sec.  156.480(c) would 
be paid to the U.S. Treasury. We further noted that user fee amounts 
recovered by HHS as a result of an audit under Sec.  156.480(c) would 
be paid to the ACA Marketplace user fee program collection account.
    Lastly, HHS proposed to add a new paragraph (c)(6) to Sec.  156.480 
to codify HHS's ability to enforce the applicable federal APTC, CSR, 
and user fee standards if a State Exchange or SBE-FP is not enforcing 
or fails to substantially enforce one or more of these requirements. In 
instances where HHS enforces compliance with the applicable APTC, CSR, 
and user fee standards with respect to QHP issuers participating in 
State Exchanges or SBE-FPs, HHS proposed to use the same standards and 
processes as outlined in Sec. Sec.  156.805 and 156.806 for QHP issuers 
participating in an FFE with respect to the imposition of CMPs. This 
would include the proposed extension of the process outlined in Sec.  
156.901, et seq., for the QHP issuer to appeal the imposition of CMPs. 
For a discussion of the framework and proposed accompanying penalties 
for non-compliance in situations where HHS is responsible for 
enforcement of these requirements, see the following discussion of 
proposed changes to Sec. Sec.  156.800 and 156.805.
    We sought comment on these proposals, including HHS's clarification 
of its compliance review authority, the proposed timeframes and 
processes for issuers to respond to audit notices and requests for 
information and for issuers to request extensions of those timeframes, 
and the proposals related to HHS's authority to enforce compliance with 
the federal APTC, CSR, and user fee requirements if a State Exchange or 
SBE-FP is not enforcing or fails to substantially enforce one or more 
of these requirements. We are finalizing these provisions as proposed, 
with slight modifications to certain audit timelines in response to 
comments stating that issuers need more time during audits to provide 
complete and accurate data. HHS will provide at least 30 calendar days 
advance notice of its intent to conduct an audit, rather than the 
proposed 15 calendar days. If HHS determines the need for a corrective 
action plan as the result of an audit, the issuer must provide a 
written corrective action plan to HHS for approval within 45 calendar 
days of the issuance of the final audit report, rather than the 
proposed 30 calendar days. As noted in the above sections on audits of 
issuers of reinsurance-eligible plans and risk adjustment covered plans 
(Sec. Sec.  153.410(d) and 153.620(c)), these modified timeframes apply 
across the parallel HHS audit provisions for reinsurance, risk 
adjustment, ATPC, CSR, and user fee audits.
    We also clarify that we will recoup monies owed due to a finding as 
the result of a reinsurance, risk adjustment, APTC, CSR, or user fee 
audit using the same method with which we collect all debts. That is, 
we will first net using the process set forth in 45 CFR 156.1215, and 
we will then invoice issuers for the remaining debt.
    We received public comments on the proposed updates to audits and 
compliance reviews of federal APTC, CSR, and user fee standards (Sec.  
156.480(c)). The majority of the comments we received to the proposed 
updates outlined in this section were also made to the sections 
regarding audits and compliance reviews of issuers of reinsurance-
eligible plans (Sec.  153.410(d)) and audits and compliance reviews of 
issuers of risk adjustment covered plans (Sec.  153.620(c)). We respond 
to all of these parallel comments in this section. As noted above, the 
comments we received to the proposed Sec.  156.480(c)(6) were also made 
to the sections regarding the application of requirements to issuers in 
State Exchanges and SBE-FPs (Sec.  156.480), enforcement remedies in 
the Exchanges (Sec.  156.800), and bases and process for imposing CMPs 
in the Exchanges (Sec.  156.805). We summarize and respond to those 
parallel comments in the Sec.  156.805 preamble section below.
    The following is a summary of the parallel general comments we 
received to all of the audits and compliance review proposals in this 
rule and the specific comments on the proposed

[[Page 24246]]

updates to Sec.  156.480(c), with the exception of the comments 
submitted on Sec.  156.480(c)(6), and our responses.
    Comment: Several commenters supported the various audit and 
compliance review proposals, noting that they will clarify expectations 
and requirements, ensure compliance, and protect federal funds. Other 
commenters opposed the proposals and asked HHS to put audit standards 
in guidance, rather than regulation, as this would maintain flexibility 
and make it easier for HHS to revise requirements and improve the audit 
process.
    Response: We agree that these provisions will provide clarity for 
issuers and better facilitate compliance with any HHS audits, as well 
as enable HHS to protect federal funds. Many of the provisions are 
merely a codification of the current audit processes that have been 
used in prior reinsurance, APTC, CSR, and user fee audits.\265\ We 
maintain our commitment to working with issuers to meet these 
requirements, and we note that we proposed and are finalizing a process 
to allow issuers to submit written requests to extend certain audit 
response deadlines with good cause.\266\
---------------------------------------------------------------------------

    \265\ HHS has not yet conducted any risk adjustment audits under 
45 CFR 153.620(c).
    \266\ See 45 CFR 153.410(d)(2)(iv), 156.620(c)(2)(iv) and 
156.480(c)(2)(iv), which we are finalizing as proposed.
---------------------------------------------------------------------------

    We also note that, to provide clear and enforceable standards, we 
proposed and are finalizing the codification of these procedures in 
regulation.
    Comment: A few commenters requested more flexibility regarding the 
data format issuers must use.
    Response: In order for HHS to complete an audit, we must receive 
data from issuers in a set format communicated to issuers at the audit 
entrance conference to be able to analyze data from all issuers using 
the same procedures. As we explained in the proposed rule, HHS 
experienced difficulties receiving requested audit data in a format 
that is readily usable for purposes of conducting the audit. Therefore, 
we believe it is appropriate and necessary to codify in regulation a 
requirement that issuers must submit complete and accurate data to HHS 
or its designees that is necessary to complete the audit, in the format 
and manner specified by HHS. For example, for CSR audits, HHS may 
request that QHP issuers provide a re-adjudicated claims data extract 
for the selected sample of policies to verify accuracy of the re-
adjudication process and reported amounts (this would include 
verification of all elements necessary to perform accurate re-
adjudication) and a data extract containing incurred claims for the 
selected sample of policies to verify accuracy of actual amount the 
enrollee(s) paid for EHBs via an Electronic File Transfer. For APTC 
audits, issuers may be asked to provide data to validate and support 
APTC payments received for the applicable benefit year. To reduce 
burden on issuers, we anticipate being able to continue to review 
compliance with applicable federal user fee standards when conducting 
APTC audits because the same data is used for both purposes. We also 
note that if more time is needed to compile the requested data in the 
required format, an issuer could request an extension under Sec. Sec.  
153.410(d)(2)(iv), 156.620(c)(2)(iv), or 156.480(c)(2)(iv), as 
applicable.
    Comment: Many commenters requested longer timelines for audit 
notice and issuer responses to HHS to the various audit requests, 
noting that issuers would need more time than what was proposed in 
order for issuers to provide complete and accurate data or otherwise 
respond to HHS requests. Some commenters requested that HHS provide 30 
calendar days advance notice of its intent to conduct an audit, rather 
than the proposed 15 calendar days. Other commenters requested that HHS 
set the deadline for issuers to submit corrective action plans at 
either 45 or 60 calendar days, rather than the proposed 30 calendar 
days. One commenter requested that HHS set the initial data submission 
deadline at 45 calendar days and subsequent request deadlines at 30 
calendar days, rather than the proposed 30 calendar days and 15 
calendar days, respectively. Other commenters asked that HHS permit 
extensions to the timeframes set forth for these audits. A couple of 
commenters asked that HHS be more timely with respect to performing 
audits.
    Response: We appreciate these comments and acknowledge that our 
experience with 2014 benefit year CSR and reinsurance audits 
demonstrated that issuers need sufficient time to provide complete and 
accurate data for audits, and we acknowledge that some issuers will 
face difficulties in retrieving and properly formatting data from prior 
benefit years. We also recognize that it would be beneficial for all 
stakeholders if issuers could receive more advance notice of an 
upcoming audit or compliance review to allow the issuer (and HHS or its 
designee) to begin preparation and coordination efforts earlier. 
Therefore, in response to these comments, we are modifying the 
timeframe in Sec.  156.480(c)(1) to require HHS to provide at least 30 
calendar days advance notice of its intent to conduct an APTC, CSR, or 
user fee audit rather than the proposed 15 calendar days. Similarly, we 
are modifying the timeframes in Sec. Sec.  153.410(d)(1) and 
153.620(c)(1) to require HHS to provide at least 30 calendar days 
advance notice of its intent to conduct an audit of a reinsurance-
eligible plan or a risk adjustment covered plan, respectively, rather 
than the proposed 15 calendar days. As for the time allowed to provide 
the initial audit submission, HHS will continue to maintain the 30 
calendar day deadline. HHS believes that in order to complete the audit 
process in a timely manner and based on prior audit experience, after 
giving issuers 30 calendars days advance notice of the audit, which is 
15 days longer than initially proposed, an additional 30 days to 
provide the initial data submission for the audit is more than 
reasonable. We note that as stated in Sec. Sec.  153.410(d)(2)(iv), 
153.620(c)(2)(iv), and 156.480(c)(2)(iv), we proposed and are 
finalizing the flexibility for issuers to seek extensions for 
reinsurance, risk adjustment, and APTC, CSR, and user fee audit-related 
requests from HHS under Sec. Sec.  153.410(d)(2)(ii) or (iii), 
153.620(c)(2)(ii) or (iii), and 156.480(c)(2)(ii) or (iii), 
respectively, but believe the 30 calendar day timeline to provide the 
initial audit submission strikes the appropriate balance and will allow 
HHS to work with issuers to ensure the proper data is provided and the 
audit can be conducted and completed more efficiently. We are also 
maintaining the 30 calendar day timeframe for issuers to respond to 
preliminary audit findings.\267\ We similarly believe that this 
timeframe strikes the appropriate balance and ensures these audits can 
be completed more efficiently.
---------------------------------------------------------------------------

    \267\ See 45 CFR 153.410(d)(3), 153.620(c)(3), and 
156.480(c)(3).
---------------------------------------------------------------------------

    Additionally, in response to comments suggesting a 45 calendar day 
deadline for issuers to provide written corrective action plans rather 
than the proposed 30 calendar day deadline, we will finalize a 45 
calendar day timeframe to submit a corrective action plan if an audit 
results in the inclusion of a finding in the final audit report, rather 
than a 30 calendar day timeframe, at Sec.  153.410(d)(4)(i) for 
reinsurance program audits, Sec.  153.620(c)(4)(i) for risk adjustment 
program audits, and Sec.  156.480(c)(4)(i) for APTC, CSR, and user fee 
audits. We are persuaded by these comments and agree that issuers would 
benefit from the extension of this timeframe because the development of 
a

[[Page 24247]]

corrective action plan may require a significant amount of coordination 
and discussion between HHS, the state (if applicable), and the issuer 
in order to finalize the appropriate corrective action(s) and plan for 
implementation. Therefore, as finalized, the issuer must provide a 
written corrective action plan to HHS for approval within 45 calendar 
days of the issuance of the final audit report, rather than the 
proposed 30 calendar days, for those situations where one or more 
findings are included in the final audit report.\268\
---------------------------------------------------------------------------

    \268\ We also reiterate that an issuer, acting in good faith, 
can submit an extension request if it finds additional time is 
needed to respond to certain HHS requests stemming from these 
audits. See 45 CFR 153.410(d)(2)(iv), 156.620(c)(2)(iv) and 
156.480(c)(2)(iv).
---------------------------------------------------------------------------

    HHS makes every effort to conduct audits in an efficient and timely 
manner and will continue to do so. The audit proposals addressed in the 
proposed rule and this final rule are aimed at making the audit process 
more efficient so that audits may be completed in a shorter length of 
time. However, HHS is flexible and willing to work with issuers who 
keep us informed of their progress but may need more time. Therefore, 
as we proposed, we are also finalizing at Sec.  153.410(d)(2)(iv) for 
reinsurance program audits, Sec.  153.620(c)(2)(iv) for risk adjustment 
program audits and Sec.  156.480(c)(2)(iv) for APTC, CSR, and user fee 
audits that issuers may request an extension to certain audit deadlines 
by submitting a written request to HHS within the applicable 
timeframe(s) \269\ for reinsurance program audits, risk adjustment 
program audits, and APTC, CSR, and user fee audits. For all of these 
audits, the written request would have to detail the reasons for the 
extension request and the good cause in support of the request and must 
be submitted within the applicable timeframe for responding to the HHS 
request.
---------------------------------------------------------------------------

    \269\ As proposed and finalized, issuers may request to extend 
the following timeframes: (1) For reinsurance program audits, the 
timeframes under 45 CFR 153.410(d)(2)(ii) or (iii); (2) for risk 
adjustment audits, the timeframes under 45 CFR 153.620(c)(2)(ii) or 
(iii); and (3) for APTC, CSR, and user fee audits, the timeframes 
under 45 CFR 156.480(c)(2)(ii) or (iii).
---------------------------------------------------------------------------

    Comment: A few commenters asked that HHS avoid audits during the 
annual open enrollment period (OEP) to allow issuers to focus their 
resources on enrollment and other OEP activities.
    Response: HHS agrees that issuers should devote their resources to 
enrollment during the OEP and will take this request into consideration 
in scheduling the start of future audits. Because audits are an ongoing 
process and the timeline for completion is not always fixed, it may not 
be possible to entirely avoid overlap between audit activities and OEP, 
but HHS will work with issuers to avoid situations where audit 
activities could undermine or otherwise negatively impact issuers' 
ability to focus on enrollment during the annual OEP. For example, we 
are finalizing the proposal to permit issuers to request an extension 
to certain audit deadlines at Sec. Sec.  153.410(d)(2)(iv), 
153.620(c)(2)(iv), and 156.480(c)(2)(iv), for audits of issuers of 
reinsurance-eligible plans, audits of issuers of risk adjustment 
covered plans, and audits of the APTC, CSR, and user fee programs, 
respectively. We clarify that an issuer who has made good faith efforts 
to otherwise comply with HHS audit requests could submit such an 
extension request if it needed more time with respect to completing its 
audit activities under 45 CFR 153.410(d)(2)(ii) or (iii) for 
reinsurance program audits, 45 CFR 153.620(c)(2)(ii) or (iii) for risk 
adjustment program audits, and 45 CFR 156.480(c)(2)(ii) or (iii) for 
APTC, CSR, and user fee audits, due to the overlap with the annual OEP.
    Comment: Some commenters asked that HHS rely on existing audits 
rather than adding new audits and audit requirements.
    Response: In response to these comments, we clarify that HHS is not 
adding new audit authority for reinsurance-eligible plans, risk 
adjustment covered plans, or APTC, CSRs, and user fees. Rather, we are 
expanding the existing authority to codify more details about audit 
activities to set clear expectations, facilitate compliance and 
enforcement, protect federal funds, and maintain program integrity. The 
standards being codified comprise best practices and procedures that 
HHS has established in audit entrance conferences and incorporates 
lessons learned from audits of the reinsurance and CSR programs for the 
2014 benefit year, and audits of the APTC program for the 2014 through 
2017 benefit years. HHS's audit regulations in these areas were 
finalized in earlier rulemakings.\270\ We are, however, finalizing new 
authority to permit HHS to conduct compliance reviews to ensure 
compliance with applicable reinsurance, risk adjustment, and federal 
APTC, CSR, and user fee standards. As explained elsewhere in this rule 
and in the proposed rule, we believe this additional authority related 
to compliance reviews is necessary and appropriate in order to provide 
HHS a mechanism to address situations in which a systematic error or 
issue is identified during the random and targeted auditing of a sample 
of QHP issuers, and HHS suspects similarly situated issuers may have 
experienced the same systematic error or issue but were not selected 
for audit in the year in question.
---------------------------------------------------------------------------

    \270\ See, for example, 78 FR at 65077-65078; 79 FR at 13770-
13771 and 13781-13782.
---------------------------------------------------------------------------

    Comment: A few commenters noted that the proposed compliance 
reviews would place an increased burden on states and issuers.
    Response: We generally disagree that the proposed compliance review 
proposals would place an increased burned on states. Of particular 
note, these proposals, which we are finalizing in the introductory 
language to Sec. Sec.  153.410(d), 153.620(c), and 156.480(c), involve 
situations where HHS--rather than the states--would conduct a review to 
confirm an issuer's compliance with the applicable federal program 
standards and requirements. While there may be some increased burden 
associated with coordination between HHS and the states, any such 
increased burden on states should be minimal. We further note that the 
purpose of the proposed HHS compliance reviews, as stated in the 
preamble section above and in the proposed rule, is to confirm QHP 
issuer compliance with the applicable federal reinsurance, risk 
adjustment, or APTC, CSR, and user fee standards. These compliance 
reviews are intended to be less burdensome than audits of compliance 
with requirements under the applicable programs, and may further be 
targeted at a specific potential error and conducted on an ad hoc 
basis.\271\ For example, HHS may require an issuer to submit data 
pertaining to specific data submissions. We believe this flexibility is 
necessary and appropriate to provide HHS a mechanism to address 
situations in which a systematic error or issue is identified during 
the random and targeted auditing of a sample of QHP issuers, and HHS 
suspects similarly situated issuers may have experienced the same 
systematic error or issue but were not selected for audit in the year 
in question. HHS intends to conduct compliance reviews sparingly and 
will provide advance notice of a compliance review to the issuer being 
reviewed and the applicable state regulator(s), State Exchange, or SBE-
FP. Therefore, while we acknowledge that there will be some burden on 
issuers associated with these compliance reviews, we believe the 
benefits for all stakeholders associated with finalizing this 
additional oversight tool outweighs such burdens as it allows for a 
more targeted approach to ensure

[[Page 24248]]

compliance with applicable federal requirements.
---------------------------------------------------------------------------

    \271\ See 78 FR 65100.
---------------------------------------------------------------------------

    Comment: One commenter asked that HHS only conduct CSR audits of 
issuers for the time during which HHS made advance CSR payments; that 
is, the 2014 benefit year through September of the 2017 benefit year.
    Response: At this time, HHS is beginning audits of the 2015 and 
2016 benefit year of CSR payments. HHS has not yet made a determination 
as to whether or not CSR audits will be conducted for the 2017 benefit 
year and beyond.
    Comment: One commenter supported HHS recouping up to 100 percent of 
applicable APTC or CSR payments. Another commenter stated that HHS 
should use the normal debt collection process of netting and then 
invoicing issuers to collect any remaining debt amount owed as a result 
of audit findings and that the proposed 100 percent recoupment of APTC, 
CSR, reinsurance, and risk adjustment payments was unreasonable.
    Response: If an issuer is not able to adequately substantiate the 
APTC, CSR, reinsurance, or risk adjustment payments it received from 
HHS during the course of an audit, HHS has an obligation to recoup 
federal funds and protect the integrity of these programs. We further 
note that issuers have separate record retention requirements that must 
be met and the documents required to be maintained can be utilized to 
substantiate payment.\272\ Therefore, it is appropriate and necessary 
for HHS to recoup any APTC, CSR, reinsurance, or risk adjustment 
payments made to issuers that were not adequately substantiated by the 
issuer during the course of an audit. This may include up to 100 
percent recoupment if the issuer is entirely unable to substantiate the 
payments it received that are the subject of the audit. However, we 
anticipate that this situation would be extremely rare, and HHS would 
work with the issuer to provide reasonable opportunities for the issuer 
to substantiate the payments it received under these programs. As with 
all debt collection for the ACA financial programs, HHS will follow the 
process set forth in Sec.  156.1215 to collect any amounts owed as a 
result of an audit under 45 CFR 153.410(d), 153.620(c) and 156.480(c). 
We affirm that we therefore intend to leverage the existing netting and 
debt collection process to recoup monies owed due to a finding as the 
result of these audits. That is, to recoup an amount identified as owed 
as a result of an audit under 45 CFR 153.410(d), 156.620(c), and 
156.480(c), we will first net using the process set forth in 45 CFR 
156.1215, and will then invoice issuers for the remaining debt (if any 
is owed).
---------------------------------------------------------------------------

    \272\ See Sec. Sec.  153.410(c), 153.620(b), 156.480(a), and 
156.705.
---------------------------------------------------------------------------

    Comment: A couple of commenters requested more information on the 
proposed updates to audits and compliance reviews of APTC, CSRs, and 
user fees under Sec.  156.480(c) and, more specifically, the proposed 
inclusion of user fees as part of the audit framework in this 
regulation. One commenter wanted more information on the user fee 
audits referred to in this proposal. Another commenter wanted HHS to 
publish audit protocols with information on audit requirements, file 
layouts, submission requirements, and source documentation for the 
Sec.  156.480(c) audits.
    Response: As stated in the preamble section above, HHS currently 
reviews compliance with applicable federal user fee standards in 45 CFR 
156.50 when conducting APTC audits, because the same data is used to 
audit both APTC and user fees. Audits of APTC and user fees are 
conducted simultaneously using the same data; as such, there is minimal 
increased burden as a result of the amendments being finalized in this 
rule to consolidate the user fee audit standards alongside the APTC and 
CSR audit standards in Sec.  156.480(c).
    We further note that HHS currently provides information on audit 
requirements, file layouts, submission requirements, and source 
documentation as part of the applicable audit entrance conference. 
Issuers selected for audit receive this information at the entrance 
conference, which they are required to attend, and also receive further 
details on these requirements from HHS via the audit contractor. 
Guidance documents related to APTC audit requirements are also 
available on REGTAP.\273\
---------------------------------------------------------------------------

    \273\ See, for example, ``CMS Issuer Audits of the Advance 
Payments of the Premium Tax Credit,'' April 1, 2019. Available at 
(login required): https://www.regtap.info/uploads/library/CMS_PPFMG_EA_CMSAPTCAudits_5CR_040119.pdf.
---------------------------------------------------------------------------

    After consideration of the comments on the audit proposals in 
Sec. Sec.  153.410(d), 153.630(c), and 156.480(c), we are finalizing 
these provisions as proposed, with slight modifications to certain 
audit timelines in response to comments stating that issuers need more 
time during audits to provide complete and accurate data and to provide 
written corrective action plans. HHS will provide at least 30 calendar 
days advance notice of its intent to conduct a reinsurance, risk 
adjustment, APTC, CSR, or user fee audit, rather than the proposed 15 
calendar days. If an audit results in the inclusion of a finding in the 
final audit report, the issuer must provide a written corrective action 
plan to HHS for approval within 45 calendar days of the issuance of the 
final audit report, rather than the proposed 30 calendar days.
    We also clarify that we will recoup monies owed due to a finding as 
the result of a reinsurance, risk adjustment, APTC, CSR, or user fee 
audit using the same method with which we collect all ACA financial 
program debts. That is, we will first net using the process set forth 
in 45 CFR 156.1215, and we will then invoice issuers for the remaining 
debt.
7. Subpart I--Enforcement Remedies in Federally-Facilitated Exchanges; 
Available Remedies; Scope. (Sec.  156.800)
    We proposed to rename Subpart I to ``Enforcement Remedies in the 
Exchanges,'' and to make other amendments to clarify that HHS has the 
ability to impose CMPs when it is enforcing the applicable federal 
requirements in part 156, subpart E and 45 CFR 156.50 for user fees, 
regardless of whether the Exchange is established and operated by a 
state (including a regional Exchange or subsidiary exchange) or by 
HHS.\274\ As explained in prior rulemaking, in states where there is a 
State Exchange, the State Exchange has primary enforcement authority 
over QHP issuers participating in the Exchange and ensuring compliance 
with the applicable federal APTC, CSR, and user fee standards.\275\ 
However, consistent with the framework established in section 
1321(c)(2) of the ACA, HHS has authority to step in to enforce 
requirements related to the operation of Exchanges and the offering of 
QHPs through Exchanges if a state fails to do so.276 277 As 
such, in the case of a determination by the Secretary that a State 
Exchange or SBE-FP has failed to enforce or substantially enforce a 
federal requirement (or requirements) related to QHP issuer 
participation in the individual market Exchange, HHS has authority to 
step in and enforce

[[Page 24249]]

QHP issuer compliance with the requirement(s).
---------------------------------------------------------------------------

    \274\ Exchange models include State Exchanges, SBE-FPs, and 
FFEs. HHS does not intend to use this authority to impose CMPs 
related to user fee standards applicable to QHP issuer participating 
in State Exchanges.
    \275\ See the proposed Program Integrity Rule, 78 FR 37058. Also 
see 78 FR 65077 and 65078.
    \276\ Ibid.
    \277\ Section 1321(c)(2) of the ACA provides that the 
enforcement framework established in section 2736(b), which was 
renumbered 2723(b), of the PHS Act shall apply to the enforcement of 
requirements established in section 1321(a)(1).
---------------------------------------------------------------------------

    Through its cross-reference to section 2723(b) of the PHS Act,\278\ 
section 1321(c)(2) of the ACA authorizes the Secretary to impose CMPs 
for non-compliance with applicable federal Exchange requirements. In 
the proposed rule, we proposed to codify HHS authority to impose CMPs 
for non-compliance by QHP issuers that participate or have participated 
in a State Exchange or SBE-FP in situations where HHS steps in to 
enforce certain requirements. Specifically, this proposal is focused on 
ensuring compliance with the standards for APTC, CSR payments, and user 
fees captured in part 156, subpart E and 45 CFR 156.50. Under this 
proposal, we would apply the bases and follow the processes for 
imposing CMPs as set forth in Sec.  156.805, would send a notice of 
non-compliance as set forth in Sec.  156.806, and would extend the 
administrative review and appeal process set forth in Sec.  156.901, et 
seq. to provide a forum for QHP issuers in State Exchanges and SBE-FPs 
to appeal the imposition of CMPs by HHS. We did not propose to extend 
the authority to decertify a QHP under Sec.  156.800(a)(2) for non-
compliance by QHP issuers in State Exchanges or SBE-FPs; QHP de-
certification in State Exchanges or SBE-FPs would remain an available 
enforcement tool for the applicable Exchange. We explained that this 
proposal is not intended to duplicate state enforcement efforts, as HHS 
generally depends on State Exchanges and SBE-FPs to enforce federal 
requirements applicable to QHPs and QHP issuers participating in the 
state's individual market Exchange. The proposed amendments are instead 
intended to establish an enforcement framework to capture situations 
where HHS is responsible for enforcement if a State Exchange or SBE-FP 
fails to do so and is focused on the federal APTC, CSR, and user fee 
requirements in order to protect federal funds.
---------------------------------------------------------------------------

    \278\ While the text of section 1321(c)(2) of the ACA cites to 
section 2736(b) of the PHS Act, this PHS Act provision was 
renumbered a second time to section 2723(b) as part of the technical 
and conforming amendments in the ACA. See section 1562(c)(13)(C) of 
the ACA.
---------------------------------------------------------------------------

    We also explained that we expected that states that established a 
State Exchange or SBE-FP will enforce all applicable federal 
requirements applicable to QHPs and QHP issuers participating in 
Exchanges, including the applicable APTC, CSR, and user fee standards 
captured in part 156, subpart E and 45 CFR 156.50. However, to address 
situations where a State Exchange or SBE-FP fails to enforce these 
federal Exchange requirements, consistent with the framework 
established in section 2723(b) of the PHS Act, we proposed that if HHS 
determines that a State Exchange or SBE-FP lacks authority or has 
otherwise failed to substantially enforce the requirements captured in 
part 156, subpart E or 45 CFR 156.50, HHS would step in to enforce 
these requirements with respect to QHP issuers participating in the 
State Exchange or SBE-FP. Once this determination is made, HHS would 
become responsible for enforcement of these provisions and would take 
appropriate action to ensure QHP issuer compliance with the applicable 
requirement(s),\279\ and may impose CMPs, if appropriate. To more 
clearly capture HHS's authority to impose CMPs in these situations, we 
proposed to amend the introductory sentence to Sec.  156.800(a) to 
replace the current references to the ``Federally-facilitated 
Exchange'' with references to ``an Exchange.'' We also proposed to 
amend Sec.  156.800(b) to remove the word ``only'' from the sentence 
describing the scope of HHS sanctions with respect to QHP issuers 
participating in FFEs and to add a new second sentence that affirms HHS 
authority to impose CMPs for non-compliance with the applicable 
requirements in part 156, subpart E and 45 CFR 156.50 by QHP issuers 
participating in State Exchanges and SBE-FPs.
---------------------------------------------------------------------------

    \279\ As detailed earlier, when HHS is responsible for 
enforcement of these Exchange requirements, we are finalizing the 
proposal to extend authority for HHS to pursue a compliance review 
under Sec.  156.480(c), consistent with the framework establish in 
Sec.  156.715, to confirm compliance with federal APTC, CSR, and 
user fee requirements by a QHP issuer participating in a State 
Exchange or SBE-FP.
---------------------------------------------------------------------------

    We also noted that we intend to continue our collaborative 
enforcement approach and would coordinate our actions with state 
efforts to avoid duplication and to streamline oversight of the 
administration of APTC, CSRs, and user fees. We solicited comments for 
how HHS can collaborate with State Exchanges and SBE-FPs to proactively 
address non-compliance with applicable federal requirements and share 
compliance tools regarding APTC, CSRs, and user fees. We are finalizing 
the proposals to (1) amend the introductory sentence to Sec.  
156.800(a) to replace the current references to the ``Federally-
facilitated Exchange'' with references to ``an Exchange,'' and (2) 
amend Sec.  156.800(b) to remove the word ``only'' from the sentence 
describing the scope of HHS sanctions with respect to QHP issuers 
participating in FFEs and to add a new sentence that affirms HHS 
authority to impose CMPs for non-compliance with the applicable 
requirements in part 156, subpart E and 45 CFR 156.50 by QHP issuers 
participating in State Exchanges and SBE-FPs.
    We received public comments on the proposed updates to Subpart I--
Enforcement Remedies in Federally-Facilitated Exchanges; Available 
remedies; Scope (Sec.  156.800). The comments we received to this 
section were also made to the sections regarding the application of 
requirements to issuers in State Exchanges and SBE-FPs (Sec.  156.480), 
HHS enforcement of the applicable federal APTC, CSR, and user fee 
standards if a State Exchange or SBE-FP is not enforcing or fails to 
substantially enforce one or more of these requirements (Sec.  
156.480(c)(6)), and the bases and process for imposing CMPs in the 
Exchanges (Sec.  156.805), and we responded to all of these parallel 
comments in the bases and process for imposing CMPs in the Exchanges 
(Sec.  156.805) preamble section below.
    After consideration of the relevant comments, we are finalizing the 
amendments to Sec.  156.800 as proposed. As detailed further in the 
below section on the bases and process for imposing CMPs in the FFEs, 
we also clarify that we intend to leverage this authority to pursue 
enforcement and the imposition of CMPs in State Exchange and SBE-FP 
states where HHS is responsible for enforcement in a targeted manner 
with a focus on egregious or repeated occurrences of QHP issuer 
noncompliance with the applicable APTC, CSR, and user fee standards 
that are discovered as the result of audits and the State Exchange or 
SBE-FP fails to substantially enforce the applicable standard(s). We 
further note that we did not propose and are not finalizing any 
substantive changes related to the enforcement framework applicable to 
QHP issuers participating in FFEs. The below section on bases and 
process for imposing CMPs in the Exchanges discusses this point in 
further detail.
8. Bases and Process for Imposing Civil Money Penalties in Federally-
Facilitated Exchanges (Sec.  156.805)
    We also proposed to amend Sec.  156.805 to more clearly reflect 
HHS's authority to impose CMPs due to non-compliance with respect to 
the applicable federal APTC, CSR, and user fee standards against a QHP 
issuer participating in a State Exchange or SBE-FP. Under this 
proposal, we would use the same bases and process currently captured in 
Sec.  156.805 for imposing CMPs on QHP issuers participating in an FFE. 
More specifically, in Sec.  156.805, we proposed

[[Page 24250]]

renaming this section to ``Bases and process for imposing CMPs in the 
Exchanges,'' and also proposed to amend the introductory language in 
Sec.  156.805(a) to use the words ``an Exchange,'' instead of 
``Federally-facilitated Exchange,'' to more clearly capture HHS's 
authority to impose CMPs on QHP issuers participating in State 
Exchanges and SBE-FPs who fail to comply with the applicable 
requirements in part 156, subpart E or Sec.  156.50 in situations where 
HHS is responsible for enforcement. We similarly proposed to modify 
Sec.  156.805(a)(5)(i) where the reference to ``HHS'' currently appears 
to also incorporate a reference to ``an Exchange'' to clarify that all 
QHP issuers must avoid intentionally or recklessly misrepresenting or 
falsifying APTC, CSR, and user fee information to both HHS and 
Exchanges, regardless of whether HHS or a state operates the Exchange. 
We proposed this amendment to clarify that HHS has authority to impose 
CMPs against QHP issuers participating in State Exchanges and SBE-FPs 
who misrepresent or falsify APTC, CSR, and user fee information 
provided to HHS in situations where HHS is responsible for enforcement 
of the requirements in part 156, subpart E or Sec.  156.50, including 
when HHS is performing an audit or compliance review under Sec.  
156.480(c). If HHS seeks to use this authority to impose CMPs against a 
QHP issuer participating in a State Exchange or SBE-FP, we proposed the 
issuer would have the opportunity to appeal the CMPs following the 
existing framework for administrative hearings in Sec.  156.901, et 
seq.
    Finally, we proposed to add a new paragraph (f) to Sec.  156.805 to 
capture in this regulation details on the circumstances requiring HHS 
enforcement of the applicable requirements in part 156, subpart E and 
Sec.  156.50. Consistent with the framework established in section 
2723(b) of the PHS Act and section 1321(c) of the ACA, we propose in 
new Sec.  156.805(f)(1) that HHS's authority to enforce in these 
situations would be limited to situations where the State Exchange or 
SBE-FP notifies HHS that it is not enforcing these requirements or if 
HHS makes a determination using the process set forth at 45 CFR 
150.201, et seq. that a State Exchange or SBE-FP is failing to 
substantially enforce these requirements.\280\ In new proposed Sec.  
156.805(f)(2), we proposed to affirm that when HHS is responsible for 
enforcement in these circumstances, HHS may impose CMPs on an issuer in 
the State Exchange or SBE-FP, in accordance with the bases and process 
set forth in this section. As noted in the proposed rule, this includes 
the ability for a QHP issuer in a State Exchange or SBE-FP to appeal 
the imposition of CMPs by HHS following the existing framework for 
administrative hearings in Sec.  156.901, et seq.
---------------------------------------------------------------------------

    \280\ See, for example, 45 CFR 150.203.
---------------------------------------------------------------------------

    We proposed that HHS would apply the same process HHS uses to 
determine when a state is failing to substantially enforce PHS Act 
requirements in determining whether a State Exchange or SBE-FP is 
substantially enforcing the applicable federal APTC, CSR, and user fee 
standards. More specifically, we proposed that if an audit of a QHP 
issuer in a State Exchange or SBE-FP demonstrates the State Exchange or 
SBE-FP's failure to enforce the applicable federal APTC, CSR, and user 
fee standards, HHS would investigate the State Exchange or SBE-FP's 
enforcement and follow the process set forth in 45 CFR 150.207 if 
necessary. We proposed that if HHS receives or obtains information 
(including information discovered through an audit) that a State 
Exchange or SBE-FP may not be enforcing the applicable requirements in 
part 156, subpart E, or 45 CFR 156.50, HHS may initiate the process 
described in 45 CFR 150.207 to determine whether the State Exchange or 
SBE-FP is failing to substantially enforce these requirements. 
Mirroring the process set forth in 45 CFR 150.207 for making 
determinations regarding substantial enforcement of PHS Act 
requirements, HHS would follow the procedures in Sec. Sec.  150.209 
through 150.219 to determine if a State Exchange or SBE-FP is failing 
to enforce one or more of the applicable requirements in part 156, 
subpart E or 45 CFR 156.50. If HHS believes there is a reasonable 
question whether there has been a failure to enforce one or more of the 
applicable requirements in part 156, subpart E or 45 CFR 156.50, HHS 
would send a notice, as described in 45 CFR 150.213, identifying the 
applicable requirement(s) that allegedly have not been substantially 
enforced to the proper State Exchange or SBE-FP officials using the 
process outlined in 45 CFR 150.211. We proposed that, following the 
process described in 45 CFR 150.215, HHS may extend, for good cause, 
the time the State Exchange or SBE-FP has for responding to the notice, 
such as if there is an agreement between HHS and the State Exchange or 
SBE-FP that there should be a public hearing on the State Exchange or 
SBE-FP's enforcement, or evidence that the State Exchange or SBE-FP is 
undertaking expedited enforcement activities. Using the process 
described in 45 CFR 150.217, if at the end of the extension period HHS 
determines that the State Exchange or SBE-FP has not established to 
HHS's satisfaction that it is substantially enforcing the applicable 
requirements, we proposed that HHS would consult with the appropriate 
State Exchange or SBE-FP officials, notify the State Exchange or SBE-FP 
of its preliminary determination that the State Exchange or SBE-FP has 
failed to substantially enforce the requirements and that the failure 
is continuing, and permit the State Exchange or SBE-FP a reasonable 
opportunity to show evidence of substantial enforcement. If, after 
providing notice and a reasonable opportunity for the State Exchange or 
SBE-FP to show that it has corrected any failure to substantially 
enforce, HHS finds that the failure to substantially enforce has not 
been corrected, HHS would notify the State Exchange or SBE-FP of its 
final determination using the process described in 45 CFR 150.219. 
Therefore, we proposed that after a determination that a State Exchange 
or SBE-FP is not or cannot substantially enforce the applicable 
requirements in part 156, subpart E or Sec.  156.50, HHS could impose 
CMPs on issuers in the State Exchange or SBE-FP if there is cause for 
such imposition. HHS would also provide a notice of non-compliance, 
consistent with Sec.  156.806, to QHP issuers in State Exchanges or 
SBE-FPs prior to imposing CMPs.
    We explained that we sought to work collaboratively with State 
Exchanges and SBE-FPs for any topics of mutual concern and oversight 
activities where possible. We also sought comment to this proposal, the 
proposed updates to Sec.  156.805, and ways in which HHS and state 
authorities can efficiently and effectively enforce federal standards 
related to APTC, CSRs, and user fees.
    We also proposed that if the changes to Sec. Sec.  156.800 and 
156.805 were finalized as proposed, we would also amend Sec.  156.903 
such that an administrative law judge's authority also extends to CMPs 
imposed against QHP issuers in State Exchanges and SBE-FPs under Sec.  
156.805. Specifically, we proposed to amend Sec.  156.903(a) to extend 
the provision to also include State Exchanges and SBE-FPs so that the 
ALJ has the authority, including all the authority conferred by the 
Administrative Procedure Act, to adopt whatever procedures may be 
necessary or proper to carry out in an efficient and effective manner 
the ALJ's duty to provide a fair and impartial hearing on

