Federal Register, Volume 87 Issue 3 (Wednesday, January 5, 2022)

[Federal Register Volume 87, Number 3 (Wednesday, January 5, 2022)]
[Proposed Rules]
[Pages 584-728]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-28317]

[[Page 583]]

Vol. 87

Wednesday,

No. 3

January 5, 2022

Part III

Department of Health and Human Services

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45 CFR Parts 144, 147, 153, et al.

Patient Protection and Affordable Care Act; HHS Notice of Benefit and
Payment Parameters for 2023; Proposed Rule

Federal Register / Vol. 87 , No. 3 / Wednesday, January 5, 2022 /
Proposed Rules

[[Page 584]]

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DEPARTMENT OF HEALTH AND HUMAN SERVICES

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

[CMS-9911-P]
RIN 0938-AU65

Patient Protection and Affordable Care Act; HHS Notice of Benefit
and Payment Parameters for 2023

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

ACTION: Proposed rule.

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SUMMARY: This proposed rule includes proposed payment parameters and
provisions related to the risk adjustment and risk adjustment data
validation programs, as well as proposed 2023 user fee rates for
issuers offering qualified health plans (QHPs) through federally-
facilitated Exchanges and State-based Exchanges on the Federal
platform. This proposed rule also proposes requirements related to
prohibiting discrimination based on sexual orientation and gender
identity; guaranteed availability; the offering of QHP standardized
options through Exchanges on the Federal platform; requirements for
agents, brokers, web-brokers, and issuers assisting consumers with
enrollment through Exchanges that use the Federal platform;
verification standards related to employer sponsored coverage; Exchange
eligibility determinations during a benefit year; special enrollment
period verification; cost-sharing requirements; Essential Health
Benefits (EHBs); Actuarial Value (AV); QHP issuer quality improvement
strategies; accounting for quality improvement activity (QIA) expenses
and provider incentives for medical loss ratio (MLR) reporting and
rebate calculation purposes; re-enrollment, and requirements related to
a new State Exchange improper payment measurement program. This
proposed rule also seeks comment on how HHS can advance health equity
through QHP certification standards and otherwise in the individual and
group health insurance markets, and how HHS might address plan choice
overload in the Exchanges.

DATES: To be assured consideration, comments must be received at one of
the addresses provided below, no later than 5 p.m. on January 27, 2022.

ADDRESSES: In commenting, please refer to file code CMS-9911-P.
You may submit comments in one of three ways (please choose only
one of the ways listed):
1. Electronically. You may submit electronic comments on this
regulation to http://www.regulations.gov. Follow the ``Submit a
comment'' instructions.
2. By regular mail. You may mail written comments to the following
address ONLY: Centers for Medicare & Medicaid Services, Department of
Health and Human Services, Attention: CMS-9911-P, P.O. Box 8016,
Baltimore, MD 21244-8016.
Please allow sufficient time for mailed comments to be received
before the close of the comment period.
3. By express or overnight mail. You may send written comments to
the following address ONLY: Centers for Medicare & Medicaid Services,
Department of Health and Human Services, Attention: CMS-9911-P, Mail
Stop C4-26-05, 7500 Security Boulevard, Baltimore, MD 21244-1850.
For information on viewing public comments, see the beginning of
the SUPPLEMENTARY INFORMATION section.

FOR FURTHER INFORMATION CONTACT:
Jeff Wu, (301) 492-4305, Rogelyn McLean, (301) 492-4229, Grace
Bristol, (410) 786-8437, Sara Rosta, (301) 492-4223, or Kaye Wells,
(301) 492-4301, for general information.
Cam Moultrie Clemmons, (206) 615-2338, or Anthony Galace, (301)
492-4400, for matters related to past-due premiums.
Allison Yadsko, (410) 786-1740, John Barfield, (301) 492-4433, or
Jacqueline Wilson, (301) 492-4286 for matters related to risk
adjustment or risk adjustment data validation (HHS-RADV).
Aaron Franz, (410) 786- 8027, or John Barfield, (301) 492-4433, for
matters related to federally-facilitated Exchange (FFE) and State-based
Exchange on the Federal platform (SBE-FP) user fees.
Nora Simmons, (410) 786-1981, for matters related to advance
payment of the premium tax credit (APTC) proration.
Aaron Franz, (410) 786- 8027, or Hi'ilei Haru, 301-492-4363, for
matters related to cost-sharing reduction reconciliation.
Josh Van Drei, (410) 786-1659, for matters related to actuarial
value (AV).
Becca Bucchieri, (301) 492-4341, for matters related to essential
health benefit (EHB)-benchmark plans and defrayal of state-required
benefits.
Marisa Beatley, (301) 492-4307, for matters related to employer
sponsored coverage verification.
Susan Kalmus, (301) 492-4275, for matters related to agent, broker,
and web-broker guidelines. Dena Nelson, 240-401-3535, or Carly Rhyne,
301-492-4188, for matters related to income calculation for eligibility
for advance payments of premium tax credits.
Katherine Bentley, (301) 492-5209, or Ariel Kennedy, (301) 492-
4306, for matters related to special enrollment period verification.
Leigha Basini, (301) 492-4380, for matters related to
nondiscrimination based on sexual orientation and gender identity; and
EHB nondiscrimination.
Christina Whitefield, (301) 492-4172, for matters related to the
medical loss ratio (MLR) program.
Nidhi Singh Shah, (301) 492-5110, for matters related to quality
improvement strategy standards for Exchanges.
Erika Ourisman, (301) 492-4170, for matters related to downstream
and delegated entities.
Nikolas Berkobien, (301) 492-4400, or Leigha Basini, (301) 492-4380
for matters related to standardized options.
Erika Melman, (301) 492-4348, Deborah Hunter, (443) 386-3651, or
Whitney Allen, (667) 290-8748, for matters related to network adequacy
and essential community providers.
Linus Bicker, (803) 931-6185, for matters related to State Exchange
improper payment measurement.
Phuong Van, (202) 570-5594, for matters related to advancing health
equity through qualified health plans (QHPs).
Angelica Torres-Reid, (410) 786-1721, and Robert Yates, (301) 492-
5151, for matters related to State Exchange general program integrity
and oversight requirements.
Zarah Ghiasuddin, (301) 492-4308, for matters related to re-
enrollment in the Exchanges.

SUPPLEMENTARY INFORMATION: Inspection of Public Comments: All comments
received before the close of the comment period are available for
viewing by the public, including any personally identifiable or
confidential business information that is included in a comment. We
post comments received before the close of the comment period on the
following website as soon as possible after they have been received:
http://www.regulations.gov. Follow the search instructions on that
website to view public comments. CMS will not post on Regulations.gov
public comments that make threats to individuals or institutions or
suggest that the individual will take actions to harm the individual.
CMS continues to encourage individuals not to submit duplicative
comments. We will post acceptable comments from multiple unique
commenters even if the content is identical or nearly identical to
other comments.

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Table of Contents

I. Executive Summary
II. Background
A. Legislative and Regulatory Overview
B. Stakeholder Consultation and Input
C. Structure of Proposed Rule
III. Provisions of the Proposed HHS Notice of Benefit and Payment
Parameters for 2023
A. Part 144--Requirements Relating to Health Insurance Coverage
B. Part 147--Health Insurance Reform Requirements for the Group
and Individual Health Insurance 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. Solicitation of Comments Regarding Health Equity and
Qualified Health Plans
IV. Collection of Information Requirements
A. Wage Estimates
B. ICRs Regarding State Flexibility for Risk Adjustment (Sec.
153.320)
C. ICRs Regarding Distributed Data and Risk Adjustment Data
Submission Requirements (Sec. Sec. 153.610, 153.700, and 153.710)
D. ICRs Regarding Ability of States To Permit Agents and Brokers
and Web-brokers To Assist Qualified Individuals, Qualified
Employers, or Qualified Employees Enrolling in QHPs (Sec. 155.220)
E. ICRs Regarding Verification of Eligibility for Special
Enrollment Periods (Sec. 155.420)
F. ICRs Regarding General Program Integrity and Oversight
Requirements (Sec. 155.1200)
G. ICRs Regarding State Exchange Improper Payment Measurement
program (Sec. Sec. 155.1500-155.1540)
H. ICRs Regarding State Selection of EHB-Benchmark Plan for Plan
Years Beginning on or After January 1, 2020 (Sec. 156.111)
I. ICR Regarding Differential Display of Standardized Options on
the websites of Web-Brokers (Sec. 155.220) and QHP Issuers (Sec.
156.265)
J. ICRs Regarding Network Adequacy and Essential Community
Providers (Sec. Sec. 156.230 and 156.235)
K. ICRs Regarding Payment for Cost-Sharing Reductions (Sec.
156.430)
L. ICRs Regarding Quality Improvement Strategy (Sec. 156.1130)
M. ICRs Regarding Medical Loss Ratio (Sec. Sec. 158.140,
158.150, 158.170)
O. Summary of Annual Burden Estimates for Proposed Requirements
P. Submission of PRA-related Comments
V. Response to Comments
VI. Regulatory Impact Analysis
A. Statement of Need
B. Overall Impact
C. Impact Estimates of the Payment Notice Provisions and
Accounting Table
D. Regulatory Alternatives Considered
E. Regulatory Flexibility Act
F. Unfunded Mandates
G. Federalism