[[Page 24251]]

the record and to issue an initial decision concerning HHS's imposition 
of a CMP on a QHP offered in a FFE, State Exchange, or SBE-FP.
    We received public comments on the proposed updates to bases and 
process for imposing civil money penalties in Federally-facilitated 
Exchanges (Sec.  156.805). The majority of the comments we received to 
this section were also made to the proposals regarding HHS enforcement 
of the applicable federal APTC, CSR, and user fee standards if a State 
Exchange or SBE-FP is not enforcing or fails to substantially enforce 
one or more of these requirements (Sec.  156.480(c)(6)), the 
application of requirements to issuers in State Exchanges and SBE-FPs 
(Sec.  156.480), and the enforcement remedies in the Exchanges, 
available remedies, and scope (Sec.  156.800). The following is a 
summary of these comments and our responses.
    Comment: One commenter supported the proposed updates to the 
application of requirements to issuers in State Exchanges and SBE-FPs 
(Sec.  156.480(c)), the enforcement remedies in the Exchanges, 
available remedies, and scope (Sec.  156.800), and the bases and 
process for imposing CMPs in the Exchanges and the accompanying updates 
to Sec.  156.805. Several commenters opposed the proposal and asked for 
more information on the process by which HHS would determine that a 
State Exchange or SBE-FP is failing to substantially enforce the 
applicable requirements. A few commenters asked for more information on 
the types of issues that would result in HHS commencing the process to 
determine whether a State Exchange or SBE-FP is failing to 
substantially enforce the applicable federal requirements.
    Response: We anticipate that an imposition of a CMP by HHS on QHP 
issuers in State Exchanges and SBE-FPs through these proposed updates 
should be very rare, as we have not yet imposed a CMP on any QHP issuer 
in any of the APTC, CSR, user fee, reinsurance, or risk adjustment 
audits we have conducted to date. We also anticipate that it would be 
rare for an issuer to repeatedly fail to comply with the applicable 
federal APTC, CSR, and user fee standards, as well as for the State 
Exchange or SBE-FP to fail to substantially enforce these standards 
after being notified by HHS of such potential non-compliance as the 
result of an audit. We reiterate our commitment to working with 
issuers, State Exchanges, and SBE-FPs to evaluate issuer non-compliance 
with the applicable federal APTC, CSR, and user fee standards and 
intend to resort to leveraging the authority for HHS to step in and 
take the appropriate enforcement action in State Exchange and SBE-FP 
states, including imposing CMPs, in very limited situations where we 
have evidence or information suggesting that the state is not enforcing 
and QHP issuers in that state are not complying with the applicable 
federal standard(s) for APTC, CSRs, and/or user fees. We did not 
propose and are not finalizing any substantive changes related to the 
enforcement framework applicable to QHP issuers participating in FFEs. 
The purpose of these proposals is to codify the authority for HHS to 
step in and enforce the applicable standards, including the ability to 
impose CMPs, if necessary should the situation arise. We emphasize that 
the amendments to Sec. Sec.  156.800 and 156.805 are targeted to 
provide HHS authority to step in when there are egregious or repeated 
occurrences of QHP issuer non-compliance with the applicable APTC, CSR, 
and user fee standards that are discovered as the result of multiple 
audits and the State Exchange or SBE-FP is also failing to 
substantially enforce the applicable standard(s). We therefore 
anticipate such situations will be rare.
    In response to comments, we offer the following example of a 
situation in which HHS could begin the process of making a 
determination that a State Exchange or SBE-FP is failing to 
substantially enforce the applicable APTC, CSR, and user fee 
requirements. If HHS discovers, as the result of an audit, that an 
issuer in a State Exchange or SBE-FP failed to comply with a federal 
APTC requirement, it would inform the State Exchange or SBE-FP and the 
issuer of this finding and set forth required corrective actions for 
the issuer to take. If HHS then discovers in the following year's audit 
of this same issuer that the issuer has not taken the corrective 
actions and is continuing to fail to comply with the requirement, HHS 
would again inform the State Exchange or SBE-FP and the issuer of this 
repeated finding, and ask the State Exchange or SBE-FP to take the 
appropriate enforcement action against the issuer for noncompliance. If 
the State Exchange or SBE-FP repeatedly fails to enforce the applicable 
requirement across multiple benefit years and the issuer continues to 
have an audit finding related to this non-compliance across multiple 
benefit years, HHS would begin the process of making a determination 
that the State Exchange or SBE-FP is failing to substantially enforce 
that requirement. We reiterate our commitment to working with State 
Exchanges and SBE-FPs, and we confirm that this policy is narrowly 
targeted at egregious or repeated occurrences of QHP issuer non-
compliance with the applicable APTC, CSR, and user fee standards 
evaluated through audits of these programs. We also reiterate that the 
above is an illustrative example. Consistent with the statutory 
framework outlined in section 1321(c) of the ACA, and as reflected in 
the amendments we are finalizing to Sec. Sec.  156.800 and 156.805, HHS 
may step in to enforce applicable federal APTC, CSR, and user fee 
standards in other situations where there is evidence or information 
suggesting that the State Exchange or SBE-FP is failing to do so.\281\ 
Once HHS makes a determination that a State Exchange or SBE-FP is 
failing to substantially enforce the applicable federal requirements, 
HHS may pursue CMPs against issuers for non-compliance under Sec. Sec.  
156.800 and 156.805 in appropriate situations.
---------------------------------------------------------------------------

    \281\ Consistent with the statute, HHS may also leverage this 
authority in situations where there is evidence or information 
suggesting the State Exchange or SBE-FP is failing to substantially 
enforce other federal Exchange requirements.
---------------------------------------------------------------------------

    The process by which HHS proposed and is finalizing to determine 
whether a State Exchange or SBE-FP is failing to substantially enforce 
the applicable APTC, CSR, and user fee requirements mirrors the process 
set forth in 45 CFR 150.207 for making determinations regarding a 
state's substantial enforcement of PHS Act requirements. As detailed 
above, the process involves HHS sending notice to the proper State 
Exchange or SBE-FP officials; permits extending the time the State 
Exchange or SBE-FP has for responding to the notice; requires 
consulting with the appropriate State Exchange or SBE-FP officials; and 
mandates that HHS notify the State Exchange or SBE-FP of HHS's 
preliminary determination that the State Exchange or SBE-FP has failed 
to substantially enforce the requirement(s) and that the failure is 
continuing. Only after HHS goes through the process and makes a 
determination that the State Exchange or SBE-FP is substantially non-
enforcing applicable APTC, CSR, and user fee requirements, and the 
State Exchange or SBE-FP fails to address the identified concerns, 
would HHS have authority to begin the process to impose a CMP on a QHP 
issuer in a State Exchange or SBE-FP state pursuant to 45 CFR 156.805 
for their non-compliance.
    Comment: Numerous commenters stated that this proposal would 
improperly usurp the role of states in

[[Page 24252]]

enforcing these requirements in their own Exchanges.
    Response: We disagree that this approach improperly usurps the role 
of states in enforcing requirements within their own Exchanges, as the 
process outlined above provides ample opportunity for State Exchanges 
and SBE-FPs to take action and demonstrate substantial enforcement at 
multiple points in the process before HHS assumes enforcement 
authority. Additionally, pursuant to section 1321(c) of the ACA, HHS 
has the statutory authority and responsibility to enforce federal 
requirements when the State Exchange or SBE-FP fails to do so and is 
instructed to follow the framework set forth in section 2723(b) of the 
PHS Act when doing so. This authority necessarily includes the ability 
to impose CMPs on issuers for non-compliance with APTC, CSR, or user 
fee requirements in states where HHS is responsible for enforcement. As 
explained above and in the proposed rule, our experience with APTC, 
CSR, and user fee audits led us to propose these amendments to ensure a 
framework is in place for HHS to address non-compliance and protect 
federal funds when a State Exchange or SBE-FP fails to substantially 
enforce federal standards and QHP issuers in those states are failing 
to comply with applicable federal APTC, CSR, and user fee requirements. 
We again reiterate our commitment to working with State Exchanges and 
SBE-FPs to address non-compliance by QHP issuers operating in their 
respective states with applicable federal APTC, CSR, and user fee 
standards. As noted earlier, the purpose of these proposals is to 
codify in regulation HHS's authority to step in and enforce federal 
requirements and protect federal funds when the applicable state 
authority fails to do so. Further, we also note that we intend to focus 
our enforcement efforts on egregious or repeated occurrences of QHP 
issuer non-compliance with the applicable APTC, CSR, and user fee 
standards evaluated through an audit of these programs.
    Comment: Several commenters emphasized that HHS should work with 
State Exchanges and SBE-FPs to enforce the applicable federal 
requirements. One commenter requested that HHS monitor State Exchange 
and SBE-FP remediation efforts to address issuer non-compliance before 
imposing CMPs.
    Response: HHS will work with State Exchanges and SBE-FPs to enforce 
the applicable requirements, as set forth above. We intend for audits, 
compliance reviews, and enforcement activities to be collaborative 
processes with states, State Exchanges, and SBE-FPs, where possible. 
For instance, HHS will consider the recommendations for how to leverage 
existing audit activities that HHS requires State Exchanges to conduct 
under Sec.  155.1200 to collaborate with State Exchanges on identifying 
instances of issuer non-compliance or monitoring State Exchange or 
issuer remediation activities. HHS will follow the process for 
determining that a State Exchange or SBE-FP is failing to enforce or 
failing to substantially enforce these requirements, consistent with 
the framework set forth in Sec. Sec.  150.209 through 150.219. As 
described above, this process follows a collaborative approach and 
permits HHS to monitor State Exchange and SBE-FP remediation efforts as 
the Exchange works to address issues identified by HHS. It also 
provides ample opportunity for the State Exchange or SBE-FP to show 
that it has corrected (or is working to correct) any failure to 
substantially enforce before HHS makes a final determination about 
whether a State Exchange or SBE-FP is failing to enforce one or more of 
the applicable requirements in part 156, subpart E or 45 CFR 156.50. It 
is only after HHS goes through the process and makes a determination 
that the State Exchange or SBE-FP is substantially failing to enforce 
these requirements, and the State Exchange or SBE-FP fails to address 
the identified concerns, that HHS would have authority to begin the 
process to impose a CMP on a QHP issuer in a State Exchange or SBE-FP 
state pursuant to 45 CFR 156.805 for their non-compliance.\282\ As 
detailed in the above illustrative example, we intend to work closely 
with the applicable state authorities and monitor state remediation 
efforts to address issuer non-compliance before HHS starts the process 
to step in to enforce the applicable federal requirements or impose 
CMPs.
---------------------------------------------------------------------------

    \282\ If a State Exchange or SBE-FP notifies HHS that it has not 
enacted legislation to enforce or that it is not otherwise enforcing 
the applicable federal requirement(s), HHS may step in to enforce 
the requirement(s) in that state at that time. See 45 CFR 
150.203(a).
---------------------------------------------------------------------------

    Comment: One commenter requested that we link the proposed audit 
provisions for the APTC, CSR and user fee programs and HHS's authority 
to recoup payments to the regulations codified in 45 CFR part 150 to 
more directly link this recoupment authority to the PHS Act.
    Response: Consistent with the authority in section 1321(c) of the 
ACA, HHS proposed and is finalizing the proposals to establish and 
clarify its authority to audit and conduct compliance reviews of all 
QHP issuers who receive APTC or CSRs or pay user fees under Sec.  
156.480(c) regardless of Exchange type. We are also finalizing 
provisions that reference the process in 45 CFR 150.201, et seq., so 
HHS can leverage the existing, known process in situations where HHS 
has evidence or other information that the State Exchange or SBE-FP is 
failing to substantially enforce the applicable requirements found at 
45 CFR 156, subpart E for APTC and CSRs and 45 CFR 156.50 for user 
fees. We believe this is an appropriate and adequate link of the audit 
requirements in Sec.  156.480(c) to the regulations codified in 45 CFR 
part 150, which implement section 2723(b) of the PHS Act.\283\ We 
confirm that our current intention is to apply this new framework to 
situations involving egregious or repeated occurrences of QHP issuer 
non-compliance with the applicable APTC, CSR, and user fee standards 
evaluated through the audits of these programs. However, consistent 
with the statutory framework outlined in section 1321(c) of the ACA, 
and as reflected in the amendments we are finalizing to Sec. Sec.  
156.800 and 156.805, HHS may step in to enforce applicable federal 
APTC, CSR, and user fee standards in situations where there is evidence 
or information suggesting that the State Exchange or SBE-FP is failing 
to do so.\284\ As detailed above, we believe it is appropriate and 
necessary for HHS to recoup amounts that were not adequately 
substantiated by the issuer during the course of an audit.\285\
---------------------------------------------------------------------------

    \283\ While the APTC, CSR, and user fee statutory provisions are 
codified outside of the PHS Act, section 1321(c) of the ACA applies 
the PHS Act enforcement framework to the enforcement of the federal 
Exchange requirements.
    \284\ Consistent with the statute, HHS may also leverage this 
authority in situations where there is evidence or information 
suggesting the State Exchange or SBE-FP is failing to substantially 
enforce other federal Exchange requirements.
    \285\ Issuers have separate record retention requirements that 
must be met and the documents required to be maintained can be 
utilized to substantiate payment. See Sec. Sec.  153.410(c), 
153.620(b), 156.480(a), and 156.705.
---------------------------------------------------------------------------

    After consideration of the comments received on these proposals, we 
are finalizing the proposed amendments to Sec.  156.805 to describe the 
bases and process by which HHS may determine that a State Exchange or 
SBE-FP is failing to substantially enforce the applicable federal APTC, 
CSR, and user fee standards and subsequently impose CMPs on these State 
Exchange or SBE-FP issuers as proposed.

[[Page 24253]]

9. Subpart J--Administrative Review of QHP Issuer Sanctions (Sec. Sec.  
156.901, 156.927, 156.931, 156.947)
    We proposed to change the title to subpart J, removing the 
reference to ``in Federally-Facilitated Exchanges'' to make clear it 
applies to QHP issuers participating in any Exchange type to align with 
accompanying proposed changes outlined above to Sec. Sec.  156.800 and 
156.805. We also proposed several procedural changes to provisions in 
subpart J of part 156 related to administrative hearings consistent 
with the amendments discussed in the preamble to part 150. These 
proposed procedural changes are intended to align with the Departmental 
Appeals Board's current practices for administrative hearings to appeal 
CMPs. Specifically, we proposed changes that would remove requirements 
to file submissions in triplicate and instead require electronic 
filing. This change is reflected in the proposed amendments to the 
definition of ``Filing date'' in Sec.  156.901, to the introductory 
text in Sec.  156.927(a), and to the service of submission requirements 
captured in paragraph (b). We also proposed to allow for the option of 
video conferencing as a form of administrative hearing by amending the 
definition of ``Hearing'' in Sec.  156.901 and to the requirements 
outlined in Sec.  156.919(a) related to the forms for the hearing, 
Sec.  156.941(e) related to prehearing conferences, and Sec.  
156.947(a) related to the record of the hearing. Finally, we proposed 
to update Sec.  156.947 to allow the ALJ to communicate the next steps 
for a hearing in either the acknowledgement of a request for hearing or 
on a later date. We sought comment on these proposals.
    We received the same public comments on the proposed updates to 
Subpart J--Administrative Review of QHP Issuer Sanctions (Sec. Sec.  
156.901, 156.927, 156.931, 156.947) and the parallel proposed updates 
to Part 150, Administrative Hearings, for the parallel amendments made 
to reflect the Departmental Appeals Board's current practices for 
administrative hearings to appeal CMPs. We summarized and responded to 
these comments in the above preamble section on Part 150 Administrative 
Hearings. We did not receive comments on the proposed change to the 
title to subpart J, removing the reference to ``in Federally-
Facilitated Exchanges''. After consideration of the comments on the 
proposed amendments to Sec. Sec.  156.901, 156.927, 156.931 and 156.947 
and the title to subpart J, we are finalizing these amendments as 
proposed.
10. Quality Rating System (Sec.  156.1120) and Enrollee Satisfaction 
Survey System (Sec.  156.1125)
    Section 1311(c)(3) of the ACA directs the Secretary of HHS to 
develop a quality rating for each QHP offered through an Exchange, 
based on quality and price. Section 1311(c)(4) of the ACA directs the 
Secretary to establish an enrollee satisfaction survey that will assess 
enrollee satisfaction with each QHP offered through the Exchanges with 
more than 500 enrollees in the prior year.
    Based on this authority, HHS finalized rules in May 2014 to 
establish standards and requirements related to QHP issuer data 
collection and public reporting of quality rating information in every 
Exchange.\286\ To balance HHS's strategic goals of empowering consumers 
through data, minimizing cost and burden on QHP issuers, and supporting 
state flexibility, HHS developed a phased-in approach to establishing 
quality standards for Exchanges and QHP issuers, collecting and 
reporting quality measure data, and displaying quality rating 
information across the Exchanges. Since 2015, we have collected 
clinical quality measure data and enrollee experience survey measure 
data and generated quality ratings to provide reliable, meaningful 
information about QHP quality performance data across Exchanges. In 
addition, since 2016, select states \287\ with FFEs and State Exchanges 
have displayed QHP quality rating information as a tool for consumer 
decision-making while shopping for health insurance coverage in an 
Exchange. Beginning with the open enrollment period for plan year 2020, 
we displayed the QHP quality rating information for all Exchanges that 
used the HealthCare.gov platform, including the FFEs and SBE-FPs. State 
Exchanges that operated their own eligibility and enrollment platform 
were similarly required to display QHP quality ratings beginning with 
the open enrollment period for plan year 2020, but had some flexibility 
to customize the display of the QHP quality rating information.\288\
---------------------------------------------------------------------------

    \286\ See 79 FR 30240 at 30352. Also see 45 CFR 155.1400, 
155.1405, 156.1120 and 156.1125.
    \287\ Prior to the PY2020 nationwide display of quality rating 
information, states that displayed QHP quality rating information 
included California, Colorado, Connecticut, Maryland, Michigan, 
Montana, New Hampshire, New York, Rhode Island, Virginia, 
Washington, and Wisconsin.
    \288\ ``CMS Bulletin on display of QRS star ratings and QHP 
Enrollee Survey results for QHPs offered through Exchanges (often 
called the Health Insurance Marketplace),'' August 15, 2019. 
Available at https://www.cms.gov/CCIIO/Resources/Regulations-and-Guidance/Downloads/QualityRatingInformationBulletinforPlanYear2020.pdf.
---------------------------------------------------------------------------

    Through valuable feedback from the QRS and QHP Enrollee Survey Call 
Letter process and continued engagement with health plan issuer 
organizations, health care quality measurement experts, state 
representatives, consumer advocates and other stakeholders, we 
continued to learn about populations buying insurance coverage across 
the Exchanges and about areas of improvement for these programs. We 
also continued to assess potential refinements to the QRS rating 
methodology and the QHP Enrollee Survey to prioritize strategies to 
improve value for consumers and to reduce the burden of quality 
reporting.
    As part of the 2020 QRS and QHP Enrollee Survey Call Letter 
process, we received many comments requesting that we remove levels of 
the QRS hierarchy to help streamline and improve consumer understanding 
of the quality rating information. While we did not propose amendments 
to the QRS or to the QHP Enrollee Survey as part of the proposed rule, 
we sought comment on the removal of one or more levels of the QRS 
hierarchy, which is a key element of the QRS framework that establishes 
how quality measures are organized for scoring, rating and reporting 
purposes. We previously described the general overall framework for the 
QRS, including details on the hierarchical structure of the measure set 
and the elements of the QRS rating methodology.\289\ Currently, the QRS 
measures are organized into composites, domains, and summary indicators 
that serve as a foundation for the rating methodology and scores are 
calculated at every level of the hierarchy using specific scoring and 
standardization rules, as described in the annual QRS and QHP Enrollee 
Survey Technical Guidance.\290\ We noted in the proposed rule that we 
believe that a simplified QRS hierarchy would support alignment with 
other CMS quality reporting programs and help the overall quality score 
be more reflective of the performance of individual survey and clinical 
quality measures within the QRS. For example, the Medicare Part C & D 
Star Ratings framework consists of measures, domains, summary ratings 
and an overall rating.\291\ In addition, we

[[Page 24254]]

noted that we believe a simplified hierarchy, in combination with 
additional methodology modifications we considered (for example, 
explicit weights at the measure level) will help stabilize ratings 
across years.\292\ We sought comment specifically on which level or 
levels of the QRS hierarchy should be removed (for example, the 
composite level or the domain level).
---------------------------------------------------------------------------

    \289\ See, for example, 78 FR 69418.
    \290\ ``The Quality Rating System and Qualified Health Plan 
Enrollee Experience Survey: Technical Guidance for 2021,'' September 
2020. Available at https://www.cms.gov/files/document/quality-rating-system-and-qualified-health-plan-enrollee-experience-survey-technical-guidance-2021.pdf.
    \291\ ``Medicare 2019 Part C & D Star Rating Technical Notes,'' 
October 10, 2019. Available at https://www.cms.gov/Medicare/Prescription-Drug-Coverage/PrescriptionDrugCovGenIn/Downloads/Star-Ratings-Technical-Notes-Oct-10-2019.pdf.
    \292\ CMS anticipates continuing to propose methodology 
refinements to the QRS and QHP Enrollee Survey through the Call 
Letter process.
---------------------------------------------------------------------------

    In addition, to further support transparency of QHP quality data 
and to empower stakeholders including consumers, states, issuers and 
researchers with valuable information related to enrollee experience 
with QHPs, we proposed to make the full QHP Enrollee Survey results 
publicly available in an annual PUF. Currently, we post on 
HealthCare.gov some enrollee experience results in the form of a 
quality rating for Member Experience and Plan Administration that make 
up part of the overall rating for QHPs.\293\ The Member Experience 
rating is based on a select number of survey measures from the QHP 
Enrollee Survey. The Plan Administration rating is based on a select 
number of survey measures and clinical quality measures. To promote 
transparency of data to the public, we already post QRS PUFs every year 
for QHP issuers operating in all Exchange types that were eligible to 
receive quality ratings. As we stated in the Exchange and Insurance 
Market Standards for 2015 and Beyond Final Rule, we have been 
considering different ways to make QHP quality data, including QHP 
Enrollee Survey results, publicly available and accessible to 
researchers, consumer groups, states and other entities.\294\ Similar 
to the QRS PUFs, we proposed to post a QHP Enrollee Survey PUF 
annually, beginning with the 2021 QHP Enrollee Survey results and 
during the 2022 open enrollment period, that would include the score 
and proportion of responses (for example, the percentage of respondents 
answering ``Never'' or ``Sometimes'') for every survey question and 
composite as well as demographic information such as employment status, 
race and ethnicity, and age at the reporting unit and national level to 
facilitate data transparency.
---------------------------------------------------------------------------

    \293\ A rating for Medical Care is the other component of the 
overall rating.
    \294\ 79 FR at 30311.
---------------------------------------------------------------------------

    We solicited comment on this proposal to post a QHP Enrollee Survey 
PUF annually and on potential changes to the QRS hierarchy.
    The following is a summary of the comments we received and our 
responses.
    Comment: Many commenters supported the removal of levels of the QRS 
hierarchy to align with other CMS quality reporting programs and to 
increase the ability for the overall quality score to be more 
reflective of the performance of individual quality measures in the 
QRS. Several commenters specifically supported the removal of the 
composite and domain levels of the QRS hierarchy. Some commenters 
requested the timeframe of when modifications to the QRS hierarchy 
would take effect.
    Response: We agree that with removal of levels of the QRS 
hierarchy, there will be closer alignment with other CMS quality 
reporting programs such as Medicare Part C & D Star Ratings. We also 
agree that by removing the composite level and domain level from the 
QRS hierarchy, we will be simplifying the hierarchy and the 
anticipated, improved understanding of the overall quality scores will 
be more reflective of the individual measures' performance that 
contributes to those scores. Thus, after consideration of the comments 
received, we are finalizing the removal of the composite level and 
domain level from the QRS hierarchy. We intend to clarify the timeframe 
for these modifications to the QRS hierarchy in the QRS and QHP 
Enrollee Survey Technical Guidance for 2022, which would affect the 
2022 ratings year for Plan Year 2023.
    Comment: One commenter urged CMS to route any changes related to 
the QRS hierarchy through the QRS Technical Expert Panel (TEP), which 
is comprised of subject matter experts who will be able to give 
feedback on the proposed changes to the methodology and weigh proposed 
changes against any other QRS methodology changes that are being 
considered. Another commenter urged CMS to continue examining the QRS 
hierarchy to understand impact to weight redistribution before 
finalization of removal of a level of the QRS hierarchy (that is, with 
either the composite or domain level removed) and to identify evidence 
that the streamlined hierarchy is effective in mitigating data or 
calculation concerns encountered in other rating systems.
    Response: We appreciate the commenters' suggestions and requests 
for clarification related to the removal of one or more levels of the 
QRS hierarchy. We confirm that we discussed the potential removal of 
levels of the QRS hierarchy with the QRS TEP in 2017 and based on 
testing using previous years' data, CMS believes that the removal of 
the composite and domain levels and the explicit weights at the summary 
indicator will balance the weight of individual measures on the global 
score. In addition, removal of both the composite and domain levels of 
the QRS hierarchy will not result in issues with weight redistribution 
because we intend to retain the explicit weights at the summary 
indicator level to align with the amount of measures within each 
summary indicator. CMS intends to retain the summary indicators to 
remain in alignment with other CMS quality reporting programs (that is, 
Medicare Part C & D Star Ratings) and intends to continue to assign a 
weight of \2/3\ (66.67%) to the Clinical Quality Management summary 
indicator, and a weight of \1/6\ (16.67%) to the Enrollee Experience 
and Plan Efficiency, Affordability, & Management summary indicators. 
This weighting structure reflects the approximate percentage of 
measures in each summary indicator. CMS believes that the removal of 
both the composite and domain levels of the QRS hierarchy will mitigate 
stakeholders' main concern with data and calculations in the QRS (that 
is, the implicit weighting). We also clarify that we continue to 
explore the potential of introducing new methods of assessing 
performance at the measure level and have proposals available in the 
current Draft 2021 Call Letter.\295\
---------------------------------------------------------------------------

    \295\ ``Draft 2021 Call Letter for the Quality Rating System and 
QHP Enrollee Experience Survey,'' February 2021. Available at 
https://www.cms.gov/files/document/draft-2021-call-letter-qrs-qhp-enrollee-survey.pdf.
---------------------------------------------------------------------------

    Comment: A few commenters requested further clarifications and 
considerations including urging CMS to grant additional flexibility to 
states in the display of the star ratings and noted that technical 
details around quality rating information display are provided to State 
Exchanges too late for states to update system requirements.
    Response: We clarify that per the 2021 Payment Notice final rule, 
State Exchanges have increased flexibility and can make determinations 
about display of quality rating information to best meet the needs of 
their population. As part of the 2021 Payment Notice final rule, we 
codified in Sec. Sec.  155.1400 and 155.1405 the option for State 
Exchanges that operate their own eligibility and enrollment platforms 
to customize the display of quality rating information provided by HHS 
or to display HHS-provided quality rating information with certain 
state-specific customizations for their QHPs to best

[[Page 24255]]

reflect local priorities or information.\296\ We also clarify that 
refinements to the QRS hierarchy do not change the display requirements 
for State Exchanges that operate their own eligibility and enrollment 
platforms. State Exchanges that operate their own eligibility and 
enrollment platforms continue to have the flexibility to make certain 
state-specific customizations related to the display of quality ratings 
or to maintain the display of the overall rating and three summary 
indicator ratings in alignment with HealthCare.gov. We understand that 
guidance posted by CMS related to the display of quality rating 
information on HealthCare.gov may be communicated too late for states 
to update their system requirements. Thus, CMS will continue to provide 
flexibility and technical assistance to State Exchanges as necessary 
and appropriate, and will continue to discuss timelines for 
implementation with any State Exchanges that are unable to meet 
applicable quality rating information display requirements.
---------------------------------------------------------------------------

    \296\ 85 FR 29214 through 29216.
---------------------------------------------------------------------------

    Comment: A majority of commenters strongly agreed with the proposal 
to make QHP Enrollee Survey results publically available in an annual 
PUF to increase transparency and consumer satisfaction and to assist 
states in monitoring the quality of insurance coverage offered through 
the Exchanges. One commenter asked for clarification related to the 
reasons underlying CMS' proposal to make QHP Enrollee Survey results 
publically available.
    Response: We agree that a PUF that includes results from the full 
QHP Enrollee Survey will improve transparency of enrollee experience 
information across Exchanges. We stated in the Exchange and Insurance 
Market Standards for 2015 and Beyond Final Rule that we have been 
considering different ways to make QHP quality data, including QHP 
Enrollee Survey results, publicly available and accessible to 
researchers, consumer groups, states and other entities.\297\ We 
believe that providing this QHP quality data aligns with other CMS 
quality reporting programs, including Medicare Advantage and 
Prescription Drug Plan (PDP) Consumer Assessment of Healthcare 
Providers and Systems (CAHPS) and CAHPS for the Merit-based Incentive 
Payment System (MIPS), that publically report survey scores and help 
beneficiaries, issuers, researchers and others better understand the 
experiences of the individuals and families that are enrolled in 
different health plans and programs.
---------------------------------------------------------------------------

    \297\ 79 FR 30311.
---------------------------------------------------------------------------

    Comment: A few commenters who supported the proposal to make QHP 
Enrollee Survey results publicly available urged CMS to require 
additional information related to quality measure data submitted to an 
Exchange by survey vendors and issuers. One commenter requested that 
CMS permit states to collect a de-identified survey response file that 
includes demographic information needed to appropriately case-mix 
adjust the results to facilitate a better understanding of 
opportunities for improvement. Another commenter urged CMS to require 
stratification of at least some quality measures by race, ethnicity, 
primary language, and disability to address highly prevalent conditions 
in communities of color.
    Response: We appreciate the requests for CMS to require that 
additional quality measure information to be submitted to an Exchange 
by survey vendors and issuers. CMS does permit HHS-approved survey 
vendors to share de-identified person-level data sets of QHP Enrollee 
Survey questions with States, but to protect enrollee confidentiality, 
survey vendors are prohibited from sharing person-level demographic 
data. CMS case-mix adjusts QHP Enrollee Survey response data using 
variables including the following: General health rating, mental health 
rating, chronic conditions/medications, age, education, survey 
language, help with the survey, and survey mode. CMS intends to include 
case-mix adjusted scores for QHP Enrollee Survey questions and 
composites at the reporting unit level in the PUF. In general, CMS is 
supportive of stratification of at least some quality measures by areas 
such as race, ethnicity, primary language, disability, and potentially 
other social determinants of health. We intend to include demographic 
information such as age, education level, employment, race and 
ethnicity in the QHP Enrollee Survey PUF to facilitate transparency of 
this data at the reporting unit level. CMS is not requiring additional 
quality measure data at this time because we understand that 
stratification requires QHP issuers to have specific member-level data 
and anticipates that the incorporation of stratification for quality 
measures may take time. CMS is committed to advancing health equity and 
addressing health and health care disparities. As part of this 
objective, CMS is exploring the stratification of measures by 
sociodemographic factors including race and ethnicity. CMS will follow 
industry standards around the type of data needed to report stratified 
measure rates.
    Comment: A few commenters mentioned they do not support publishing 
QHP Enrollee Survey results at this time because of a lack of 
transparency of the information to be included in the PUF, explanatory 
materials, data definitions and communication strategy that would allow 
consumers to use this information appropriately in making decisions. 
One commenter noted that survey results are already displayed through 
star ratings and that additional results would not be meaningful 
without sufficient explanation, including cut points.
    Response: We clarify that CMS will provide details and materials 
related to the QHP Enrollee Survey PUF in alignment with other Exchange 
PUFs and other quality data PUFs, including a data dictionary, an 
overview of the QHP Enrollee Survey, as well as the definitions of all 
survey questions and composites. We agree that there are already some 
survey results displayed on HealthCare.gov in the form of a quality 
rating for Member Experience, which makes up part of the Overall Rating 
for QHPs. The Member Experience rating is based on a select number of 
survey measures from the QHP Enrollee Survey. However, after 4 years of 
collecting survey measure data, we believe it is important to 
facilitate transparency of QHP enrollee experience results from the 
full survey. Similar to the QRS PUF, CMS intends to include responses 
at the reporting unit level for all survey questions in the annual QHP 
Enrollee Survey PUF, including those not included in the QRS. The QHP 
Enrollee Survey PUF will provide results of scoring the QHP Enrollee 
Survey questions and composites. CMS does not use cut points to 
calculate the QHP Enrollee Survey scores. We agree that including cut 
points may provide more meaning to the QRS results included in the QRS 
PUF and will consider adding the cut points to the QRS PUFs in the 
future.
    Comment: One commenter noted that the QHP Enrollee Survey results 
are proprietary and cannot be shared publicly.
    Response: We disagree with the assertion that QHP Enrollee Survey 
results are proprietary. In accordance with section 1311(c)(3) and 
(c)(4) of the ACA and 45 CFR 155.1400 and 155.1405, all Exchanges have 
the authority to publicly report QHP quality rating information, 
including survey results, on their websites to help consumers compare 
and shop for QHPs. QHP issuers are required to collect survey data and 
the data is used both by

[[Page 24256]]