I. Executive Summary

American Health Benefit Exchanges, or ``Exchanges,'' are entities
established under the Patient Protection and Affordable Care Act (ACA)
\1\ through which qualified individuals and qualified employers can
purchase health insurance coverage in qualified health plans (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 transfers funds from issuers that attract lower-than-
average risk populations to issuers that attract higher-than-average
risk populations to reduce incentives for issuers to avoid higher-risk
enrollees.
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\1\ The Patient Protection and Affordable Care Act (Pub. L. 111-
148) was enacted on March 23, 2010. The Healthcare and Education
Reconciliation Act of 2010 (Pub. L. 111-152), which amended and
revised several provisions of the Patient Protection and Affordable
Care Act, was enacted on March 30, 2010. In this rulemaking, the two
statutes are referred to collectively as the ``Patient Protection
and Affordable Care Act'', ``Affordable Care Act'', or ``ACA.''
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In previous rulemakings, we established provisions and parameters
to implement many ACA requirements and programs. In this proposed rule,
we propose to amend some of these provisions and parameters, with a
focus on maintaining a stable regulatory environment. These proposed
changes are intended to provide issuers with greater predictability for
upcoming plan years (PYs), while simultaneously enhancing the role of
states in these programs. The proposals would provide states with
additional flexibilities, reduce unnecessary regulatory burdens on
stakeholders, empower consumers, ensure program integrity, and improve
affordability.
On January 20, 2021, the President issued an Executive Order which
stated the Administration's policy on preventing and combating
discrimination on the basis of gender identity and sexual
orientation.\2\ This Executive Order instructed the Secretary of Health
and Human Services (Secretary of HHS, or HHS Secretary) to review all
existing regulations, guidance documents, and other agency actions to
determine whether they are consistent with the aforementioned policy,
and to consider whether to suspend, revise, or rescind any agency
actions that are inconsistent with it. In consideration of this
Executive Order, and as a result of our review of certain regulations,
we propose to amend HHS regulations such that Exchanges, issuers, and
agents and brokers are prohibited from discriminating based on sexual
orientation and gender identity. The provisions in this proposed rule
reflect the aspects of the Executive Order 13988 and aligns with the
HHS' Notice, released on May 10, 2021, that HHS interprets and enforces
section 1557's and Title IX's prohibition on discrimination on the
basis of sex to include: (1) Discrimination on the basis of sexual
orientation; and (2) discrimination on the basis of gender identity,
based on the Supreme Court's decision in Bostock v. Clayton County.\3\
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\2\ Executive Order 13988 on Preventing and Combating
Discrimination on the Basis of Gender Identity or Sexual
Orientation, January 20, 2021, see 86 FR 7023.
\3\ U.S. Dep't of Health & Hum. Servs., Notification of
Interpretation and Enforcement of Section 1557 of the Affordable
Care Act and Title IX of the Education Amendments of 1972, 86 FR
27984 (May 25, 2021). Also see, Bostock v. Clayton County, 140 S.
Ct. 1731 (2020). https://www.supremecourt.gov/opinions/19pdf/17-1618_hfci.pdf.
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Risk adjustment continues to be a core program in the individual,
small group, and merged markets both on and off Exchanges, and we
propose recalibrated parameters for the HHS-operated risk adjustment
methodology. We published a technical paper, the 2021 HHS-Operated Risk
Adjustment Technical Paper on Possible Model Changes \4\ in October
2021, and sought comment on potential updates to the risk adjustment
models. Consistent with the model changes discussed in the October 2021
Risk Adjustment (RA) Technical Paper, in this rule, we propose the
following three updates to the HHS risk adjustment models beginning
with the 2023 benefit year: (1) Adding a two-stage weighted approach to
the adult and child models; (2) removing the current severity illness
factors from the adult models and adding an interacted hierarchical
condition category (HCC) count model specification to the adult and
child models; and (3) replacing the current enrollment duration factors
in the adult models with HCC-contingent enrollment duration factors.
These proposals are intended to improve prediction in the adult and
child risk adjustment models for the lowest-risk enrollees, the
highest-risk enrollees, and partial-year enrollees, whose plan
liabilities are underpredicted in the

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current models. We also propose to recalibrate the 2023 benefit year
risk adjustment models using the 2017, 2018, and 2019 enrollee-level
External Data Gathering Environment (EDGE) data. We further propose to
continue applying a market pricing adjustment to the plan liability
associated with Hepatitis C drugs in the risk adjustment models,
consistent with the approach adopted beginning with the 2020 models. We
discuss our consideration of the targeted removal of the mapping of
hydroxychloroquine sulfate to Immune Suppressants and Immunomodulators
(RXC 09) in the 2018 and 2019 benefit year enrollee-level EDGE data
used for the 2023 benefit year model recalibration,\5\ as well as the
targeted removal of Descovy[supreg] from mapping to Anti-HIV Agents
(RXC 01) in all three benefit years' enrollee-level EDGE datasets used
for the 2023 benefit year model recalibration. We also propose for the
2024 benefit year and beyond to recalibrate the adult models using the
final, fourth quarter (Q4) RXC mapping document that was applicable for
each benefit year of data that is included in the current year's model
recalibration. We propose to begin to use this approach for
recalibration of the 2023 adult risk adjustment models, with the
exception of the 2017 enrollee-level EDGE data year, for which we
propose to use the most recent RXC mapping document that was available
when we first processed the 2017 enrollee-level EDGE data (that is, Q2
2018).
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\4\ Available at https://www.cms.gov/files/document/2021-ra-technical-paper.pdf.
\5\ The same concern was not present for the 2016 or 2017
enrollee-level EDGE data because hydroxychloroquine was not included
in the crosswalk until 2018.
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Additionally, we propose to repeal the ability of states to request
a reduction in risk adjustment state transfers starting with the 2024
benefit year, while proposing to provide an exception for states that
previously requested a reduction to transfers under Sec. 153.320(d).
In addition, we solicit comments on the requests from Alabama to reduce
risk adjustment state transfers for the 2023 benefit year in the
individual (including the catastrophic and non-catastrophic risk pools)
and small group markets.
We also propose the 2023 benefit year risk adjustment user fee for
states where HHS operates the risk adjustment program. We also propose
to collect and extract five new data elements including ZIP code, race,
ethnicity, individual coverage health reimbursement arrangement (ICHRA)
indicator, and a subsidy indicator as part of the required risk
adjustment data that issuers must make accessible to HHS in states
where HHS is operating the risk adjustment program. We also propose to
extract three new data elements issuers already provide to HHS as part
of the required risk adjustment data submissions (plan ID, rating area,
and subscriber indicator) and to expand the permitted uses of the risk
adjustment data and reports. Finally, we propose that whenever HHS
recoups high-cost risk pool funds as a result of audits of risk
adjustment covered plans, actionable discrepancies, or successful
appeals, the recouped funds would be used to reduce high-cost risk pool
charges for that national high-cost risk pool for the next applicable
benefit year for which high-cost risk pool payments have not already
been calculated.
We propose further refinements to the HHS-RADV error estimation
methodology beginning with the 2021 benefit year to (1) extend the
application of Super HCCs (which are currently based on the coefficient
estimation groups defined in the applicable benefit year's ``Additional
Adult Variables'' Table of the ``Do It Yourself (DIY)'' software (Table
6 in the 2021 Benefit Year DIY Software), which is published on the
CCIIO website) \6\ from their current application only in the sorting
step that assigns HCCs to failure rate groups to broader application
throughout the HHS-RADV error rate calculation process, (2) specify
that Super HCCs will be defined separately according to the age group
model to which an enrollee is subject, and (3) constrain to zero any
failure rate group outlier with a negative failure rate, regardless of
whether the outlier issuer has a negative or positive error rate.
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\6\ https://www.cms.gov/CCIIO/Resources/Regulations-and-Guidance. The August 3, 2021 version of the 2021 DIY Software Tables
is available at https://www.cms.gov/files/document/cy2021-diy-tables-07092021.xlsx.
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As we do every year in the HHS notice of benefit and payment
parameters, we propose updated parameters applicable in the individual
and small group markets. We propose the PY 2023 user fee rates for
issuers offering plans through the Exchanges using the Federal
platform. We propose maintaining the Federal-facilitated Exchange (FFE)
and State-based Exchange on the Federal platform (SBE-FP) user fees at
the current PY 2022 rates, 2.75 and 2.25 percent of total monthly
premiums, respectively, in order to preserve and ensure that the FFEs
and Federal platform have sufficient funding to cover the cost of all
special benefits provided to FFE and SBE-FP issuers during PY 2023. We
also note that HHS will issue the 2023 benefit year premium adjustment
percentage index and related payment parameters in guidance, consistent
with the policy finalized in part 2 of the 2022 Payment Notice.
We also propose to require all Exchanges to prorate premiums and
advance payments of the premium tax credit (APTC) when administering
APTC for enrollees enrolled in a particular policy for less than the
full coverage month, including when the enrollee is enrolled in
multiple policies within a month, each lasting less than the full
coverage month.
We are proposing changes to clarify that the cost-sharing reduction
(CSR) data submission process is mandatory only for those issuers that
received CSR payments from HHS for any part of the benefit year, and
voluntary for other issuers. We propose a technical correction to the
definition of large group market in Sec. 144.103 to delete the
concluding phrase ``unless otherwise provided under state law.''
We propose new display requirements for web-broker non-Exchange
websites, including requirements related to QHP comparative information
and standardized disclaimer language; a prohibition on displaying QHP
advertisements or otherwise providing favored or preferred display of
QHPs based on compensation agents, brokers, or web-brokers receive from
QHP issuers; and a requirement to prominently display a clear
explanation of the rationale for explicit QHP recommendations and the
methodology for the default display of QHPs on web-broker non-Exchange
websites to better inform and protect consumers using such websites.
We propose a number of policies to address certain agent, broker,
and web-broker practices. These policies would be added as part of the
FFE standards of conduct codified at Sec. 155.220(j)(2), improving
CMS's ability to enforce existing responsibilities agents, brokers, and
web-brokers utilizing the Exchange are required to adhere to without
substantially burdening other agents, brokers, and web-brokers, while
also providing more detail about specific business practices that are
prohibited. We believe the proposed new regulatory text would protect
consumers, ensure the efficient operation of the Exchange, minimize the
risk of future tax discrepancies, reduce unauthorized enrollments in
Exchange coverage, and provide a stronger basis for CMS to take
enforcement action against agents, brokers, and web-brokers for
violations of these requirements.
We propose revising our interpretation of the guaranteed
availability requirement to prohibit

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issuers from applying a premium payment to an individual's or
employer's past debt owed for coverage and refusing to effectuate
enrollment in new coverage. We believe this proposal would have a
positive impact on the risk pool by removing barriers to enrollment for
low-income individuals who lost prior coverage due to nonpayment of
premiums. In addition, this proposal would promote more equitable
access to health insurance coverage by ensuring that enrollment is not
delayed as a result of non-payment of past-due premiums to the same
issuer or control group, regardless of an individual's or employee's
status as an APTC recipient.
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 propose to allow Exchanges to conduct
risk-based employer sponsored coverage verification.
We propose to clarify that only those provider incentives and
bonuses that are tied to clearly defined, objectively measurable, and
well-documented clinical or quality improvement standards that apply to
providers may be included in incurred claims for MLR reporting and
rebate calculation purposes. We also propose to specify that only
expenses directly related to activities that improve health care
quality may be included as quality improvement activity (QIA) expenses
for MLR reporting and rebate calculation purposes.
In addition, we propose to make a technical amendment to remove a
reference to a provision that was vacated by the United States District
Court for the District of Maryland in City of Columbus, et al. v.
Cochran, 523 F. Supp. 3d 731 (D. Md. 2021), and thus deleted in part 2
of the 2022 Payment Notice final rule.
With regards to the essential health benefits (EHB), we propose an
evergreen deadline for EHB-benchmark plan applications by states, as
well as proposing to remove the ability for states to permit issuers to
substitute benefits between EHB categories. In addition, we propose
changed de minimis thresholds for the actuarial value (AV) for plans
subject to EHB requirements, as well as narrower de minimis thresholds
for individual market silver QHPs and income-based CSR plan variations.
We also propose to remove the state annual reporting requirement to
report state-required benefits in addition to the EHB to HHS. We
believe there may be ways to achieve compliance with the defrayal
policy without imposing the rigid submission requirements on states
that exist under the annual reporting requirement.
We propose policies to strengthen and clarify our network adequacy
standards, including expanding the provider specialty list for time and
distance standards and adding appointment wait time standards. For
plans with tiered networks, we propose that, to count toward the
issuer's satisfaction of the network adequacy and essential community
provider (ECP) standards, providers must be contracted within the
network tier that results in the lowest cost-sharing obligation. We
also propose to require issuers to submit information about whether
providers offer telehealth services. We propose to increase the ECP
threshold from 20 percent to 35 percent.
We also propose to amend the current regulation, which provides
that, notwithstanding any relationship or relationships a QHP issuer
may have with delegated or downstream entities, the QHP issuer
maintains responsibility for its compliance and the compliance of any
of its delegated or downstream entities with all applicable Federal
standards related to Exchanges. Specifically, HHS proposes adding a
requirement that all agreements between QHP issuers and their
downstream and delegated entities include language stating that any
Exchange authority, including State Exchanges, may demand and receive
records related to the QHP issuers' obligations and compliance with
applicable Federal standards related to Exchanges. We also propose
other amendments to extend the obligation to oversee compliance of
delegated and downstream entities to QHP issuers in all models of
Exchange. These proposals would hold QHP issuers in all models of
Exchange responsible for their downstream and delegated entities'
adherence to applicable Federal standards, and make their oversight
obligations, and the obligations of their downstream and delegated
entities, explicit. We also propose to amend the title of subpart D of
45 CFR part 156 from ``Standards for Qualified Health Plan Issuers on
Federally Facilitated Exchanges and State-Based Exchanges on the
Federal platform'' to ``Standards for Qualified Health Plan Issuers on
Specific Types of Exchanges'' to more accurately reflect the
applicability of the regulations within the subpart.
We solicit comments on incorporating the net premium, maximum out-
of-pocket (MOOP), deductible, and annual out-of-pocket costs (OOPC) of
a plan into the Exchange re-enrollment hierarchy as well as additional
criteria or mechanisms HHS could consider to ensure the Exchange
hierarchy for re-enrollment aligns with plan generosity and consumer
needs, such as, re-enrolling a current bronze QHP enrollee into an
available silver QHP with a lower net premium and higher plan
generosity offered by the same QHP issuer. We also propose to update
the quality improvement strategy (QIS) standards to require QHP issuers
to address health and health care disparities as a specific topic area
within their QIS beginning in 2023.
We also propose to require issuers of QHPs in FFEs and SBE-FPs to
offer through the Exchange standardized QHP options beginning in PY
2023.
Finally, we solicit comments regarding additional ways HHS could
incentivize QHP issuers to design plans that improve health equity and
health conditions in enrollees' environments, as well as how QHP
issuers could address other social determinants of health (SDOH)
outside of the QHP certification process.

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 and health insurance issuers in
the group and individual markets. The term ``group health plan''
includes both insured and self-insured group health plans.\7\
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\7\ 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.
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Section 2702 of the PHS Act, as added by the ACA, establishes
requirements for guaranteed availability of coverage in the group and
individual markets.
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 2791 of the PHS Act defines several terms, including
``large group market''.

[[Page 588]]

Section 1301(a)(1)(B) of the ACA directs all issuers of QHPs to
cover the 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 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 of
HHS), cost-sharing limits, and AV requirements. The law directs that
EHBs be equal in scope to the benefits provided under a typical
employer plan, and that they cover at least the following 10 general
categories: Ambulatory patient services; emergency services;
hospitalization; maternity and newborn care; mental health and
substance use disorder services, including behavioral health treatment;
prescription drugs; rehabilitative and habilitative services and
devices; laboratory services; preventive and wellness services and
chronic disease management; and pediatric services, including oral and
vision care. Section 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 of HHS
to develop guidelines that allow for de minimis variation in AV
calculations. Sections 1302(b)(4)(A) through (D) establish that the
Secretary must define EHB in a manner that: (1) Reflects appropriate
balance among the 10 categories; (2) is not designed in such a way as
to discriminate based on age, disability, or expected length of life;
(3) takes into account the health care needs of diverse segments of the
population; and (4) does not allow denials of EHBs based on age, life
expectancy, disability, degree of medical dependency, or quality of
life.
Section 1311(c) of the ACA provides the Secretary the authority to
issue regulations to establish criteria for the certification of QHPs.
Section 1311(c)(1)(B) of the ACA requires among the criteria for
certification that the Secretary must establish by regulation that QHPs
ensure a sufficient choice of providers. 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) 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.\8\
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\8\ 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
Patient Protection and Affordable Care Act.
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Section 1311(c)(1)(E) of the ACA specifies that to be certified as
a QHP, each health plan must implement a QIS, which is described in
section 1311(g)(1) of the ACA. Section 1311(g)(1) of the ACA describes
this strategy as a payment structure that provides increased
reimbursement or other incentives to improve health outcomes of plan
enrollees, to prevent hospital readmissions, improve patient safety and
reduce medical errors, promote wellness and health, and reduce health
and health care disparities.
Section 1311(d)(3)(B) of the ACA permits a state, at its option, to
require QHPs to cover benefits in addition to EHB. This section also
requires a state to make payments, either to the individual enrollee or
to the issuer on behalf of the enrollee, to defray the cost of these
additional state-required benefits.
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 provides the Secretary with the
authority to establish procedures under which a state may allow agents
or brokers to (1) enroll qualified individuals and qualified employers
in qualified health plans offered through Exchanges and (2) assist
individuals in applying for PTC and CSRs for qualified health plans
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 1313(a)(5)(A) of
the ACA provides the Secretary with the authority to implement any
measure or procedure that the Secretary determines is appropriate to
reduce fraud and abuse in the administration of the Exchanges. 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, including such other requirements as the
Secretary determines appropriate. 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 Revised establishes Federal
policy regarding user fees and specifies that a user charge will be
assessed against each identifiable recipient for special benefits
derived from federal activities beyond those received by the general
public.
Section 1321(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 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 1401(a) of the ACA amended the Internal Revenue Code (the
Code) to add Section 36B, which, among other things, requires that a
taxpayer reconcile APTC for a year of coverage with the amount of the
PTC the taxpayer is allowed for the year.

[[Page 589]]

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 qualified health plans offered through
the individual market Exchanges. This section also provides for
reductions in cost sharing for Indians enrolled in QHPs at any metal
level.
Section 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) 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 Treasury and Homeland Security Department Secretaries 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 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, and
limits the disclosure of such information.
Section 1557 of the ACA applies certain long-standing civil rights
nondiscrimination requirements to ``any health program or activity, any
part of which is receiving Federal financial assistance, including
credits, subsidies, or contracts of insurance, or under any program or
activity that is administered by an Executive agency, or any entity
established under'' Title I of the ACA (or amendments). It did so by
referencing statutes that specify prohibited grounds of discrimination,
namely, race, color, national origin, sex, age, or disability, in an
array of federally funded and administered programs or activities.\9\
In addition, HHS has previously finalized rules unrelated to section
1557 of the ACA to address populations that have historically been
subject to discrimination.
---------------------------------------------------------------------------

\9\ 42 U.S.C. 18116.
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Section 5000A of the Code, as added by section 1501(b) of the ACA,
requires individuals to have minimum essential coverage (MEC) for each
month, qualify for an exemption, or make an individual shared
responsibility payment. Under the Tax Cuts and Jobs Act, which was
enacted on December 22, 2017, the individual shared responsibility
payment is reduced to $0, effective for months beginning after December
31, 2018.\10\ Notwithstanding that reduction, certain exemptions are
still relevant to determine whether individuals age 30 and above
qualify to enroll in catastrophic coverage under Sec. Sec. 155.305(h)
and 156.155(a)(5).
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\10\ Public Law 115-97, 131 Stat. 2054 (2017).
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1. Premium Stabilization Programs
In the July 15, 2011 Federal Register (76 FR 41929), we published a
proposed rule outlining the framework for the premium stabilization
programs.\11\ 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.
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\11\ 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 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 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
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,

[[Page 590]]