CMS and to inform issuers' internal quality improvement efforts. 
Similar to the QRS PUF and other Exchange PUFs, CMS will publish the 
QHP Enrollee Survey PUF on data.healthcare.gov.
    Comment: One commenter expressed concerns regarding potential 
negative impacts on the QHP Enrollee Survey results due to the COVID-19 
pandemic, including significant membership fluctuations and membership 
composition changes.
    Response: We recognize the concern regarding negative impacts of 
the COVID-19 pandemic on the QHP Enrollee Survey results. We note that 
CMS proposed, in the Draft 2021 Call Letter, temporary QRS methodology 
changes to mitigate the impact of COVID-19 on QRS ratings. We also 
clarify that CMS will review all quality measure data that is submitted 
for 2021 QRS ratings, including survey measure data, and make 
determinations regarding display of quality rating information and 
release of quality data PUFs after the scoring and rating process and 
prior to the 2022 open enrollment period for the individual Exchange.
    Comment: Some commenters noted general concerns about the QHP 
Enrollee Survey, including burdensome survey length and appropriate 
survey timing resulting in lower response rates and lower reliability 
on certain questions. Before publicly reporting full survey results, 
the commenter recommended that CMS consider removing questions that 
have reliability below 0.70, remove questions outside of the health 
plan's control, remove any survey questions with less than 100 
responses in the denominator from reporting and remove the demographic 
items from the survey that duplicate information submitted at 
enrollment and rely on the 834 enrollment file instead.
    Response: We understand the commenter's concerns and provide the 
following clarifications about the QHP Enrollee Survey. CMS aims for 
statistically high reliability (generally, 0.70 or above) for the 
survey questions and composites. In some cases, there are topic areas 
critical to inform consumer understanding and issuer quality 
improvement that may not consistently meet high reliability thresholds 
but remain important indicators of quality (for example, topics such as 
enrollee experience with their provider and health care). Given the 
importance of transparency around these topics, CMS anticipates 
including all survey questions within the PUF. CMS also anticipates 
monitoring reliability over time and will consider refinements to this 
approach, if needed. CMS expects the PUF will include the number of 
responses to each question and the number of completed surveys to 
assist users with analyzing survey data. We also clarify that we 
continue to assess the length and timing of the QHP Enrollee Survey. We 
believe that currently, the QHP Enrollee Survey generally aligns with 
the length and timing of other CAHPS surveys (for example, Medicare 
Advantage PDP CAHPS survey, Medicare Advantage Only CAHPS) and 
similarly, posting of an annual QHP Enrollee Survey PUF would align 
with other quality reporting programs. In addition, we rely on QHP 
issuers to populate the sample frame files used to field the QHP 
Enrollee Survey. QHP issuers' access to demographic data collected in 
the 834 enrollment file can vary based on the type of Exchange in which 
the issuer operates (that is, State Exchanges or Federally-facilitated 
Exchanges). Furthermore, CMS collects demographic data through the QHP 
Enrollee Survey that may not be included in the 834 enrollment file.
    After consideration of all public comments received, we are 
finalizing the proposal to make the full QHP Enrollee Survey results 
publicly available in an annual PUF, and the removal of the composite 
level and domain level from the QRS hierarchy. We intend to clarify the 
timeframe for the removal of the composite and domain levels of the QRS 
hierarchy in the QRS and QHP Enrollee Survey Technical Guidance for 
2022, which would affect the 2022 ratings year for Plan Year 2023.
11. Dispute of HHS Payment and Collections Reports (Sec.  156.1210)
    In the 2014 Payment Notice, we established provisions related to 
the confirmation and dispute of payment and collection reports. These 
policies were finalized under the assumption that all issuers that 
receive APTC would generally be able to provide these confirmations or 
disputes automatically to HHS. However, HHS has found that many issuers 
prefer to research payment errors and use enrollment reconciliation and 
disputes to update their enrollment and payment data, and may be unable 
to complete this research and provide confirmation or dispute of their 
payment and collection reports within 15 days, the timeline established 
by the 2014 Payment Notice.
    In the 2021 Payment Notice, we amended Sec.  156.1210(a) to 
lengthen the time to report payment inaccuracies from 15 days to 90 
days to allow all issuers who receive APTC more time to research, 
report, and correct inaccuracies through other channels. The longer 
timeframe also allows for the processing of reconciliation updates, 
which may resolve potential disputes. Additionally, at Sec.  156.1210, 
we removed the requirement at paragraph (a) that issuers actively 
confirm payment accuracy to HHS each month, as well as the language in 
paragraph (b) regarding late filed inaccuracies. Instead, we amended 
paragraph (b) to require an annual confirmation from issuers that the 
amounts identified in the most recent payment and collections report 
for the coverage year accurately reflect applicable payments owed by 
the issuer to the federal government and the payments owed to the 
issuer by the federal government, or that the issuer has disputed any 
identified inaccuracies, after the end of each payment year, in a form 
and manner specified by HHS.
    Since finalizing these changes, HHS's experience has shown that 
some data inaccuracies reasonably will be identified after the 90-day 
reporting window. For example, issuers might receive notification of an 
eligibility appeal adjudication after the 90-day submission window. 
Additionally, some issuers are directed to update their enrollment and 
payment data after an HHS data review or audit which may occur after 
this 90-day window. In such instances it is in the interest of HHS, 
states, issuers, and enrollees to accept the late reporting of data 
inaccuracies. As such, we proposed to amend Sec.  156.1210 by 
redesignating current Sec.  156.1210(b) to Sec.  156.1210(d) and adding 
new Sec.  156.1210(b) to establish a process for issuers to report 
enrollment or payment data changes in these situations.
    We clarified that this proposed flexibility would not reduce an 
issuer's obligation to make a good faith effort to identify and 
promptly report discrepancies within the 90-day reporting window 
established under Sec.  156.1210(a). We further explained that issuers 
could demonstrate good faith by sending regular and accurate enrollment 
reconciliation files and timely enrollment disputes throughout the 
applicable enrollment calendar year, making timely and regular changes 
to enrollment reconciliation and dispute files to correct past errors, 
and by reaching out to HHS and responding timely to HHS outreach to 
address any issues identified. With respect to inaccuracies identified 
after the end of the applicable 90-day period, we proposed to work with 
the issuer to resolve the inaccuracy if the issuer promptly notifies 
HHS, in a form and

[[Page 24257]]

manner specified by HHS, no later than 15 days after identifying the 
inaccuracy. The failure to identify the inaccuracy in a timely manner 
in these situations must not have been due to the issuer's misconduct 
or negligence. For example, issuers must regularly perform monthly 
enrollment reconciliation as required under Sec.  156.265(f), and 
should regularly review monthly enrollment reconciliation files so that 
disputes are submitted in the 90-day reporting window. Disputes 
submitted after the expiration of the reporting window as a result of 
an issuer's failure to conduct these activities in a timely manner 
would not satisfy the good faith standard. We proposed to codify these 
criteria at new proposed Sec.  156.1210(b)(1) and (2).
    Additionally, we proposed to add paragraph (c) to allow the 
reporting of data inaccuracies after the 90-day period up to 3 years 
following the end of the plan year to which the inaccuracy relates or 
the date of the completion of the HHS audit process for such plan year, 
whichever is later. We believe this deadline will provide issuers with 
enough time to report any data inaccuracies discovered after the 90-day 
submission window, while providing a reasonable end date by which HHS, 
the State Exchange, issuer and other stakeholders can consider the 
records for a particular benefit year closed.
    We noted that, under section 1313(a)(6) of the ACA, ``payments made 
by, through, or in connection with an Exchange are subject to the False 
Claims Act (31 U.S.C. 3729, et seq.) if those payments include any 
Federal funds.'' As such if an issuer has an obligation to pay back 
APTC, the issuer could be liable under the False Claims Act for 
knowingly and improperly avoiding the obligation to pay. We proposed to 
codify in Sec.  156.1210(c)(3), that, if a payment error is discovered 
after the 3-year or end of audit reporting deadline, the issuer is 
obligated to notify HHS and the State Exchange, as applicable and repay 
any overpayment. However, HHS will not pay the issuer after the 3-year 
or end of audit reporting deadline for any underpayments discovered.
    We further clarified that the requirements of Sec.  156.1210 apply 
to all issuers who receive APTC, including issuers in State Exchanges. 
We sought comment on all aspects of this proposal, including its impact 
on the State Exchanges' ability to resolve disputes and report payment 
adjustments to HHS in this timeframe. We are finalizing the amendments 
to Sec. Sec.  156.1210(b) and (c), as proposed, to establish a 
framework to permit issuers to report data inaccuracies after the 90-
day window up to 3 years following the end of the plan year to which 
the inaccuracy relates or the date of the completion of the HHS audit 
process for such plan year, whichever is later. As detailed further 
below, we are also codifying the clarification we announced in the 
proposed rule by finalizing conforming amendments to section Sec.  
156.1210 to more clearly reflect that these requirements also apply to 
issuers in state Exchanges. We received public comments on the proposed 
updates to dispute of HHS payment and collections reports (Sec.  
156.1210). The following is a summary of the comments we received and 
our responses.
    Comment: Several commenters supported the amendments to Sec.  
156.1210 which provide issuers the flexibility to identify inaccuracies 
after the 90-day reporting window within the 3-year or end of audit 
deadline for reporting identified inaccuracies window. Commenters, 
including those representing a State Exchange, appreciated HHS's 
interest in removing unnecessary reporting requirements to reduce 
administrative burden for issuers, and improving data accuracy, as well 
as HHS's expressed intention to work cooperatively with issuers that 
make a good faith effort to comply with these requirements. These 
commenters also supported the proposed change to reporting timeframes 
and appreciated the additional time to report payment inaccuracies, 
while highlighting the importance of maintaining compliance standards.
    Response: We agree with commenters that finalizing these provisions 
will improve data accuracy and reduce administrative burden on issuers 
by allowing more time to address inaccuracies in enrollment and payment 
data, while maintaining compliance standards. We are committed to 
supporting State Exchanges in resolving disputes and reporting payment 
adjustments in an efficient and timely manner. We are finalizing the 
proposed amendments to Sec.  156.1210, which will allow the 
identification of inaccuracies in the monthly payment and collections 
reports after the 90-day period if the late-identification was not due 
to the issuer's misconduct or negligence. We are also finalizing the 
provision that permits the reporting of these inaccuracies up to 3 
years following the end of the plan year to which the inaccuracy 
relates or the date of the completion of the HHS audit process for such 
plan year after which point the issuer will not be paid for any 
underpayments that may be discovered. However, if any payment errors 
are discovered after the applicable deadline, the issuer remains 
obligated to notify HHS and the State Exchange, or SBE-FP, as 
applicable, and will be responsible for repaying any identified 
overpayments. As detailed further below, we are also codifying the 
clarification we announced in the proposed rule by finalizing 
conforming amendments to section Sec.  156.1210 to more clearly reflect 
that these requirements also apply to issuers in State Exchanges. We 
clarify that these conforming amendments are not intended to change 
existing requirements or processes for State Exchanges or their 
respective issuers. If State Exchange issuers currently work with the 
State Exchange to review the amounts identified in the payment and 
collection reports and resolve inaccuracies, they should continue to do 
so with any identified overpayments being repaid to HHS within the 
applicable timeframe set forth in Sec.  156.1210. State Exchange 
issuers who currently work with HHS to review these reports and resolve 
any inaccuracies under Sec.  156.1210, along with issuers in FFE 
states, should continue to work with HHS on these matters and should 
also repay any identified overpayments to HHS within the applicable 
timeframe(s) set forth in Sec.  156.1210.
    Comment: One commenter suggested that HHS make payments to issuers 
for underpayments discovered after the 3-year or end of audit deadline 
proposed in Sec.  156.1210(c). Another commenter opposed the 3-year 
deadline and noted it would prolong the dispute resolution process and 
the time and work that goes into addressing disputes. This commenter 
suggested that HHS shorten the timeframe for identifying inaccuracies 
from 3 years following the end of a plan year to 1 year following the 
end of a plan year.
    Response: The 3-year following the end of the plan year to which 
the inaccuracy relates or end of HHS audit process for such plan year 
deadline is intended to provide issuers the flexibility to resolve data 
inaccuracies encountered after the initial 90-day reporting window, 
while still encouraging the timely review of enrollment and payment 
data by providing a date certain for the deadline for identification of 
such inaccuracies. Based on our experience operating the FFE, we 
believe shortening this timeframe to one year following the end of a 
plan year would be insufficient to support the resolution process both 
for issuers, States, and HHS. For example, the one year timeframe would 
not align with the submission window for an issuer in a State Exchange 
time to

[[Page 24258]]

complete the retroactive State Based Marketplace Inbound (SBMI) payment 
files, which are submitted up to 3 years after the relevant benefit 
year. Further, our changes align with the 3-year timeframe established 
by the IRS. More specifically, 26 U.S.C. 6501 and 26 U.S.C. 6511 state 
that the amount of any tax imposed shall be assessed within 3 years 
after the return was filed. For example, in both the FFE and State 
Exchanges, a consumer may dispute or amend their insurance coverage by 
submitting a 1095A update which allows them to amend their taxes up to 
3 years. We further note that the 3-year following the end of the plan 
year to which the inaccuracy relates or end of the HHS audit process 
for such plan year deadline finalized in this rule does not reduce the 
issuer's obligation to make a good faith effort to promptly report 
discrepancies within the 90-day reporting window. In order to encourage 
all issuers to complete review within the applicable timeframes, HHS 
reaffirms that it will not make additional payments to issuers for 
identified underpayments after 3 years following the end of the plan 
year to which the inaccuracy relates or the date of the completion of 
the HHS audit process for such plan year, whichever is later.
    After consideration of the comments on these proposals, we are 
finalizing amendments to Sec.  156.1210 which will allow issuers the 
flexibility to identify data inaccuracies after the 90-day period and 
report inaccuracies up to 3 years following the end of the plan year to 
which the inaccuracy relates or the date of the completion of the HHS 
audit process for such plan year. We are finalizing these amendments as 
proposed and are codifying the clarification we announced in the 
proposed rule by finalizing conforming amendments to more clearly 
reflect that the requirements of Sec.  156.1210 apply to all issuers 
who receive APTCs, including issuers in State Exchanges by adding a 
reference to ``or the State Exchange (as applicable)'' to paragraph 
(a), the introductory sentence to paragraph (b), paragraphs (b)(1) and 
(b)(2), as well as paragraph (c)(3).
12. Payment and Collection Processes (Sec.  156.1215)
    In the 2015 Payment Notice, HHS established a monthly payment and 
collections cycle for insurance affordability programs, user fees, and 
premium stabilization programs. As discussed elsewhere in this rule, we 
proposed to eliminate state user fee collection flexibility that HHS 
had previously offered to states as part of the 2017 Payment 
Notice,\298\ and proposed conforming amendments to remove the reference 
to ``State'' governments from paragraph (b). We sought comment on these 
proposed amendments.
---------------------------------------------------------------------------

    \298\ See 81 FR at 12317-12318.
---------------------------------------------------------------------------

    We received public comments on the proposed updates to dispute of 
HHS payment and collections processes (Sec.  156.1215). The following 
is a summary of the comments we received and our responses.
    Comment: The comments received on the proposed updates to payment 
and collection processes (Sec.  156.1215) supported the elimination of 
the state user fee collection flexibility that HHS had previously 
offered to states in the 2017 Payment Notice, and the conforming 
amendments to remove the reference to ``State'' governments from Sec.  
156.1215(b).
    Response: We believe that updating the payment and collection 
processes in Sec.  156.1215 to align with the elimination of the 
unutilized state user fee collection flexibility by striking the 
reference to ``State'' will clarify the policy and is an appropriate 
amendment to make at this time. We appreciate the supportive comments 
on this proposal.
    After consideration of comments received on this proposal, we are 
finalizing the amendment to Sec.  156.1215(b) as proposed.
13. Administrative Appeals (Sec.  156.1220)
    As detailed earlier in this preamble, we previously established a 
three-level administrative appeals process for issuers to seek 
reconsideration of amounts under certain ACA programs, including the 
calculation of risk adjustment charges, payments and user fees. This 
process also applies to issuer disputes of the findings of a second 
validation audit (if applicable) as a result of HHS-RADV for the 2016 
benefit year and beyond.\299\ As explained in the 2020 Payment Notice, 
only those issuers who have insufficient pairwise agreement between the 
initial validation audit and second validation audit will receive a 
Second Validation Audit Findings Report and therefore have the right to 
appeal the second validation audit findings. In this rule, we proposed 
to amend Sec.  156.1220(a)(1)(vii) to add ``if applicable'' when 
discussing an issuer's ability to appeal the findings of the second 
validation audit to more clearly capture this limitation as part of the 
regulation, consistent with the existing language at Sec.  
153.630(d)(2) and the previously finalized policy. We proposed a 
similar amendment in this rule to Sec.  153.630(d)(3).
---------------------------------------------------------------------------

    \299\ See 45 CFR 156.1220(a)(1)(vii).
---------------------------------------------------------------------------

    We also proposed amendments to Sec.  156.1220(a)(3) to clarify that 
the 30-calendar day timeframe to file a request for reconsideration of 
second validation audit findings (if applicable) or the risk score 
error rate calculation would be 30 calendar days from the applicable 
benefit year's Summary Report of Benefit Year Risk Adjustment Data 
Validation Adjustments to Risk Adjustment Transfers. To capture this 
clarification, we proposed to create a new proposed Sec.  
156.1220(a)(3)(ii) to specify the timeframe for filing a request for 
reconsideration for a risk adjustment payment or charge, including an 
assessment of risk adjustment user fees. This new proposed regulatory 
provision maintains the language that establishes a 30 calendar day 
window for these appeals that begin on the date of notification under 
Sec.  153.310(e). We also proposed to create a new proposed Sec.  
156.1220(a)(3)(iii) to separately address the timeframe for filing a 
request for reconsideration of second validation audit findings or the 
risk score error rate calculation and to add the phrase ``if 
applicable'' to more clearly capture the limitation on the ability to 
appeal second validation audit findings. To accommodate these two new 
proposed paragraphs, we also proposed to amend Sec.  156.1220 to 
redesignate paragraphs (a)(3)(iii) through (vi) as (a)(3)(iv) through 
(vii), respectively. We sought comment on these proposals.
    The only comment received on the proposed updates to the 
administrative appeals regulations (Sec.  156.1220) noted general 
support of the proposed amendments and accompanying clarifications.
    After consideration of comments received on these proposals, we are 
finalizing the amendments to Sec.  156.1220 as proposed.

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

1. Definitions (Sec.  158.103)
    We proposed to amend Sec.  158.103 to establish the definition of 
prescription drug rebates and other price concessions that are deducted 
from incurred claims for MLR reporting and rebate calculation purposes.
    In the preamble to the proposed rule, we discussed that HHS 
received numerous comments during the regulatory process of finalizing 
amendments to Sec.  158.140(b)(1)(i) in the 2021 Payment Notice final 
rule with respect to reporting prescription drug

[[Page 24259]]

rebates and other price concessions.\300\ The commenters requested HHS 
to codify and align the definition of prescription drug rebates and 
other price concessions that are reported by issuers for MLR purposes 
with the definition in section 1150A of the Act, as added by the 
ACA,\301\ which requires QHP issuers and PBMs to report certain 
prescription drug benefit information to HHS. The reference to rebates, 
discounts, and price concessions in section 1150A(b)(2) of the Act 
excludes bona fide service fees paid to PBMs by drug manufacturers or 
issuers. Under section 1150A of the Act, bona fide service fees are 
fees negotiated by PBMs that include but are not limited to 
``distribution service fees, inventory management fees, product 
stocking allowances, and fees associated with administrative services 
agreements and patient care programs (such as medication compliance 
programs and patient education programs).'' Section 156.295, 
implementing section 1150A of the Act, defines bona fide services fees 
as ``fees paid by a manufacturer to an entity that represent fair 
market value for a bona fide, itemized service actually performed on 
behalf of the manufacturer that the manufacturer would otherwise 
perform (or contract for) in the absence of the service arrangement, 
and that are not passed on in whole or in part to a client or customer 
of an entity, whether or not the entity takes title to the drug.''
---------------------------------------------------------------------------

    \300\ See 85 FR at 29240-29241.
    \301\ The requirements of section 1150A with respect to QHP 
issuers are codified at Sec.  156.295. In the proposed rule, we 
proposed to amend that regulation and to codify the requirements 
with respect to PBMs at a new 45 CFR part 184.
---------------------------------------------------------------------------

    In light of the comments that we previously received during the 
process of amending Sec.  158.140(b)(1)(i), we proposed to further 
amend the MLR rules to add the definition for prescription drug rebates 
and other price concessions to Sec.  158.103 and to clarify that this 
term excludes bona fide service fees, consistent with how such fees are 
described in Sec.  156.295. We proposed that this provision become 
applicable beginning with the 2022 MLR reporting year (MLR reports 
filed in 2023), which aligns with the applicability date of the 
amendment to Sec.  158.140(b)(1)(i) and should provide issuers with 
adequate time to adjust contracts with entities providing pharmacy 
benefit management services to provide transparency regarding 
prescription drug rebates and other price concessions they receive from 
drug manufacturers. We solicited comment on this proposal.
    We received public comments on the proposed amendment of Sec.  
158.103 to establish the definition of prescription drug rebates and 
other price concessions that are deducted from incurred claims for MLR 
reporting and rebate calculation purposes. The following is a summary 
of the comments we received and our responses.
    Comment: All of the commenters generally supported the proposal to 
define prescription drug rebates and other price concessions that 
issuers must deduct from incurred claims because they agreed it would 
provide clarity, consistency, transparency, and accuracy for reporting 
incurred claims in the MLR calculation. A few commenters expressed 
concern that excluding bona fide service fees from the definition of 
prescription drug rebates and other price concessions could facilitate 
evasion and abuse, and incentivize greater use of service fee-
generating activities focused on impeding or denying care. These 
commenters urged HHS to ensure that amounts that are treated as bona 
fide service fees are in fact bona fide service fees and that this 
category is not inappropriately exploited to obscure the true cost of 
prescription drugs.
    Response: We agree that including a definition of prescription drug 
rebates and other price concessions will promote transparency and 
higher-quality reporting of incurred claims. We also share commenters' 
concerns that the regulated entities may restructure their contracts in 
ways that could circumvent the rules regarding the exclusion of bona 
fide service fees and emphasize that we will only permit as an 
exclusion from prescription drug rebates and other price concessions 
bona fide service fees that meet the definition at Sec.  158.103. We 
intend to continue monitoring developments in the prescription benefit 
markets in order to ensure that the MLR rules continue to appropriately 
reflect the prevailing market practices.
    Comment: Several commenters requested that HHS clarify that the 
definition of prescription drug rebates and other price concessions at 
Sec.  158.103 excludes prescription drug coupons and similar items that 
benefit enrollees directly at the point of sale, since these items do 
not reduce issuers' drug costs and may not be known to issuers.
    Response: We agree with the commenters and clarify that it was 
never our intent to include prescription drug coupons and similar items 
that benefit enrollees directly at the point of sale in the definition 
of prescription drug rebates and other price concessions at Sec.  
158.103. Accordingly, we are modifying the proposed definition of 
prescription drug rebates and other price concessions in this final 
rule to clarify that this term excludes any remuneration, coupons, or 
price concessions for which the full value is passed on to the 
enrollee, such that no other entity receives any portion of the coupon 
payment, remuneration, or price concession.
    Comment: Several commenters recommended that HHS exclude from the 
definition of prescription drug rebates and other price concessions at 
Sec.  158.103 payments for services related to quality improvement 
activities (QIA).
    Response: We disagree with this recommendation. The purpose of the 
requirement at Sec.  158.140(b)(1)(i)(B) that prescription drug rebates 
and other price concessions must be subtracted from an issuer's 
incurred claims for MLR purposes is to accurately capture issuers' true 
expenditures on enrollees' prescription drugs. Separately, section 
158.150 requires reporting of QIA expenditures. Excluding amounts 
attributable to QIA from the definition of prescription drug rebates 
and other prices concessions that must be subtracted from incurred 
claims would improperly inflate incurred claims, preventing an accurate 
accounting of prescription drug costs. Thus, any portion of 
prescription drug rebates and other price concessions that represents 
compensation for QIA services should be reported as QIA for MLR 
purposes.
    Comment: Several commenters recommended that HHS remove the term 
``direct and indirect remuneration'' (DIR) from the definition of 
prescription drug rebates and other price concessions at Sec.  158.103. 
These commenters stated that this term originated within the Medicare 
Part D program and would be confusing for issuers and PBMs.
    Response: We note that in the preambles to both the 2021 Payment 
Notice proposed rule and the 2021 Payment Notice final rule, we 
explained that the prescription drug price concessions that must be 
subtracted from an issuer's incurred claims are intended to capture 
``any time an issuer or an entity that provides pharmacy benefit 
management services to the issuer receives something of value related 
to the provision of a covered prescription drug (for example, 
manufacturer rebate, incentive payment, direct or indirect 
remuneration, etc.).'' \302\ At that time, we did not receive any 
comments expressing concern with inclusion of DIR in the term price 
concessions. In addition, we are not persuaded that the DIR definitions 
used in the Medicare Part D program are inapplicable or

[[Page 24260]]

inappropriate in the non-Medicare markets, as it includes the same 
direct and indirect remuneration that is relevant in the commercial 
markets, such as PBM-retained rebates, PBM rebate guarantee amounts, 
PBM penalty payments, dispensing incentive payments, risk-sharing 
amounts, and remuneration from pharmaceutical manufacturers in the form 
of rebates, grants, reduced price administrative services, legal 
settlement amounts, and prompt pay discounts from pharmacies that are 
not included in the negotiated price. However, in response to comments 
and in order to avoid any confusion between the Medicare and non-
Medicare markets, we are making a technical edit to remove the 
reference to DIR from the definition of prescription drug rebates and 
other price concessions at Sec.  158.103. Nonetheless, we note that in 
the definition of prescription drug rebates and price concessions at 
Sec.  158.103, we continue to intend to require issuers to treat both 
direct and indirect items of value related to the provision of a 
covered prescription drug, including compensation collected by an 
issuer or PBM after the point of sale, as prescription drug rebates and 
other price concessions that must be subtracted from an issuer's 
incurred claims. Further, HHS intends to continue to review issues 
surrounding the MLR definition and treatment of prescription drug 
rebates and other price concessions, and as more information and data 
become available, HHS may propose revisions in the future as may be 
necessary or appropriate to ensure that consumers receive value for 
their premium dollars pursuant to section 2718 of the PHS Act.
---------------------------------------------------------------------------

    \302\ 85 FR 7139 and 85 FR 29240.
---------------------------------------------------------------------------

    Comment: Several commenters recommended that HHS remove the term 
``receivable'' from the definition of prescription drug rebates and 
other price concessions at Sec.  158.103.
    Response: In response to these comments and to preserve consistency 
with the language used throughout Sec.  158.140, we are making a 
technical edit to remove the term ``receivable'' from the definition of 
prescription drug rebates and other price concessions at Sec.  158.103. 
However, we note that, similar to other components of incurred claims, 
prescription drug rebates and other price concessions attributable to 
enrollees' drug utilization during the MLR reporting year are not 
always settled and received by the time issuers submit MLR reports to 
the Secretary. Consequently, while Sec.  158.140 commonly refers to 
``payments'' and ``receipts'' as well as amounts ``paid'' and 
``received,'' the MLR Annual Reporting Form Filing Instructions provide 
more detailed guidance specifying where these terms include amounts 
that are payable or receivable. Currently, for MLR purposes, issuers 
report the prescription drug rebate amounts they expect to receive with 
respect to the reporting year, and QHP issuers and PBMs similarly 
report such expected amounts for purposes of the reporting required 
under section 1150A of the Act. Therefore, we intend to clarify in the 
MLR Annual Reporting Form Filing Instructions that the prescription 
drug rebates and other price concessions that issuers must subtract 
from incurred claims (which for the 2022 and later MLR reporting years 
will include amounts received and retained by PBMs) include the 
receivable amounts.
    After consideration of all the comments received and for the 
reasons stated in our responses, we are finalizing the definition of 
prescription drug rebates and price concessions at Sec.  158.103 as 
proposed, with a modification to clarify that the definition excludes 
any remuneration, coupons, or price concessions for which the full 
value is passed on to the enrollee, and technical edits to replace the 
phrase ``direct and indirect remuneration'' with ``remuneration,'' and 
remove the term ``receivable.''
2. Premium Revenue (Sec.  158.130)
    We proposed to clarify the MLR premium reporting requirements under 
Sec.  158.130 for issuers that choose to offer temporary premium 
credits during a public health emergency (PHE) declared by the 
Secretary of HHS (declared PHE) in the 2021 benefit year and beyond, 
when such credits are permitted by HHS. In the August 4, 2020 guidance, 
Temporary Policy on 2020 Premium Credits Associated with the COVID-19 
PHE, CMS adopted a temporary policy of relaxed enforcement to allow 
issuers in the individual and small group markets the flexibility, when 
consistent with state law, to temporarily offer premium credits for 
2020 coverage to support continuity of coverage for individuals, 
families and small employers who may struggle to pay premiums because 
of illness or loss of incomes or revenue resulting from the COVID-19 
PHE.\303\ On September 2, 2020, HHS issued an interim final rule on 
COVID-19 wherein we set forth MLR data reporting and rebate 
requirements for issuers offering temporary premium credits for 2020 
coverage.\304\ For the 2021 MLR reporting year \305\ and beyond, we 
proposed to adopt these MLR data reporting and rebate requirements for 
all health insurance issuers in the individual and small group markets 
\306\ who elect to offer temporary premium credits during a declared 
PHE in situations in which HHS issues guidance announcing its adoption 
of a similar temporary policy of relaxed enforcement to allow such 
issuers to offer temporary premium credits during the declared 
PHE.\307\
---------------------------------------------------------------------------

    \303\ ``Temporary Policy on 2020 Premium Credits Associated with 
the COVID-19 Public Health Emergency,'' August 4, 2020. Available at 
https://www.cms.gov/CCIIO/Programs-and-Initiatives/Health-Insurance-Marketplaces/Downloads/Premium-Credit-Guidance.pdf.
    \304\ 85 FR 54820 (Sept. 2, 2020).
    \305\ The MLR reporting year means a calendar year during which 
group or individual health insurance coverage is provided by an 
issuer. See 45 CFR 158.103. The 2021 MLR reporting year refers to 
the MLR reports that issuers must submit for the 2021 benefit year 
by July 31, 2022. See 45 CFR 158.110(b).
    \306\ While this final rule, the interim final rule on COVID-19, 
and the August 4, 2020 guidance focus on the individual and small 
group markets, to remove the barriers in support of issuers offering 
these premium credits to enrollees impacted by a PHE declared by the 
Secretary of HHS, we note that issuers in the large group market may 
also, when consistent with state law, offer temporary premium 
credits and should similarly report the lower, adjusted amount that 
accounts for the premium credits for MLR purposes.
    \307\ The Secretary of HHS may, under section 319 of the PHS 
Act, determine that: (a) A disease or disorder presents a public 
health emergency; or (b) that a public health emergency, including 
significant outbreaks of infectious disease or bioterrorist attacks, 
otherwise exists.
---------------------------------------------------------------------------

    We proposed that for purposes of Sec.  158.130, issuers must 
account for temporary premium credits provided to enrollees during a 
declared PHE as reductions in earned premium for the applicable MLR 
reporting years, consistent with any technical guidance set forth in 
the applicable year's MLR Annual Reporting Form Instructions,\308\ when 
such credits are permitted by HHS. Specifically, as clarified in the 
interim final rule on COVID-19, we proposed that the amount of 
temporary premium credits \309\ will constitute neither collected 
premium nor due and unpaid premium described in the MLR Annual 
Reporting Form Instructions for purposes of reporting written premium 
(which is a component of earned premium). Consequently, issuers that 
offer temporary premium credits during a declared PHE will report as 
earned premium for MLR and rebate

[[Page 24261]]

calculation purposes the actual, reduced premium paid when such credits 
are permitted by HHS.
---------------------------------------------------------------------------

    \308\ Available at https://www.cms.gov/cciio/Resources/Forms-Reports-and-OtherResources/index#Medical_Loss_Ratio.
    \309\ MLR rebates provided in the form of premium credits are 
different than the temporary premium credits such as those outlined 
in the August 4, 2020 guidance issued by CMS. When MLR rebates are 
provided in the form of premium credits, issuers must continue to 
report the full amount of earned premium and may not reduce it by 
the amount of MLR rebates provided in form of premium credits, as 
required by Sec.  158.130(b)(3).
---------------------------------------------------------------------------

    We solicited comment on this proposal.
    We received public comments on the proposal to require issuers for 
purposes of Sec.  158.130 to account for temporary premium credits 
provided to enrollees during a declared PHE as reductions in earned 
premium for the applicable MLR reporting years, consistent with any 
technical guidance set forth in the applicable year's MLR Annual 
Reporting Form Instructions, when such credits are permitted by HHS. 
The following is a summary of the comments we received and our 
responses.
    Comment: Several commenters supported the proposal to adopt the MLR 
data reporting and rebate requirements for issuers who elect to offer 
temporary premium credits during a declared PHE in future MLR reporting 
years. Specifically, these commenters noted that the proposal ensures 
accuracy and consistency in the MLR reporting and rebate calculation 
process.
    Response: We agree that this proposal provides accuracy and 
consistency in MLR reporting and rebate calculations and appreciate the 
comments.
    Comment: A few commenters appeared to assume that this proposal 
sought to permanently codify CMS' temporary policy of relaxed 
enforcement that allowed issuers in the individual and small group 
markets the flexibility, when consistent with state law, to temporarily 
offer premium credits for 2020 coverage to support continuity of 
coverage for individuals, families and small employers who may struggle 
to pay premiums because of illness or loss of incomes or revenue 
resulting from the COVID-19 PHE and to extend this policy of relaxed 
enforcement to future years. Some commenters cautioned HHS to ensure 
that any such premium credits be aligned with state regulations and 
legislation or be subject to state regulatory approval.
    Response: We note that this proposal did not seek to extend CMS' 
temporary policy of relaxed enforcement or expand issuers' ability to 
offer temporary premium credits in future years. Rather, we proposed 
that if HHS were to allow issuers to offer temporary premium credits 
during a declared PHE in future years, then issuers would account for 
such temporary premium credits as reductions in earned premium for the 
applicable MLR reporting years. We continue to be cognizant that state 
regulators may have additional considerations with respect to any 
temporary premium credits provided by issuers, and note that both the 
interim final rule on COVID-19 and the August 4, 2020 guidance required 
issuers to receive the applicable insurance regulator's permission in 
advance of providing temporary premium credits for 2020 coverage.
    After consideration of all of the comments received and for the 
reasons stated in our responses, we are finalizing as proposed the 
clarification that issuers must account for temporary premium credits 
provided to enrollees during a declared PHE as reductions in earned 
premium for the applicable MLR reporting years, when such credits are 
permitted by HHS.
3. Formula for Calculating an Issuer's Medical Loss Ratio (Sec.  
158.221)
    As noted in section IV of the preamble, on March 4, 2021, the 
United States District Court for the District of Maryland decided City 
of Columbus, et al. v. Cochran, No. 18-2364, 2021 WL 825973 (D. Md. 
Mar. 4, 2021), vacating 45 CFR 158.221(b)(8), which provided that 
beginning with the 2017 MLR reporting year, an issuer had 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. Pursuant to this provision, 
issuers who chose this method of reporting were required to apply it 
for a minimum of 3 consecutive MLR reporting years and for all of their 
individual, small group, and large group markets; and all affiliated 
issuers were required to choose the same reporting method. As a result 
of the Court's decision, we are finalizing the deletion of Sec.  
158.221(b)(8).\310\
---------------------------------------------------------------------------

    \310\ Consistent with the removal of Sec.  158.221(b)(8), 
existing paragraph (b)(9) is redesignated as paragraph (b)(8).
---------------------------------------------------------------------------

    With the deletion of Sec.  158.221(b)(8), our regulations will no 
longer provide issuers 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 issuers' actual expenditures for activities that improve 
health care quality. As discussed in section IV of the preamble and 
consistent with the court's decision, we are reverting to requiring 
issuers to itemize QIA expenditures, on a prospective basis, beginning 
with the 2020 MLR reporting year (MLR reports due by July 31, 2021). 
However, we are not requiring issuers to incur the burden or expense of 
revising MLR Annual Reporting Forms from prior years or otherwise 
updating QIA expenditure amounts reported for prior years. In addition, 
because MLR calculations are based on a three-year average,\311\ there 
will be a transition period during which these averages will continue 
to reflect the standardized QIA expenditure amounts for those issuers 
that reported such amounts in the 2017-2019 MLR reporting years.\312\
---------------------------------------------------------------------------

    \311\ See 42 U.S.C. 300gg-18(b)(1)(B)(ii) and 45 CFR 158.220(b).
    \312\ For example, calculations for the 2020 MLR Reporting Year 
are based on 2018, 2019 and 2020 data.
---------------------------------------------------------------------------

4. Rebating Premium if the Applicable Medical Loss Ratio Standard Is 
Not Met (Sec.  158.240)
    In order to allow enrollees to benefit from the ability to receive 
estimated rebates earlier and to provide MLR reporting flexibilities to 
issuers that may owe rebates, we proposed to amend Sec.  158.240 by 
adding paragraph (g) to explicitly allow issuers to prepay a portion or 
all of their estimated rebates to enrollees for any MLR reporting year. 
We also proposed to require that issuers that choose to prepay a 
portion or all of their estimated rebates do so for all eligible 
enrollees in a given state and market in a non-discriminatory manner.
    In the preamble to the proposed rule, we noted that an issuer that 
prepays a portion or all of its estimated rebate and subsequently 
determines that such prepayment is less than the total rebate owed to 
an enrollee would have to incur the costs of disbursing rebates twice: 
First to disburse the prepaid rebate amount, and again to disburse the 
remaining rebate amount by the deadlines set forth in Sec. Sec.  
158.240(e) and 158.241(a)(2). Therefore, in order to reduce the 
regulatory burden on issuers and incentivize issuers to deliver rebates 
to enrollees sooner, we proposed to add to the new Sec.  158.240(g) a 
safe harbor under which an issuer that prepays at least 95 percent of 
the total rebate owed to enrollees in a given state and market for a 
given MLR reporting year by the MLR rebate payment deadlines set forth 
in Sec. Sec.  158.240(e) and 158.241(a)(2) may, without penalty or late 
payment interest under Sec.  158.240(f), defer the payment of any 
remaining rebate owed to enrollees in that state and market until the 
MLR rebate payment deadlines set forth in Sec. Sec.  158.240(e) and 
158.241(a)(2) for the following MLR reporting year. This would enable 
such an issuer to maintain a single rebate disbursement cycle per year, 
while ensuring that enrollees continue to receive most of the rebate 
within the regular timeframe. To further ensure that enrollees do not 
regularly receive reduced rebates as a result of

[[Page 24262]]

prepayments, we also proposed that under this safe harbor, the rebate 
amount remaining after prepayment would not be treated as de minimis, 
regardless of how small the remaining amount is. That is, the de 
minimis provisions in Sec.  158.243 would continue to apply only if the 
total rebate (the sum of the prepaid amount and any amount remaining 
after prepayment) owed to an enrollee for a given MLR reporting year is 
below the applicable threshold.
    We noted that Sec.  158.250 requires issuers to provide a notice of 
rebates at the time any rebate is provided, which includes both rebate 
prepayments and payments of rebates remaining after prepayment. We also 
noted that we intend to modify the ICRs approved under OMB Control 
Number 0938-1164 to add modified standard notices that can be used by 
issuers that elect to prepay rebates under the proposed new Sec.  
158.240(g). In addition, we noted that we intend to revise the MLR 
Annual Reporting Form Instructions to clarify that an issuer that 
prepays a portion or all of its estimated rebate and subsequently 
determines that the amount of such prepayment is more than the total 
rebate owed to an enrollee for that MLR reporting year and that does 
not recoup the overpayment from the enrollee, may include the 
overpayment in its rebate payments reported for purposes of calculating 
the optional limit on the payable rebates under Sec.  158.240(d). We 
also noted that we intend to revise the MLR Annual Reporting Form 
Instructions to clarify how issuers that prepay estimated rebates must 
report such prepayments.
    We proposed that the amendment to create new Sec.  158.240(g) would 
be applicable beginning with the 2020 MLR reporting year (MLR reports 
filed in 2021). We solicited comment on this proposal, including the 
proposed applicability date.
    We received public comments on the proposed amendments to Sec.  
158.240. The following is a summary of the comments we received and our 
responses.
    Comment: Most commenters supported the proposal, stating that it 
will benefit consumers, provide flexibility and relief for enrollees in 
future crises, and help consumers maintain comprehensive health 
coverage. Some commenters recommended that HHS clarify that rebate 
prepayment is only permitted if consistent with state law and provided 
statewide in a nondiscriminatory manner; one commenter requested that 
rebate prepayment be subject to state regulatory approval and only with 
the 95 percent safe harbor guardrail. Several commenters opposed the 
proposal, expressing concern with the operational and administrative 
burden for State Exchanges and group health plan rebate recipients, 
consumers favoring issuers that provide prepayments, and the deferred 
rebates being less likely to reach consumers.
    Response: We appreciate the comments in support of this proposal 
and generally believe that any potential disadvantages of rebate 
prepayment are outweighed by the benefit of consumers receiving rebates 
earlier in the year. While we recognize that issuers' ability to reach 
the original enrollees to provide them with any deferred rebates may 
diminish as time passes, we believe that the potential harm to 
consumers that are unable to receive the residual amount remaining 
after rebate prepayment is mitigated by the 95 percent safe harbor 
threshold and outweighed by the benefits associated with enrollees' 
ability to receive rebates earlier than September 30, when they are 
generally disbursed. We also note that payment of remaining rebate 
amounts after prepayment may only be deferred until the MLR rebate 
payment deadlines set forth in Sec. Sec.  158.240(e) and 158.241(a)(2) 
for the following MLR reporting year. We further believe that issuers 
do not gain a significant advantage by prepaying rebates other than 
delivering a benefit to their enrollees, and we expect that issuers 
will consider whether in the group markets that benefit exceeds any 
complexities that it may create for group policyholders or any 
administrative burden or operational challenges for the issuer, their 
enrollees, or the Exchanges. Because a consumer is unlikely to know 
whether an issuer intends to prepay MLR rebates in any given year prior 
to purchasing a policy, and since an issuer that pre-paid rebates in a 
previous year may decide not to pre-pay them in a future year, we do 
not believe that consumers will be more likely to purchase a policy or 
enroll in health insurance coverage from any given issuer based on the 
issuer's prepayment of MLR rebates. And if consumers are able to take 
rebate prepayment into account when selecting an issuer, we do not see 
why they should be prevented from doing so and selecting an issuer that 
they believe provides a valuable service. We acknowledge the 
commenters' concerns regarding the potential interaction of rebate 
prepayment and state rules or State Exchange operations, and are 
modifying the proposal to clarify that issuers that choose to prepay a 
portion or all of their estimated rebates must do so to the extent 
consistent with state law or other applicable state authority. This 
would include receiving state approval, if required under state law. 
Further, we note that the regulatory text does provide that any issuer 
that chooses to prepay a portion or all of their estimated rebates must 
provide the prepayment to all of the enrollees in that state and market 
in a non-discriminatory manner.
    Comment: One commenter requested that the safe harbor threshold 
either be lowered to 85 percent or be based on the estimated MLR 
falling within 0.5 percent of actual MLR, to make the safe harbor more 
attainable for issuers that owe small rebate amounts and consequently 
may estimate rebates more accurately in dollar terms.
    Response: We have considered this option but concluded that 95 
percent is an appropriate safe harbor threshold. Reducing the threshold 
would expand the safe harbor for all issuers, rather than only issuers 
that owe relatively small rebates per enrollee, which would result in 
overall larger rebate amounts being eligible to be deferred for a year. 
Further, we trust that issuers will evaluate the relative value of 
prepaying very small per-enrollee rebate amounts early versus the 
associated administrative costs and the deferral of a fraction of those 
small per-enrollee rebates.
    Comment: One commenter suggested that enrollees should have the 
option to choose whether an issuer that chooses to prepay a portion or 
all of their estimated rebates must pay any remaining rebate amounts in 
full during the current year or may defer the payment of any remaining 
rebate amounts until the following year under the proposed new Sec.  
158.240(g) safe harbor.
    Response: We appreciate the commenter's suggestion, but believe 
that the burden of collecting and implementing each enrollee's election 
with respect to rebates remaining after prepayment would be a 
significant disincentive for issuers to offer rebate prepayment, and as 
stated above, we generally believe that any potential disadvantages of 
rebate prepayment are outweighed by the benefit of consumers receiving 
rebates earlier in the year.
    After consideration of all the comments received and for the 
reasons stated in our responses, we are finalizing the amendments to 
Sec.  158.240 as proposed, with an additional clarification that 
issuers that choose to prepay a portion or all of their estimated 
rebates must do so to the extent consistent with state law or other 
applicable state authority.

[[Page 24263]]

5. Form of Rebate (Sec.  158.241)
    We proposed to amend Sec.  158.241(a)(2) to allow issuers to 
provide rebates in the form of a premium credit prior to the date that 
the rules previously provided.
    As discussed in the proposed rule, under Sec.  158.240(e), issuers 
that choose to provide a rebate via a lump-sum check or lump-sum 
reimbursement to the account used to pay the premium must issue the 
rebate no later than September 30 following the end of the MLR 
reporting year. In contrast, Sec.  158.241(a)(2) previously provided 
that issuers that elect to provide rebates in the form of a premium 
credit must apply the rebate to the first month's premium that is due 
on or after September 30 following the MLR reporting year, and that 
when the rebate is provided in the form of a premium credit and the 
total amount of the rebate owed exceeds the premium due in October, any 
excess rebate amount must be applied to succeeding premium payments 
until the full amount of the rebate has been credited.
    Given the proposed addition of Sec.  158.240(g) discussed in the 
prior section, the fact that an issuer may wish to provide rebates in 
the form of a premium credit earlier than October, and the desire to 
reduce the regulatory burden and enable enrollees to receive the 
benefit of rebates sooner, we proposed to amend Sec.  158.241(a)(2) to 
allow issuers to provide rebates in the form of a premium credit prior 
to September 30. Specifically, we proposed to amend Sec.  158.241(a)(2) 
to specify that when provided in the form of premium credits, rebates 
must be applied to premium that is due no later than October 30 
following the MLR reporting year. We proposed that this amendment would 
be applicable beginning with the 2020 MLR reporting year (rebates due 
in 2021). We solicited comment on this proposal, including on the 
proposed applicability date.
    We received public comments on the proposal to amend Sec.  
158.241(a)(2) to allow issuers to provide rebates in the form of a 
premium credit prior to the date that the rules previously provided. 
The following is a summary of the comments we received and our 
responses.
    Comment: All of the commenters supported the proposal to allow 
issuers to provide rebates in the form of a premium credit before 
(rather than only after) September 30 because it would allow consumers 
to receive the benefit of rebates sooner. One commenter recommended 
making the amendment effective beginning with the 2021 MLR reporting 
year in order to enable issuers to continue relying on the related 
guidance issued by HHS in 2020.
    Response: We agree with the commenters that this amendment will 
benefit consumers. While we do not believe that the proposed 
applicability date overlaps with previous guidance regarding the timing 
of rebates provided in the form of premium credits, as that guidance 
applied to the 2019 MLR reporting year (rebates paid in 2020),\313\ we 
agree that there is a potential for confusion, and therefore we are 
adding a clarification that this amendment will be applicable beginning 
with rebates due for the 2020 MLR reporting year.
---------------------------------------------------------------------------

    \313\ ``Temporary Period of Relaxed Enforcement for Submitting 
the 2019 MLR Annual Reporting Form and Issuing MLR Rebates in 
Response to the Coronavirus Disease 2019 (COVID-19) Public Health 
Emergency,'' June 12, 2020. Available at https://www.cms.gov/files/document/Issuing-2019-MLR-Rebates-in-Response-to-COVID-19.pdf.
---------------------------------------------------------------------------

    After consideration of all the comments received and for the 
reasons stated in our responses, we are finalizing the amendment to 
Sec.  158.241 as proposed, with a clarification that the amendment will 
be applicable beginning with rebates due for the 2020 MLR reporting 
year.

G. Part 184--Pharmacy Benefit Manager Standards Under the Affordable 
Care Act

1. Prescription Drug Distribution and Cost Reporting by Pharmacy 
Benefit Managers (Sec. Sec.  184.10 and 184.50)
    PBMs are third-party administrators that manage the prescription 
drug benefit for a contracted entity.\314\ This administration 
typically involves processing claims, maintaining drug formularies, 
contracting with pharmacies for reimbursement for drugs dispensed, and 
negotiating prices with drug manufacturers.\315\
---------------------------------------------------------------------------

    \314\ PBMs contract with a variety of health plans, including, 
but not limited to, individual and small group health plans, large 
group and self-insured plans, and Medicare Part D drug plans. In 
this section, we only reference PBMs that contract with a health 
insurance company to administer the prescription drug benefit for 
QHPs.
    \315\ ``Pharmacy Benefit Managers,'' Health Affairs Health 
Policy Brief, September 14, 2017.
    Available at https://www.healthaffairs.org/do/10.1377/hpb20171409.000178/full/.
---------------------------------------------------------------------------

    The role of PBMs in the prescription drug landscape, including any 
impact on the rising cost of prescription drugs, is not well 
understood.\316\ For example, PBMs generate revenue, in part, by 
retaining the difference between the amount paid by the health plan for 
prescription drugs and the amount the PBM reimburses pharmacies, a 
practice commonly referred to as ``spread pricing.'' While estimates 
report the increasing prevalence of spread pricing in private health 
insurance plans,\317\ detailed data on the practice has generally not 
been collected by plans or by any state or federal regulatory body.
---------------------------------------------------------------------------

    \316\ Elizabeth Seeley and Aaron S. Kesselheim. ``Pharmacy 
Benefit Managers: Practices, Controversies, and What Lies Ahead,'' 
Commonwealth Fund, March 2019. Available at https://doi.org/10.26099/n60j-0886.
    \317\ See ``The Prescription Drug Landscape, Explored.'' 
Available at https://www.pewtrusts.org/-/media/assets/2019/03/the_prescription_drug_landscape-explored.pdf.
---------------------------------------------------------------------------

    We proposed to add part 184 to 45 CFR subchapter E to codify in 
regulation the statutory requirement that PBMs under contract with QHP 
issuers report the data described at section 1150A(b) of the Act to the 
Secretary and to each QHP for which the PBM administers the 
prescription drug benefit.
    At proposed Sec.  184.10(a)(1), we explained that new part 184 is 
based on section 1150A of the Act. At proposed Sec.  184.10(b), we 
proposed that the scope of new part 184 establishes standards for PBMs 
that administer prescription drug benefits for health insurance issuers 
which offer QHPs with respect to the offering of such plans. We also 
proposed definitions for part 184 at new Sec.  184.20. Except for the 
definition of pharmacy benefit manager, these proposed definitions 
would codify terms already in use in parts 144 and 155 of subchapter B 
of subtitle A of title 45 of the Code of Federal Regulations.
    As part of the ACA, Congress passed section 6005, which added 
section 1150A to the Act, requiring a PBM under a contract with a QHP 
offered through an Exchange established by a state under section 1311 
of the ACA \318\ to provide certain prescription drug information to 
the QHP and to Secretary at such times, and in such form and manner, as 
the Secretary shall specify. Section 1150A(b) of the Act addresses the 
information that a QHP issuer and their PBM must report. Section 
1150A(c) of the Act requires the Secretary to keep the information 
reported confidential and specifies that the information may not be 
disclosed by the Secretary or by a plan receiving the information, 
except that the Secretary may disclose the information in a form which 
does not disclose the identity of a specific PBM, plan, or prices 
charged for drugs for certain purposes.\319\
---------------------------------------------------------------------------

    \318\ This includes an FFE, as a Federal Exchange may be 
considered an Exchange established under section 1311 of the ACA. 
King v. Burwell, 576 U.S. 988 (2015).
    \319\ As noted earlier in this preamble, the purposes are: As 
the Secretary determines to be necessary to carry out Section 1150A 
or part D of title XVIII; to permit the Comptroller General to 
review the information provided; to permit the Director of the 
Congressional Budget Office to review the information provided; and, 
to States to carry out section 1311 of the ACA.

---------------------------------------------------------------------------

[[Page 24264]]

    In the 2012 Exchange Final Rule, we codified the requirements of 
section 1150A of the Act, as it applies to QHPs, at Sec.  156.295.\320\ 
On January 1, 2020 \321\ and on September 11, 2020,\322\ we published 
Federal Register notices and solicited public comment on collection of 
information requirements detailing the proposed collection envisioned 
by section 1150A of the Act, as referenced earlier. As noted earlier in 
this preamble, we proposed to revise Sec.  156.295 to state that where 
a QHP issuer does not contract with a PBM to administer the 
prescription drug benefit for QHPs, the QHP issuer will report the data 
required by section 1150A of the Act to HHS.
---------------------------------------------------------------------------

    \320\ Section 1150A(a)(1) also authorizes the collection of data 
from PBMs that manage prescription drug coverage under contract with 
a Prescription Drug Plan sponsor of a prescription drug plan or a 
Medicare Advantage organization offering a Medicare Advantage 
prescription drug plan.
    \321\ 85 FR 4993 through 4994.
    \322\ 85 FR 56227 through 56229.
---------------------------------------------------------------------------

    We proposed to add Sec.  184.50(a) to state that where a PBM 
contracts with an issuer of QHPs to administer the prescription drug 
benefit for their QHPs, the PBM is required to report the data required 
by section 1150A(b) of the Act to the QHP and to the Secretary, at such 
times, and in such form and manner, as the Secretary shall specify. 
While we acknowledge that this section applies to both the QHP issuer 
and their PBMs to report this data, we proposed to implement section 
1150A to require PBMs to report this data directly to the Secretary, 
and only to require the QHP issuer to report the data only when the QHP 
issuer does not contract with a PBM to administer the prescription drug 
benefit for their QHPs, as further discussed in the preamble to Sec.  
156.295 in this final rule.
    We proposed to add Sec.  184.50(a)(1) through (3) to require these 
PBMs to report the data described at section 1150A(b) of the Act to the 
Secretary. The data proposed to be collected, as required by section 
1150A, are: The percentage of all prescriptions that were provided 
through retail pharmacies compared to mail order pharmacies, and the 
percentage of prescriptions for which a generic drug was available and 
dispensed (generic dispensing rate), that is paid by the health 
benefits plan or PBM under the contract; \323\ the aggregate amount, 
and the type of rebates, discounts, or price concessions (excluding 
bona fide service fees, which include but are not limited to 
distribution service fees, inventory management fees, product stocking 
allowances, and fees associated with administrative services agreements 
and patient care programs (such as medication compliance programs and 
patient education programs \324\) that the PBM negotiates that are 
attributable to patient utilization under the plan, and the aggregate 
amount of the rebates, discounts, or price concessions that are passed 
through to the plan sponsor, and the total number of prescriptions that 
were dispensed; and the aggregate amount of the difference between the 
amount the health benefits plan pays the PBM and the amount that the 
PBM pays retail pharmacies (spread pricing), and mail order pharmacies, 
and the total number of prescriptions that were dispensed.
---------------------------------------------------------------------------

    \323\ As stated above in the preamble for Sec.  156.295, section 
1150A(b)(1) requires the Secretary to collect data by pharmacy type. 
However, we are aware that it is not currently possible to report 
such data by pharmacy type because pharmacy type is a not standard 
classification currently captured in industry databases or files. To 
reduce burden, we are not finalizing collecting data by pharmacy 
type at this time. We intend to collect this information at a time 
when the imposition of such a requirement would pose reasonable 
burden. We seek comment on ways that we may impose the collection of 
data by pharmacy type in the future without imposing unreasonable 
burden on the industry.
    \324\ This definition of bona fide service fees was finalized at 
Sec.  156.295 in the 2012 Exchange Final Rule at 77 FR 18432. There, 
we finalized this definition to align with the definition of bona 
fide service fees finalized in the Medicare Program; Changes to the 
Medicare Advantage and the Medicare Prescription Drug Benefit 
Programs for Contract Year 2013 and Other Changes final rule. See 77 
FR 22072 at 22093.
---------------------------------------------------------------------------

    At new Sec.  184.50(b) and (c), we also proposed to codify the 
confidentiality and penalty provisions that appear at Sec.  1150A(c) 
and (d) to PBMs which administer the prescription drug benefits for QHP 
issuers.
    We sought comment on these proposals.
    We received public comments on the proposed updates to prescription 
drug distribution and cost reporting by pharmacy benefit managers 
(Sec. Sec.  184.10 and 184.50). We have consolidated the description of 
the public comments received in response to this proposal at Part 184 
as part of the discussion in the preamble above for Sec.  156.295. 
Please refer to that section for our responses to those comments 
received.
    After consideration of all the comments received and for the 
reasons stated in our responses, we are finalizing this policy as 
proposed.

IV. Implementation of the Decision in City of Columbus, et al. v. 
Cochran

    On March 4, 2021, the United States District Court for the District 
of Maryland decided City of Columbus, et al. v. Cochran, No. 18-2364, 
2021 WL 825973 (D. Md. Mar. 4, 2021). The court reviewed nine separate 
policies we had promulgated in the ``Patient Protection and Affordable 
Care Act; HHS Notice of Benefit and Payment Parameters for 2019'' (83 
FR 16930) published in the Federal Register on April 17, 2018 (the 2019 
Payment Notice). The court upheld five of the challenged policies but 
vacated four others. Specifically, the court vacated the following 
portions of the 2019 Payment Notice:
    1. The 2019 Payment Notice's extension of the elimination of 
federal reviews of network adequacy of qualified health plans offered 
through the FFEs in certain circumstances by incorporating the results 
of the states' reviews, first finalized in rulemaking in the Market 
Stabilization final rule \325\ (83 FR 17024 through 17026).
---------------------------------------------------------------------------

    \325\ 82 FR 18346, 18371-18372 (April 18, 2017).
---------------------------------------------------------------------------

    2. The 2019 Payment Notice's cessation of the practice of 
designating some plans in the FFEs as ``standardized options'' in an 
effort to encourage innovation in the individual market (83 FR 16974 
through 16975).
    3. The 2019 Payment Notice's modification of Exchange income 
verification requirements for resolving data matching issues related to 
eligibility for advance payments of premium tax credits to require an 
individual who attests to a household income within 100 percent to 400 
percent of the federal poverty level (FPL), but whose income according 
to trusted electronic data sources is below 100 percent FPL, to submit 
additional documentation supporting the attested to household income 
(83 FR 16985 through 16987).
    4. The 2019 Payment Notice's amendment of medical loss ratio 
requirements to allow issuers to submit either a detailed, itemized 
report of quality improvement activity (QIA) expenditures or to report 
a single, fixed QIA amount (83 FR 17032 through 17036).
    We intend to implement the court's decision as soon as possible. 
However, we will not be able to fully implement those aspects of the 
court's decision regarding network adequacy review and standardized 
options in time for issuers to design plans and for Exchanges to be 
prepared to certify such plans as QHPs for the 2022 plan year, and 
therefore, intend instead to address these issues in time for plan 
design and certification for plan year 2023. Specifically, in order to 
implement the court's ruling on the network adequacy provision, HHS 
will need to set up a new network adequacy review process, and issuers 
will need

[[Page 24265]]

sufficient time before the applicable plan year to assess that their 
networks meet the new regulatory standard, submit network information, 
and have the information reviewed by applicable regulatory authorities 
in order for their plans to be certified as QHPs. Issuers might also 
have to contract with other providers in order to meet the standard. 
This is not feasible for the QHP certification cycle for the 2022 plan 
year, since the annual QHP certification cycle generally begins in late 
April of each year. CMS' planning for the 2022 plan year had already 
taken into account the provisions that the court vacated before the 
court issued its decision, and it is too late now to revisit those 
factors if the process is to go forward in time for plans to be 
certified by open enrollment later this year. We plan to propose 
specific steps to address implementation of this aspect of the court's 
decision in future rulemaking. At that time, we might also address 
other aspects of the court's decision, including potentially some 
provisions that the court upheld.
    The same is true for the court's decision regarding standardized 
options. With the rule removing standardized options vacated, we need 
to design and propose new standardized options that otherwise meet 
current market reform requirements, and we must also alter the Federal 
Exchange eligibility and enrollment platform system build 
(HealthCare.gov) to provide differential display of such plans. Web-
brokers that are direct enrollment partners in FFE and SBE-FP states 
will also need time to adjust their respective systems to provide 
differential display of such plans on their non-Exchange websites.\326\ 
We will need to design, propose and finalize such plans in time for 
issuers to design their own standardized options in accord with HHS's 
parameters and submit those plans for approval by applicable regulatory 
authorities and for certification by Exchanges as qualified health 
plans. Again, this is not feasible for the QHP certification cycle for 
the 2022 plan year, since the annual QHP certification cycle generally 
begins in late April of each year. CMS' planning for the 2022 plan year 
had already taken into account the provisions that the court vacated 
before the court issued its decision, and it is too late now to revisit 
those factors if the process is to go forward in time for plans to be 
developed, reviewed and certified by open enrollment later this year.
---------------------------------------------------------------------------

    \326\ See 45 CFR 155.220(c)(3)(i)(H).
---------------------------------------------------------------------------

    Although standardized options have been required in the past, we 
will not be able to simply reinstate the same standardized option plans 
that previously existed. Specifically, in the last iteration of 
standardized options we finalized in the 2018 Payment Notice, we 
created three sets of standardized options based on FFE and SBE-FP 
enrollment data and state cost-sharing laws. The basis on which we 
created these three sets of options as well as a number of other 
factors in the individual market) have changed considerably since the 
last iteration of standardized options in 2018. Several such changes 
include modifications in the most popular plans' cost-sharing 
structures, shifting enrollment trends, the introduction of new state 
cost sharing laws that affect standardized option plan designs, and 
states with FFEs or SBE-FPs transitioning to SBEs (which affects the 
number of sets of options). As a result of these changes, the sets of 
standardized options and the design of the options themselves must be 
adjusted accordingly. Further, we do not have sufficient time prior to 
the 2022 plan year to conduct a full analysis of the changes that have 
occurred in the last several years in order to design and propose 
adequate standardized options suitable for the current environment. 
Additionally, in prior years, we proposed and finalized standardized 
option plan designs prior to the start of the QHP certification cycle 
for the following plan year such that issuers had sufficient time to 
assess these standardized options in order to determine if they wanted 
to offer them and take the steps necessary to do so. Even if we were 
able to design standardized option plans prior to the 2022 plan year, 
issuers would not have a sufficient amount of time to meaningfully 
assess any standardized options we might propose and decide whether or 
not to offer them.
    For these reasons, we intend to resume the designation of 
standardized options and propose specific designs in more complete 
detail in the 2023 Payment Notice. As such, we will seek comment during 
the corresponding comment period. In the interim, we encourage states 
with FFEs or SBE-FPs and unique cost-sharing laws that could affect 
standardized plan design to contact us to discuss their circumstances.
    We can take more immediate steps to begin to implement the court's 
holdings regarding income verification and QIA reporting. First, as 
discussed more fully later in this section, we are exercising 
flexibilities under the Administrative Procedure Act (APA) to rescind 
or replace in this final rule relevant parts of the income verification 
and MLR regulations the court invalidated. Second, we plan to implement 
accompanying operational policies to begin implementation of the 
court's order with respect to the impacted income verification 
regulation.
    Specific to income verification, we are deleting the invalidated 
provision requiring certain consumers to provide information for income 
verification purposes. We note that HHS's systems automatically 
generate requests for income verification information for those with 
income data matching issues, and it will take some time for us to 
redesign this function. Until that redesign is complete, however, HHS 
will be able to identify consumers who receive requests for 
verification information and we have established a manual process to 
notify those recipients that they need not provide the requested 
information.
    As to QIA reporting, we are deleting the invalidated provision to 
remove the option to report the fixed standardized amount of QIA. The 
regulation will thus revert to requiring issuers to itemize QIA 
expenditures on a prospective basis beginning with the 2020 MLR 
reporting year (MLR reports due by July 31, 2021).\327\ However, we are 
not requiring issuers to incur the burden or expense of revising MLR 
Annual Reporting Forms from prior years or otherwise updating QIA 
expenditure amounts reported for prior years. In addition, because MLR 
calculations are based on a 3-year average,\328\ there will be a 
transition period during which these averages will continue to reflect 
in part the standardized QIA expenditure amounts for those issuers that 
reported such amounts in the 2017-2019 MLR reporting years.\329\
---------------------------------------------------------------------------

    \327\ With the removal of Sec.  158.221(b)(8), CMS regulations 
require issuers to separately track and itemize QIA expenditures. 
See 45 CFR 158.150, 158.151 and 158.221.
    \328\ See 42 U.S.C. 300gg-18(b)(1)(B)(ii) and 45 CFR 158.220(b).
    \329\ For example, calculations for the 2020 MLR Reporting Year 
are based on 2018, 2019 and 2020 data.
---------------------------------------------------------------------------

V. Collection of Information Requirements

    Under the Paperwork Reduction Act of 1995 (PRA), 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

[[Page 24266]]

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 PRA requires that we 
solicit comment on the following issues:
     The need for the information collection and its usefulness 
in carrying out the proper functions of our agency.
     The accuracy of our estimate of the information collection 
burden.
     The quality, utility, and clarity of the information to be 
collected.
     Recommendations to minimize the information collection 
burden on the affected public, including automated collection 
techniques.
    We solicited public comment on each of the required issues under 
section 3506(c)(2)(A) of the PRA for the following ICRs.

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.\330\ Table 11 in this final rule presents the 
mean hourly wage, the cost of fringe benefits and overhead, and the 
adjusted hourly wage.
---------------------------------------------------------------------------

    \330\ See May 2019 Bureau of Labor Statistics, Occupational 
Employment Statistics, National Occupational Employment and Wage 
Estimates. Available at https://www.bls.gov/oes/2019/may/oes_nat.htm#00-0000.
---------------------------------------------------------------------------

    As indicated, employee hourly wage estimates have been adjusted by 
a factor 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.
[GRAPHIC] [TIFF OMITTED] TR05MY21.027

B. ICRs Regarding Submission of Adjusted Premium Amounts for Risk 
Adjustment

    45 CFR 153.610 and 153.710 provide that issuers of a risk 
adjustment covered plan must provide HHS with access to risk adjustment 
data through a dedicated distributed data environment (EDGE server), in 
a manner and timeframe specified by HHS. We clarify that, for purposes 
of risk adjustment data submissions in the 2021 benefit year and beyond 
when a declared PHE is in effect and HHS permits temporary premium 
credits, issuers that choose to provide temporary premium credits must 
submit the adjusted (that is, lower) plan premiums for those months, 
instead of the unadjusted plan premiums. HHS is finalizing the proposal 
to require issuers to submit adjusted plan premiums to their EDGE 
servers for all enrollees whom the issuer has actually provided 
temporary premium credits as a reduction to the corresponding benefit 
year premiums. We do not believe that issuers who elect to provide 
these temporary premium credits during a declared PHE will incur 
additional operational burden associated with EDGE server data 
submissions as a result of these requirements because we expect 
issuers' premium reporting systems will already be configured to enable 
issuers to upload the billable premiums actually charged to enrollees 
for the applicable benefit year to the EDGE server. Additionally, the 
current EDGE server operational guidance for the risk adjustment 
program allows issuers to submit billable premium changes so there will 
be no changes to the data submission rules. The burden related to this 
information collection is currently approved under OMB control number 
0938-1155 (Standards Related to Reinsurance, Risk Corridors, Risk 
Adjustment, and Payment Appeals). The information collection request 
expires on February 23, 2021.

C. ICRs Regarding Direct Enrollment (Sec. Sec.  155.220 and 155.221)

    At Sec.  155.220(c)(6), we are finalizing the proposal that a web-
broker must demonstrate operational readiness and compliance with 
applicable requirements prior to the web-broker's non-Exchange website 
being used to complete an Exchange eligibility application or a QHP 
selection, which may include submission of a number of artifacts of 
documentation or completion of certain testing processes. The required 
documentation may include operational data including licensure 
information, points of contact, and third-party relationships; security 
and privacy assessment documentation, including penetration testing 
results, security and privacy assessment reports, vulnerability scan 
results, plans of action and milestones, and system

[[Page 24267]]

security and privacy plans; and an agreement between the web-broker and 
HHS documenting the requirements for participating in the applicable 
direct enrollment program. We estimate that it will take up to 2 hours 
for a Business Operations Specialist (at an hourly cost of $77.14) to 
complete and submit the required operational data and web-broker 
agreement to HHS each year. We estimate that it will take up to 17 
hours for a Business Operations Specialist (at an hourly cost of 
$77.14) to complete and submit the required security and privacy 
assessment documentation to HHS. The total burden for each web-broker 
would be approximately 19 hours, with an equivalent cost of 
approximately $1,466. Based on current web-broker participation and 
potential market size, we estimate that 30 web-brokers will 
participate. We estimate that these data collections will have an 
annual burden of 570 hours with a cost of approximately $43,970.
    We are finalizing the proposal to add additional detail to the 
operational readiness requirement in Sec.  155.221(b)(4) for direct 
enrollment entities. In Sec.  155.221(b)(4), we require that a direct 
enrollment entity must demonstrate operational readiness and compliance 
with applicable requirements prior to the direct enrollment entity's 
website being used to complete an Exchange eligibility application or a 
QHP selection, which may include submission of a number of artifacts of 
documentation or completion of various testing or training processes. 
The required documentation may include business audit documentation 
including: Notices of intent to participate including auditor 
information; documentation packages including privacy questionnaires, 
privacy policy statements, and terms of service; and business audit 
reports including testing results. The required documentation may also 
include security and privacy audit documentation including: 
Interconnection security agreements; security and privacy controls 
assessment test plans; security and privacy assessment reports; plans 
of action and milestones; privacy impact assessments; system security 
and privacy plans; incident response plans; vulnerability scan results; 
and an agreement between the direct enrollment entity and HHS 
documenting the requirements for participating in the applicable direct 
enrollment program. We estimate that for each direct enrollment entity 
it will take up to 9 hours for a Business Operations Specialist (at an 
hourly cost of $77.14) to complete and submit a typical documentation 
package and related information to HHS each year. Based on current EDE 
participation and potential market size, we estimate that 77 EDE 
entities will participate in a manner such that they will be required 
to submit this type of information, and therefore, this data collection 
will have an annual burden of 693 hours with an annual cost of 
approximately $53,458.
    In addition, we estimate that it will take up to 72 hours for an 
Auditor (at an hourly cost of $76.46) to complete and submit a business 
requirements audit package for a direct enrollment entity, including 
audit report and testing results, to HHS. Based on current EDE 
participation and potential market size, we estimate that 4 EDE 
entities will participate, and therefore this data collection would 
have an annual burden of 288 hours with a cost of approximately 
$22,020.
    We also estimate that it will take up to 122 hours for an Auditor 
(at an hourly cost of $76.46) to complete and submit a security and 
privacy audit package for a direct enrollment entity to HHS each year. 
Based on current EDE participation and potential market size, we 
estimate that 14 EDE entities will participate, and therefore this data 
collection will have an annual burden of 1,708 hours with a cost of 
approximately $130,594.
    We are finalizing these burden estimates as proposed.

D. ICRs Regarding Income Inconsistencies (Sec.  155.320(c))

    We anticipate that removing the income verification requirements 
for resolving data matching issues will reduce burden on those 
consumers who are identified and notified as having this income 
inconsistency, saving them approximately 45 minutes since they will not 
be required to complete associated questions in the application or 
submit supporting documentation. Based on historical data from the FFE, 
HHS estimates that approximately 295,000 inconsistencies are generated 
at the household level. Therefore, eliminating these inconsistencies 
will reduce burden by approximately 221,250 hours. Using the average 
hourly wage for all occupations (at an hourly cost $51.44 per hour), we 
estimate that the annual reduction in cost for each consumer will be 
approximately $39, and the annual cost reduction for all consumers who 
would have generated this income inconsistency will be approximately 
$11,381,100.
    The burden related to this information collection is approved under 
OMB control number 0938-1191 (Data Collection to Support Eligibility 
Determinations for Insurance Affordability Programs and Enrollment 
through Health Insurance Marketplaces, Medicaid and Children's Health 
Insurance Program Agencies), which will be revised to account for this 
reduced burden. The approval for this information collection expires on 
September 30, 2022.

E. ICRs Regarding Prescription Drug Distribution and Cost Reporting by 
QHP Issuers (Sec.  156.295) and PBMs (Sec.  184.50)

    We are finalizing the proposal to revise Sec.  156.295 and add 
Sec.  184.50 to require QHP issuers or PBMs that contract with QHP 
issuers to report the data envisioned by section 1150A. We have not 
previously collected this data; therefore, the burden associated with 
these proposals will reflect the imposition of the burden for a new 
collection, and not merely the burden created by changes to existing 
regulatory text. On January 1, 2020 \331\ and on September 11, 
2020,\332\ we published notices in the Federal Register and solicited 
public comment on the burden related to these ICRs. Here, we replicated 
the discussion regarding burden from the information collection 
published in September 2020 and solicited a third round of public 
comment on the burden associated with this collection.
---------------------------------------------------------------------------

    \331\ 85 FR 4993 through 4994.
    \332\ 85 FR 56227 through 56229.
---------------------------------------------------------------------------

    The burden associated with this collection is attributed to QHP 
issuers and PBMs, and the burden estimates were developed based on our 
previous experience with QHP information reporting activities. We 
stated that we were unaware of any QHP issuer that does not contract 
with a PBM to administer their prescription drug benefit. While we 
invited comment on whether any QHP issuer does not use a PBM, we did 
not estimate any burden for a QHP issuer to submit data directly. The 
following burden estimate reflects our expectation that all data will 
be submitted by PBMs.
    Across all 50 states and the District of Columbia, we estimate 
approximately 40 PBMs will be subject to the reporting requirement. We 
further estimate that these PBMs, taken as a whole, annually contract 
with approximately 275 QHP issuers to administer the prescription drug 
benefit for their QHPs. We estimate that the 275 QHP issuers offer 
7,000 total QHPs annually or 25.4 QHPs per QHP issuer. Thus, we 
estimate that each of the 40 PBMs will report data for 175 QHPs on 
average each year. We understand that some of these PBMs

[[Page 24268]]

will contract with more QHP issuers than others, and as such, the 
reporting requirement will vary per PBM.
    Each PBM that administers pharmacy benefits for a QHP issuer will 
be required to complete a web form and a data collection instrument. 
The web form will collect data aggregated at the QHP issuer level for 
all plans and products offered by the QHP issuer combined. The web form 
will also require the reporting of an allocation methodology that is 
selected by the PBM to allocate data, where necessary. We expect 
submitters to maintain internal documentation of the allocation 
methodologies chosen, as we may need to follow-up with the submitter to 
better understand the methodology.
    PBMs will prepare and submit one data collection instrument per QHP 
issuer by Health Insurance Oversight System (HIOS) ID. Each data 
collection instrument will contain information regarding each plan the 
issuer offers. We estimated that an average PBM will report information 
for 5,200 NDCs for each QHP. The reports must include the data for all 
of the plans that the QHP issuer offered in their QHPs in the 
applicable plan year, even if they have no data to report for that plan 
year.
    Each submitter will also be required to complete an attestation 
which confirms the data submitted is accurate, complete, and truthful.
    We estimate that 40 PBMs will submit data for this reporting 
requirement, each submitting data for 175 QHPs on average. For each 
PBM, we estimate that it will take compliance officers approximately 
570 hours (for an annual cost of approximately $39,934 at a rate of 
$70.06 per hour), pharmacy technician 350 hours (for an annual cost of 
$11,865 at a rate of $33.90 per hour), secretaries and administrative 
assistants 175 hours (for an annual cost of $6,594 at a rate of $37.68 
per hour), and billing and posting clerks 175 hours (for an annual cost 
of approximately $6,836 at a rate of $39.06 per hour) to prepare and 
submit the information and 8 hours for a chief executive (for an annual 
cost of approximately $1,491.20 at a rate of $186.40 per hour) to 
review the information and complete the attestation. In total, we 
estimate it will take a PBM approximately 1,278 hours to respond to 
this reporting requirement each year on average, for a total annual 
cost of approximately $66,719 per PBM to report data. This estimate 
will vary by PBM, since each PBM will report for a different number of 
plans, depending on the number of QHPs offered by a particular QHP 
issuer. Thus, we estimate the total annual burden for all 40 PBMs 
combined to be approximately 51,120 hours or $2,668,796.
    We estimate that PBMs will incur burden to complete a one-time 
technical build to implement the changes necessary for this collection, 
which will involve activities such as planning, assessment, budgeting, 
contracting, and reconfiguring systems to generate data extracts that 
conform to this collection's requirements. We expect that this one-time 
burden will be incurred primarily in 2021. We estimate that, for each 
PBM, on average, it will take project management specialists and 
business operations specialists 500 hours (at $77.51 per hour), 
computer system analysts 1,300 hours (at $92.46 per hour), computer 
programmers 2,080 hours (at $89.06 per hour), computer and information 
systems managers 40 hours (at $150.38 per hour) and general and 
operations managers 50 hours (at $118.30 per hour) to complete this 
task. The total one-time burden for a PBM would be approximately 3,970 
hours on average, with an equivalent cost of approximately $356,128. 
For all 40 PBMs, the total one-time burden will be 158,800 hours for a 
total cost of approximately $14.2 million. For all 40 PBMs, the average 
annual burden in 2021-2023 incurred for implementation and reporting 
will be approximately 87,000 hours with an average annual cost of 
approximately $6.5 million.
    We estimate that 275 QHP issuers will need to identify for the PBMs 
each year which plans are QHPs. For each QHP issuer, we estimate that 
it will take secretaries and administrative assistants 7 hours (for an 
annual burden of $263.76 at a rate of $37.68 per hour) to identify, on 
average, approximately 25 QHPs offered by a QHP issuer. This estimate 
will vary by QHP issuer, since each QHP issuer would identify a 
different number of QHPs, depending on the number of QHPs offered by a 
particular QHP issuer. Thus, we estimate the total annual burden for 
all 275 QHP issuers combined to be 1,925 hours or approximately 
$72,534.
    Comment: We received one comment that inquired whether QHPs that 
are part of integrated systems comprised of health plans that operate 
their own pharmacy network are subject to this reporting requirement, 
and if so, whether such a system would qualify as a PBM or QHP issuer 
under this burden estimate.
    Response: While there is nothing in the statute that would allow 
exemption from this reporting requirement based on the business 
structure of reporting entities, we acknowledge that some entities may 
have initial difficulty complying with the instructions and reporting 
mechanisms described in the ICR. We intend to provide robust technical 
assistance to all reporting entities to minimize the upfront burden 
created by this collection. For purposes of this estimate, we consider 
such a system a PBM that will report this data.
    We are finalizing as proposed.