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.\12\
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\12\ ``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.
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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 (77 FR 17220 through 17252) and March 8, 2016 editions of the
Federal Register (81 FR 12204 through 12352). That 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. That final rule
also 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 the final rule.\13\
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\13\ ``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.
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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 (77 FR 17219) and in the December 22, 2016 editions of the 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 (77 FR
17219) and the December 22, 2016 (81 FR 94058) editions of the Federal
Register. That 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 a final rule titled, the
Amendments to the HHS-Operated Risk Adjustment Data Validation Under
the Patient Protection and Affordable Care Act's HHS-Operated Risk
Adjustment Program (2020 HHS-RADV Amendments Rule) in the December 1,
2020 Federal Register (85 FR 76979). That final rule revised the
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 public health emergency (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 January 20, 2021 Federal Register (86 FR 6138), HHS issued a
final rule containing certain policy and regulatory revisions related
to the risk adjustment program (hereinafter referred to as ``part 1 of
the 2022 Payment Notice final rule''). In the May 5, 2021 Federal
Register (86 FR 24140), HHS issued another final rule containing policy
and regulatory revisions related to the risk adjustment program,
including approval of the request from Alabama to reduce risk
adjustment transfers by 50 percent in the individual and small group
markets for the 2022 benefit year (hereinafter referred to as ``part 2
of the 2022 Payment Notice final rule''). In addition, part 2 of the
2022 Payment Notice final rule established a revised schedule of
collections for HHS-RADV and updated the provisions regulating second
validation audit (SVA) and initial validation audit (IVA) entities.
2. Program Integrity
In the June 19, 2013 Federal Register (78 FR 37031), we published a
proposed rule that proposed certain program integrity standards related
to Exchanges and the premium stabilization programs (proposed Program
Integrity Rule). The provisions of that proposed rule were finalized in
two rules, the ``first Program Integrity Rule'' published in the August
30, 2013 Federal Register (78 FR 54069) and the ``second Program
Integrity Rule'' published in the October 30, 2013 Federal Register (78
FR 65045).
3. 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 the 2014 health insurance market
rules was published in the November 26, 2012 Federal Register (77 FR
70584). A final rule implementing the health insurance market rules was
published in the February 27, 2013 Federal Register (78 FR 13406) (2014
Market Rules).
A proposed rule relating to Exchanges and Insurance Market
Standards for 2015 and beyond was published in the March 21, 2014
Federal Register (79 FR 15808) (2015 Market Standards Proposed Rule). A
final rule implementing the Exchange and Insurance Market Standards for
2015 and Beyond was published in the May 27, 2014 Federal Register (79
FR 30240) (2015 Market Standards Rule). The 2018 Payment Notice final
rule in the December 22, 2016 Federal Register (81 FR 94058) provided
additional guidance on guaranteed availability and guaranteed
renewability. In the Market Stabilization final rule that was published
in the April 18, 2017 Federal Register (82 FR 18346), we further
interpreted the guaranteed availability provision. 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.

[[Page 591]]

In the Nondiscrimination in Health and Human Education Programs or
Activities final rule on section 1557 of the ACA, published in the June
19, 2020 Federal Register (85 FR 37160), we removed nondiscrimination
protections on the basis of gender identity and sexual orientation from
the guaranteed availability regulation.
In part 2 of the 2022 Payment Notice final rule in the May 5, 2021
Federal Register (86 FR 24140), we made additional amendments to the
guaranteed availability regulation regarding special enrollment periods
and finalized new special enrollment periods related to untimely notice
of triggering events, cessation of employer contributions or government
subsidies to COBRA continuation coverage, and loss of APTC eligibility.
In the final rule Updating Payment Parameters, Section 1332 Waiver
Implementing Regulations, and Improving Health Insurance Markets for
2022 and Beyond published in the September 27, 2021 Federal Register
(86 FR 53412) (part 3 of the 2022 Payment Notice) by HHS and the
Department of the Treasury, HHS finalized additional amendments to the
guaranteed availability regulations regarding special enrollment
periods.
4. Exchanges
We published a request for comment relating to Exchanges in the
August 3, 2010 Federal Register (75 FR 45584). We issued initial
guidance to states on Exchanges on November 18, 2010. We proposed a
rule in the July 15, 2011 Federal Register (76 FR 41865) to implement
components of the Exchanges, and a rule in the August 17, 2011 Federal
Register (76 FR 51201) regarding Exchange functions in the individual
market and 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, as well as network adequacy and ECP
certification standards, 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 2016 Payment Notice, we also set forth the ECP certification
standard at Sec. 156.235, with revisions in the 2017 Payment Notice in
the March 8, 2016 Federal Register (81 FR 12203) and the 2018 Payment
Notice in the December 22, 2016 Federal Register (81 FR 94058).
In an interim final rule, published in the May 11, 2016 Federal
Register (81 FR 29146), we made amendments to the parameters of certain
special enrollment periods (2016 Interim Final Rule). We finalized
these in the 2018 Payment Notice final rule, published in the December
22, 2016 Federal Register (81 FR 94058).
In the April 18, 2017 Market Stabilization final rule Federal
Register (82 FR 18346), we amended standards relating to special
enrollment periods and QHP certification. 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 February 6, 2020 Federal Register (85 FR 7088), we published
a proposed rule (proposal 2021 Payment Notice). We published the final
rule in the May 14, 2020 Federal Register (85 FR 29164) (2021 Payment
Notice).
In the December 4, 2020 Federal Register (85 FR 78572), we issued a
proposed rule containing certain policy and regulatory revisions
related to user fees (proposed 2022 Payment Notice). In the January 19,
2021 Federal Register (86 FR 6138), HHS issued a rule finalizing
certain of the provisions in the proposed 2022 Payment Notice (part 1
of the 2022 Payment Notice final rule). In the May 5, 2021 Federal
Register (86 FR 24140), HHS published a second final rule addressing
the remainder of the proposed provisions (part 2 of the 2022 Payment
Notice final rule). In the July 1, 2021 Federal Register (86 FR 35156),
HHS and the Department of the Treasury released a proposed rule
proposing to amend certain policies in part 1 of the 2022 Payment
Notice final rule, and finalized the rule in the September 27, 2021
Federal Register (86 FR 53412) (part 3 of the 2022 Payment Notice final
rule).
5. Essential Health Benefits
On December 16, 2011, HHS released a bulletin that outlined an
intended regulatory approach for defining EHB, including a benchmark-
based framework.\14\ 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 PYs 2020 and beyond.
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\14\ ``Essential Health Benefits Bulletin.'' December 16, 2011.
Available at https://www.cms.gov/CCIIO/Resources/Files/Downloads/essential_health_benefits_bulletin.pdf.
---------------------------------------------------------------------------

6. 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 the May 5, 2021 Federal Register (86 FR
24140), and an interim final rule that was published in the September
2, 2020 Federal Register (85 FR 54820).
7. Quality Improvement Strategy
We promulgated regulations in 45 CFR 155.200(d) to direct Exchanges
to evaluate quality improvement strategies, and 45 CFR 156.200(b) that
direct QHP issuers to implement and report on a quality improvement
strategy or strategies consistent with section 1311(g) standards as a
QHP certification criteria for participation in an Exchange. In the
2016 Payment Notice, published in the February 27, 2015 Federal
Register (80 FR 10749), we finalized

[[Page 592]]

regulations at Sec. 155.1130 to establish standards and the associated
timeframe for QHP issuers to submit the necessary information to
implement QIS standards for QHPs offered through an Exchange.
8. Nondiscrimination
Section 1311(b) and section 1321(b) of the ACA provide that each
state has the opportunity to establish an Exchange. In the July 15,
2011 Federal Register (76 FR 41866), HHS published the ``Patient
Protection and Affordable Care Act; Establishment of Exchanges and
Qualified Health Plans'' proposed rule to implement section 1311(b) and
section 1321(b) of the ACA. In the March 27, 2012 Federal Register (77
FR 18310), HHS published the ``Patient Protection and Affordable Care
Act; Establishment of Exchanges and Qualified Health Plans; Exchange
Standards for Employers'' final rule and interim final rule
(hereinafter referred to as the ``Exchange Standards final rule''),
which included nondiscrimination protections.
Section 1302 of the ACA provides for the establishment of an EHB
package that includes coverage of EHB and actuarial value requirements.
In the November 26, 2012 Federal Register (77 FR 70644), HHS published
the ``Patient Protections and Affordable Care Act; Standards Related to
Essential Health Benefits, Actuarial Value, and Accreditation''
proposed rule to implement section 1302 of the ACA. In the February 25,
2013 Federal Register (78 FR 12834), HHS published the ``Patient
Protections and Affordable Care Act; Standards Related to Essential
Health Benefits, Actuarial Value, and Accreditation'' final rule, which
included nondiscrimination protections.
Sections 2701, 2702, and 2703 of the PHS Act and Section 1312(c) of
the ACA provide protections to individuals and employers in obtaining
health insurance coverage. In the November 26, 2012 Federal Register
(77 FR 70584), HHS published the ``Patient Protection and Affordable
Care Act; Health Insurance Market Rules; Rate Review'' proposed rule to
implement sections 2701, 2702, and 2703 of the PHS Act and section
1312(c) of the ACA. In the February 27, 2013 Federal Register (78 FR
13406), HHS published the ``Patient Protections and Affordable Care
Act; Health Insurance Market Rules; Rate Review'' final rule, which
included nondiscrimination protections.
In the HHS Notice of Benefit and Payment Parameters for 2017
proposed rule, published in the December 2, 2015 Federal Register (80
FR 75488), HHS proposed policies for nondiscrimination protections into
the relevant notice of benefit and payment parameters. In the March 8,
2016 Federal Register (81 FR 12204), HHS published the HHS Notice of
Benefit and Payment Parameters for 2017 final rule, which included
nondiscrimination protections.
In the Nondiscrimination in Health and Human Education Programs or
Activities final rule on section 1557 of the ACA, published in the June
19, 2020 Federal Register (85 FR 37160), HHS removed nondiscrimination
protections on the basis of gender identity and sexual orientation from
various CMS nondiscrimination regulations. In the HHS Notice of
Interpretation and Enforcement of Section 1557 of the Affordable Care
Act and Title IX of the Education Amendments of 1972, published in the
May 25, 2021 Federal Register (86 FR 27984), HHS informed the public
that HHS will interpret and enforce section 1557's and Title IX's
prohibition on discrimination on the basis of sex to include
discrimination based on sexual orientation and gender identity.

B. Stakeholder Consultation and Input

HHS has consulted with stakeholders on policies related to the PHS
Act federal market reform requirements, the operation of Exchanges and
the risk adjustment (including HHS-RADV) program. We have held a number
of meetings 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 EHBs, state mandates, and risk adjustment. We consulted
with stakeholders through regular meetings with the National
Association of Insurance Commissioners (NAIC), regular contact with
states through the Exchange Blueprint approval and general Exchange
oversight processes, and meetings with Tribal leaders and
representatives, health insurance issuers, trade groups, consumer
advocates, employers, and other interested parties. We considered all
public input we received as we developed the policies in this proposed
rule.