F. ICRs Regarding Medical Loss Ratio (Sec. Sec.  158.103, 158.130, 
158.240, 158.241)

    We are finalizing our proposal to amend Sec.  158.103 to establish 
the definition of prescription drug rebates and other price concessions 
that issuers must deduct from incurred claims for MLR reporting and 
rebate calculation purposes under Sec.  158.140(b)(1)(i). We are also 
finalizing the proposal to add a new Sec.  158.240(g) to explicitly 
allow issuers to prepay a portion or all of their estimated MLR rebates 
to enrollees for a given MLR reporting year, and to establish a safe 
harbor allowing such issuers, under certain conditions, to defer the 
payment of rebates remaining after prepayment until the following MLR 
reporting year. In addition, we are finalizing the proposal to amend 
Sec.  158.241(a)(2) to allow issuers to provide MLR rebates in the form 
of a premium credit prior to the date that the rules currently provide. 
Finally, are finalizing the proposal to clarify MLR reporting and 
rebate requirements for issuers that choose to offer temporary premium 
credits during a PHE declared by the Secretary of HHS in the 2021 
benefit year and beyond when such credits are permitted by HHS. We 
anticipate that implementing these provisions will require minor 
changes to the MLR Annual Reporting Form, but will not significantly 
increase the associated burden. The burden related to this information 
collection was approved under OMB control number 0938-1164 (Medical 
Loss Ratio Annual Reports, MLR Notices, and Recordkeeping Requirements 
(CMS-10418)). The control number expired on October 31, 2020. A revised 
collection of information seeking OMB approval for an additional 3 
years is currently under review by OMB.

G. Summary of Annual Burden Estimates for Requirements

[[Page 24269]]

[GRAPHIC] [TIFF OMITTED] TR05MY21.028

H. 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 requirements. The requirements are 
not effective until they have been approved by OMB.
    To obtain copies of the supporting statement and any related forms 
for the collections discussed in this rule (CMS-9914-F2), please visit 
the CMS website at www.cms.hhs.gov/PaperworkReductionActof1995, or call 
the Reports Clearance Office at 410-786-1326.

VI. Waiver of Proposed Rulemaking and Delay in Effective Date

    We ordinarily publish a notice of proposed rulemaking in the 
Federal Register and invite public comment on the proposed rule before 
the provisions of the rule are finalized, either as proposed or as 
amended, in response to public comments and take effect, in accordance 
with the APA (Pub. L. 79-404), 5 U.S.C. 553 and, where applicable, 
section 1871 of the Act. Specifically, 5 U.S.C. 553 requires the agency 
to publish a notice of proposed rulemaking in the Federal Register that 
includes a reference to the legal authority under which the rule is 
proposed, and the terms and substances of the proposed rule or a 
description of the subjects and issues involved. Section 553(c) of the 
APA further requires the agency to give interested parties the 
opportunity to participate in the rulemaking through public comment 
before the provisions of the rule take effect. Section 553(b)(B) of the 
APA authorize the agency to waive these procedures, however, if the 
agency finds good cause that notice and comment procedures are 
impracticable, unnecessary, or contrary to the public interest and 
incorporates a statement of the finding and its reasons in the rule 
issued.
    Section 553(d) of the APA ordinarily requires a 30-day delay in the 
effective date of a final rule from the date of its publication in the 
Federal Register. This 30-day delay in effective date can be waived, 
however, if an agency finds good cause to support an earlier effective 
date. Finally, the Congressional Review Act (CRA) (Pub. L. 104-121, 
Title II) requires a 60-day delay in the effective date for major rules 
unless an agency finds good cause that notice and public procedure are 
impracticable, unnecessary, or contrary to the public interest, in 
which case the rule shall take effect at such time as the agency 
determines 5 U.S.C. 801(a)(3) and 808(2).
    In City of Columbus, as explained earlier in the preamble, the 
district court vacated four provisions of the 2019 Payment Notice. 
Implementing the court's order as to two of those provisions, regarding 
income verification and QIA expenditure reporting, can be accomplished 
immediately. We find that it is necessary and in the public interest to 
implement these two provisions quickly to provide immediate notice to 
the regulated community on what standards will apply and to prevent 
injury to the public. A delay in implementing the court's decision 
regarding these two provisions would cause unnecessary harm. HHS needs 
to move quickly on these two provisions to fill the regulatory void 
caused by the court's vacatur. Without immediate action, there will be 
confusion among issuers and consumers regarding what is expected, which 
we find to be contrary to the public interest. We find it impractical 
to wait months to clarify what standards apply after the vacatur of the 
two policies. In this rule we have explained the impact of the court's 
decision.
    With regard to MLR QIA expenditures, we need to clarify that CMS 
will implement the court's decision going forward, that is, as CMS 
explained above, issuers will have to report actual data and cannot 
report standardized QIA expenditure amounts for 2020 and future MLR 
reporting years, but issuers will not be required to go back and 
correct their MLR Annual Reporting Forms for 2017-2019. We find it 
necessary to immediately clarify issuer reporting obligations to avoid 
issuer confusion regarding how to report QIA on the 2020 MLR Annual 
Reporting Forms (due by July 31, 2021) and to mitigate the potential of 
any delay or inaccuracy in providing consumers rebates that may be owed 
for the 2020 MLR reporting year. In vacating the QIA provision of the 
2019 Payment Notice, the court found that the statute requires the 
itemization of QIA expenditures and does not permit a reporting of such 
expenses as a standard percentage of earned premium. In light of the 
court's decision, additional public comments could not meaningfully 
impact whether CMS is authorized to allow the standardized reporting of 
QIA expenses. For this additional reason, we find good

[[Page 24270]]

cause to dispense with any delay in implementing the court's decision 
on this issue to allow for a comment period, because such a delay would 
be unnecessary.
    With regard to income verification requirements, in which the court 
vacated the requirement imposed on consumers to provide verification if 
certain sources of information indicated a variance from a consumer's 
reported income, we find it necessary and in the public interest to 
immediately suspend enforcement of these provisions to ensure that 
consumers are not improperly denied advance payments of premium tax 
credits. Any delay in clarifying what is required after the court's 
decision will create confusion and interfere with consumers' access to 
health coverage. We have concerns that any delay in implementing 
clarification of this rule could lead eligible consumers to improperly 
losing coverage if they are unable to produce documentation compliant 
with the income verification requirements. Without immediate changes, 
the public, and particularly consumers who are eligible for advance 
payments of the premium tax credits, may be deterred in accessing 
advance payments of the premium tax credits that allow them to afford 
coverage.
    For these reasons, we find it necessary and in the public interest 
to move quickly and without the delay that would accompany a period for 
notice and comment to address the court's decision regarding the QIA 
provisions and income verification requirements. We find good cause for 
waiving notice-and-comment rulemaking and the delay in effective date 
given the decision of the district court and the public interest in 
expeditious implementation of the district court's ruling. Immediately 
taking the steps described in section IV. of this final rule to 
implement the court's decision regarding income verification and QIA 
reporting, including removing the regulation text at Sec. Sec.  
155.320(c) and 158.221(b)(8) directly in this final rule rather than 
through the normal notice-and-comment rulemaking cycle and waiving 
delay of the effective date, will ensure an expeditious implementation 
of those aspects of the court's decision and remove any doubt about 
what standards apply after that decision. We believe rulemaking without 
notice and comment for these limited purposes is a reasonable response 
to the court's order that will minimize confusion over the current 
status of our rules in those two areas. Therefore, we find good cause 
to waive notice-and-comment rulemaking for the provisions in section 
IV. of this final rule, waive delay of the effective date, and to issue 
these changes as part of this final rule.

VII. Regulatory Impact Analysis

A. Statement of Need

    This final rule includes standards related to the risk adjustment 
program and cost sharing parameters for the 2022 benefit year and 
beyond. It also includes changes related to special enrollment periods; 
direct enrollment entities; the administrative appeals process with 
respect to health insurance issuers and non-federal governmental group 
health plans; and the medical loss ratio program. In addition, it 
includes changes to the regulation to require the reporting of certain 
prescription drug information for QHPs or their PBM.

B. Overall Impact

    We have examined the impacts of this rule as required by Executive 
Order 12866 on Regulatory Planning and Review (September 30, 1993), 
Executive Order 13563 on Improving Regulation and Regulatory Review 
(January 18, 2011), the Regulatory Flexibility Act (RFA) (September 19, 
1980, Pub. L. 96-354), section 202 of the Unfunded Mandates Reform Act 
of 1995 (March 22, 1995, Pub. L. 104-4), Executive Order 13132 on 
Federalism (August 4, 1999), and the Congressional Review Act (5 U.S.C. 
804(2)).
    Executive Orders 12866 and 13563 direct agencies to assess all 
costs and benefits of available regulatory alternatives and, if 
regulation is necessary, to select regulatory approaches that maximize 
net benefits (including potential economic, environmental, public 
health and safety effects, distributive impacts, and equity). Executive 
Order 13563 emphasizes the importance of quantifying both costs and 
benefits, of reducing costs, of harmonizing rules, and of promoting 
flexibility. A regulatory impact analysis (RIA) must be prepared for 
rules with economically significant effects ($100 million or more in 
any one year).
    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 one year, or adversely and materially affecting a sector of the 
economy, productivity, competition, jobs, the environment, public 
health or safety, or state, local or tribal governments or communities 
(also referred to as ``economically significant''); (2) creating a 
serious inconsistency or otherwise interfering with an action taken or 
planned by another agency; (3) materially altering the budgetary 
impacts of entitlement grants, user fees, or loan programs or the 
rights and obligations of recipients thereof; or (4) raising novel 
legal or policy issues arising out of legal mandates, the President's 
priorities, or the principles set forth in the Executive Order. An RIA 
must be prepared for major rules with economically significant effects 
($100 million or more in any one 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 one year, and therefore, meets the definition of ``significant 
rule'' under Executive Order 12866. Therefore, HHS has provided an 
assessment of the potential costs, benefits, and transfers associated 
with this rule. In accordance with the provisions of Executive Order 
12866, this regulation was reviewed by OMB.
    The provisions in this final rule aim to ensure that consumers 
continue to have access to affordable coverage and health care, and 
that states have flexibility and control over their insurance markets. 
They will reduce regulatory burden, reduce administrative costs for 
states, ensure greater market stability, increase transparency and 
availability of QHP survey data, and increase transparency on the 
impact of PBMs on the cost of prescription drugs for QHPs. Through the 
reduction in financial uncertainty for issuers and increased 
affordability for consumers, these provisions are expected to increase 
access to affordable health coverage.
    Affected entities, such as Exchanges, issuers and FFE Classic DE 
and EDE partners, will incur costs to implement new special enrollment 
period requirements. Issuers will incur costs to comply with audits and 
compliance reviews of risk adjustment covered plans, reinsurance-
eligible plans, and APTC, CSRs, and user fees requirements. Web-brokers 
and direct enrollment entities will incur costs to comply with 
operational readiness demonstration requirements. QHP issuers and PBMs 
will incur costs to implement and operationalize drug data reporting. 
In accordance with Executive Order 12866, HHS believes that the 
benefits of this regulatory action justify the costs.
    Comment: A few commenters stated that the RIA in the proposed rule 
was inadequate.
    Response: As explained in the proposed rule, we are unable to 
quantify all the effects of the provisions of this rule. Therefore, we 
have included

[[Page 24271]]

qualitative discussions of costs and benefits related to the provisions 
in this final rule.

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 allowing consumers to have continued access 
to coverage and health care, and stabilizing premiums in the individual 
and small group health insurance markets and in an Exchange. We are 
unable to quantify all benefits and costs of this final rule. The 
effects in Table 13 reflect non-quantified impacts and estimated direct 
monetary costs and transfers resulting from the provisions of this 
final rule for health insurance issuers and consumers.
    We are finalizing the risk adjustment user fee of $0.25 PMPM for 
the 2022 benefit year to operate the risk adjustment program on behalf 
of states,\333\ which we estimate to cost approximately $60 million in 
benefit year 2022. We expect risk adjustment user fee transfers from 
issuers to the federal government to remain steady at $60 million, the 
same as those estimated for the 2021 benefit year.
---------------------------------------------------------------------------

    \333\ As noted earlier in this rule, no state has elected to 
operate the risk adjustment program for the 2022 benefit year; 
therefore, HHS will operate the program for all 50 states and the 
District of Columbia.
---------------------------------------------------------------------------

BILLING CODE 4150-28-P

[[Page 24272]]

[GRAPHIC] [TIFF OMITTED] TR05MY21.029

    This RIA expands upon the impact analyses of previous rules and 
utilizes the Congressional Budget Office's (CBO) analysis of the ACA's 
impact on federal spending, revenue collection, and insurance 
enrollment. The ACA ends the transitional reinsurance program and 
temporary risk corridors program after the benefit year 2016. 
Therefore, the costs associated with those programs are not included in 
Table 13 or 14. Table 14 summarizes the effects of the risk adjustment 
program on the federal budget from fiscal years 2022 through 2026, 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.
    In addition to utilizing CBO projections, HHS conducted an internal 
analysis of the effects of its regulations

[[Page 24273]]

on enrollment and premiums. Based on these internal analyses, we 
anticipate that the quantitative effects of the provisions in this rule 
are consistent with our previous estimates in the 2021 Payment Notice 
for the impacts associated with the APTC and the premium stabilization 
programs.
[GRAPHIC] [TIFF OMITTED] TR05MY21.030

BILLING CODE 4150-28-C
1. Health Insurance Reform Requirements for the Group and Individual 
Health Insurance Markets (Sec.  147.104)
---------------------------------------------------------------------------

    \334\ Reinsurance collections ended in FY 2018 and outlays in 
subsequent years reflect remaining payments to Treasury under 
section 1341(b)(3)(B)(iv) of the ACA and to CMS for administrative 
expenses under section 1341(b)(3)(B)(ii) of the ACA, refunds, and 
allowable activities.
---------------------------------------------------------------------------

    The revision to Sec.  147.104(b)(4)(ii) will allow an individual or 
dependent who did not receive timely notice of a triggering event and 
otherwise was reasonably unaware that a triggering event occurred to 
use the date the individual knew, or reasonably should have known, of 
the occurrence of the triggering event as the date of the triggering 
event for a special enrollment period to enroll in individual market 
coverage through or outside of an Exchange. This will enable consumers 
to maintain continued access to coverage and health care.
2. CMS Enforcement in Group and Individual Markets (Part 150) and 
Administrative Review of QHP Issuer Sanctions (Part 156, Subpart J)
    We are removing the requirement to file submissions to the 
Departmental Appeals Board in triplicate and instead require electronic 
filing. Based on our experience, such filings are infrequent, and this 
proposed change will not have a significant impact. An entity filing a 
submission will experience a small reduction in costs related to 
printing and mailing the submission.
3. Risk Adjustment (Part 153)
    The risk adjustment program is a permanent program created by 
section 1343 of the ACA that collects charges from issuers with lower-
than-average risk populations and uses those funds to make payments to 
issuers with higher-than-average risk populations in the individual, 
small group, and merged markets (as applicable), inside and outside the 
Exchanges. We established standards for the administration of the risk 
adjustment program in subparts A, B, D, G, and H of part 153. 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. For the 2022 benefit year, HHS will operate a risk adjustment 
program in every state and the District of Columbia. 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. For the 2022 
benefit year, we used the same methodology that we finalized in the 
2020 Payment Notice to estimate our administrative expenses to operate 
the program. Risk adjustment user fee costs for the 2022 benefit year 
are expected to remain steady from the prior 2021 benefit year 
estimates of approximately $60 million. We estimate that the total cost 
for HHS to operate the risk adjustment program on behalf of all 50 
states and the District of Columbia for 2022 will be approximately $60 
million, and the risk adjustment user fee will be $0.25 PMPM. Because 
of the constant costs estimated for the 2022 benefit year, we expect 
the final risk adjustment user fee for the 2022 benefit year to have no 
additional financial impact on issuers of risk adjustment covered plans 
or the federal government.
    Additionally, for the risk adjustment factors, we are finalizing an 
approach to recalibrate the HHS risk adjustment models for the 2022 
benefit year by using the 2016, 2017 and 2018 enrollee-level EDGE data, 
the same data years used for the 2021 benefit year.\335\ We are 
adopting an approach of using the 3 most recent consecutive years of 
available enrollee-level EDGE data that are available in time for 
incorporating the data in the draft recalibrated coefficients published 
in the proposed rule for recalibration of the risk adjustment models 
for the 2022 benefit year and beyond. We believe that the approach of 
blending (or averaging) 3 years of separately solved coefficients will 
provide stability within the risk adjustment program and minimize 
volatility in changes to risk scores from the 2021 benefit year to the 
2022 benefit year. We are also finalizing the continuation of a pricing 
adjustment for Hepatitis C drugs for all three models (adult, child and 
infant). Overall, these changes make limited changes to the number and 
type of risk adjustment model factors; therefore, we do not expect 
these changes to impact issuer burden beyond the current burden for the 
risk adjustment program.
---------------------------------------------------------------------------

    \335\ As discussed earlier, the one exception relates to RXC 09, 
which involved the use of only 2016 and 2017 enrollee-level data to 
develop the applicable 2022 benefit year coefficients and 
interaction terms.
---------------------------------------------------------------------------

    We are finalizing the requirement that issuers that choose to offer 
premium credits to consumers during a declared PHE, when HHS permits 
such credits, must report the adjusted plan premium amount, taking into 
account the credits provided to consumers as a reduction to premiums 
for the applicable months for risk adjustment data submissions for the 
2021 benefit year and beyond. We do not believe that the clarifications 
regarding risk adjustment reporting in this provision will impose 
additional administrative burden on health insurance issuers beyond the 
effort already required to submit data to HHS for the purposes of 
operating risk adjustment, as previously estimated in

[[Page 24274]]

the interim final rule on COVID-19 (85 FR 54820).
    In the 2021 Payment Notice, HHS finalized the risk adjustment state 
payment transfer formula under the HHS risk adjustment methodology for 
the 2021 benefit year, and reaffirmed that HHS will continue to operate 
the risk adjustment program in a budget neutral manner. As finalized in 
this rule, we will maintain the same methodology for the 2022 benefit 
year and beyond, unless changed through notice-and-comment 
rulemaking.\336\ Therefore, there is no net aggregate financial impact 
on health insurance issuers or the federal government as a result of 
the risk adjustment provisions with respect to the finalized proposals 
regarding the methodology, as well as the premium credit related 
provisions. However, while risk adjustment transfers are net neutral in 
aggregate, we recognize that individual issuers may be financially 
impacted by reduced transfers (either lower risk adjustment payments or 
lower risk adjustment charges) if any issuer in the issuer's state 
market risk pool provides premium credits to enrollees in future 
benefit years during a declared PHE when HHS permits such credits. The 
extent of this impact will vary based on the number of issuers in a 
state market risk pool that elect to provide the temporary premium 
credits during a declared PHE, the amount of these premium credits 
provided, as well as the market share of the issuers that provide these 
premium credits.
---------------------------------------------------------------------------

    \336\ As finalized in the 2020 Payment Notice, we intend to also 
maintain the high-cost risk pool parameters with a threshold of $1 
million and a coinsurance rate of 60 percent for the 2020 benefit 
year and beyond unless amended through notice with comment 
rulemaking. See 84 FR at 17480 through 17484.
---------------------------------------------------------------------------

    We do not believe that the impact of this provision will vary from 
what was previously estimated in the interim final rule on COVID-19 (85 
FR 54820). Similar to our analysis of regulatory impacts in the interim 
final rule on COVID-19, we recognize the potential for financial 
impacts for individual issuers as a result of these clarifications. We 
believe that if HHS permitted issuers that provided premium credits 
when permitted by HHS during a declared PHE to submit unadjusted 
premiums for the purposes of calculating risk adjustment, distortions 
could occur which could also financially impact individual issuers. For 
example, absent the requirement that issuers that offer premium credits 
report the adjusted, lower premium amount for risk adjustment purposes, 
an issuer with a large market share with higher-than-average risk 
enrollees that provides temporary premium credits would inflate the 
statewide average premium by submitting the higher, unadjusted premium 
amount, thereby increasing its risk adjustment payment. In such a 
scenario, a smaller issuer in the same state market risk pool that owes 
a risk adjustment charge, and also provides premium credits to 
enrollees, would pay a risk adjustment charge that is relatively higher 
than it would have been if it were calculated based on a statewide 
average that reflected the actual, reduced premium charged to enrollees 
by issuers in the state market risk pool.
    For all of these reasons, we believe that requiring issuers that 
offer temporary premium credits when permitted by HHS for 2021 and 
future benefit years' coverage to accurately report to the EDGE server 
the adjusted, lower premium amounts actually charged to enrollees is 
most consistent with existing risk adjustment program requirements. We 
also believe this requirement will mitigate the distortions that would 
occur if issuers that offer these temporary premium credits did not 
report the actual amounts charged to enrollees, while avoiding 
additional financial burden on issuers, as compared to an approach that 
would permit issuers to report unadjusted premium amounts.
    We also are providing more clarity regarding audits and 
establishing authority to conduct compliance reviews of issuers of risk 
adjustment covered plans by finalizing amendments to Sec.  153.620(c), 
with slight modifications to certain audit timeframes in response to 
comments requesting issuers be provided more time to provide the 
initial audit data submissions and written corrective action plans. 
Issuers being audited under the risk adjustment program will be 
required to comply with audit requirements including participating in 
entrance and exit conferences, submitting complete and accurate data to 
HHS in a timely manner, and providing responses to additional requests 
for information from HHS and to preliminary audit reports in a timely 
manner. If an audit results in a finding, issuers must also provide 
written corrective plans in the time and manner set forth by HHS. We 
are also codifying our authority to recoup risk adjustment (including 
high-cost risk pool) payments if they are not adequately substantiated 
by the data and information submitted by issuers during the course of 
the audit.
    We anticipate that compliance with risk adjustment program 
(including high-cost risk pool) audits will take 120 hours by a 
business operations specialist (at a rate of $77.14 per hour), 40 hours 
by a computer systems analyst (at a rate of $92.46 per hour), and 20 
hours by a compliance officer (at a rate of $70.06 per hour) per issuer 
per benefit year. The cost per issuer will be approximately $14,356. 
While the number of issuers participating in the risk adjustment 
program varies per benefit year, (for example, there were 751 issuers 
participating in the risk adjustment program for the 2016 benefit 
year), HHS only intends to audit a small percentage of these issuers, 
roughly 30-60 issuers per benefit year, and intends to focus these 
audits on payments under the high-cost risk pool.\337\ Depending on the 
number of issuers audited each year, the total cost to issuers being 
audited will be between $430,692 and $861,384, with an average annual 
cost of approximately $646,038.
---------------------------------------------------------------------------

    \337\ Currently, HHS uses HHS-RADV to audit the actuarial risk 
reported by issuers to their EDGE servers that is used for 
performing calculations under the state payment transfer formula. 
See 45 CFR 153.350 and 153.630.
---------------------------------------------------------------------------

    We anticipate that compliance with risk adjustment program 
(including high-cost risk pool) compliance reviews will take 30 hours 
by a business operations specialist (at a rate of $77.14 per hour), 10 
hours by a computer systems analyst (at a rate of $92.46 per hour), and 
5 hours by a compliance officer (at a rate of $70.06 per hour) per 
issuer per benefit year. The cost per issuer will be approximately 
$3,589. While the number of issuers participating in the risk 
adjustment program varies per benefit year, (for example, there were 
751 issuers participating in the risk adjustment program for the 2016 
benefit year), HHS only intends to conduct compliance reviews for no 
more than 15 issuers per benefit year and intends to focus these 
reviews on payments under the high-cost risk pool.\338\ The total 
annual cost to issuers undergoing compliance reviews will be 
approximately $53,836.
---------------------------------------------------------------------------

    \338\ Currently, HHS uses HHS-RADV to audit the actuarial risk 
reported by issuers to their EDGE servers that is used for 
performing calculations under the state payment transfer formula. 
See 45 CFR 153.350 and 153.630.
---------------------------------------------------------------------------

    We are increasing the materiality threshold for EDGE discrepancies, 
beginning in the 2020 benefit year of HHS-operated risk adjustment, so 
that HHS may only take action if the amount in dispute is equal to or 
exceeds $100,000 or one percent of the total estimated transfer amount 
in the applicable state market risk pool, whichever is less. As a 
result of this change, some discrepant issuers will no

[[Page 24275]]

longer be charged for their EDGE data error. In addition, issuers in 
the same state market risk pool as the discrepant issuer will not 
receive positive adjustments to their risk adjustment transfers. This 
is because HHS's process for addressing material EDGE data 
discrepancies is to recalculate the dollar value of any difference in 
risk adjustment transfers, charge the discrepant issuer for the 
difference, and distribute the amount collected from the discrepant 
issuer to the issuers in the same state market risk pool who were 
harmed. Based on analysis of discrepancies from prior years' data, 
payments to these issuers who were harmed by the discrepant issuer's 
error are occasionally as low as $1.00 and typically represent a 
fraction of one percent of the issuer's overall transfers in the state 
market risk pool for the applicable benefit year. We anticipate that 
this change will have a minimal impact on regulatory burden. There 
might be a slight reduction in administrative burden to some issuers 
who currently report, and receive adjustments for, EDGE discrepancies 
that are less than a fraction of total state market risk pool 
transfers.
4. Audits of Reinsurance-Eligible Plans (Sec.  153.410(d))
    We are finalizing the amendments to Sec.  153.410(d) providing more 
clarity regarding audits and establishing authority to conduct 
compliance reviews of reinsurance-eligible plans, with slight 
modifications to certain audit timeframes in response to comments 
requesting issuers be provided more time to provide the initial audit 
data submissions and written corrective action plans. Issuers of 
reinsurance-eligible plans being audited will be required to comply 
with audit requirements including participating in entrance and exit 
conferences, submitting complete and accurate data to HHS in a timely 
manner, and providing responses to additional requests for information 
from HHS and to preliminary audit reports in a timely manner. If an 
audit results in a finding, issuers must also provide written 
corrective plans in the time and manner set forth by HHS. We are also 
codifying our authority to recoup reinsurance payments if they are not 
adequately substantiated by the data and information submitted by 
issuers during the course of the audit.
    We anticipate that compliance with reinsurance program audits will 
take 120 hours by a business operations specialist (at a rate of $77.14 
per hour), 40 hours by a computer systems analyst (at a rate of $92.46 
per hour), and 20 hours by a compliance officer (at a rate of $70.06 
per hour) per issuer per benefit year. The cost per issuer will be 
approximately $14,356. There were 557 issuers participating in the 
reinsurance program for the 2015 benefit year and 496 issuers 
participating in the reinsurance program for the 2016 benefit year; 
however, HHS will only audit a small percentage of these issuers, 
roughly 30-60 issuers per benefit year. As noted above, we also intend 
to combine the 2015 and 2016 benefit year reinsurance audits to reduce 
the burden on issuers subject to such audits. Depending on the number 
of issuers audited for each benefit year, the total cost to issuers 
being audited will be between $430,692 and $861,384, with an average 
annual cost of approximately $646,038.
    We anticipate that compliance with reinsurance program compliance 
reviews will take 30 hours by a business operations specialist (at a 
rate of $77.14 per hour), 10 hours by a computer systems analyst (at a 
rate of $92.46 per hour), and 5 hours by a compliance officer (at a 
rate of $70.06 per hour) per issuer per benefit year. The cost per 
issuer will be approximately $3,589. There were 557 issuers 
participating in the reinsurance program for the 2015 benefit year and 
496 issuers participating in the reinsurance program for the 2016 
benefit year; however, HHS only intends to conduct compliance reviews 
for no more than 15 issuers per benefit year and intends to focus these 
reviews on payments received by reinsurance-eligible plans under the 
program. The total annual cost to issuers undergoing compliance reviews 
will be approximately $53,836.
5. HHS Risk Adjustment Data Validation (Sec.  153.630(g))
    We are codifying two previously-established exemptions from HHS-
RADV under Sec.  153.630(g). These exemptions apply when the issuer 
only has small group carryover coverage for the applicable benefit year 
or when an issuer is the sole issuer in the state market risk pool for 
the applicable benefit year (and did not participate in another risk 
pool with other issuers for that benefit year). We further note that 
these new regulatory provisions are not establishing new exemptions; 
instead, the amendments to Sec.  153.630(g) merely codify existing 
policies and previously established exemptions from HHS-RADV for these 
subsets of issuers. The impact of the exemption for sole issuers was 
addressed in the 2019 Payment Notice and the discussion of exempting 
small group carryover coverage issuers was set forth in the 2020 
Payment Notice.\339\ Under these exemptions, these issuers are not be 
required to complete HHS-RADV for the given benefit year, and 
therefore, they will have a decreased administrative burden. However, 
given that these exemptions are limited to issuers only offering small 
group carry-over coverage and issuers who are sole issuers in all 
markets in a state, we estimate that approximately 13 issuers will be 
exempt from HHS-RADV for a given benefit year under these exemptions.
---------------------------------------------------------------------------

    \339\ 83 FR 17047 and 83 FR 17504.
---------------------------------------------------------------------------

    We are also changing the HHS-RADV collections timeline from the 
timeline finalized in the 2020 Payment Notice in response to 
stakeholder feedback. Under the revised timeline, we will implement the 
collection of HHS-RADV charges and disbursement of payments in the 
calendar year in which HHS-RADV results are released. We do not believe 
this will change the administrative burden previously estimated in the 
2020 Payment Notice \340\ as we understand that the majority of states 
and issuers follow a timeline that aligns more closely with the one in 
this rulemaking and few pursued the flexibility provided under the 
timeline finalized in the 2020 Payment Notice.
---------------------------------------------------------------------------

    \340\ See 84 FR 1507.
---------------------------------------------------------------------------

6. Direct Enrollment (Sec. Sec.  155.220 and 155.221)
a. QHP Information Display on Web-Broker Websites
    After consideration of comments received, we are not finalizing the 
proposal to provide flexibility to web-brokers regarding the 
information they are required to display on their non-Exchange websites 
for QHPs in certain circumstances. As explained above, we intend to 
further consider these issues and clarify the display requirements for 
web-broker non-Exchange websites in future rulemaking. Until addressed 
in future rulemaking, beginning at the start of the open enrollment 
period for plan year 2022, web-broker non-Exchange websites will be 
required to display all QHP information received from the Exchange or 
directly from QHP issuers, consistent with the requirements of Sec.  
155.205(b)(1) and (c) for all available QHPs with the exception of 
medical loss ratio information and transparency of coverage measures 
under Sec.  155.205(b)(1)(vi) and (vii). This interim approach does not 
establish new requirements and instead represents a change in the 
exercise of enforcement discretion regarding the standardized 
comparative information web-brokers are required to display under 
existing

[[Page 24276]]

regulations following our consideration of comments on the proposed 
changes to the web-broker QHP display requirements.\341\ We previously 
estimated the administrative burden related to the display of QHP 
information on web-broker websites in the 2013 Program Integrity final 
rule.\342\
---------------------------------------------------------------------------

    \341\ See 45 CFR 155.220(c)(3)(i)(A) and (D).
    \342\ See 78 FR 54128.
---------------------------------------------------------------------------

b. Web-Broker and Direct Enrollment Entity Operational Readiness Review 
Requirements
    At Sec.  155.220(c)(6), we are finalizing that a web-broker must 
demonstrate operational readiness and compliance with applicable 
requirements prior to the web-broker's non-Exchange website being used 
to complete an Exchange eligibility application or a QHP selection. As 
reflected in Sec.  155.220(c)(6)(i) through (iv), HHS may request a 
web-broker submit a number of artifacts or documents or complete 
certain testing processes to demonstrate the operational readiness of 
its non-Exchange website. The required documentation may include 
operational data including licensure information, points of contact, 
and third-party relationships; security and privacy assessment 
documentation, including penetration testing results, security and 
privacy assessment reports, vulnerability scan results, plans of action 
and milestones, and system security and privacy plans; and an agreement 
between the web-broker and HHS documenting the requirements for 
participating in the applicable direct enrollment program. The required 
testing processes may include enrollment testing, prior to approval or 
at the time of renewal, and website reviews performed by HHS to 
evaluate prospective web-brokers' compliance with applicable website 
display requirements prior to approval. To facilitate testing, 
prospective and approved web-brokers will have to maintain and provide 
access to testing environments that reflect their prospective or actual 
production environments. These amendments codify in regulation existing 
program requirements that apply to web-brokers that participate in the 
FFE direct enrollment program and are captured in the agreements 
executed with participating web-broker direct enrollment entities and 
related technical guidance.\343\ Some of these requirements, such as 
the collection of operational data, have effectively existed for many 
years, and so they will impose little to no new burden. The collection 
of security and privacy assessment documentation is a new requirement, 
although historically the web-broker agreement has required web-brokers 
to attest to the implementation and assessment of privacy and security 
controls. As a result, web-brokers should have historically completed 
any technical implementation of the controls and should be familiar 
with assessment of those controls. Completion of enrollment testing is 
also a new requirement, but use of the direct enrollment pathways 
inherently requires a web-broker's platform to be capable of processing 
enrollments. Therefore, the burden of testing that functionality will 
be very limited. Website reviews have been conducted historically and 
are performed by HHS, so there will be no burden to web-brokers 
associated with the completion of those reviews. The burden related to 
these requirements is discussed in the Collection of Information 
Requirements section in this rule.
---------------------------------------------------------------------------

    \343\ See, for example, ``Updated Web-broker Direct Enrollment 
Program Participation Minimum Requirements,'' May 21, 2020. 
Available at https://www.cms.gov/CCIIO/Programs-and-Initiatives/Health-Insurance-Marketplaces/Downloads/2020-WB-Program-Guidance-052120-Final.pdf.
---------------------------------------------------------------------------

    We are revising Sec.  155.221(b)(4) to add additional detail on the 
operational readiness requirements for direct enrollment entities. 
Similar to the proposed web-broker operational readiness requirement at 
new Sec.  155.220(c)(6), these amendments codify in Sec.  155.221(b)(4) 
additional details about the existing program requirements that apply 
to direct enrollment entities and are captured in the agreements 
executed with participating web-broker and QHP issuer direct enrollment 
entities. We note that these requirements are in addition to the 
operational readiness requirements at new Sec.  155.220(c)(6) for web-
brokers, although web-brokers may not be required to submit the 
documentation required under this proposal to revise Sec.  
155.221(b)(4) or they may be permitted to use the same documentation to 
satisfy the requirements of both operational readiness reviews 
depending on the specific circumstances of their participation in 
direct enrollment programs and the source and type of documentation.
    In paragraph (b)(4), we require a direct enrollment entity to 
demonstrate operational readiness and compliance with applicable 
requirements prior to the direct enrollment entity's website being used 
to complete an Exchange eligibility application or a QHP selection. We 
add new paragraphs (b)(4)(i) through (v) to reflect that direct 
enrollment entities may need to submit or complete, in the form and 
manner specified by HHS, a number of artifacts of documentation or 
various testing or training processes. The documentation may include 
business audit documentation including: Notices of intent to 
participate including auditor information; documentation packages 
including privacy questionnaires, privacy policy statements, and terms 
of service; and business audit reports including testing results. The 
required documentation may also include security and privacy audit 
documentation including: Interconnection security agreements; security 
and privacy controls assessment test plans; security and privacy 
assessment reports; plans of action and milestones; privacy impact 
assessments; system security and privacy plans; incident response 
plans; and vulnerability scan results. Submission of agreements between 
the direct enrollment entity and HHS documenting the requirements for 
participating in the applicable direct enrollment program may also be 
required. Required testing may include eligibility application audits 
performed by HHS. The direct enrollment entity may also be required to 
complete online training modules developed by HHS related to the 
requirements to participate in direct enrollment programs. We expect 
minimal new burden associated with this policy as these requirements 
have historically been established through agreements EDE entities have 
executed with HHS, and therefore entities have completed these tasks in 
the past to be able to use the EDE pathway. The burden related to these 
requirements is discussed in the Collection of Information Requirements 
section in this final rule.
c. Direct Enrollment Entity Plan Display Requirements
    We are revising Sec.  155.221(b)(1) to require that direct 
enrollment entities display and market QHPs offered through the 
Exchange, individual health insurance coverage as defined in Sec.  
144.103 offered outside the Exchange (including QHPs and non-QHPs other 
than excepted benefits), and all other products, such as excepted 
benefits, on at least three separate website pages, with certain 
exceptions. This change is a revision of a policy adopted in 2019. We 
anticipate this policy will provide increased flexibility and believe 
many direct enrollment entity websites are already designed in a manner 
largely consistent with this proposal, and therefore the burden 
associated with it is minimal.

[[Page 24277]]

7. Verification Process Related to Eligibility for Insurance 
Affordability Programs (Sec.  155.320)
a. Income Inconsistencies (Sec.  155.320(c))
    In the 2019 Payment Notice we estimated a one-time burden on 
Exchanges for necessary system changes to meet the requirement related 
to data matching issues. The 2019 Payment Notice estimate did not take 
into account the ongoing operational cost for processing data matching 
issues from this requirement, because ongoing operational costs are 
dependent on the Exchange's number of applicants with income 
inconsistencies and the threshold for setting a data matching issue 
which was unknown at the time.
    Now that we are changing this requirement, we expect a cost saving 
and burden reduction. We estimate the amendments to Sec.  155.320(c) 
will create a one-time cost for an Exchange of approximately $450,000 
to complete the necessary system changes to remove functionality for 
this policy. We estimate that approximately half of the State Exchanges 
implemented verification functionality in 2019 or 2020. Therefore, for 
7 State Exchanges, the estimated total cost will be $3.15 million.
    Based on plan year 2019 and 2020 data of the volume of income 
inconsistencies generated in the FFEs, we estimate that approximately 
295,000 fewer inconsistencies will be generated annually by FFEs by 
removing this requirement and will result in annual savings of 
approximately $3,560,650 for FFEs. We anticipate additional ongoing 
annual savings for FFEs estimated at $242,550 due to the reduction of 
approximately 385,000 mailed consumer notices (approximately $0.63 per 
notice). We estimate that approximately 57,361 fewer inconsistencies 
will be generated annually by State Exchanges by removing this 
requirement and will result in annual savings of approximately $692,349 
annually for State Exchanges. Likewise, we anticipate additional 
ongoing annual savings for State Exchanges estimated at $74,861 due to 
the reduction of approximately 10,694 mailed consumer notices. Total 
annual savings for FFEs and State Exchanges is estimated to be 
approximately $4,570,410. We note that there could also be additional 
savings in appeals costs.
b. Employer Sponsored Coverage (155.320(d))
    As discussed previously in the preamble, as for benefit years 2020 
and 2021, we will not take enforcement action against Exchanges that do 
not perform random sampling as required by Sec.  155.320(d)(4) for 
benefit year 2022. HHS's experience conducting random sampling revealed 
that employer response rates to HHS's request for information were low. 
The manual verification process described in paragraph (d)(4)(i) 
requires significant resources and government funds, and the value of 
the results ultimately does not appear to outweigh the costs of 
conducting the work because only a small percentage of sample enrollees 
have been determined by HHS to have received APTC/CSRs inappropriately. 
We estimate the annual costs to conduct sampling on a statistically 
significant sample size of approximately 1 million cases to be 
approximately $6 million to $8 million for the Exchanges on the Federal 
platform and State Exchanges that operate their own eligibility and 
enrollment platforms. This estimate includes operational activities 
such as noticing, inbound and outbound calls to the Marketplace call 
center, and adjudicating consumer appeals. We estimate that the total 
annual cost for the Exchanges on the Federal platform and the 15 State 
Exchanges operating their own eligibility and enrollment platform in 
2022 would have been approximately $113 million. Relieving Exchanges of 
the requirement to conduct sampling for benefit year 2022 will 
therefore result in total savings of approximately $113 million. We 
sought comment on this estimate.
    Comment: While we did not receive specific comments on this 
estimate, one commenter did note that they supported the proposal but 
encouraged HHS to consider the costs and benefits of any new evidence-
based alternative approach for employer-sponsored coverage verification 
and to assess whether any benefits would be significant enough to 
warrant future regulatory action on this issue.
    Response: Given HHS's own findings that the manual verification 
process described in paragraph (d)(4)(i) requires significant resources 
and government funds to fully operationalize, we agree with the 
commenter that HHS should consider all costs and benefits of any future 
proposed verification process that is evidence-based as we do not wish 
to increase administrative burden on states, employers, consumers, and 
taxpayers. We will continue to explore the best approach for employer 
sponsored coverage verification, while taking into consideration the 
cost and benefits of such an approach in future rulemaking.
8. Special Enrollment Periods (Sec.  155.420)
a. Exchange Enrollees Newly Ineligible for APTC
    We are adding a new paragraph at Sec.  155.420(a)(4)(ii)(C) to 
require Exchanges, no later than January 1, 2024, to allow enrollees 
and their dependents who qualify for a special enrollment period 
because they become newly ineligible for APTC in accordance with 
paragraph (d)(6)(i) or (ii) of this section to enroll in a QHP of any 
metal level. We anticipate that this change will help reduce Exchanges' 
implementation burden by simplifying the policy and providing 
additional time to operationalize it, which some Exchanges may need in 
light of competing priorities such as the need to implement changes to 
calculate financial assistance established in the American Rescue Plan 
Act of 2021. We also expect that this policy will help impacted 
enrollees' ability to maintain continuous coverage for themselves and 
for their dependents in spite of losing a potentially significant 
amount of financial assistance to help them purchase coverage. For 
example, an enrollee impacted by an increase to his or her monthly 
premium payment may change to a bronze-level plan, or to catastrophic 
coverage if they are otherwise eligible. Relatedly, this proposal may 
benefit the individual market risk pool by encouraging healthy 
individuals to maintain continuous coverage. Previously, an enrollee 
who lost APTC eligibility had only two choices: Paying the full premium 
or terminating his or her coverage. Healthy individuals who lose APTC 
may be more likely to terminate coverage due to increased premium 
liability, while enrollees who have one or more medical conditions will 
be incentivized to maintain coverage in spite of the additional 
expense. This provision will serve to facilitate continuous coverage of 
healthy individuals by giving them the ability to enroll in a new plan 
with a lower premium, thereby supporting a healthier risk pool. 
Finally, the American Rescue Plan Act of 2021 will prevent some 
individuals from losing a significant amount of APTC based on a 
relatively small change in household income, because it allows 
individuals whose household income exceeds 400 percent FPL to qualify 
for a premium tax credit if they are otherwise eligible. However, we 
believe that some consumers will still benefit from this flexibility to 
plan category limitations, in part because, as described in preamble, 
there are scenarios other than a household income increase that may

[[Page 24278]]

cause consumers to become ineligible for APTC.
    As discussed in the proposed rule, we did not believe that this 
change would have a negative impact on the individual market risk pool, 
because most applicable enrollees would be seeking to change coverage 
based on financial rather than health needs. However, we sought comment 
on concerns about adverse selection risk with permitting newly 
unsubsidized enrollees to change to any plan of a lower metal level to 
help them maintain coverage (for example, permitting an individual to 
change from a gold plan to a bronze plan), or whether this risk would 
be significantly lower if we only permitted an enrollee to change to a 
plan one metal level lower than their current QHP. We also requested 
comment from issuers on whether there were concerns about impacts such 
as experiencing a decrease in premium receipts from enrollees who opted 
to change to a lower-cost plan, or whether they view adverse selection 
as a possibility.
    Additionally, we solicited comments on the extent to which 
Exchanges would experience burden due to the proposed change, and on 
whether we should exempt the special enrollment periods at Sec.  
155.420(d)(6)(i) and (ii) due to becoming newly ineligible for APTC 
from plan category limitations altogether to help to mitigate this 
burden, or whether such a change would significantly increase risk for 
adverse selection.
    Finally, we solicited comment on whether this change to current 
system logic would impose burden on FFE Direct Enrollment and Enhanced 
Direct Enrollment partners, as well as more generally, on the impact of 
this proposal.
    We received public comments on the potential risk related to the 
proposed updates to add new flexibility to allow current Exchange 
enrollees and their dependents to enroll in a new QHP of a lower metal 
level if they qualify for a special enrollment period due to becoming 
newly ineligible for APTC. The following is a summary of the comments 
we received and our responses.
    Comment: Almost all comments on this proposal were supportive of 
this change, for the same reasons that HHS proposed the policy: 
Allowing enrollees the flexibility to change to a plan of a lower metal 
level based on a loss of APTC will likely allow more individuals to 
maintain continuous coverage. No commenters raised concerns that this 
policy would increase the risk of adverse selection. One commenter 
encouraged us to bear in mind the risks of adverse selection in 
general, but did not oppose this proposal and noted that it would help 
consumers. Some commenters also noted that this proposal could improve 
the individual market risk pool by increasing the likelihood that 
Exchange enrollees would maintain coverage in spite of losing financial 
assistance. No commenters raised concerns about receiving lower premium 
payments from enrollees who opted to change to a plan of a lower metal 
level. Many commenters supported allowing individuals who qualify for a 
special enrollment period based on a loss of APTC eligibility to change 
to a plan of any metal level, either to provide enrollees with 
flexibility to change to the best plan for themselves and their 
families, to make implementation easier for State Exchanges, or both. 
One of these commenters requested that instead of applying plan 
category limitations, HHS require Exchange enrollees to provide 
documents to confirm their SEP eligibility. Some commenters supported 
allowing individuals who lose APTC eligibility to change to a plan of a 
higher or lower metal level rather than just to a plan of a lower metal 
level. No commenters raised concerns about this proposal's 
implementation burden on direct enrollment or enhanced direct 
enrollment partners. Finally, many commenters disagreed with the need 
to require plan category limitations in general, and requested that HHS 
provide Exchanges with flexibility in terms of when or whether to 
implement plan category limitations at all based on considerations 
related to their specific State Exchange's market.
    Response: We agree with commenters that allowing enrollees to 
access a plan at any metal level through this existing special 
enrollment period, rather than only allowing them to change to a plan 
of a lower metal level, will significantly decrease Exchange 
implementation complexity and cost. As discussed earlier in the 
preamble, we also agree with commenters who suggested that providing 
more flexibility for Exchange enrollees in this situation will help 
them to stay enrolled in coverage by switching to a new QHP that better 
suits their changed financial situation. We also agree with commenters 
that this specific policy does not pose adverse selection risk because 
enrollees are likely to access it based on a financial change as 
opposed to a change in their health care needs. Therefore, we are 
finalizing a modified version of this policy to permit Exchange 
enrollees who lose APTC eligibility to change to a new plan at any 
metal level, and to require that Exchanges implement this change no 
later than January 1, 2024 to provide them with potentially necessary 
time to account for this change in their operational planning. While 
some Exchanges may be able to implement this new flexibility sooner 
than January 1, 2024, in light of competing priorities such as the need 
to implement changes to calculate financial assistance established in 
the American Rescue Plan Act of 2021, we believe that substantial 
flexibility for Exchanges is appropriate.
    We also clarify that this policy does not create a new special 
enrollment period qualifying event, but rather is a change to 
limitations on plan selection that apply to an already-existing special 
enrollment period for Exchange enrollees who become newly ineligible 
for APTC per 45 CFR 155.420(d)(6)(i) and (ii).
    We did not propose removing plan category limitations. We will 
continue to study potential policies to promote continuous coverage and 
provide consumers with flexibility. Finally, we acknowledge the 
potential benefit of requiring Exchanges to implement this change 
quickly, but we believe that providing Exchanges with flexibility to 
implement it no later than January 1, 2024 strikes an appropriate 
balance between allowing early implementation if possible and providing 
Exchanges with necessary flexibility to plan related system updates 
based on Exchange-specific competing priorities and resources, such as 
implementation of changes to eligibility for advance payments of the 
premium tax credit established by the American Rescue Plan Act of 2021.
b. Special Enrollment Periods--Untimely Notice of Triggering Event
    We anticipate that the amendments related to qualified individuals 
who do not receive timely notice of a triggering event and otherwise 
are reasonably unaware that a triggering event occurred will provide 
certain consumers a pathway to maintain continuous coverage, which will 
have an overall positive impact on the risk pool and will benefit 
consumers. Consumers will benefit from being able to maintain continued 
access to coverage and health care. We recognize the possibility of 
some minor adverse selection risk given that consumers with known 
health issues may be more likely to request a retroactive effective 
date than healthy consumers. However, we expect this risk to be very 
limited as the proposal only permits individuals to request a 
retroactive effective date if they did not

[[Page 24279]]

receive timely notice of a triggering event, and we do not expect this 
to happen very often.
    We expect that Exchanges and direct enrollment partners might incur 
minor costs to update consumer messaging and processes to administer 
this proposal. State Exchanges that currently do not have this policy 
and issuers offering off-Exchange plans would incur minor costs to 
implement this proposal.
    We received public comments on the proposed updates to Special 
Enrollment Periods--Untimely Notice of Triggering Event. See the 
preamble to this provision for a summary of the comments we received 
and our responses.
c. Cessation of Employer Contributions and Government Subsidies to 
COBRA as Special Enrollment Period Trigger
    We anticipate that the amendments regarding special enrollment 
period eligibility for qualified individuals whose employers completely 
cease payment of their portion of COBRA continuation coverage premiums 
will provide clarity regarding a policy that has been operationalized 
on HealthCare.gov. In addition, we believe that specifying that 
cessation of government subsidies to COBRA is also a special enrollment 
period triggering event will help make stakeholders aware of the 
options consumers have for enrolling through a special enrollment 
period. We also believe that these amendments will benefit direct 
enrollment partners and employers by providing clarity regarding 
special enrollment period eligibility. In addition, consumers who would 
have otherwise lost coverage due to an increase in the cost of their 
COBRA continuation coverage will benefit from continuity of coverage 
and access to health care.
    Although this special enrollment period has already been available 
to individuals enrolling in a qualified health plan on Exchanges on the 
Federal Platform, because cessation of government subsidies to COBRA 
has not previously been considered a triggering event, we do anticipate 
that the Exchanges on the Federal platform, direct enrollment partners, 
State Exchanges that do not have this policy, and issuers who operate 
off-Exchange plans will incur some costs to implement this policy, 
especially in light of the projected increase in COBRA enrollments as a 
result of the subsidies provided for in the American Rescue Plan Act of 
2021.\344\ However, due to the similarity between cessation of employer 
contributions to COBRA, which has already been a special enrollment 
period trigger on Exchanges on the Federal platform, and government 
subsidies, we do not believe these amendments will have a negative 
impact on the risk pool for Federally-facilitated Exchanges. However, 
we do anticipate that there may be some negative impact to the risk 
pool in State Exchanges and in the off-Exchange individual market where 
this special enrollment period has not previously been available.
---------------------------------------------------------------------------

    \344\ https://www.cbo.gov/system/files/2021-02/hEdandLaborreconciliationestimate.pdf. These projections from the 
CBO reference an earlier version of the legislation in which 
enrollees would have been required to pay 15 percent of the COBRA 
premium, whereas the final version that was passed subsidizes COBRA 
premiums at 100 percent. Thus these projections may underestimate 
the increase in enrollments in COBRA as a result of the subsidies.
---------------------------------------------------------------------------

    We received public comments on the proposed updates to cessation of 
employer contributions to COBRA as special enrollment period trigger. 
The following is a summary of the comment we received and our response.
    Comment: One commenter, while not opposing the proposal, expressed 
concern regarding the potential impact on adverse selection and premium 
costs of providing a pathway for those who were enrolled in COBRA 
continuation coverage to enroll in individual market coverage, given 
the likelihood of this population having increased claims. In addition, 
this commenter expressed concern that the requirements of this proposal 
would be burdensome for employers, as they would need to make changes 
to current COBRA administration procedures in order to be able to 
verify eligibility for this special enrollment period. They also noted 
that the existence of this special enrollment period could reduce the 
number of employers willing to provide COBRA subsidies as part of a 
severance package. Another commenter expressed support for the 
proposal, and stated that because the special enrollment period is 
based on reduced affordability of coverage rather than a health 
condition, it avoids concerns regarding adverse selection, and in fact 
will likely benefit the risk pool overall by encouraging younger 
individuals to enroll. A State Exchange noted that, because loss of 
COBRA coverage is used infrequently as a triggering event on its State 
Exchange, this policy would be unlikely to impact premium costs or the 
risk pool.
    Response: We note that enrollments through this special enrollment 
period based on cessation of employer contributions to COBRA has 
already been available on Exchanges on the Federal platform, and thus 
this policy is unlikely to result in changes for issuers on such 
Exchanges as a result of adverse selection or for consumers in the form 
of premium increases. In addition, for State Exchanges and off-Exchange 
issuers who have not treated cessation of employer contributions to 
COBRA continuation coverage as a special enrollment period triggering 
event, we expect, based on a recent CBO analysis projecting low overall 
enrollment in COBRA among the eligible population,\345\ as well as the 
comment on this provision from a State Exchange noting that loss of 
COBRA coverage is used infrequently as a triggering event on its 
Exchange, that the volume of enrollments through this special 
enrollment period based on cessation of employer contributions will be 
low. However, the inclusion of government subsidies to COBRA coverage 
as a special enrollment period trigger may lead to an increase in 
uptake of COBRA coverage among the eligible population, and a 
corresponding increase in enrollments through this special enrollment 
period for Exchanges using the Federal platform, State Exchanges, and 
off-Exchange issuers, and thereby have a negative impact on these risk 
pools and on premiums.
---------------------------------------------------------------------------

    \345\ https://www.cbo.gov/system/files/2021-02/hEdandLaborreconciliationestimate.pdf.
---------------------------------------------------------------------------

    The aforementioned CBO analysis notes however that many of the 
enrollees who are projected to enroll in COBRA as a result of the 
federal subsidies would have otherwise enrolled in individual market 
coverage,\346\ thus limiting the potential negative impact. 
Additionally, because this provision does not impose any new 
requirements on employers or increase the opportunity to enroll in 
employer-sponsored coverage, it is unlikely that it will discourage 
them from providing COBRA subsidies as part of a severance package, nor 
is it likely to provide additional administrative burden. Because this 
special enrollment period provides a pathway to individual health 
insurance coverage for individuals whose employer ceases contributions 
to their COBRA coverage, this provision may, in fact, increase the 
number of employers willing to provide contributions to former 
employees' COBRA coverage.
---------------------------------------------------------------------------

    \346\ https://www.cbo.gov/system/files/2021-02/hEdandLaborreconciliationestimate.pdf.
---------------------------------------------------------------------------

9. Provisions Related to Cost Sharing (Sec.  156.130)
    As described earlier in the preamble, we are finalizing a premium 
adjustment percentage of 1.3760126457 for the 2022 benefit year. The 
annual premium

[[Page 24280]]

adjustment percentage is used to set the rate of increase for several 
parameters detailed in the ACA, including: 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 (defined at Sec.  155.605(d)(2)), and the 
employer shared responsibility payments under sections 4980H(a) and 
4980H(b) of the Code. Additionally, we finalized other cost-sharing 
parameters using an index based on the final premium adjustment 
percentage for the 2022 benefit year.
    In accordance with Sec.  155.605(d)(2), we are finalizing a 
required contribution of 8.09 percent for the 2022 benefit year, which 
reflects the premium adjustment percentage calculation for the 2022 
benefit year detailed in preamble. In accordance with Sec.  
156.130(a)(2), we are finalizing a maximum annual limitation on cost 
sharing of $8,700 for self-only coverage and $17,400 for other than 
self-only for the 2022 benefit year. The CMS Office of the Actuary 
estimates that the change in measure of premium growth from using 
private health insurance (excluding Medigap, and property and casualty 
insurance) to ESI to calculate the premium adjustment percentage may 
have the following impacts between 2022 and 2026.\347\
---------------------------------------------------------------------------

    \347\ CMS Office of the Actuary's estimates are based on their 
health reform model, which is an amalgam of various estimation 
approaches involving federal programs, employer-sponsored insurance, 
and individual insurance choice models that ensure consistent 
estimates of coverage and spending in considering legislative 
changes to current law.
[GRAPHIC] [TIFF OMITTED] TR05MY21.031

    As noted in Table 15, we expect that the change in measure of 
premium growth used to calculate the premium adjustment percentage 
index for the 2022 benefit year and beyond will likely result in:
---------------------------------------------------------------------------

    \348\ The American Rescue Plan Act of 2021 Public Law 117-2 (3/
11/2021) amends Section 36B(b)(3)(A) of the Internal Revenue Code of 
1986 to lower the applicable percentage for taxpayers at all FPL 
levels, and includes taxpayers with an income of 400 percent FPL or 
higher to be eligible for premium tax credits. The effects of the 
American Rescue Plan Act of 2021 are expected to supplant the 
economic impacts of finalizing the premium adjustment percentage and 
cost-sharing parameters using the NHEA ESI premium measure for the 
2022 benefit year.
---------------------------------------------------------------------------

     Net premium decreases of approximately $181 million per 
year, which is approximately one percent of 2018 benefit year net 
premiums, for the 2024 benefit year through the 2026 benefit year.
     An increase in federal premium tax credit spending of $460 
million to $510 million between 2023 and 2026, due to the decrease in 
the applicable percentage table, based on an assumption that the 
Department of the Treasury and the IRS will adopt the use of the NHEA 
ESI premium measure finalized for the calculation of the premium 
adjustment percentage in this rule for the purposes of calculating the 
indexing of the premium tax credit applicable percentage and required 
contribution percentage under section 36B of the Code.
    We are also finalizing the proposed rates of reductions to the 
maximum annual limitation on cost sharing of \2/3\ for enrollees with a 
household income between 100 and 200 percent of FPL, \1/5\ for 
enrollees with a household income between 200 and 250 percent of FPL, 
and no reduction for individuals with household incomes of 250 to 400 
percent of FPL for the 2022 benefit year and beyond. We are finalizing 
the proposed methodology to ensure that these reductions do not result 
in unacceptably high AVs. We do not anticipate that the rates of 
reduction and the methodology will result in significant economic 
impact because these rates of reduction and the AV-impact testing 
methodology have remained consistent since the 2014 Payment Notice.
    We are also finalizing that beginning with the 2023 benefit year, 
we will publish the premium adjustment percentage, maximum annual 
limitation on cost sharing, reduced maximum annual limitations on cost 
sharing, and required contribution percentage in guidance in January of 
the calendar year preceding the benefit year to which the parameters 
are applicable, unless HHS is changing the methodology, in which case 
we will do so through the applicable HHS notice of benefit and payment 
parameters. This policy change affects only the timing and method by 
which these parameters are released and will provide issuers with 
additional time for plan design and rate setting.
10. Prescription Drug Distribution and Cost Reporting by QHP Issuers 
(Sec.  156.295) and PBMs (Sec.  184.50)
    As part of the ACA, Congress passed section 6005, which added 
section 1150A to the Act, requiring a PBM under a contract with a QHP 
offered through an Exchange established by a state under section 1311 
of the ACA \349\ to provide certain prescription drug information to 
the QHP and to Secretary at such times, and in such form and manner, as 
the Secretary shall specify. Section 1150A(b) of the Act addresses the 
information that a QHP issuer and their PBM must report. Section

[[Page 24281]]

1150A(c) of the Act requires the Secretary to keep the information 
reported confidential and specifies that the information may not be 
disclosed by the Secretary or by a plan receiving the information, 
except that the Secretary may disclose the information in a form which 
does not disclose the identity of a specific PBM, plan, or prices 
charged for drugs for certain purposes.\350\
---------------------------------------------------------------------------

    \349\ This includes an FFE, as a Federal Exchange may be 
considered an Exchange established under section 1311 of the ACA. 
King v. Burwell, 576 U.S. 988 (2015).
    \350\ The purposes are: As the Secretary determines to be 
necessary to carry out section 1150A or part D of title XVIII; to 
permit the Comptroller General to review the information provided; 
to permit the Director of the Congressional Budget Office to review 
the information provided; and, to States to carry out section 1311 
of the ACA.
---------------------------------------------------------------------------

    On January 1, 2020 \351\ and on September 11, 2020,\352\ we 
published notices in the Federal Register and solicited public comment 
on the burden related to the collection of information required by 
section 1150A of the Act. In those information collections and in this 
final rule, we fulfill this statutory requirement with the goal of 
imposing the least amount of burden possible while collecting data that 
would be usable to ensure increased transparency on prescription drug 
coverage in QHPs.
---------------------------------------------------------------------------

    \351\ 85 FR 4993 through 4994.
    \352\ 85 FR 56227 through 56229.
---------------------------------------------------------------------------

    For example, to reduce overall burden, we will collect data 
directly from PBMs that contract with QHPs directly, rather than 
require QHP issuers to serve as a go-between their PBM and CMS.\353\ 
This approach will reduce overall burden on QHP issuers and will place 
the onus to report data on those entities that QHP issuers have already 
entrusted to oversee and manage their prescription drug line of 
business.
---------------------------------------------------------------------------

    \353\ Under this interpretation, QHP issuers will be required to 
report data directly to CMS only when the QHP issuer does not 
contract with a PBM to administer their drug benefit.
---------------------------------------------------------------------------

    These information collections also explained how we utilize the 
reporting paradigm currently used by CMS' DIR reporting requirement 
which collects, in part, the data required by section 1150A(a)(1) of 
the Act from Prescription Drug Plan sponsors of a prescription drug 
plan and Medicare Advantage organizations offering a Medicare Advantage 
Prescription Drug Plan under part D of title XVII. We noted our 
intention to utilize the DIR reporting mechanisms only to the extent 
authorized solely by section 1150A(a)(2), explaining our understanding 
that DIR reporting is not authorized by section 1150A alone.\354\ Usage 
of these existing CMS reporting paradigms ensures minimal impact of a 
new data collection on QHP issuers and PBMs, given the longstanding 
industry use of the DIR reporting mechanism. The payer community is 
familiar with fulfilling the DIR reporting requirement. Therefore, we 
believe replicating that collection to the greatest degree will enable 
respondents to implement this data collection with minimal relative 
burden.
---------------------------------------------------------------------------

    \354\ Except for PBM spread amount aggregated to the plan 
benefit package level, section 1150A imposes no additional reporting 
requirements for entities subject to DIR reporting. See 77 FR 22094.
---------------------------------------------------------------------------

11. Audits of APTC, CSRs, and User Fees (Sec.  156.480(c))
    We are providing more clarity around the APTC, CSR, and user fee 
program audits and establishing authority for HHS to conduct compliance 
reviews to assess compliance with federal APTC, CSR, and user fee 
standards by finalizing amendments to Sec.  156.480(c), with slight 
modifications to certain audit timeframes in response to comments 
requesting issuers be provided more time to provide the initial audit 
data submissions and written corrective action plans. QHP issuers being 
audited for compliance with federal APTC, CSR, and user fee standards 
will be required to comply with audit requirements including 
participating in entrance and exit conferences, submitting complete and 
accurate data to HHS in a timely manner, and providing responses to 
additional requests for information from HHS and to preliminary audit 
reports in a timely manner. If an audit results in a finding, issuers 
must also provide written corrective plans in the time and manner set 
forth by HHS. We are also codifying our authority to recoup APTC and 
CSR payments if they are not adequately substantiated by the data and 
information submitted by issuers during the course of the audit.
    We anticipate that compliance with APTC, CSR, and user fee program 
audits will take 120 hours by a business operations specialist (at a 
rate of $77.14 per hour), 40 hours by a computer systems analyst (at a 
rate of $92.46 per hour), and 20 hours by a compliance officer (at a 
rate of $70.06 per hour) per issuer per benefit year. The cost per 
issuer will be approximately $14,356. While the number of QHP issuers 
participating in the APTC, CSR, and user fee programs varies per 
benefit year (for example, there were 561 QHP issuers participating in 
the programs for the 2019 benefit year), HHS only intends to audit a 
small percentage of these issuers, roughly 30-60 issuers per benefit 
year. Depending on the number of issuers audited each year, the total 
cost to issuers being audited will be between $430,692 and $861,384, 
with an average annual cost of approximately $646,038.
    We anticipate that APTC, CSR, and user fee program compliance 
reviews will take 30 hours by a business operations specialist (at a 
rate of $77.14 per hour), 10 hours by a computer systems analyst (at a 
rate of $92.46 per hour), and 5 hours by a compliance officer (at a 
rate of $70.06 per hour) per issuer per benefit year. The cost per 
issuer will be approximately $3,589. While the number of QHP issuers 
participating in the APTC, CSR, and user fee programs varies per 
benefit year, (for example, there were 561 QHP issuers participating in 
the programs for the 2019 benefit year), HHS only intends to conduct 
compliance reviews for no more than 15 issuers per benefit year. The 
total annual cost to issuers undergoing compliance reviews will be 
approximately $53,836.
12. Quality Rating System (Sec.  156.1120) and Enrollee Satisfaction 
Survey System (Sec.  156.1125)
    We are finalizing removal of the composite level and domain level 
of the QRS hierarchy, which is a key element of the QRS framework that 
establishes how quality measures are organized for scoring, rating and 
reporting purposes. We will also make the full QHP Enrollee Survey 
results publicly available in an annual PUF. We anticipate that these 
changes will benefit consumers and QHP issuers by increasing 
transparency and availability of QHP survey data through publication of 
a nationwide PUF, and simplifying the QRS scoring hierarchy to improve 
understanding of QRS quality rating information and alignment with 
other CMS quality reporting programs. Neither refinement will alter the 
data collection and reporting requirements for the QRS and QHP Enrollee 
Survey because QHP issuers are already required to report all data 
needed to support a QHP Enrollee Survey PUF and simplified QRS 
hierarchy. Therefore, these refinements will create no additional cost 
or burden for QHP issuers.
13. Medical Loss Ratio (Sec. Sec.  158.103, 158.130, 158.240, and 
158.241)
    We are finalizing the proposal to amend Sec.  158.103 to establish 
the definition of prescription drug rebates and other price concessions 
that issuers must deduct from incurred claims for MLR reporting and 
rebate calculation purposes pursuant to Sec.  158.140(b)(1)(i). We do 
not expect this to change the result of the regulatory impact analysis 
previously conducted for the 2021 Payment Notice with respect to the 
requirement that issuers deduct from MLR incurred claims not only 
prescription drug rebates received by

[[Page 24282]]

the issuer, but also any price concessions received and retained by the 
issuer and any prescription drug rebates and other price concessions 
received and retained by a PBM or other entity providing pharmacy 
benefit management services to the issuer.
    We are also finalizing the proposal that issuers that choose to 
provide temporary premium credits to consumers during a declared PHE in 
2021 and beyond when permitted by HHS must account for these credits as 
reductions to premium for the applicable months when reporting earned 
premium for the applicable MLR reporting year. Although we do not know 
how many states will permit issuers to provide temporary credits to 
reduce premiums or how many issuers will elect to do so, for purposes 
of this analysis, we previously estimated in the interim final rule on 
COVID-19 (85 FR 54820) that approximately 40 percent of issuers 
offering individual, small group or merged market health insurance 
coverage will provide these premium credits to reduce the premiums 
charged to enrollees to support continuity of coverage during the PHE 
for COVID-19. We do not estimate a change to the cost or burden 
previously estimated in that final rule, and anticipate that that 
regulatory impact estimate would extend to 2021 and beyond. Although we 
do not know the number of issuers that will provide these temporary 
premium credits or the amount of premium credits that issuers may elect 
to provide, for purposes of this estimate we assume that such premium 
credits will on average constitute approximately 8 percent of total 
annual premium (equivalent to one month of premium), as previously 
estimated in that final rule. Because the MLR calculation uses three 
consecutive years of data, there may be additional rebate decreases in 
subsequent years, although the impact on rebates might be smaller as 
issuers will likely account for the premium relief provided to 
enrollees through these temporary premiums credits at the time they 
develop premium rates for the 2022 benefit year and future benefit 
years.
    As noted in section IV of this final rule, on March 4, 2021, the 
U.S. District Court for the District of Maryland, in City of Columbus, 
et al. v. Cochran, vacated 45 CFR 158.221(b)(8). As a result, we are 
finalizing the deletion of Sec.  158.221(b)(8) and removing the option 
that issuers had for the 2017-2019 MLR reporting years to report a 
single standardized QIA expense amount equal to 0.8 percent of earned 
premium in lieu of reporting the issuers' actual expenditures for 
activities that improve health care quality. The 0.8 percent QIA option 
was added to 45 CFR part 158 in the 2019 Payment Notice final rule in 
order to reduce the burden on issuers required to accurately identify, 
track, and report QIA expenses. In that final rule, based on MLR data 
for the 2015 MLR reporting year, HHS estimated that the amendment would 
decrease rebate payments from issuers to consumers by approximately $23 
million. Accordingly, we estimate that finalizing the deletion of Sec.  
158.221(b)(8) in this final rule will increase rebate payments from 
issuers to consumers by approximately $23 million annually.
    We are also finalizing the proposal to add a new Sec.  158.240(g) 
to explicitly allow issuers to prepay a portion or all of their 
estimated MLR rebates to enrollees for a given MLR reporting year, and 
to establish a safe harbor allowing such issuers, under certain 
conditions, to defer the payment of rebates remaining after prepayment 
until the following MLR reporting year. We are additionally finalizing 
the proposal to amend Sec.  158.241(a) to allow issuers to provide 
rebates in form of a premium credit prior to the date that the rules 
previously provided. We do not expect these provisions to have a 
significant quantitative impact as they will not change the rebate 
amounts provided by issuers to enrollees. Since it is easiest and most 
cost-effective for issuers to conduct rebate disbursement activities 
all at once, the additional rebates will generally be paid during the 
following year's disbursement cycle--that is, if 95 percent of rebates 
for 2020 was prepaid during Jan.-July 2021, the remainder will be paid 
no later than Sept. 2022 (possibly earlier in 2022 if the issuer 
decides to prepay again). However, we note that there may be some 
increased administrative burden on issuers that owe rebates remaining 
after prepayment associated with good faith efforts to locate 
enrollees, if any, with whom they no longer have a direct economic 
relationship.
14. 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 this rule will be reviewed by 
all affected issuers, states, PBMs, and some individuals and other 
entities that commented on the proposed rule. We acknowledge that this 
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 affected entities and commenters to be a fair estimate of the 
number of reviewers of this rule.
    We are required to issue a substantial portion of this rule each 
year under our regulations and we estimate that approximately half of 
the remaining provisions would 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 final 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 issue 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 $110.74 per hour, including overhead and fringe 
benefits.\355\ Assuming an average reading speed, we estimate that it 
will take approximately 1 hours to review the relevant portions of this 
final rule that causes unanticipated burden. We assume that 750 
entities will review this final rule. For each entity that reviews the 
rule, the estimated cost is approximately $110.74. Therefore, we 
estimate that the total cost of reviewing this regulation is 
approximately $83,055 ($110.74 x 750 reviewers).
---------------------------------------------------------------------------

    \355\ https://www.bls.gov/oes/current/oes_nat.htm.
---------------------------------------------------------------------------

D. Regulatory Alternatives Considered

    In developing the policies contained in this final rule, we 
considered numerous alternatives to the presented proposals. Below we 
discuss the key regulatory alternatives that we considered.
    Under part 153 of this final rule, we are finalizing an approach to 
recalibrate the risk adjustment models for the 2022 benefit year using 
2016, 2017, and 2018 enrollee-level EDGE data.\356\ The purpose of 
using these data years is to better ensure that the applicable benefit 
year's risk adjustment model coefficients can be included in the 
applicable benefit year's proposed payment notice. As part of our 
consideration of proposals to recalibrate the risk adjustment models 
for the 2022 benefit year, we also considered recalibrating the models 
using the 2017,