C. Structure of Proposed Rule

The regulations outlined in this proposed rule would be codified in
45 CFR parts 144, 147, 153, 155, 156 and 158.
The proposed changes to 45 CFR part 144 would remove superfluous
language from the definition of large group market.
The proposed changes to 45 CFR part 147 would prohibit issuers from
discriminating against individuals in issuer marketing practices and
benefit designs based on sexual orientation and gender identity. We
also propose to reinterpret the guaranteed availability requirements in
Sec. 147.104 such that issuers could not refuse to effectuate new
coverage based on failure of an individual or employer to pay premiums
owed for prior coverage.
The proposed changes to 45 CFR part 153 would recalibrate the 2023
benefit year risk adjustment models using the 2017, 2018, and 2019
enrollee-level External Data Gathering Environment (EDGE) data. We also
propose to update the adult and child risk adjustment models for 2023
and beyond to better predict plan liability for certain subpopulations.
We propose to update the adult risk adjustment models by removing the
current severity illness factors and replacing the current enrollment
duration factors with enrollment duration factors contingent on the
enrollee having at least one HCC. In addition, we propose to update the
adult and child risk adjustment models by adding a two-stage weighted
approach to model recalibrations and an interacted HCC count model
specification for 2023 and beyond. We propose to continue applying a
market pricing adjustment to the plan liability associated with
Hepatitis C drugs in the risk adjustment models, consistent with the
approach adopted beginning with the 2020 models. We discuss removing
the mapping of hydroxychloroquine sulfate to RXC 09 (Immune
Suppressants and Immunomodulators) in the 2018 and 2019 benefit year
enrollee-level EDGE data used for the annual recalibration of the HHS
risk adjustment models. We also propose for the 2024 benefit year and
beyond to recalibrate the models using the final, fourth quarter (Q4)
RXC mapping document that was applicable for each benefit year of data
that is included in the current year's model recalibration. We propose
using this approach for recalibration of the 2023 adult risk adjustment
models with the exception of the 2017 enrollee-level EDGE data year,
for which we propose to use the most recent RXC mapping document that
was available when we first processed the 2017 enrollee-level EDGE data
(that is, Q2 2018).We also propose to collect and extract five new data
elements including ZIP code, race, ethnicity, ICHRA indicator, and a
subsidy indicator as part of the required risk adjustment data that
issuers must make accessible to HHS in states where HHS is operating
the risk adjustment program. We also propose to extract three new data
elements issuers already

[[Page 593]]

provide to HHS as part of the required risk adjustment data submissions
(plan ID, rating area, and subscriber indicator) and to expand the
permitted uses of the risk adjustment data and reports. Additionally,
we propose an amendment to Sec. 153.730 to address situations when
April 30 does not fall on a business day and to provide that when this
occurs, the deadline for issuers to submit the required risk adjustment
data in states where HHS operates the program would be the next
applicable business day.
The proposals in part 153 also relate to risk adjustment state
flexibility requests. We propose to repeal the ability of states to
request a reduction in risk adjustment transfers calculated by HHS
under the state payment transfer formula starting with the 2024 benefit
year, while proposing to create an exception for any state that has
requested a reduction in prior benefit years. In addition, we solicit
comments on the requests from Alabama to reduce risk adjustment state
transfers for the 2023 benefit year in the individual (including the
catastrophic and non-catastrophic risk pools) and small group markets.
In part 153 we also propose the risk adjustment user fee for the
2023 benefit year and modifications to the error estimation methodology
applied in HHS-RADV. We propose updating the HHS-RADV error estimation
process to extend the application of Super HCCs beyond the sorting step
that assigns HCCs to failure rate groups to also apply throughout the
HHS-RADV error rate calculation processes and to specify that Super
HCCs will be defined separately according to the model (infant, child,
adult) to which an enrollee is subject. We also propose to constrain to
zero any failure rate group outlier negative failure rate, regardless
of whether the outlier issuer has a negative or positive error rate.
Finally, we propose that whenever HHS recoups high-cost risk pool funds
as a result of audits of risk adjustment covered plans, an actionable
discrepancy, or a successful administrative appeal, the recouped high-
cost risk pool funds will be used to reduce high-cost risk pool charges
for that national high-cost risk pool beginning for the next benefit
year for which a high cost risk pool payment has not already been
calculated.
In addition, the proposals regarding part 153 also relate to MLR
reporting requirements and clarify how issuers should report certain
ACA program amounts that could be subject to reconsideration for MLR
reporting purposes. We propose to separately address and reference HHS-
RADV adjustments to make clear that HHS expects issuers to report HHS-
RADV adjustments as part of their MLR reports in the same manner as
they report risk adjustment payment and charge amounts.
The proposed changes to 45 CFR part 155 would allow Exchanges to
implement a verification process for enrollment in or eligibility for
an eligible employer sponsored plan based on the Exchange's assessment
of risk for inappropriate payments of APTC/CSR. In part 155 we also
propose to require all Exchanges to prorate when administering APTC for
enrollees enrolled in a particular policy for less than the full
coverage month, including when the enrollee is enrolled in multiple
policies within a month, each lasting less than the full coverage
month. We also propose new requirements in part 155 related to the QHP
comparative information and standardized disclaimer required to be
displayed on web-broker non-Exchange websites, a prohibition on
displaying QHP advertisements or otherwise providing favored or
preferred placement in the display of QHPs on web-broker non-Exchange
websites based on compensation agents, brokers, or web-brokers receive
from QHP issuers, and a requirement regarding the prominent display of
a clear explanation of the rationale for explicit QHP recommendations
and the methodology for the default display of QHPs on web-broker non-
Exchange websites to better inform and protect consumers using such
websites. We also propose changes to part 155, to clarify the FFE
standards of conduct and what it means for agents, brokers, and web-
brokers to provide the Exchange with correct information under section
1411(b) of the ACA, including ensuring that accurate consumer
information is being entered on Exchange applications. Finally, we
propose changes to part 155 to set forth prohibited agent, broker, and
web-broker business practices commonly observed by HHS and to create
enforceable standards under which HHS may take enforcement action
against agents, brokers, and web-brokers when these prohibited business
practices are discovered.
In 45 CFR part 156, as we do every year in the HHS notice of
benefit and payment parameters, we propose to update the user fee rates
for the 2023 benefit year for all issuers participating on the
Exchanges using the Federal platform. We note that we intend to publish
the 2023 premium adjustment percentage index and related payment
parameters in guidance as finalized in part 2 of the 2022 Payment
Notice. The proposed changes to part 156 also include technical
amendments to Sec. 156.50 to conform the user fee regulations with the
repeal of Exchange Direct Enrollment (DE) option finalized in part 3 of
the 2022 Payment Notice.\15\ We are proposing changes to Sec. 156.430
to clarify that the CSR data submission process is mandatory only for
those issuers that receive CSR payments from HHS for any part of the
benefit year as a result of HHS possessing a valid appropriation to
make CSR payments, and voluntary for other issuers.
---------------------------------------------------------------------------

\15\ 86 FR 53412.
---------------------------------------------------------------------------

In part 156, we also propose an evergreen deadline for EHB-
benchmark plan applications by states, as well as proposing to remove
the ability for states to permit issuers to substitute benefits between
EHB categories, proposing to change de minimis thresholds for the AV of
plans subject to the AV requirements, as well as narrower de minimis
thresholds for individual market silver QHPs and income-based CSR plan
variations; and proposing to remove the annual reporting requirement on
states to report state-required benefits in addition to the EHB to HHS.
In part 156, we also propose to require issuers of QHPs in FFEs and
SBE-FPs to offer through the Exchange standardized QHP options
beginning in PY 2023. We also propose to update the QIS standards in
part 156 to require QHP issuers to address health and health care
disparities as a specific topic area within their QIS beginning with PY
2023.
The proposed changes to part 158 would clarify that only those
provider incentives and bonuses that are tied to clearly defined,
objectively measurable, and well-documented clinical or quality
improvement standards that apply to providers may be included in
incurred claims for MLR reporting and rebate calculation purposes. The
proposed changes to part 158 would also specify that only expenses
directly related to activities that improve health care quality may be
included as QIA expenses for MLR reporting and rebate calculation
purposes. In addition, the proposed changes to part 158 would make a
technical amendment to Sec. 158.170(b) to correct an oversight and
remove the reference to the percentage of premium QIA reporting option
described in Sec. 158.221(b)(8), a provision that was vacated by the
United States District Court for the District of Maryland in City of
Columbus, et al. v.

[[Page 594]]

Cochran,\16\ and thus deleted in part 2 of the 2022 Payment Notice
final rule.
---------------------------------------------------------------------------

\16\ 523 F. Supp. 3d 731 (D. Md. 2021).
---------------------------------------------------------------------------

III. Provisions of the Proposed HHS Notice of Benefit and Payment
Parameters for 2023

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

1. Definitions (Sec. 144.103)
We propose to remove superfluous language from the definition of
large group market. The definition currently provides that ``Large
group market'' means the health insurance market under which
individuals obtain health insurance coverage (directly or through any
arrangement) on behalf of themselves (and their dependents) through a
group health plan maintained by a large employer, unless otherwise
provided under State law. We propose to amend the definition by
deleting the phrase ``unless otherwise provided under State law.'' The
phrase has no meaning or application, and does not appear in the
statutory definition of the term in section 2791(e)(3) of the PHS Act.
That phrase was initially included in the PHS Act regulatory
definitions of large group market, large employer, and small employer
adopted by HHS under HIPAA.\17\ However, in final rules published on
October 30, 2013 (78 FR 65045), we amended the definitions of large
employer and small employer to make them consistent with PHS Act
section 2791(e), as amended by the ACA, and in so doing, removed that
phrase from the definitions. At that time, we inadvertently neglected
to delete the phrase from the regulatory definition of large group
market, and we now propose to do so, in order to align these
definitions and make the regulatory definition for large group market
consistent with the definition under the ACA.
---------------------------------------------------------------------------

\17\ 62 FR 16894 (April 8, 1997) and 69 FR 78720 (Dec. 30,
2004).
---------------------------------------------------------------------------

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

1. Guaranteed Availability of Coverage (Sec. 147.104)
a. Past-Due Premiums
We propose to re-interpret the guaranteed availability requirement
at section 2702 of the PHS Act and its implementing regulation at Sec.
147.104 to require issuers to accept individuals and employers who
apply for coverage, even where the individual or employer owes past-due
premiums for coverage from the same issuer or another issuer in the
same controlled group. On January 28, 2021, President Biden issued
Executive Order 14009, ``Strengthening Medicaid and the Affordable Care
Act'' (E.O. 14009).\18\ Section 3 of E.O. 14009 directs HHS, and the
heads of all other executive departments and agencies with authorities
and responsibilities related to Medicaid and the ACA, to review all
existing regulations, orders, guidance documents, policies, and any
other similar agency actions to determine whether they are inconsistent
with policy priorities described in Section 1 of E.O. 14009, to include
protecting and strengthening the ACA and making high-quality health
care accessible and affordable for all individuals. Consistent with
E.O. 14009, specifically section 3(iv), this proposal intends to remove
an unnecessary barrier to individuals and families attempting to enroll
into health coverage in the individual market.
---------------------------------------------------------------------------

\18\ E.O. 14009; 86 FR 7793 (Feb. 2, 2021).
---------------------------------------------------------------------------

Specifically, we propose to redesignate Sec. 147.104(i) as Sec.
147.104(j) and add a new Sec. 147.104(i) to specify that a health
insurance issuer that denies coverage to an individual or employer due
to the individual's or employer's failure to pay premium owed under a
prior policy, certificate, or contract of insurance, including by
attributing payment of premium for a new policy, certificate, or
contract of insurance to the prior policy, certificate, or contract of
insurance, violates Sec. 147.104(a). The guaranteed availability
provisions require health insurance issuers offering non-grandfathered
coverage in the individual or group market to accept every individual
and employer in the state that applies for such coverage unless an
exception applies. Individuals and employers typically are required to
pay the first month's premium to effectuate coverage. Under the current
interpretation of the guaranteed availability requirement stated in the
Market Stabilization final rule, to the extent permitted by applicable
state law, an issuer does not violate the guaranteed availability
requirements under Sec. 147.104 where the issuer attributes a premium
payment made for new coverage to any past-due premiums owed for
coverage from the same issuer or another issuer in the same controlled
group within the prior 12-month period before effectuating enrollment
in the new coverage. This policy addressed concerns that individuals
might take unfair advantage of the rules regarding grace periods.\19\
However, in part 3 of the 2022 Payment Notice proposed rule, we stated
our intention to reassess this interpretation to analyze whether this
policy presents unnecessary barriers to accessing health coverage.\20\
---------------------------------------------------------------------------

\19\ QHP issuers are required, under Sec. 156.270, to provide a
grace period of 3 consecutive months for an enrollee, who, when
failing to timely pay premiums, is receiving APTC. If the enrollee
exhausts the grace period without paying all outstanding premiums,
subject to a premium payment threshold implemented under Sec.
155.400(g), then the QHP issuer must terminate the enrollee's
enrollment back to the last day of the first month of the 3-month
grace period. As a result, an individual receiving APTC whose
coverage is terminated after the exhaustion of a grace period would
owe at most 1 month of premiums, net of any APTC paid on their
behalf to the issuer; however, an individual who attempts to enroll
in new coverage while in a grace period, and whose coverage has not
yet been terminated, could owe up to 3 months of premium, net of any
APTC paid on their behalf to the issuer.
\20\ 86 FR 35156, 36071.
---------------------------------------------------------------------------

After reevaluating our interpretation of the guaranteed
availability requirement, we propose reinstating our previous
interpretation of the guaranteed availability rules with respect to
non-payment of premiums.\21\ Under this interpretation, an issuer may
not apply any premium payment made for new coverage in the same or a
different plan or product to any outstanding debt owed from any
previous coverage and then refuse to effectuate the new enrollment
based on failure to pay premiums. Thus, the guaranteed availability
requirement would prohibit issuers from refusing to effectuate new
coverage due to failure to pay outstanding premium debt from the
previous year.
---------------------------------------------------------------------------

\21\ Federally-facilitated Marketplace (FFM) and Federally-
facilitated Small Business Health Options Program Enrollment Manual,
Section 6.3 Terminations for Non-Payment of Premiums, https://www.cms.gov/CCIIO/Resources/Regulations-and-Guidance/Downloads/ENR_FFMSHOP_Manual_080916.pdf (describing operational requirements
effective as of July 19, 2016, which were superseded by subsequent
publications).
---------------------------------------------------------------------------

Based on HHS' experience since we codified the currently-effective
interpretation of guaranteed availability, we believe the current
policy, has the unintended consequence of creating barriers to health
coverage that disproportionately affect low-income individuals, and is
therefore inconsistent with the intent of the guaranteed availability
statutory requirements. The current policy heightens the risk of
economic hardships for low-income individuals enrolled in health
insurance coverage with APTC. Individuals stop paying premiums (and
lose coverage due to nonpayment of premiums) for a variety of reasons
throughout the year. For example, commenters to the Market
Stabilization proposed rule stated that individuals who are victims of
crime, or those grappling with domestic violence,

[[Page 595]]

medical emergencies, incarceration, or other urgent circumstances are
often forced to make difficult financial decisions that may lead to
failure to pay their health insurance premiums. Even for some middle-
income families, the high cost of health care for multiple family
members with chronic health conditions may result in non-payment of
premiums.\22\ Requiring such individuals to pay back past-due premium
plus a binder payment prior to enrollment may present an insurmountable
barrier leading to gaps in coverage. For this reason, HHS is of the
view that the current interpretation of the guaranteed availability
requirement creates unnecessary barriers to accessing health coverage.
---------------------------------------------------------------------------

\22\ John Tozzi. (March 2018). ``Why Some Americans Are Risking
It and Skipping Health Insurance.'' Bloomberg News. Retrieved from
https://www.bloomberg.com/news/features/2018-03-26/why-some-americans-are-risking-it-and-skipping-health-insurance.
---------------------------------------------------------------------------

HHS is also concerned that the barriers created by the current
interpretation of guaranteed availability disproportionately affect
low-income enrollees for whom APTC is paid. Under federal law governing
grace periods for enrollees for whom APTC is paid, QHP issuers must
provide a 3-month grace period before they are allowed to terminate an
enrollee's coverage for non-payment of premiums and must continue to
provide coverage during the first month of the grace period. As a
result, those enrollees who are unable to satisfy outstanding premium
payments by the end of the 3-month grace period generally may owe at
least one month of past due premium after their coverage is terminated.
In contrast, grace period rules for individuals who are not eligible
for APTC are governed by state law. Many state laws allow for
termination back to the end of the period for which an enrollee paid
premium, in which case an enrollee without APTC whose coverage is
terminated for nonpayment would not owe past-due premium when they
attempt to enroll in coverage during a subsequent open enrollment or
special enrollment period. Enrollees for whom APTC is paid generally
may have household incomes as low as 100 percent of the federal poverty
level (FPL) (which, for the 2021 benefit year, is $12,760 for a single
person household).\23\ Thus, premium payment policies that require
payment of past-due premiums prior to effectuation of new coverage are
likely to disproportionately affect low-income enrollees with APTC, the
individuals who may be least able to pay all outstanding premium debt
among those seeking coverage in the individual market.
---------------------------------------------------------------------------

\23\ See 2021 Poverty Guidelines for the 48 Contiguous States
and the District of Columbia, available at https://aspe.hhs.gov/topics/poverty-economic-mobility/poverty-guidelines/prior-hhs-poverty-guidelines-federal-register-references/2020-poverty-guidelines.
---------------------------------------------------------------------------

Conditioning health insurance enrollment on the payment of past-due
premiums could disincentivize health insurance enrollment altogether,
reducing the rate of enrollment for low-income individuals. The
economic burden associated with being required to pay past-due premiums
prior to enrolling in new coverage may prevent low-income individuals
from enrolling in coverage and affect the demographics of the risk
pool. Various studies have found that low-income families often
struggle to balance out-of-pocket health care costs alongside rent or
mortgage payments, and other necessary living expenses.\24\ Maintaining
the current interpretation of the guaranteed availability rules would
uphold barriers to health insurance coverage for low-income
individuals, who face a greater risk of poorer health outcomes.\25\
Reverting to the previous interpretation of the guaranteed availability
rules would ensure individuals who stand to benefit the most from
health insurance coverage can enroll in coverage, and would promote
more equitable access to health insurance coverage. In addition, the
public health and economic crises caused by the COVID-19 pandemic
exacerbated the hardships facing low-income individuals and families.
The resulting financial and health insecurity caused by the pandemic
underscores the critical role that access to continuous health coverage
will continue to play during the ongoing and often unpredictable
challenges of the pandemic and beyond. Returning to the previous
interpretation of the guaranteed availability rule would remove a
barrier to accessing health coverage that compounds the economic
challenges from the COVID-19 crisis.
---------------------------------------------------------------------------

\24\ Tim Thomas, Ph.D.; Jose Hernandez, Ph.D.; et al. (2019).
The Evictions Study. The University of California Berkeley and the
University of Washington. Retrieved from https://evictions.study/index.html.
\25\ P.J. Cunningham; T.L. Green; R.T. Braun. (February 2018).
Income Disparities in the Prevalence, Severity, and Costs of Co-
Occurring Chronic and Behavioral Health Conditions. Medical Care.
Retrieved from https://www.commonwealthfund.org/publications/journal-article/2018/feb/income-disparities-prevalence-severity-and-costs-co-occurring.
---------------------------------------------------------------------------