[[Page 24283]]

2018, and 2019 benefit year enrollee-level EDGE data. If we had 
proposed that approach, we would not have been able to provide the 
proposed coefficients in the proposed rule and would have had to 
instead display draft coefficients only reflective of the 2017 and 2018 
benefit years of enrollee-level EDGE data. This approach would not have 
achieved the desired policy goals--namely, to respond to stakeholder 
requests for HHS to take steps to provide the draft and final 
coefficients at an earlier time.
---------------------------------------------------------------------------

    \356\ As detailed above, the one exception relates to RXC 09, 
which involved the use of only 2016 and 2017 enrollee-level data to 
develop the applicable 2022 benefit year coefficients and 
interaction terms.
---------------------------------------------------------------------------

    We also considered alternatives to the proposed model specification 
changes and revised enrollment duration factors that we are not 
finalizing in this rulemaking. For example, we initially considered 
adding only a non-linear term or only adopting new HCC counts terms for 
all enrollees to the adult and child risk adjustment models. As 
described earlier in this final rule, we had convergence issues with 
the non-linear model specifications and concerns that the HCC counts 
terms approach posed significant gaming concerns when pursued 
separately.
    In addition to the non-linear and HCC counts model specifications, 
we also considered alternatives to the two-stage specification and HCC 
interacted counts model. Specifically, we tested various alternative 
caps for the weights based on the distribution of costs, but found the 
finalized caps resulted in better prediction on average. For the 
prediction weights, we tested various alternative forms of weights, 
including reciprocals of square root of prediction, log of prediction, 
and residuals from first step estimation, but the reciprocal of the 
capped predictions resulted in better predictive ratios for low-cost 
enrollees compared to any of the other weights.
    For the interacted HCC counts factors, we tested several HCCs and 
considered adding and removing certain HCCs from the list in Table 3 in 
the proposed rule. We choose the list of HCCs in Table 3 of the 
proposed rule because including those HCCs most improved prediction for 
enrollees with the highest costs, multiple HCCs, and with these 
specific HCCs. For the HCC interacted counts, we also considered 
various alternatives to structure the interacted HCC counts, such as 
applying individual interacted HCC counts factors (between 1-10 based 
on the number of HCCs an enrollee has) to each of the selected HCCs 
included in the models (instead of combining all of the selected HCCs 
into two severity and transplant indicator groups). We choose the 
proposed model specifications because they would add fewer additional 
factors to the models without sacrificing any significant predictive 
accuracy. However, as noted above, after consideration of comments, we 
are not finalizing the adoption of the either the proposed two-stage 
model specification or interacted HCC counts factors in the adult and 
child models or the accompanying removal of the existing severity 
illness indicators from the adult models.
    For the enrollment duration factors in the adult risk adjustment 
models, we proposed modifying the enrollment duration factors to apply 
monthly duration factors of up to 6 months for those with HCCs. The 
purpose of this proposed change was to address the underprediction of 
plan liability for adults with HCCs. As part of this assessment, we 
considered whether enrollment duration factors by market type may be 
warranted. However, as described earlier in this final rule, we did not 
find a major distinction in market-specific incremental monthly 
enrollment duration factor risk scores after isolating the enrollment 
duration factors to enrollees with HCCs. However, as detailed above, 
after consideration of comments, we are not finalizing the adoption of 
the new proposed adult model enrollment duration factors or the 
accompanying removal of the current adult model enrollment duration 
factors.
    In regards to the changes to Sec.  155.320, we considered taking no 
action to modify the requirement that when an Exchange does not 
reasonably expect to obtain sufficient verification data related to 
enrollment in or eligibility for employer sponsored coverage that the 
Exchange must select a statistically significant random sample of 
applicants and attempt to verify their attestation with the employer 
listed on their Exchange application. However, based on HHS's 
experience conducting sampling, this manual verification process 
requires significant resources for a low return on investment, as using 
this method HHS identified only a small population of applicants who 
received APTC/CSR payments inappropriately. We ultimately determined 
that a verification process for employer-sponsored coverage should be 
one that is evidence or risk-based and that not taking enforcement 
action against Exchanges that do not conduct random sampling was 
appropriate as we anticipate future rulemaking is necessary to ensure 
that Exchanges have more flexibility for such verifications.
    We considered taking no action regarding our policy to add a new 
Sec.  155.420(a)(4)(iii)(C) to allow enrollees and their dependents to 
enroll in a new QHP of a lower metal level \357\ if they qualify for a 
special enrollment period due to becoming newly ineligible for APTC. 
However, based on questions and concerns from agents and brokers, the 
previous policy prevents some enrollees from maintaining continuous 
coverage because they lose a significant amount of financial assistance 
that would help them purchase coverage, and cannot enroll in a new, 
less costly QHP of a lower metal level. HHS believes this policy is 
unlikely to result in adverse selection, and may improve the risk pool 
by supporting continued health insurance enrollment by healthy 
individuals who would be forced to end coverage in response to an 
increase in premium.
---------------------------------------------------------------------------

    \357\ Section 1302(d) of the ACA describes the various metal 
levels of coverage based on AV, and section 2707(a) of the PHS Act 
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 includes the 
requirement to offer coverage at the metal levels of coverage 
described in section 1302(d) of the ACA. Consumer-facing 
HealthCare.gov content explains that metal levels serve as an 
indicator of ``how you and your plan split the costs of your health 
care,'' noting that lower levels like bronze plans have lower 
monthly premiums but higher out of pocket costs when consumers 
access care, while higher levels like gold have higher monthly 
premiums but lower out of pocket costs to access care--see https://www.healthcare.gov/choose-a-plan/plans-categories/.
---------------------------------------------------------------------------

    We also considered whether to provide additional flexibility to 
allow enrollees and their dependents who become newly eligible for APTC 
in accordance with section 155.420(d)(6)(i) or (ii) to enroll in a QHP 
of a higher metal level, because we recognize becoming newly eligible 
for APTC may increase the affordability of higher metal level plans for 
some individuals. However, as discussed in the proposed rule, we 
believed including this flexibility would largely exempt the special 
enrollment periods at paragraph (d)(6)(i) and (ii) from the rules at 
155.420(a)(4)(iii), which might make it likely that more individuals 
would change coverage levels in response to health status changes. More 
importantly, while we believe the flexibilities for individuals who 
become newly ineligible for APTC are needed in order to promote 
continuous coverage for individuals who can no longer afford their 
original plan choice, no similar affordability and continuous coverage 
concerns exist for enrolled consumers who gain APTC eligibility during 
the coverage year. However, as noted in preamble, we received several 
comments requesting that HHS provide this flexibility for enrollees who 
newly become eligible for APTC. Therefore,

[[Page 24284]]

while we did not propose additional plan flexibility for enrollees who 
become newly eligible for APTC, we will continue to study potential 
policies to promote continuous coverage and provide consumers with 
flexibility.
    We considered taking no action regarding our policy to add a new 
Sec.  155.420(c)(5) to allow a qualified individual, dependent or 
enrollee that did not receive timely notice of a triggering event or 
was otherwise reasonably unaware that a triggering event described in 
Sec.  155.420(d) occurred to select a new plan within 60 days of the 
date he or she knew, or reasonably should have known, of the occurrence 
of the triggering event. However, in some circumstances this would 
result in consumers, through no fault of their own, being unable to 
access a special enrollment period for which they were eligible. 
Additionally, we considered not adding new Sec.  155.420(b)(5) to 
provide a qualified individual, dependent, or enrollee described in new 
Sec.  155.420(c)(5) with the option for a retroactive effective date. 
Failing to provide the option for a retroactive effective date would 
necessarily result in a gap in coverage, and therefore hinder a 
consumer's ability to maintain continuous coverage.
    We also considered limiting the applicability of the policy to add 
a new Sec.  155.420(c)(5) to a qualified individual, enrollee, or 
dependent who does not receive notice or become reasonably aware of the 
occurrence of a triggering event until more than 15 days after the 
triggering event. However, failing to apply the new Sec.  155.420(c)(5) 
to qualified individuals, enrollees, or dependents who receive notice 
or become reasonably aware of the occurrence of a triggering event 15 
days or less after the triggering event and eliminating the option for 
a retroactive effective date for those individuals would result in a 
gap in coverage for such individuals and hinder their ability to 
maintain continuous coverage.
    We considered taking no action regarding our policy to add new 
paragraph (d)(15) to Sec.  155.420 to specify that complete cessation 
of employer contributions or government subsidies to COBRA continuation 
coverage is a special enrollment period triggering event. However, 
codifying this policy in regulation provides transparency to a long-
standing interpretation of the Exchanges on the Federal platform. 
Additionally, codifying this policy in regulation ensures alignment 
across all Exchanges and in the off-Exchange individual market.
    For the revisions to Sec.  156.295 and addition of Sec.  184.50 to 
require certain prescription drug reporting, we considered, but did not 
yet require, the reporting of data described in section 1150A(b)(1) 
broken down by pharmacy type (which includes an independent pharmacy, 
chain pharmacy, supermarket pharmacy, or mass merchandiser pharmacy 
that is licensed as a pharmacy by the state and that dispenses 
medication to the general public). As mentioned in this final rule, we 
are aware that it is not currently possible to report such data by 
pharmacy type because pharmacy type is not a standard classification 
currently captured in industry databases or files. While we believe the 
imposition of this level of reporting would impose unreasonable burden 
at this time, we intend to begin collecting this information in the 
future.

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 final rule on small entities, unless the 
head of the agency can certify that the rule will not have a 
significant economic impact on a substantial number of small entities. 
The RFA generally defines a ``small entity'' as (1) a proprietary firm 
meeting the size standards of the Small Business Administration (SBA), 
(2) a not-for-profit organization that is not dominant in its field, or 
(3) a small government jurisdiction with a population of less than 
50,000. States and individuals are not included in the definition of 
``small entity.'' HHS uses a change in revenues of more than 3 to 5 
percent as its measure of significant economic impact on a substantial 
number of small entities.
    In this rule, we finalize standards for the risk adjustment 
program, which are intended to stabilize premiums and reduce incentives 
for issuers to avoid higher-risk enrollees. We believe that health 
insurance issuers and group health plans would be classified under the 
North American Industry Classification System code 524114 (Direct 
Health and Medical Insurance Carriers). According to SBA size 
standards, entities with average annual receipts of $41.5 million or 
less are considered small entities for these North American Industry 
Classification System codes. Issuers could possibly be classified in 
621491 (HMO Medical Centers) and, if this is the case, the SBA size 
standard would be $35 million or less.\358\ We believe that few, if 
any, insurance companies underwriting comprehensive health insurance 
policies (in contrast, for example, to travel insurance policies or 
dental discount policies) fall below these size thresholds. Based on 
data from MLR annual report \359\ submissions for the 2019 MLR 
reporting year, approximately 77 out of 479 issuers of health insurance 
coverage nationwide had total premium revenue of $41.5 million or less. 
This estimate may overstate the actual number of small health insurance 
companies that may be affected, since over 67 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 will result in their revenues exceeding $41.5 million. Therefore, 
we do not expect the provisions of this rule to affect a substantial 
number of small entities.
---------------------------------------------------------------------------

    \358\ https://www.sba.gov/document/support--table-size-standards.
    \359\ Available at https://www.cms.gov/CCIIO/Resources/Data-Resources/mlr.html.
---------------------------------------------------------------------------

    In this rule, we are requiring certain QHP issuers or their PBMs to 
report certain prescription drug information to CMS. We are not aware 
of any QHP issuer or PBM that contracts with a QHP issuer to administer 
their prescription drug benefit which would be considered a ``small 
entity'' under the RFA.
    In addition, section 1102(b) of the Act requires us to prepare a 
regulatory impact analysis if a rule under title XVIII, title XIX, or 
part B of title 42 of the Act may have a significant impact on the 
operations of a substantial number of small rural hospitals. This 
analysis must conform to the provisions of section 604 of the RFA. For 
purposes of section 1102(b) of the Act, we define a small rural 
hospital as a hospital that is located outside of a metropolitan 
statistical area and has fewer than 100 beds. While this rule is not 
subject to section 1102 of the Act, we have determined that this rule 
will not affect small rural hospitals. Therefore, the Secretary has 
determined that this rule will not have a significant impact on the 
operations of a substantial number of small rural hospitals.

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 one year by a 
state, local, or Tribal governments, in the aggregate, or by the 
private sector, of $100 million in 1995 dollars, updated annually for 
inflation. In 2021 that threshold is approximately $158

[[Page 24285]]

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 issues a final rule that imposes substantial 
direct costs on state and local governments, preempts state law, or 
otherwise has federalism implications. In our view, while this final 
rule will not impose substantial direct requirement costs on state and 
local governments, this regulation has federalism implications due to 
potential 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.
    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, we 
have engaged in efforts to consult with and work cooperatively with 
affected states, including participating in conference calls with and 
attending conferences of the NAIC, and consulting with state insurance 
officials on an individual basis.
    While developing this rule, we attempted to balance the states' 
interests in regulating health insurance issuers with the need to 
ensure market stability. By doing so, we 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, those states had 
the opportunity to use funds under Exchange Planning and Establishment 
Grants to fund the development of data. Accordingly, some of the 
initial cost of creating 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 state. A user fee is assessed on issuers under all existing 
Exchange models, including State Exchanges where the user fee is 
assessed by the state, SBE-FPs, and the FFEs.

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 the Congress and the Comptroller for 
review. Pursuant to the Congressional Review Act, the Office of 
Information and Regulatory Affairs designated this final rule as a 
``major rule'' as that term is defined in 5 U.S.C. 804(2), because it 
is likely to result in an annual effect on the economy of $100 million 
or more.
    I, Elizabeth Richter, Acting Administrator of the Centers for 
Medicare & Medicaid Services, approved this document on April 21, 2021.

List of Subjects

45 CFR Part 147

    Age discrimination, Citizenship and naturalization, Civil rights, 
Health care, Health insurance, Individuals with disabilities, 
Intergovernmental relations, Reporting and recordkeeping requirements, 
Sex discrimination.

45 CFR Part 150

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

45 CFR Part 153

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

45 CFR Part 155

    Administrative practice and procedure, Advertising, Age 
discrimination, Brokers, Civil rights, Citizenship and naturalization, 
Conflict of interests, Consumer protection, Grant programs--health, 
Grants administration, 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, Sex discrimination, State and local governments, 
Technical assistance, Taxes, Women, Youth.

45 CFR Part 156

    Administrative practice and procedure, Advertising, Advisory 
committees, Age discrimination, Alaska, Brokers, Citizenship and 
naturalization, Civil rights, 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, 
Intergovernmental relations, Loan programs--health, Medicaid, 
Organization and functions (Government agencies), Prescription drugs, 
Public assistance programs, Reporting and recordkeeping requirements, 
Sex discrimination, State and local governments, Sunshine Act, 
Technical assistance, Women, Youth.

45 CFR Part 158

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

45 CFR Part 184

    Administrative practice and procedure, Consumer protection, Health 
care, Health insurance, Health maintenance organization (HMO), 
Organization and functions (Government agencies), Prescription Drugs, 
Reporting and recordkeeping requirements.

    For the reasons set forth in the preamble, under the authority at 5 
U.S.C. 301, the Department of Health and Human Services proposes to 
amend 45 CFR subtitle A, subchapter B, 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: 42 U.S.C. 300gg through 300gg-63, 300gg-91, and 
300gg-92, as amended, and section 3203, Pub. L. 116-136, 134 Stat. 
281.


0
2. Section 147.104 is amended by revising paragraphs (b)(2)(ii) and 
(4)(ii) to read as follows:


Sec.  147.104  Guaranteed availability of coverage.

* * * * *
    (b) * * *
    (2) * * *
    (ii) In applying this paragraph (b)(2), a reference in Sec.  
155.420 (other than in Sec. Sec.  155.420(a)(5) and (d)(4)) of this 
subchapter to a ``QHP'' is deemed to refer to a plan, a reference to 
``the

[[Page 24286]]

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. For purposes of Sec.  
155.420(d)(4) of this subchapter, ``the Exchange'' is deemed to refer 
to the Exchange or the health plan, as applicable.
* * * * *
    (4) * * *
    (ii) In the individual market, subject to Sec.  155.420(c)(5) of 
this subchapter, individuals must be provided 60 calendar days after 
the date of an event described in paragraph (b)(2) and (3) of this 
section to elect coverage, as well as 60 calendar days before certain 
triggering events as provided for in Sec.  155.420(c)(2) of this 
subchapter.
* * * * *

PART 150--CMS ENFORCEMENT IN GROUP AND INDIVIDUAL INSURANCE MARKETS

0
3. The authority citation for part 150 is revised to read as follows:

    Authority: 42 U.S.C. 300gg through 300gg-63, 300gg-91, and 
300gg-92, as amended.


Sec.  150.103  [Amended]

0
4. In Sec.  150.103, amend the definition of ``Complaint'' by removing 
the word ``HIPAA'' and adding in its place ``PHS Act''.


Sec.  150.205  [Amended]

0
5. In Sec.  150.205, amend paragraph (e)(2) by removing the word 
``HIPAA'' and adding in its place ``PHS Act''.


Sec.  150.213  [Amended]

0
6. In Sec.  150.213, amend paragraph (b) by removing the word ``HIPAA'' 
and adding in its place ``PHS Act''.


Sec.  150.303  [Amended]

0
7. In Sec.  150.303, amend paragraph (a) introductory text by removing 
the word ``HIPAA'' and adding in its place ``PHS Act''.


Sec.  150.305  [Amended]

0
8. In Sec.  150.305, amend paragraphs (a)(1), (a)(2), (b)(1), and 
(c)(1) by removing the word ``HIPAA'' each time it appears and adding 
in its place ``PHS Act''.


Sec.  150.311  [Amended]

0
9. In Sec.  150.311, amend paragraph (g) by removing the word ``HIPAA'' 
and adding in its place ``PHS Act''.


Sec.  150.313  [Amended]

0
10. In Sec.  150.313, amend paragraph (b) by removing the word 
``HIPAA'' and adding in its place ``PHS Act''.

0
11. Amend Sec.  150.401 by revising the definitions of ``Filing date'' 
and ``Hearing'' to read as follows:


Sec.  150.401  Definitions.

* * * * *
    Filing date means the date filed electronically.
    Hearing includes a hearing on a written record as well as an in-
person, telephone, or video teleconference hearing.
* * * * *


Sec.  150.419  [Amended]

0
12. In Sec.  150.419, amend paragraph (a) by removing the phrase ``or 
by telephone'' and adding in its place the phrase ``by telephone, or by 
video teleconference''.

0
13. Amend Sec.  150.427 by revising paragraph (a) introductory text and 
paragraph (b) to read as follows:


Sec.  150.427  Form and service of submissions.

    (a) Every submission filed with the ALJ must be filed 
electronically and include:
* * * * *
    (b) A party filing a submission with the ALJ must, at the time of 
filing, serve a copy of such submission on the opposing party. An 
intervenor filing a submission with the ALJ must, at the time of 
filing, serve a copy of the submission on all parties. If a party is 
represented by an attorney, service must be made on the attorney. An 
electronically filed submission is considered served on all parties 
using the electronic filing system.

0
14. Revise Sec.  150.431 to read as follows:


Sec.  150.431  Acknowledgment of request for hearing.

    After receipt of the request for hearing, the ALJ assigned to the 
case or someone acting on behalf of the ALJ will send a written notice 
to the parties that acknowledges receipt of the request for hearing, 
identifies the docket number assigned to the case, and provides 
instructions for filing submissions and other general information 
concerning procedures. The ALJ will set out the next steps in the case 
either as part of the acknowledgement or on a later date.

0
15. Amend Sec.  150.441 by revising paragraph (e) to read as follows:


Sec.  150.441  Prehearing conferences.

* * * * *
    (e) Establishing a schedule for an in-person, telephone, or video 
teleconference hearing, including setting deadlines for the submission 
of written direct testimony or for the written reports of experts.
* * * * *


Sec.  150.447  [Amended]

0
16. In Sec.  150.447, amend paragraph (a) by removing the phrase ``or 
by telephone'' and adding in its place the phrase ``by telephone, or by 
video teleconference''.

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

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

    Authority:  42 U.S.C. 18031, 18041, and 18061 through 18063.


0
18. Section 153.320 is amended by revising paragraph (c) as follows:


Sec.  153.320  Federally certified risk adjustment methodology.

* * * * *
    (c) Use of methodology for States that do not operate a risk 
adjustment program. HHS will specify in notice-and-comment rulemaking 
by HHS in advance of the applicable benefit year, the Federally 
certified risk adjustment methodology that will apply in States that do 
not operate a risk adjustment program.
* * * * *

0
19. Section 153.410 is amended by revising paragraph (d) to read as 
follows:


Sec.  153.410  Requests for reinsurance payment.

* * * * *
    (d) Audits and compliance reviews. HHS or its designee may audit or 
conduct a compliance review of an issuer of a reinsurance-eligible plan 
to assess its compliance with the applicable requirements of this 
subpart and subpart H of this part. Compliance reviews conducted under 
this section will follow the standards set forth in Sec.  156.715 of 
this subchapter.
    (1) Notice of audit. HHS will provide at least 30 calendar days 
advance notice of its intent to conduct an audit of an issuer of a 
reinsurance-eligible plan.
    (i) Conferences. All audits will include an entrance conference at 
which the scope of the audit will be presented and an exit conference 
at which the initial audit findings will be discussed.
    (ii) [Reserved]
    (2) Compliance with audit activities. To comply with an audit under 
this section, the issuer must:
    (i) Ensure that its relevant employees, agents, contractors, 
subcontractors,

[[Page 24287]]

downstream entities, and delegated entities cooperate with any audit or 
compliance review under this section;
    (ii) Submit complete and accurate data to HHS or its designees that 
is necessary to complete the audit, in the format and manner specified 
by HHS, no later than 30 calendar days after the initial audit response 
deadline established by HHS at the entrance conference described in 
paragraph (d)(1)(i) of this section for the applicable benefit year;
    (iii) Respond to all audit notices, letters, and inquiries, 
including requests for supplemental or supporting information, as 
requested by HHS, no later than 15 calendar days after the date of the 
notice, letter, request, or inquiry; and
    (iv) In circumstances in which an issuer cannot provide the 
requested data or response to HHS within the timeframes under paragraph 
(d)(2)(ii) or (iii) of this section, as applicable, the issuer may make 
a written request for an extension to HHS. The extension request must 
be submitted within the timeframe established under paragraph 
(d)(2)(ii) or (iii) of this section, as applicable, and must detail the 
reason for the extension request and the good cause in support of the 
request. If the extension is granted, the issuer must respond within 
the timeframe specified in HHS's notice granting the extension of time.
    (3) Preliminary audit findings. HHS will share its preliminary 
audit findings with the issuer, who will then have 30 calendar days to 
respond to such findings in the format and manner specified by HHS.
    (i) If the issuer does not dispute or otherwise respond to the 
preliminary findings, the audit findings will become final.
    (ii) If the issuer responds and disputes the preliminary findings, 
HHS will review and consider such response and finalize the audit 
findings after such review.
    (4) Final audit findings. If an audit results in the inclusion of a 
finding in the final audit report, the issuer must comply with the 
actions set forth in the final audit report in the manner and timeframe 
established by HHS, and the issuer must complete all of the following:
    (i) Within 45 calendar days of the issuance of the final audit 
report, provide a written corrective action plan to HHS for approval.
    (ii) Implement that plan.
    (iii) Provide to HHS written documentation of the corrective 
actions once taken.
    (5) Failure to comply with audit activities. If an issuer fails to 
comply with the audit activities set forth in this subsection in the 
manner and timeframes specified by HHS:
    (i) HHS will notify the issuer of reinsurance payments received 
that the issuer has not adequately substantiated; and
    (ii) HHS will notify the issuer that HHS may recoup any payments 
identified in paragraph (5)(i) of this section.

0
20. Section 153.620 is amended by revising paragraph (c) to read as 
follows:


Sec.  153.620  Compliance with risk adjustment standards.

* * * * *
    (c) Audits and compliance reviews. HHS or its designee may audit or 
conduct a compliance review of an issuer of a risk adjustment covered 
plan to assess its compliance with respect to the applicable 
requirements in this subpart and subpart H of this part. Compliance 
reviews conducted under this section will follow the standards set 
forth in Sec.  156.715 of this subchapter.
    (1) Notice of audit. HHS will provide at least 30 calendar days 
advance notice of its intent to conduct an audit of an issuer of a risk 
adjustment covered plan.
    (i) Conferences. All audits will include an entrance conference at 
which the scope of the audit will be presented and an exit conference 
at which the initial audit findings will be discussed.
    (ii) [Reserved]
    (2) Compliance with audit activities. To comply with an audit under 
this section, the issuer must:
    (i) Ensure that its relevant employees, agents, contractors, 
subcontractors, downstream entities, and delegated entities cooperate 
with any audit or compliance review under this section;
    (ii) Submit complete and accurate data to HHS or its designees that 
is necessary to complete the audit, in the format and manner specified 
by HHS, no later than 30 calendar days after the initial audit response 
deadline established by HHS at the audit entrance conference described 
in paragraph (c)(1)(i) of this section for the applicable benefit year;
    (iii) Respond to all audit notices, letters, and inquiries, 
including requests for supplemental or supporting information, as 
requested by HHS, no later than 15 calendar days after the date of the 
notice, letter, request, or inquiry; and
    (iv) In circumstances in which an issuer cannot provide the 
requested data or response to HHS within the timeframes under 
paragraphs (c)(2)(ii) or (iii) of this section, as applicable, the 
issuer may make a written request for an extension to HHS. The 
extension request must be submitted within the timeframe established 
under paragraphs (c)(2)(ii) or (iii) of this section, as applicable, 
and must detail the reason for the extension request and the good cause 
in support of the request. If the extension is granted, the issuer must 
respond within the timeframe specified in HHS's notice granting the 
extension of time.
    (3) Preliminary audit findings. HHS will share its preliminary 
audit findings with the issuer, who will then have 30 calendar days to 
respond to such findings in the format and manner specified by HHS.
    (i) If the issuer does not dispute or otherwise respond to the 
preliminary findings, the audit findings will become final.
    (ii) If the issuer responds and disputes the preliminary findings, 
HHS will review and consider such response and finalize the audit 
findings after such review.
    (4) Final audit findings. If an audit results in the inclusion of a 
finding in the final audit report, the issuer must comply with the 
actions set forth in the final audit report in the manner and timeframe 
established by HHS, and the issuer must complete all of the following:
    (i) Within 45 calendar days of the issuance of the final audit 
report, provide a written corrective action plan to HHS for approval.
    (ii) Implement that plan.
    (iii) Provide to HHS written documentation of the corrective 
actions once taken.
    (5) Failure to comply with audit activities. If an issuer fails to 
comply with the audit activities set forth in this subsection in the 
manner and timeframes specified by HHS:
    (i) HHS will notify the issuer of the risk adjustment (including 
high-cost risk pool) payments that the issuer has not adequately 
substantiated; and
    (ii) HHS will notify the issuer that HHS may recoup any risk 
adjustment (including high-cost risk pool) payments identified in 
paragraph (c)(5)(i) of this section.

0
21. Section 153.630 is amended by--
0
a. Revising paragraph (d)(3); and
0
b. Adding paragraphs (g)(4) and (5).
    The revisions read as follows:


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

* * * * *
    (d) * * *
    (3) An issuer may appeal the findings of a second validation audit 
(if applicable) or the calculation of a risk

[[Page 24288]]

score error rate as result of risk adjustment data validation, under 
the process set forth in Sec.  156.1220 of this subchapter.
* * * * *
    (g) * * *
    (4) The issuer only offered small group market carryover coverage 
during the benefit year that is being audited.
    (5) The issuer was the sole issuer in the state market risk pool 
during the benefit year that is being audited and did not participate 
in any other market risk pools in the State during the benefit year 
that is being audited.

0
22. Section 153.710 is amended--
0
a. By redesignating paragraphs (e) through (g), as paragraphs (f) 
through (h), respectively;
0
b. By adding a new paragraph (e); and
0
c. In newly redesignated paragraph (h) introductory text by removing 
the reference ``paragraph (g)(3)'' and adding in its place the 
reference ``paragraph (h)(3)''.
    The addition reads as follows:


Sec.  153.710  Data requirements.

* * * * *
    (e) Materiality threshold. HHS will consider a discrepancy reported 
under paragraph (d)(2) of this section to be material if the amount in 
dispute is equal to or exceeds 1 percent of the applicable payment or 
charge payable to or due from the issuer for the benefit year, or 
$100,000, whichever is less.
* * * * *

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

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

    Authority:  42 U.S.C. 18021-18024, 18031-18033, 18041-18042, 
18051, 18054, 18071, and 18081-18083.


0
24. Section 155.20 is amended by--
0
a. Adding, in alphabetical order, the definition of ``Agent or broker 
direct enrollment technology provider'';
0
b. Removing the definition of ``Direct enrollment technology 
provider'';
0
c. Adding, in alphabetical order, the definition of ``Qualified health 
plan issuer direct enrollment technology provider'';
0
d. Revising the definition of ``Web-broker''.
    The additions and revision read as follows:


Sec.  155.20  Definitions.

* * * * *
    Agent or broker direct enrollment technology provider means a type 
of web-broker business entity that is not a licensed agent or broker 
under State law and has been engaged or created by, or is owned by an 
agent or broker, to provide technology services to facilitate 
participation in direct enrollment under Sec. Sec.  155.220(c)(3) and 
155.221.
* * * * *
    Qualified health plan issuer direct enrollment technology provider 
means a business entity that provides technology services or provides 
access to an information technology platform to QHP issuers to 
facilitate participation in direct enrollment under Sec. Sec.  155.221 
or 156.1230, including a web-broker that provides services as a direct 
enrollment technology provider to QHP issuers. A QHP issuer direct 
enrollment technology provider that provides technology services or 
provides access to an information technology platform to a QHP issuer 
will be a downstream or delegated entity of the QHP issuer that 
participates or applies to participate as a direct enrollment entity.
* * * * *
    Web-broker means an individual agent or broker, group of agents or 
brokers, or business entity registered with an Exchange under Sec.  
155.220(d)(1) that develops and hosts a non-Exchange website that 
interfaces with an Exchange to assist consumers with direct enrollment 
in QHPs offered through the Exchange as described in Sec.  
155.220(c)(3) or Sec.  155.221. The term also includes an agent or 
broker direct enrollment technology provider.

0
25. Section 155.205 is amended by revising paragraphs (c)(2)(i)(B), 
(c)(2)(iii)(B), (c)(2)(iv) introductory text, and (c)(2)(iv)(C) to read 
as follows:


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

* * * * *
    (c) * * *
    (2) * * *
    (i) * * *
    (B) For a web-broker, beginning November 1, 2015, or when such 
entity has been registered with the Exchange for at least 1 year, 
whichever is later, this standard also includes telephonic interpreter 
services in at least 150 languages.
* * * * *
    (iii) * * *
    (B) For a web-broker, beginning when such entity has been 
registered with the Exchange for at least 1 year, this standard also 
includes taglines on website content and any document that is critical 
for obtaining health insurance coverage or access to health care 
services through a QHP for qualified individuals, applicants, qualified 
employers, qualified employees, or enrollees. Website content or 
documents are deemed to be critical for obtaining health insurance 
coverage or access to health care services through a QHP if they are 
required to be provided by law or regulation to a qualified individual, 
applicant, qualified employer, qualified employee, or enrollee. Such 
taglines must indicate the availability of language services in at 
least the top 15 languages spoken by the limited English proficient 
population of the relevant State or States, as determined in guidance 
published by the Secretary. A web-broker that is licensed in and 
serving multiple States may aggregate the limited English populations 
in the States it serves to determine the top 15 languages required for 
taglines. A web-broker may satisfy tagline requirements with respect to 
website content if it posts a Web link prominently on its home page 
that directs individuals to the full text of the taglines indicating 
how individuals may obtain language assistance services, and if it also 
includes taglines on any critical stand-alone document linked to or 
embedded in the website.
    (iv) For Exchanges, QHP issuers, and web-brokers, website 
translations.
* * * * *
    (C) For a web-broker, beginning on the first day of the individual 
market open enrollment period for the 2017 benefit year, or when such 
entity has been registered with the Exchange for at least 1 year, 
whichever is later, content that is intended for qualified individuals, 
applicants, qualified employers, qualified employees, or enrollees on a 
website that is maintained by the web-broker must be translated into 
any non-English language that is spoken by a limited English proficient 
population that comprises 10 percent or more of the population of the 
relevant State, as determined in guidance published by the Secretary.
* * * * *

0
26. Section 155.220 is amended by adding paragraph (c)(6) to read as 
follows:


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

* * * * *
    (c) * * *
    (6) In addition to applicable requirements under Sec.  
155.221(b)(4), a web-broker must demonstrate operational readiness and 
compliance with applicable requirements prior to the web-broker's 
internet website being used to complete an Exchange eligibility 
application or a QHP selection, which

[[Page 24289]]

may include submission or completion, in the form and manner specified 
by HHS, of the following:
    (i) Operational data including licensure information, points of 
contact, and third-party relationships;
    (ii) Enrollment testing, prior to approval or renewal;
    (iii) Website reviews performed by HHS;
    (iv) Security and privacy assessment documentation, including:
    (A) Penetration testing results;
    (B) Security and privacy assessment reports;
    (C) Vulnerability scan results;
    (D) Plans of action and milestones; and
    (E) System security and privacy plans.
    (v) Agreements between the web-broker and HHS.
* * * * *

0
27. Section 155.221 is amended--
0
a. By revising paragraphs (b)(1), (3), and (4);
0
b. By redesignating paragraphs (c) through (h) as paragraphs (d) 
through (i), respectively.
0
c. By adding new paragraph (c); and
0
d. By amending newly redesignated paragraphs (g) introductory text, 
(g)(6), (g)(7), and (h) by removing the reference to ``paragraph (e)'' 
and adding in its place a reference to ``paragraph (f)''.
    The additions and revisions read as follows:


Sec.  155.221  Standards for direct enrollment entities and for third 
parties to perform audits of direct enrollment entities.

* * * * *
    (b) * * *
    (1) Display and market QHPs offered through the Exchange, 
individual health insurance coverage as defined in Sec.  144.103 of 
this subchapter offered outside the Exchange (including QHPs and non-
QHPs other than excepted benefits), and any other products, such as 
excepted benefits, on at least three separate website pages on its non-
Exchange website, except as permitted under paragraph (c) of this 
section;
* * * * *
    (3) Limit marketing of non-QHPs during the Exchange eligibility 
application and QHP selection process in a manner that minimizes the 
likelihood that consumers will be confused as to which products and 
plans are available through the Exchange and which products and plans 
are not, except as permitted under paragraph (c)(1) of this section;
    (4) Demonstrate operational readiness and compliance with 
applicable requirements prior to the direct enrollment entity's 
internet website being used to complete an Exchange eligibility 
application or a QHP selection, which may include submission or 
completion, in the form and manner specified by HHS, of the following:
    (i) Business audit documentation including:
    (A) Notices of intent to participate including auditor information;
    (B) Documentation packages including privacy questionnaires, 
privacy policy statements, and terms of service; and
    (C) Business audit reports including testing results.
    (ii) Security and privacy audit documentation including:
    (A) Interconnection security agreements;
    (B) Security and privacy controls assessment test plans;
    (C) Security and privacy assessment reports;
    (D) Plans of action and milestones;
    (E) Privacy impact assessments;
    (F) System security and privacy plans;
    (G) Incident response plans; and
    (H) Vulnerability scan results.
    (iii) Eligibility application audits performed by HHS;
    (iv) Online training modules offered by HHS; and
    (v) Agreements between the direct enrollment entity and HHS.
* * * * *
    (c) Exceptions to direct enrollment entity display and marketing 
requirement. For the Federally-facilitated Exchanges, a direct 
enrollment entity may:
    (1) Display and market QHPs offered through the Exchange and 
individual health insurance coverage as defined in Sec.  144.103 of 
this subchapter offered outside the Exchange (including QHPs and non-
QHPs other than excepted benefits) on the same website pages when 
assisting individuals who have communicated receipt of an offer of an 
individual coverage health reimbursement arrangement as described in 
Sec.  146.123(c) of this subchapter, as a standalone benefit, or in 
addition to an offer of an arrangement under which the individual may 
pay the portion of the premium for individual health insurance coverage 
that is not covered by an individual coverage health reimbursement 
arrangement using a salary reduction arrangement pursuant to a 
cafeteria plan under section 125 of the Internal Revenue Code, but must 
clearly distinguish between the QHPs offered through the Exchange and 
individual health insurance coverage offered outside the Exchange 
(including QHPs and non-QHPs other than excepted benefits), and 
prominently communicate that advance payments of the premium tax credit 
and cost-sharing reductions are available only for QHPs purchased 
through the Exchange, that advance payments of the premium tax credit 
are not available to individuals who accept an offer of an individual 
coverage health reimbursement arrangement or who opt out of an 
individual coverage health reimbursement arrangement that is considered 
affordable, and that a salary reduction arrangement under a cafeteria 
plan may only be used toward the cost of premiums for plans purchased 
outside the Exchange; and
    (2) Display and market Exchange-certified stand-alone dental plans 
offered outside the Exchange and non-certified stand-alone dental plans 
on the same website pages.
* * * * *

0
28. Effective May 5, 2021 amend Sec.  155.320 by--
0
a. Revising paragraph (c)(3)(iii)(A); and
0
b. Removing and reserving paragraphs (c)(3)(iii)(D) and (vi)(C)(2).
    The revision read as follows:


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

* * * * *
    (c) * * *
    (3) * * *
    (iii) * * *
    (A) Except as specified in paragraph (c)(3)(iii)(B) and (C) 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.
* * * * *

0
29. Section 155.420 is amended by--
0
a. Revising paragraph (a)(4)(ii)(B);
0
b. Adding paragraph (a)(4)(ii)(C);
0
c. Revising paragraphs (a)(4)(iii) introductory text and (b)(2)(iv);
0
d. Adding paragraph (b)(5);
0
e. Revising paragraph (c)(2);
0
f. Adding paragraphs (c)(5) and (d)(15); and

[[Page 24290]]

0
g. Revising paragraph (e)(1).
    The revisions and additions read as follows:


Sec.  155.420  Special enrollment periods.