In the Market Stabilization rule, we noted concern that enrollees
with APTC may take advantage of guaranteed availability by declining to
make premium payments for coverage at the end of a benefit year without
losing coverage. Although this remains possible, we are of the view
that the disparate negative impact on low-income populations outweighs
the possible deterrent effect on individuals who may try taking
advantage of the guaranteed availability rules. We seek comment
regarding the frequency of any potential gaming behavior, as well as
information on the primary diagnoses and services that may be involved
in suspected gaming situations so that we may better assess any
contributing causes of such non-payment. For example, non-payment may
not be the result of gaming, but could be indicative of contextual
challenges individuals face in satisfying payment obligations. We are
particularly interested in comments from issuers that have not adopted
a premium payment policy that requires payment of past-due premiums
prior to effectuating enrollment. In addition, we note that issuers are
generally not permitted to forgive past-due premium debt, and can
pursue other mechanisms to collect past-due premiums. We believe this
mitigates the risk that some enrollees may take advantage of the
guaranteed availability rules.
We seek comment on this proposal.
b. Nondiscrimination Based on Sexual Orientation and Gender Identity
We propose to amend 45 CFR 147.104(e) such that its
nondiscrimination protections would explicitly prohibit discrimination
based on sexual orientation and gender identity. HHS previously
codified such nondiscrimination protections at Sec. 147.104(e), but
amendments made in 2020 to Sec. 147.104(e) removed any reference to
sexual orientation and gender identity. If finalized, this proposal
would revert Sec. 147.104(e) to the pre-2020 nondiscrimination
protections.
Section 147.104(e) states that a health insurance issuer and its
officials, employees, agents, and representatives must not employ
marketing practices or benefit designs that would have the effect of
discouraging the enrollment of individuals with significant health
needs in health insurance coverage or discriminate based on race,
color, national origin, present or predicted disability, age, sex,
expected length of life, degree of medical dependency, quality of life,
or other health conditions. Previously, in the 2014 Market Rules, we
finalized Sec. 147.104(e) to also prohibit discrimination based on
sexual orientation and gender

[[Page 596]]

identity.\26\ However, in the 2020 final rule that revised regulations
implementing section 1557 of the ACA, HHS also revised certain CMS
regulations, including those at Sec. 147.104(e), by removing sexual
orientation and gender identity as bases of discrimination subject to
the CMS regulations' nondiscrimination protections.\27\ The 2020
section 1557 final rule is the subject of ongoing litigation.\28\
---------------------------------------------------------------------------

\26\ 78 FR 13406 (February 27, 2013).
\27\ 85 FR 37160 (June 19, 2020); See id. at 37218-21 (the 2020
section 1557 final rule revised the following CMS regulations: 45
CFR 147.104, 155.120, 155.220, 156.200, 156.1230).
\28\ The 2020 section 1557 final rule is the subject of several
lawsuits and court orders. For more information, see https://www.hhs.gov/civil-rights/for-individuals/section-1557/index.html.
---------------------------------------------------------------------------

Pursuant to section 1311(c)(1)(A) of the ACA, the HHS Secretary was
required to establish by regulation criteria for certification that
require QHP issuers to meet marketing requirements and not employ
marketing practices or benefit designs that will have the effect of
discouraging the enrollment of individuals with significant health
needs in QHPs. Under the authority of section 1321(a) of the ACA, which
provides the HHS Secretary broad rulemaking authority with respect to
the establishment and operation of Exchanges and the offering of QHPs
through such Exchanges, in the 2012 Exchange Standards final rule, CMS
codified a regulation implementing this requirement at Sec. 156.225.
Under the general rulemaking authority in section 2792 of the PHS Act,
which provides the HHS Secretary broad rulemaking authority to
promulgate regulations as may be necessary or appropriate to carry out
the provisions of title XXVII of the PHS Act, the 2014 Market Rules
adopted a similar standard in Sec. 147.104(e), applying this
requirement to the group and individual health insurance markets.
Furthermore, in order to ensure consistency against employing
discriminatory marketing practices and benefit designs, HHS finalized
Sec. 147.104(e) to align with other prohibitions on discrimination
that HHS had already codified at that time with respect to EHB in Sec.
156.125, with respect to standards applicable to QHPs under Sec.
156.200(e) that included protections against discrimination on the
basis of sexual orientation and gender identity, and with respect to
marketing standards in Sec. 156.225. The 2014 Market Rules further
clarified that discriminatory marketing practices or benefit designs
represent a failure by issuers to comply with the guaranteed
availability requirements in PHS Act section 2702, as such practices or
designs can have the effect of discouraging or preventing the
enrollment of individuals in health insurance coverage.
In the 2020 section 1557 final rule, HHS revised the section 1557
implementing regulation. Among other things, the rule removed the
definition of ``on the basis of sex,'' which included gender identity,
and instead purported to rely upon the ``plain meaning'' of the word
``sex'' in the underlying Title IX regulation.\29\ However, as HHS
noted in the 2020 section 1557 final rule, CMS possesses statutory
authority independent of section 1557 of the ACA to prohibit
discrimination in the group and individual markets.\30\
---------------------------------------------------------------------------

\29\ 85 FR 37160, 37166 (June 19, 2020). The 2016 and 2020
section 1557 final rules are the subject of several lawsuits and
court orders. For more information, see https://www.hhs.gov/civil-rights/for-individuals/section-1557/index.html, https://www.hhs.gov/civil-rights/for-individuals/section-1557/index.html.
\30\ 85 FR 37160, 37219, 37218-21 (June 19, 2020).
---------------------------------------------------------------------------

Following public posting of the 2020 section 1557 final rule on the
agency's website, the Supreme Court held in Bostock v. Clayton County,
140 S. Ct. 1731 (2020), that discrimination on the basis of sex under
Title VII of the Civil Rights Act of 1964 includes discrimination on
the basis of sexual orientation and gender identity. On January 20,
2021, the President signed Executive Order 13988 stating that it is the
Administration's policy to prevent and combat discrimination on the
basis of gender identity and sexual orientation, and that under
Bostock's reasoning, laws that prohibit sex discrimination also
prohibit discrimination on the basis of gender identity and sexual
orientation, so long as the laws do not contain sufficient indications
to the contrary.\31\ The Executive Order (E.O.) also instructed all
agency heads, including the HHS Secretary, to review all existing
regulations, guidance documents, and other agency actions to determine
whether they are consistent with the aforementioned policy, and to
consider whether to suspend, revise, or rescind any agency actions that
are inconsistent with it. The Department of Justice (DOJ) issued a
memorandum on March 26, 2021 that determined the court's reasoning in
Bostock applies to Title IX and thus that Title IX's prohibition on
discrimination on the basis of sex includes discrimination on the basis
of gender identity and sexual orientation.\32\ Following the E.O. and
DOJ's memorandum, HHS released on May 10, 2021 a Notice that HHS will
interpret and enforce section 1557's and Title IX's prohibition on
discrimination on the basis of sex to include: (1) Discrimination on
the basis of sexual orientation; and (2) discrimination on the basis of
gender identity.\33\
---------------------------------------------------------------------------

\31\ Executive Order 13988 on Preventing and Combating
Discrimination on the Basis of Gender Identity or Sexual
Orientation, 86 FR 7023 (Jan. 20, 2021).
\32\ U.S. Dep't of Justice, Memorandum on Application of Bostock
v. Clayton County to Title IX of the Education Amendments of 1972
(Mar. 26, 2021), https://www.justice.gov/crt/page/file/1383026/download. On June 16, 2021, the Department of Education's Office for
Civil Rights issued a similar Notice explaining that it too will
enforce Title IX's prohibition on discrimination on the basis of sex
to include: (1) Discrimination based on sexual orientation; and (2)
discrimination based on gender identity (available at https://www2.ed.gov/about/offices/list/ocr/docs/202106-titleix-noi.pdf).
\33\ 86 FR 27984.
---------------------------------------------------------------------------

Likewise, CMS is not relying on authority from section 1557 of the
ACA for the proposal at Sec. 147.104(e) or the parallel proposals to
nondiscrimination regulations at Sec. Sec. 155.120(c), 155.220(j),
156.125(b), 156.200(e), and 156.1230(b). We will further elaborate in
the respective preambles to Sec. Sec. 147.104(e), 155.120(c),
155.220(j), 156.125(b), 156.200(e), and 156.1230(b) the specific ACA
authority CMS is relying on to prohibit discrimination in the group and
individual markets. CMS proposes to exercise the same authority as it
exercised in the 2014 Market Rules to amend Sec. 147.104(e) to again
prohibit a health insurance issuer and its officials, employees,
agents, and representatives from discriminating in its marketing
practices or benefit designs on the basis of sexual orientation and
gender identity. Specifically, CMS proposes to again rely on section
2702 of the PHS Act, as well as section 2792 of the PHS Act, which
provides the HHS Secretary broad rulemaking authority to promulgate
regulations as may be necessary or appropriate to carry out the
provisions of title XXVII of the PHS Act. These are the same
authorities CMS relies upon for implementation of existing
nondiscrimination protections at Sec. 147.104(e). Utilizing these same
authorities to again prohibit discrimination based on sexual
orientation and gender identity would be consistent with the authority
CMS relies upon for those existing protections at Sec. 147.104(e) that
currently prohibit discrimination on the basis of race, color, national
origin, present or predicted disability, age, sex, expected length of
life, degree of medical dependency, quality of life, or other health
conditions.
People who identify as part of the lesbian, gay, bisexual,
transgender, and

[[Page 597]]

queer (LGBTQI+) community face pervasive health and health care
disparities, and are at higher risk for many concomitant conditions,
including substance use and \34\ mental health disorders, sexually
transmitted infections,\35\ HIV,\36\ cancer, cardiovascular disease,
and obesity.\37\ Overall, LGBTQI+ people report being in poorer health
than non-LGBTQI+ individuals. LGBTQI+ people of all genders are more
likely to become disabled at a younger age than heterosexual
individuals.\38\ In addition to disparities in health outcomes, LGBTQI+
people face barriers to obtaining appropriate health care and
transgender people who can access insurance may nonetheless be denied
coverage for needed services. For example, nearly half of transgender
respondents in one survey said their health insurance company denied
them gender affirming surgery,\39\ and a similar proportion reported
that they were denied coverage for hormone therapy.\40\ Beyond health
coverage issues, LGBTQI+ people may struggle to access care because of
cost barriers. LGBTQI+ people are also more likely than others to
report postponing or forgoing health care due to costs, and costs were
an even greater obstacle for younger LGBTQI+ people and those who are
transgender--especially transgender people of color.\41\
---------------------------------------------------------------------------