    (a) * * *
    (4) * * *
    (ii) * * *
    (B) Beginning January 2022, if an enrollee and his or her 
dependents become newly ineligible for cost-sharing reductions in 
accordance with paragraph (d)(6)(i) or (ii) of this section and are 
enrolled in a silver-level QHP, the Exchange must allow the enrollee 
and his or her dependents to change to a QHP one metal level higher or 
lower, if they elect to change their QHP enrollment; or
    (C) No later than January 1, 2024, if an enrollee and his or her 
dependents become newly ineligible for advance payments of the premium 
tax credit in accordance with paragraph (d)(6)(i) or (ii) of this 
section, the Exchange must allow the enrollee and his or her dependents 
to change to a QHP of any metal level, if they elect to change their 
QHP enrollment;
    (iii) For the other triggering events specified in paragraph (d) of 
this section, except for paragraphs (d)(2)(i), (4), (6)(i) and (6)(ii) 
of this section for becoming newly eligible or ineligible for CSRs or, 
no later than January 1, 2024 newly ineligible for APTC, (d)(8), (9), 
(10) and (12) of this section:
* * * * *
    (b) * * *
    (2) * * *
    (iv) If a qualified individual, enrollee, or dependent, as 
applicable, loses coverage as described in paragraph (d)(1) or 
(d)(6)(iii) of this section, gains access to a new QHP as described in 
paragraph (d)(7) of this section, becomes newly eligible for enrollment 
in a QHP through the Exchange in accordance with Sec.  155.305(a)(2) as 
described in paragraph (d)(3) of this section, becomes newly eligible 
for advance payments of the premium tax credit in conjunction with a 
permanent move as described in paragraph (d)(6)(iv) of this section, or 
is enrolled in COBRA continuation coverage and employer contributions 
to or government subsidies of this coverage completely cease as 
described in paragraph (d)(15) of this section, and if the plan 
selection is made on or before the day of the triggering event, the 
Exchange must ensure that the coverage effective date is the first day 
of the month following the date of the triggering event. If the plan 
selection is made after the date of the triggering event, the Exchange 
must ensure that coverage is effective in accordance with paragraph 
(b)(1) of this section or on the first day of the following month, at 
the option of the Exchange.
* * * * *
    (5) Option for earlier effective dates due to untimely notice of 
triggering event. At the option of a qualified individual, enrollee or 
dependent who is eligible to select a plan during a period provided for 
under paragraph (c)(5) of this section, the Exchange must provide the 
earliest effective date that would have been available under paragraph 
(b) of this section, based on the applicable triggering event under 
paragraph (d) of this section.
    (c) * * *
    (2) Advanced availability. A qualified individual or his or her 
dependent who is described in paragraph (d)(1), (d)(6)(iii), or (d)(15) 
of this section has 60 days before or after the triggering event to 
select a QHP. At the option of the Exchange, a qualified individual or 
his or her dependent who is described in paragraph (d)(7) of this 
section; who is described in paragraph (d)(6)(iv) of this section and 
becomes newly eligible for advance payments of the premium tax credit 
as a result of a permanent move to a new State; or who is described in 
paragraph (d)(3) of this section and becomes newly eligible for 
enrollment in a QHP through the Exchange because he or she newly 
satisfies the requirements under Sec.  155.305(a)(2), has 60 days 
before or after the triggering event to select a QHP.
* * * * *
    (5) Availability for individuals who did not receive timely notice 
of triggering events. If a qualified individual, enrollee, or dependent 
did not receive timely notice of an event that triggers eligibility for 
a special enrollment period under this section, and otherwise was 
reasonably unaware that a triggering event described in paragraph (d) 
of this section occurred, the Exchange must allow the qualified 
individual, enrollee, or when applicable, his or her dependent to 
select a new plan within 60 days of the date that he or she knew, or 
reasonably should have known, of the occurrence of the triggering 
event.
* * * * *
    (d) * * *
    (15) The qualified individual or his or her dependent is enrolled 
in COBRA continuation coverage for which an employer is paying all or 
part of the premiums, or for which a government entity is providing 
subsidies, and the employer completely ceases its contributions to the 
qualified individual's or dependent's COBRA continuation coverage or 
government subsidies completely cease. The triggering event is the last 
day of the period for which COBRA continuation coverage is paid for or 
subsidized, in whole or in part, by an employer or government entity. 
For purposes of this paragraph, ``COBRA continuation coverage'' has the 
meaning provided for in Sec.  144.103 of this subchapter and includes 
coverage under a similar State program.
    (e) * * *
    (1) Failure to pay premiums on a timely basis, including COBRA 
continuation coverage premiums prior to expiration of COBRA 
continuation coverage, except for circumstances in which an employer 
completely ceases its contributions to COBRA continuation coverage, or 
government subsidies of COBRA continuation coverage completely cease as 
described in paragraph (d)(15) of this section, or
* * * * *

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

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

    Authority:  42 U.S.C. 18021-18024, 18031-18032, 18041-18042, 
18044, 18054, 18061, 18063, 18071, 18082, and 26 U.S.C. 36B.


0
31. Section 156.50 is amended by--
0
a. Revising the heading for paragraph (c);
0
b. Revising paragraph (c)(2);
0
c. Adding paragraph (c)(3);
0
d. Revising the heading for paragraph (d); and
0
e. Revising paragraphs (d)(1) introductory text, (d)(2) introductory 
text, (d)(2)(i)(A), (B), (d)(2)(ii), (d)(2)(iii)(B), (d)(3) 
introductory text, (d)(4) through (6), and (d)(7) introductory text.
    The revisions and addition read as follows:


Sec.  156.50  Financial support.

* * * * *
    (c) Requirement for Exchange user fees. * * *
* * * * *
    (2) To support the functions of State Exchanges on the Federal 
platform, unless the State Exchange and HHS agree on an alternative 
mechanism to collect the funds, a participating issuer offering a plan 
through a State Exchange on the Federal Exchange platform for certain 
Exchange functions described in Sec.  155.200 of this subchapter, as 
specified in a Federal platform agreement, must remit a user fee to

[[Page 24291]]

HHS, in the timeframe and manner established by HHS, equal to the 
product of the sum of the monthly user fee rate specified in the annual 
HHS notice of benefit and payment parameters for State Exchanges on the 
Federal platform for the applicable benefit year, multiplied by the 
monthly premium charged by the issuer for each policy under the plan 
where enrollment is through the State-based Exchange on the Federal 
platform.
    (3) A participating issuer offering a plan through an State-based 
Exchange on the Federal platform that has adopted the Direct Enrollment 
option or Federally-facilitated Exchange that has adopted the direct 
enrollment option as described in Sec.  155.221(j) of this subchapter, 
as specified in a Federal agreement with HHS, must remit a user fee to 
HHS each month, in the timeframe and manner established by HHS, equal 
to the product of the monthly user fee rate for the applicable benefit 
year specified in an annual HHS notice of benefit and payment 
parameters published in advance of the applicable benefit year and the 
monthly premium charged by the issuer for each policy under the plan 
where enrollment is through the State-based Exchange on the Federal 
platform that has adopted the Direct Enrollment option or Federally-
facilitated Exchange that has adopted the direct enrollment option.
    (d) Adjustment of Exchange user fees. (1) A participating issuer 
offering a plan through a Federally-facilitated Exchange or State 
Exchange on the Federal platform may qualify for an adjustment of the 
Federally-facilitated Exchange user fee specified in paragraph (c)(1) 
of this section, the State Exchange on the Federal platform user fee 
specified in paragraph (c)(2) of this section, or the user fee 
specified in paragraph (c)(3) of this section, applicable to issuers 
participating in a State Exchange on the Federal platform or a 
Federally-facilitated Exchange that has adopted the direct enrollment 
option under Sec.  155.221(j) of this subchapter, the extent that the 
participating issuer--
* * * * *
    (2) For a participating issuer described in paragraph (d)(1) of 
this section to receive an adjustment of a user fee under this 
section--
    (i) * * *
    (A) Identifying information for the participating issuer and each 
third party administrator that received a copy of the self-
certification referenced in 26 CFR 54.9815-2713A(a)(4) or 29 CFR 
2590.715-2713A(a)(4) with respect to which the participating issuer 
seeks an adjustment of the user fee specified in paragraph (c)(1), (2), 
or (3) of this section, as applicable, whether or not the participating 
issuer was the entity that made the payments for contraceptive 
services;
    (B) Identifying information for each self-insured group health plan 
with respect to which a copy of the self-certification referenced in 26 
CFR 54.9815-2713A(a)(4) or 29 CFR 2590.715-2713A(a)(4) was received by 
a third party administrator and with respect to which the participating 
issuer seeks an adjustment of the user fee specified in paragraph 
(c)(1), (2), or (3) of this section, as applicable; and
* * * * *
    (ii) Each third party administrator that intends to seek an 
adjustment on behalf of a participating issuer of the Federally-
facilitated Exchange user fee, the State-based Exchange on the Federal 
platform user fee, or the user fee applicable to issuers participating 
in a State-based Exchange on the Federal platform or a Federally-
facilitated Exchange that has adopted the direct enrollment option 
Sec.  155.221(j) of this subchapter based on payments for contraceptive 
services, must submit to HHS a notification of such intent, in a manner 
specified by HHS, by the 60th calendar day following the date on which 
the third party administrator receives the applicable copy of the self-
certification referenced in 26 CFR 54.9815-2713A(a)(4) or 29 CFR 
2590.715-2713A(a)(4).
    (iii) * * *
    (B) Identifying information for each self-insured group health plan 
with respect to which a copy of the self-certification referenced in 26 
CFR 54.9815-2713A(a)(4) or 29 CFR 2590.715-2713A(a)(4) was received by 
the third party administrator and with respect to which the 
participating issuer seeks an adjustment of the user fee specified in 
paragraph (c)(1), (2), or (3) of this section, as applicable;
* * * * *
    (3) If the requirements set forth in paragraph (d)(2) of this 
section are met, the participating issuer will be provided a reduction 
in its obligation to pay the user fee specified in paragraph (c)(1), 
(2), or (3) of this section, as applicable, equal in value to the sum 
of the following:
* * * * *
    (4) If the amount of the adjustment under paragraph (d)(3) of this 
section is greater than the amount of the participating issuer's 
obligation to pay the user fee specified in paragraph (c)(1), (2), or 
(3) of this section, as applicable, in a particular month, the 
participating issuer will be provided a credit in succeeding months in 
the amount of the excess.
    (5) Within 60 days of receipt of any adjustment of a user fee under 
this section, a participating issuer must pay each third party 
administrator with respect to which it received any portion of such 
adjustment an amount that is no less than the portion of the adjustment 
attributable to the total dollar amount of the payments for 
contraceptive services submitted by the third party administrator, as 
described in paragraph (d)(2)(iii)(D) of this section. No such payment 
is required with respect to the allowance for administrative costs and 
margin described in paragraph (d)(3)(ii) of this section. This 
paragraph does not apply if the participating issuer made the payments 
for contraceptive services on behalf of the third party administrator, 
as described in paragraph (d)(1)(i) of this section, or is in the same 
issuer group as the third party administrator.
    (6) A participating issuer that receives an adjustment in the user 
fee specified in paragraph (c)(1), (2), or (3) of this section for a 
particular calendar year must maintain for 10 years following that 
year, and make available upon request to HHS, the Office of the 
Inspector General, the Comptroller General, and their designees, 
documentation demonstrating that it timely paid each third party 
administrator with respect to which it received any such adjustment any 
amount required to be paid to the third party administrator under 
paragraph (d)(5) of this section.
    (7) A third party administrator of a plan with respect to which an 
adjustment of the user fee specified in paragraph (c)(1), (2), or (3) 
of this section is received under this section for a particular 
calendar year must maintain for 10 years following that year, and make 
available upon request to HHS, the Office of the Inspector General, the 
Comptroller General, and their designees, all of the following 
documentation:
* * * * *

0
32. Section 156.130 is amended by revising paragraph (e) to read as 
follows:


Sec.  156.130   Cost-sharing requirements.

* * * * *
    (e) Premium adjustment percentage. 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. 
HHS may publish the annual premium adjustment percentage in

[[Page 24292]]

guidance in January of the calendar year preceding the benefit year for 
which the premium adjustment percentage is applicable, unless HHS 
proposes changes to the methodology, in which case, HHS will publish 
the annual premium adjustment percentage in an annual HHS notice of 
benefit and payment parameters or another appropriate rulemaking.
* * * * *

0
33. Section 156.295 is amended by--
0
a. Revising the section heading and paragraphs (a) introductory text, 
(a)(1) and (a)(2) introductory text,
0
b. Removing paragraph (a)(3); and
0
c. Revising paragraph (b) introductory text.
    The revisions read as follows:


Sec.  156.295  Prescription drug distribution and cost reporting by QHP 
issuers.

    (a) General requirement. In a form, manner, and at such times 
specified by HHS, a QHP issuer that administers a prescription drug 
benefit without the use of a pharmacy benefit manager must provide to 
HHS the following information:
    (1) The percentage of all prescriptions that were provided under 
the QHP through retail pharmacies compared to mail order pharmacies, 
and the percentage of prescriptions for which a generic drug was 
available and dispensed compared to all drugs dispensed;
    (2) The aggregate amount, and the type of rebates, discounts or 
price concessions (excluding bona fide service fees) that the QHP 
issuer negotiates that are attributable to patient utilization under 
the QHP, and the aggregate amount of the rebates, discounts, or price 
concessions that are passed through to the QHP issuer, and the total 
number of prescriptions that were dispensed.
* * * * *
    (b) Limitation on disclosure. Information disclosed by a QHP issuer 
under this section shall not be disclosed by HHS, except that HHS may 
disclose the information in a form which does not disclose the identity 
of a specific QHP or prices charged for specific drugs, for the 
following purposes:
* * * * *

0
34. Section 156.420 is amended by revising paragraphs (a)(1)(i), 
(a)(2)(i) and (a)(3)(i) to read as follows:


Sec.  156.420  Plan variations.

    (a) * * *
    (1) * * *
    (i) An annual limitation on cost sharing no greater than the 
reduced maximum annual limitation on cost sharing specified in the 
annual HHS guidance or notice of benefit and payment parameters for 
such individuals, and
* * * * *
    (2) * * *
    (i) An annual limitation on cost sharing no greater than the 
reduced maximum annual limitation on cost sharing specified in the 
annual HHS guidance or notice of benefit and payment parameters for 
such individuals, and
* * * * *
    (3) * * *
    (i) An annual limitation on cost sharing no greater than the 
reduced maximum annual limitation on cost sharing specified in the 
annual HHS guidance or notice of benefit and payment parameters for 
such individuals, and
* * * * *

0
35. Section 156.480 is amended by revising the section heading and 
paragraph (c) to read as follows:


Sec.  156.480  Oversight of the administration of the advance payments 
of the premium tax credit, cost-sharing reductions, and user fee 
programs.

* * * * *
    (c) Audits and compliance reviews. HHS or its designee may audit or 
conduct a compliance review of an issuer offering a QHP through an 
Exchange to assess its compliance with the applicable requirements of 
this subpart and 45 CFR 156.50. Compliance reviews conducted under this 
section will follow the standards set forth in Sec.  156.715.
    (1) Notice of audit. HHS will provide at least 30 calendar days 
advance notice of its intent to conduct an audit of an issuer under 
this section.
    (i) Conferences. All audits will include an entrance conference at 
which the scope of the audit will be presented and an exit conference 
at which the initial audit findings will be discussed.
    (ii) [Reserved]
    (2) Compliance with audit activities. To comply with an audit under 
this section, the issuer must:
    (i) Ensure that its relevant employees, agents, contractors, 
subcontractors, downstream entities, and delegated entities cooperate 
with any audit or compliance review under this section;
    (ii) Submit complete and accurate data to HHS or its designees that 
is necessary to complete the audit, in the format and manner specified 
by HHS, no later than 30 calendar days after the initial audit response 
deadline established by HHS at the entrance conference described under 
paragraph (c)(1)(i) of this section for the applicable benefit year;
    (iii) Respond to all audit notices, letters, and inquiries, 
including requests for supplemental or supporting information, as 
requested by HHS, no later than 15 calendar days after the date of the 
notice, letter, request, or inquiry; and
    (iv) In circumstances in which an issuer cannot provide the 
requested data or response to HHS within the timeframes under paragraph 
(c)(2)(ii) or (iii) of this section, as applicable, the issuer may make 
a written request for an extension to HHS. The extension request must 
be submitted within the timeframe established under paragraph 
(c)(2)(ii) or (iii), as applicable, and must detail the reason for the 
extension request and the good cause in support of the request. If the 
extension is granted, the issuer must respond within the timeframe 
specified in HHS's notice granting the extension of time.
    (3) Preliminary audit findings. HHS will share its preliminary 
audit findings with the issuer, who will then have 30 calendar days to 
respond to such findings in the format and manner specified by HHS.
    (i) If the issuer does not dispute or otherwise respond to the 
preliminary findings, the audit findings will become final.
    (ii) If the issuer responds and disputes the preliminary findings, 
HHS will review and consider such response and finalize the audit 
findings after such review.
    (4) Final audit findings. If an audit results in the inclusion of a 
finding in the final audit report, the issuer must comply with the 
actions set forth in the final audit report in the manner and timeframe 
established by HHS, and the issuer must complete all of the following:
    (i) Within 45 calendar days of the issuance of the final audit or 
compliance review report, provide a written corrective action plan to 
HHS for approval.
    (ii) Implement that plan.
    (iii) Provide to HHS written documentation of the corrective 
actions once taken.
    (5) Failure to comply with audit activities. If an issuer fails to 
comply with the audit activities set forth in this section in the 
manner and timeframes specified by HHS:
    (i) HHS will notify the issuer of payments received under this 
subpart that the issuer has not adequately substantiated; and
    (ii) HHS will notify the issuer that HHS may recoup any payments

[[Page 24293]]

identified in paragraph (c)(5)(i) of this section.
    (6) Circumstances requiring HHS enforcement. If HHS determines that 
the State Exchange or State-based Exchange on the Federal platform is 
not enforcing or fails to substantially enforce the requirements of 
this subpart or Sec.  156.50, then HHS may do so and may pursue the 
imposition of civil money penalties as specified in Sec.  156.805 for 
non-compliance by QHP issuers participating in the State Exchange or 
State Exchange on the Federal platform.

Subpart I--Enforcement Remedies in the Exchanges

0
36. Subpart I is amended by revising the heading as set forth above.

0
37. Section 156.800 is amended by revising paragraphs (a) introductory 
text, and (b) as follows:


Sec.  156.800  Available remedies; Scope.

    (a) Kinds of sanctions. HHS may impose the following types of 
sanctions on QHP issuers in an Exchange that are not in compliance with 
Exchange standards applicable to issuers offering QHPs in an Exchange:
* * * * *
    (b) Scope. Sanctions under subpart I are applicable for non-
compliance with QHP issuer participation standards and other standards 
applicable to issuers offering QHPs in a Federally-facilitated 
Exchange. Sanctions under paragraph (a)(1) of this section are also 
applicable for non-compliance by QHP issuers participating in State 
Exchanges and State-based Exchanges on the Federal platform when HHS is 
responsible for enforcement of the requirements in subpart E of this 
part and 45 CFR 156.50.
* * * * *

0
38. Section 156.805 is amended by--
0
a. Revising paragraphs (a) introductory text and (a)(5)(i); and
0
b. Adding paragraph (f).
    The revisions and addition read as follows:


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

    (a) Grounds for imposing civil money penalties. Civil money 
penalties may be imposed on an issuer in an Exchange if, based on 
credible evidence, HHS has reasonably determined that the issuer has 
engaged in one or more of the following actions:
* * * * *
    (5) * * *
    (i) To HHS or an Exchange; or
* * * * *
    (f) Circumstances requiring HHS enforcement in State Exchanges and 
State-based Exchanges on the Federal platform. (1) HHS will enforce the 
requirements of subpart E of this part and 45 CFR 156.50 if a State 
Exchange or State-based Exchange on the Federal platform notifies HHS 
that it is not enforcing these requirements or if HHS makes a 
determination using the process set forth at 45 CFR 150.201, et seq. 
that a State Exchange or State-based Exchange on the Federal platform 
is failing to substantially enforce these requirements.
    (2) If HHS is responsible under paragraph (f)(1) of this section 
for enforcement of the requirements set forth in subpart E of this part 
or 45 CFR 156.50, HHS may impose civil money penalties on an issuer in 
a State Exchange or State-based Exchange on the Federal platform, in 
accordance with the bases and process for imposing civil money 
penalties set forth in this section.

Subpart J--Administrative Review of QHP Issuer Sanctions

0
39. Amend Subpart J by revising the heading to read as set forth above.

0
40. Section 156.901 is amended by revising the definitions of ``Filing 
date'' and ``Hearing'' to read as follows.


Sec.  156.901  Definitions.

* * * * *
    Filing date means the date filed electronically.
    Hearing includes a hearing on a written record as well as an in-
person, telephone, or video teleconference hearing.
* * * * *

0
41. Section 156.903 is amended by revising paragraph (a) as follows:


Sec.  156.903  Scope of Administrative Law Judge's (ALJ) authority.

    (a) The ALJ has the authority, including all of the authority 
conferred by the Administrative Procedure Act (5 U.S.C. 554a), to adopt 
whatever procedures may be necessary or proper to carry out in an 
efficient and effective manner the ALJ's duty to provide a fair and 
impartial hearing on the record and to issue an initial decision 
concerning the imposition of a civil money penalty of a QHP offered in 
a Federally-facilitated Exchange, State Exchange, and State-based 
Exchange on the Federal platform, or the decertification of a QHP 
offered in a Federally-facilitated Exchange.
* * * * *

0
42. Section 156.919 is amended by revising paragraph (a) to read as 
follows:


Sec.  156.919  Forms of hearing.

    (a) All hearings before an ALJ are on the record. The ALJ may 
receive argument or testimony in writing, in person, by telephone, or 
by video teleconference. The ALJ may receive testimony by telephone 
only if the ALJ determines that doing so is in the interest of justice 
and economy and that no party will be unduly prejudiced. The ALJ may 
require submission of a witness' direct testimony in writing only if 
the witness is available for cross-examination.
* * * * *

0
43. Section 156.927 is amended by revising paragraphs (a) introductory 
text and (b) to read as follows:


Sec.  156.927  Form and service of submissions.

    (a) Every submission filed with the ALJ must be filed 
electronically and include:
* * * * *
    (b) A party filing a submission with the ALJ must, at the time of 
filing, serve a copy of such submission on the opposing party. An 
intervenor filing a submission with the ALJ must, at the time of 
filing, serve a copy of the submission on all parties. If a party is 
represented by an attorney, service must be made on the attorney. An 
electronically filed submission is considered served on all parties 
using the electronic filing system.

0
44. Section 156.931 is revised to read as follows:


Sec.  156.931  Acknowledgement of request for hearing.

    After receipt of the request for hearing, the ALJ assigned to the 
case or someone acting on behalf of the ALJ will send a written notice 
to the parties that acknowledges receipt of the request for hearing, 
identifies the docket number assigned to the case, and provides 
instructions for filing submissions and other general information 
concerning procedures. The ALJ will set out the next steps in the case 
either as part of the acknowledgement or on a later date.

0
45. Section 156.941 is amended by revising paragraph (e) to read as 
follows:


Sec.  156.941  Prehearing conferences.

* * * * *
    (e) Establishing a schedule for an in-person, telephone, or video 
teleconference hearing, including setting deadlines for the submission 
of written direct testimony or for the written reports of experts.
* * * * *

0
46. Section 156.947 is amended by revising paragraph (a) to read as 
follows:

[[Page 24294]]

Sec.  156.947  The record.

    (a) Any testimony that is taken in-person, by telephone, or by 
video teleconference is recorded and transcribed. The ALJ may order 
that other proceedings in a case, such as a prehearing conference or 
oral argument of a motion, be recorded and transcribed.
* * * * *

0
47. Section 156.1210 is amended by--
0
a. Revising paragraph (a);
0
b. Redesignating paragraph (b) as paragraph (d); and
0
c. Adding new paragraphs (b) and (c).
    The additions read as follows:


Sec.  156.1210   Dispute submission.

    (a) Responses to reports. Within 90 calendar days of the date of a 
payment and collections report from HHS, the issuer must, in a form and 
manner specified by HHS or the State Exchange describe to HHS or the 
State Exchange (as applicable) any inaccuracies it identifies in the 
report.
    (b) Inaccuracies identified after 90-day period. With respect to an 
inaccuracy described under paragraph (a) of this section that is 
identified and submitted to HHS or the State Exchange (as applicable) 
by the issuer after the end of the 90-day period described in such 
paragraph, HHS will consider and work with the issuer or the State 
Exchange (as applicable) to resolve the inaccuracy so long as--
    (1) The issuer promptly notifies HHS or the State Exchange (as 
applicable) upon identifying the inaccuracy, but in no case later than 
15 calendar days after identifying the inaccuracy; and
    (2) The failure to identify the inaccuracy and submit it to HHS or 
the State Exchange (as applicable) in a timely manner was not 
unreasonable or due to the issuer's misconduct or negligence.
    (c) Deadline for describing inaccuracies. To be eligible for 
resolution under paragraph (b) of this section, an issuer must describe 
all inaccuracies identified in a payment and collections report before 
the later of--
    (1) The end of the 3-year period beginning at the end of the plan 
year to which the inaccuracy relates; or
    (2) The date by which HHS notifies issuers that the HHS audit 
process with respect to the plan year to which such inaccuracy relates 
has been completed.
    (3) If a payment error is discovered after the timeframes set forth 
in paragraph (c)(1) and (2) of this section, the issuer must notify 
HHS, the State Exchange, or SBE-FP (as applicable) and repay any 
overpayments to HHS.
* * * * *

0
48. Section 156.1215 is amended by revising paragraph (b) to read as 
follows:


Sec.  156.1215  Payment and collections processes.

* * * * *
    (b) Netting of payments and charges for later years. As part of its 
payment and collections process, HHS may net payments owed to issuers 
and their affiliates operating under the same tax identification number 
against amounts due to the Federal government from the issuers and 
their affiliates under the same taxpayer identification number for 
advance payments of the premium tax credit, advance payments of and 
reconciliation of cost-sharing reductions, payment of Federally-
facilitated Exchange user fees, payment of State Exchanges utilizing 
the Federal platform user fees, and risk adjustment, reinsurance, and 
risk corridors payments and charges.
* * * * *

0
49. Section 156.1220 is amended by--
0
a. Revising paragraphs (a)(1)(vii) and (a)(3)(ii);
0
b. Redesignating paragraphs (a)(3)(iii) through (vi) as (a)(3)(iv) 
through (vii), respectively; and
0
c. Adding new paragraph (a)(3)(iii).
    The revision and addition reads as follows:


Sec.  156.1220  Administrative appeals.

    (a) * * *
    (1) * * *
    (vii) The findings of a second validation audit as a result of risk 
adjustment data validation (if applicable) with respect to risk 
adjustment data for the 2016 benefit year and beyond; or
* * * * *
    (3) * * *
    (ii) For a risk adjustment payment or charge, including an 
assessment of risk adjustment user fees, within 30 calendar days of the 
date of the notification under Sec.  153.310(e) of this subchapter;
    (iii) For the findings of a second validation audit (if 
applicable), or the calculation of a risk score error rate as a result 
of risk adjustment data validation, within 30 calendar days of 
publication of the applicable benefit year's Summary Report of Benefit 
Year Risk Adjustment Data Validation Adjustments to Risk Adjustment 
Transfers;
* * * * *

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

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

    Authority:  42 U.S.C. 300gg-18.


0
51. Section 158.103 is amended by adding the definition for 
``Prescription drug rebates and other price concessions'' in 
alphabetical order to read as follows:


Sec.  158.103  Definitions.

* * * * *
    Prescription drug rebates and other price concessions means all 
remuneration received by or on behalf of an issuer, including 
remuneration received by and on behalf of entities providing pharmacy 
benefit management services to the issuer, that decrease the costs of a 
prescription drug covered by the issuer, regardless from whom the 
remuneration is received (for example, pharmaceutical manufacturer, 
wholesaler, retail pharmacy, or vendor). Prescription drug rebates and 
other price concessions include discounts, charge backs or rebates, 
cash discounts, free goods contingent on a purchase agreement, up-front 
payments, coupons, goods in kind, free or reduced-price services, 
grants, or other price concessions or similar benefits to the extent 
the value of these items reduce costs for the issuer, and excluding 
bona fide service fees. Prescription drug rebates and other price 
concessions exclude any remuneration, coupons, or price concessions for 
which the full value is passed on to the enrollee. Bona fide service 
fees mean fees paid by a drug manufacturer to an entity providing 
pharmacy benefit management services to the issuer that represent fair 
market value for a bona fide, itemized service actually performed on 
behalf of the manufacturer that the manufacturer would otherwise 
perform (or contract for) in the absence of the service arrangement, 
and that are not passed on in whole or in part to a client or customer 
of an entity, whether or not the entity takes title to the drug.
* * * * *


Sec.  158.221  [Amended]

0
52. Effective May 5, 2021 amend Sec.  158.221 by removing paragraph 
(b)(8) and redesignating paragraph (b)(9) as paragraph (b)(8).

0
53. Section 158.240 is amended by adding paragraph (g) to read as 
follows:


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

* * * * *
    (g) Rebate prepayment and safe harbor. An issuer may choose to pay 
a portion or all of its estimated rebate amount for a given MLR 
reporting year to enrollees in any form specified in Sec.  158.241 
prior to the rebate payment

[[Page 24295]]

deadlines set forth in Sec. Sec.  158.240(e) and 158.241(a)(2) and in 
advance of submitting the MLR report required in Sec.  158.110 to the 
Secretary. Issuers that choose to prepay a portion or all of their 
rebates must do so for all eligible enrollees in a given state and 
market in a non-discriminatory manner, and consistently with State law 
or other applicable state authority. If, after submitting the MLR 
report required in Sec.  158.110, an issuer determines that its rebate 
prepayment amount in a given state and market is at least 95 percent, 
but less than 100 percent, of the total rebate amount owed for the 
applicable MLR reporting year to enrollees in that state and market, 
the issuer may, without penalty or late payment interest under 
paragraph (f) of this section, provide the remaining rebate amount to 
those enrollees no later than the rebate deadlines in Sec. Sec.  
158.240(e) and 158.241(a)(2) applicable to the following MLR reporting 
year. If the total rebate owed to an enrollee for the MLR reporting 
year is above the de minimis threshold established in Sec.  158.243(a), 
the issuer cannot treat the remaining rebate owed to an enrollee after 
prepayment as de minimis, even if the remaining rebate is below the de 
minimis threshold.

0
54. Section 158.241 is amended by revising paragraph (a)(2) to read as 
follows:


Sec.  158.241  Form of rebate.

    (a) * * *
    (2) For each of the 2011, 2012, and 2013 MLR reporting years, any 
rebate provided in the form of a premium credit must be provided by 
applying the full amount due to the first month's premium that is due 
on or after August 1 following the MLR reporting year. If the amount of 
the rebate exceeds the premium due for August, then any overage shall 
be applied to succeeding premium payments until the full amount of the 
rebate has been credited. Beginning with the 2014 MLR reporting year, 
any rebate provided in the form of a premium credit must be provided by 
applying the full amount due to the first month's premium that is due 
on or after September 30 following the MLR reporting year. If the 
amount of the rebate exceeds the premium due for October, then any 
overage shall be applied to succeeding premium payments until the full 
amount of the rebate has been credited. Beginning with rebates due for 
the 2020 MLR reporting year, any rebate provided in the form of a 
premium credit must be provided by applying the full amount due to the 
monthly premium that is due no later than October 30 following the MLR 
reporting year. If the amount of the rebate exceeds the monthly 
premium, then any overage shall be applied to succeeding premium 
payments until the full amount of the rebate has been credited.
* * * * *

0
55. Subchapter E as added in final rule published on November 27, 2019 
(84 FR 65524) and effective on January 1, 2021 is amended by adding 
part 184 to read as follows:

PART 184--PHARMACY BENEFIT MANAGER STANDARDS UNDER THE AFFORDABLE 
CARE ACT

Sec.
184.10 Basis and scope.
184.20 Definitions.
184.50 Prescription drug distribution and cost reporting by pharmacy 
benefit managers.

    Authority:  42 U.S.C. 1302, 1320b-23.


Sec.  184.10  Basis and scope.

    (a) Basis. (1) This part implements section 1150A, Pharmacy Benefit 
Managers Transparency Requirements, of title XI of the Social Security 
Act.
    (2) [Reserved]
    (b) Scope. This part establishes standards for Pharmacy Benefit 
Managers that administer prescription drug benefits for health 
insurance issuers that offer Qualified Health Plans with respect to the 
offering of such plans.


Sec.  184.20  Definitions.

    The following definitions apply to this part, unless the context 
indicates otherwise:
    Health insurance issuer has the meaning given to the term in Sec.  
144.103 of this subtitle.
    Plan year has the meaning given to the term in Sec.  156.20 of this 
subchapter.
    Qualified health plan has the meaning given to the term in Sec.  
156.20 of this subchapter.
    Qualified health plan issuer has the meaning given to the term in 
Sec.  156.20 of this subchapter.


Sec.  184.50  Prescription drug distribution and cost reporting by 
pharmacy benefit managers.

    (a) General requirement. In a form, manner, and at such times 
specified by HHS, any entity that provides pharmacy benefits management 
services on behalf of a qualified health plan (QHP) issuer must provide 
to HHS the following information:
    (1) The percentage of all prescriptions that were provided under 
the QHP through retail pharmacies compared to mail order pharmacies, 
and the percentage of prescriptions for which a generic drug was 
available and dispensed compared to all drugs dispensed;
    (2) The aggregate amount, and the type of rebates, discounts or 
price concessions (excluding bona fide service fees) that the pharmacy 
benefits manager (PBM) negotiates that are attributable to patient 
utilization under the QHP, and the aggregate amount of the rebates, 
discounts, or price concessions that are passed through to the QHP 
issuer, and the total number of prescriptions that were dispensed.
    (i) Bona fide service fees means fees paid by a manufacturer to an 
entity that represent fair market value for a bona fide, itemized 
service actually performed on behalf of the manufacturer that the 
manufacturer would otherwise perform (or contract for) in the absence 
of the service arrangement, and that are not passed on in whole or in 
part to a client or customer of an entity, whether or not the entity 
takes title to the drug.
    (ii) [Reserved]
    (3) The aggregate amount of the difference between the amount the 
QHP issuer pays its contracted PBM and the amounts that the PBM pays 
retail pharmacies, and mail order pharmacies, and the total number of 
prescriptions that were dispensed.
    (b) Limitations on disclosure. Information disclosed by a PBM under 
this section shall not be disclosed by HHS or by a QHP receiving the 
information, except that HHS may disclose the information in a form 
which does not disclose the identity of a specific PBM, QHP, or prices 
charged for drugs, for the following purposes:
    (1) As HHS determines to be necessary to carry out section 1150A or 
part D of title XVIII of the Act;
    (2) To permit the Comptroller General to review the information 
provided;
    (3) To permit the Director of the Congressional Budget Office to 
review the information provided; or
    (4) To States to carry out section 1311 of the Affordable Care Act.
    (c) Penalties. A PBM that fails to report the information described 
in paragraph (a) of this section to HHS on a timely basis or knowingly 
provides false information will be subject to the provisions of section 
1927(b)(3)(C) of the Act.

    Dated: April 27, 2021.
Xavier Becerra,
Secretary, Department of Health and Human Services.
[FR Doc. 2021-09102 Filed 4-30-21; 8:45 am]
BILLING CODE 4150-28-P