\34\ Hilary Daniel et al, Annals of Internal Med. Position
Papers, Lesbian, Gay, Bisexual, and Transgender Health Disparities:
Executive Summary of a Policy Position Paper From the American
College of Physicians (July 21, 2105), https://www.acpjournals.org/doi/full/10.7326/M14-2482?journalCode=aim.
\35\ Hilary Daniel et al, Annals of Internal Med. Position
Papers, Lesbian, Gay, Bisexual, and Transgender Health Disparities:
Executive Summary of a Policy Position Paper From the American
College of Physicians (July 21, 2105), https://www.acpjournals.org/doi/full/10.7326/M14-2482?journalCode=aim.
\36\ U.S. Dep't of Health & Human Servs., Ctrs. for Disease
Control and Prevention, HIV Surveillance Report, 2019; Vol. 32 (May
2021), https://www.cdc.gov/hiv/pdf/library/reports/surveillance/cdc-hiv-surveillance-report-2018-updated-vol-32.pdf.
\37\ See, for example, Lesbian, Gay, Bisexual, and Transgender
Health, Healthy People 2020, https://www.healthypeople.gov/2020/
topics-objectives/topic/lesbian-gay-bisexual-and-transgender-
health#:~:text=Research%20suggests%20that%20LGBT%20individuals,%2C2%2
C%203%20and%20suicide; Hafeez, Hudaisa et al. ``Healthcare
Disparities Among Lesbian, Gay, Bisexual, and Transgender Youth: A
Literature Review.'' Cureus vol. 9,4 e1184. 20 Apr. 2017,
doi:10.7759/cureus.1184 (https://www.ncbi.nlm.nih.gov/pmc/articles/PMC5478215/); Fredriksen-Goldsen KI, Kim H-J, Barkan SE, Muraco A
and Hoy-Ellis CP (2013) Health disparities among lesbian, gay, and
bisexual older adults: Results from a population-based study.
American Journal of Public Health 103, 1802-1809; Billy A. Caceres
et al. ``A Systematic Review of Cardiovascular Disease in Sexual
Minorities'', American Journal of Public Health 107, no. 4 (April 1,
2017): pp. e13-e21.
\38\ Hilary Daniel et al, Annals of Internal Med. Position
Papers, Lesbian, Gay, Bisexual, and Transgender Health Disparities:
Executive Summary of a Policy Position Paper From the American
College of Physicians (July 21, 2105), https://www.acpjournals.org/doi/full/10.7326/M14-2482?journalCode=aim.
\39\ For purposes of this preamble, the term ``gender affirming
care'' means gender affirming care for transgender individuals. This
may also be referred to as ``transition related care.''
\40\ Sharita Gruberg et al, Center for American Progress, The
State of the LGBTQ Community in 2020 (Oct. 6, 2020), https://www.americanprogress.org/issues/lgbtq-rights/reports/2020/10/06/491052/state-lgbtq-community-2020/.
\41\ Sharita Gruberg et al, Center for American Progress, The
State of the LGBTQ Community in 2020 (Oct. 6, 2020), https://www.americanprogress.org/issues/lgbtq-rights/reports/2020/10/06/491052/state-lgbtq-community-2020/.
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We believe that prohibiting discrimination based on sexual
orientation or gender identity can lead to improved health outcomes for
this community \42\ and that the removal of such protections in the
2020 section 1557 final rule frustrated not only guaranteed
availability requirements, but also the broader aim of improving health
equity. Without protection from discrimination, individuals may
continue to face barriers to accessing medically necessary health care.
For example, without protection from discrimination, transgender
individuals may face barriers or be denied medically necessary gender-
affirming care. We believe amending the nondiscrimination protections
as proposed at Sec. 147.104(e) to again explicitly prohibit
discrimination based on sexual orientation and gender identity is
warranted in light of the existing trends in health care discrimination
and to better address barriers to health equity for LGBTQI+
individuals.\43\ As proposed, such revisions to Sec. 147.104(e) would
also support the original objective of ensuring consistency against
employing discriminatory marketing practices and benefit designs, as we
are proposing parallel changes to nondiscrimination regulations at
Sec. Sec. 147.104(e), 155.120(c), 155.220(j), 156.125(b), 156.200(e),
and 156.1230(b).
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\42\ Ward, BW, Dahlhamer, JM, Galinsky, AM, and Joestl, SS.
Sexual Orientation & Health Among U.S. Adults: National Health
Interview Survey, CDC National Health Statistics Report 77, 2014.
\43\ Nguyen, T.T., Vable, A.M., Glymour, M.M. et al. Trends for
Reported Discrimination in Health Care in a National Sample of Older
Adults with Chronic Conditions. J GEN INTERN MED 33, 291-297 (2018).
https://doi.org/10.1007/s11606-017-4209-5.
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If any of the provisions at Sec. Sec. 147.104(e), 155.120(c),
155.220(j), 156.125(b), 156.200(e), and 156.1230(b) are held to be
invalid or unenforceable by its terms, or as applied to any person or
circumstance, it shall be severable from this part and shall not affect
the remainder thereof or the application of the provision to other
persons not similarly situated or to other dissimilar circumstances. In
enforcing the nondiscrimination provisions in the corresponding CMS
regulations, HHS will comply with laws protecting the exercise of
conscience and religion, including the Religious Freedom Restoration
Act (42 U.S.C. 2000bb through 2000bb-4) and all other applicable legal
requirements.
We seek comment on this proposal.

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

In subparts A, D, G, and H of part 153, we established standards
for the administration of the risk adjustment program. The risk
adjustment program is a permanent program created by section 1343 of
the 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, small group markets, or merged
markets, inside and outside the Exchanges. In accordance with Sec.
153.310(a), a state that is approved or conditionally approved by the
Secretary to operate an Exchange may establish a risk adjustment
program, or have HHS do so on its behalf.\44\ HHS did not receive any
requests from states to operate risk adjustment for the 2023 benefit
year. Therefore, HHS will operate risk adjustment in every state and
the District of Columbia for the 2023 benefit year.
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\44\ Also see 42 U.S.C. 18041(c)(1).
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1. Sequestration
In accordance with the OMB Report to Congress on the Joint
Committee Reductions for Fiscal Year 2022, the permanent risk
adjustment program is subject to the fiscal year 2022
sequestration.\45\ The federal government's 2022 fiscal year begins
October 1, 2021. Therefore, the risk adjustment program will be
sequestered at a rate of 5.7 percent for payments made from fiscal year
2022 resources (that is, funds collected during the 2022 fiscal year).
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\45\ https://www.whitehouse.gov/wp-content/uploads/2021/05/BBEDCA_251A_Sequestration_Report_FY2022.pdf.
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HHS, in coordination with OMB, has determined that, under section
256(k)(6) of the Balanced Budget and Emergency Deficit Control Act of
1985 (Pub. L. 99-177, enacted December 12, 1985), as

[[Page 598]]

amended, and the underlying authority for the risk adjustment program,
the funds that are sequestered in fiscal year 2022 from the risk
adjustment program will become available for payment to issuers in
fiscal year 2023 without further Congressional action. If Congress does
not enact deficit reduction provisions that replace the Joint Committee
reductions, the program would be sequestered in future fiscal years,
and any sequestered funding would become available in the fiscal year
following that in which it was sequestered.
Additionally, we note that the Coronavirus Aid, Relief, and
Economic Security (CARES) Act amended section 251A(6) of the Balanced
Budget and Emergency Deficit Control Act of 1985 and extended
sequestration for the risk adjustment program through fiscal year 2030
at a rate of 5.7 percent per fiscal year.\46\
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\46\ https://www.congress.gov/116/bills/s3548/BILLS-116s3548is.pdf.
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2. 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.\47\ 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 factor. 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.
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\47\ 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.
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a. Data for Risk Adjustment Model Recalibration for 2023 Benefit Year
and Beyond
We are proposing to recalibrate the 2023 benefit year risk
adjustment models with the 2017, 2018, and 2019 enrollee-level EDGE
data. Consistent with the approach outlined in the 2020 Payment Notice
to no longer rely upon MarketScan[supreg] data for recalibrating the
risk adjustment models, we will recalibrate the risk adjustment models
for the 2023 benefit year using only enrollee-level EDGE data, and we
will continue to use blended, or averaged, coefficients from the 3
years of separately solved models for the 2023 benefit year model
recalibration.\48\ Additionally, as outlined in the 2022 Payment
Notice, we will use the 3 most recent consecutive years of enrollee-
level EDGE data that are available at the time we incorporate the data
in the draft recalibrated coefficients published in the proposed rule
for the applicable benefit year,\49\ and will not update the
coefficients between the proposed and final rules if an additional year
of enrollee-level EDGE data becomes available for incorporation.\50\ We
believe this promotes stability, better meets the goal of the risk
adjustment program, and allows issuers more time to incorporate this
information when pricing their plans for the upcoming benefit year.
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\48\ 84 FR 17463 through 17466.
\49\ While we do receive the next year of enrollee-level EDGE
data prior to the proposed rule, that data must go through several
quality and analysis checks before it is useable for risk adjustment
model recalibration.
\50\ 86 FR 24140 at 24152.
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As such, we propose to determine coefficients for the 2023 benefit
year based on a blend of separately solved coefficients from the 2017,
2018, and 2019 benefit years' enrollee-level EDGE data.\51\ The draft
coefficients listed in Tables 1 through 6 reflect the use of 2017,
2018, and 2019 benefit year enrollee-level EDGE data, as well as other
risk adjustment model updates proposed in this proposed rule (including
changes to the model specifications, the pricing adjustment to
Hepatitis C drugs, and the removal of the mapping of hydroxychloroquine
sulfate to an RXC). However, we note that the coefficients could change
if we identify an error or if some or all of the proposed model changes
are not finalized or are modified in response to comments. In addition,
consistent with Sec. 153.320(b)(1)(i), if we are unable to finalize
the final coefficients in time for publication in the final rule, we
would publish the final coefficients for the 2023 benefit year in
guidance soon after the publication of the final rule. We seek comment
on the proposal to determine 2023 benefit year coefficients based on a
blend of separately solved coefficients from the 2017, 2018, and 2019
enrollee-level EDGE data.
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\51\ As discussed later in this proposed rule, we propose to
remove the mapping of hydroxychloroquine to RXC 09 (Immune
Suppressants and Immunomodulators) and the related RXC 09
interactions.
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We also solicit comments on the future use of the 2020 enrollee-
level EDGE data due to the COVID-19 PHE. Under current policy, 2020
enrollee-level EDGE data would be used in recalibration of the HHS risk
adjustment models for the 2024 benefit year and that data would
continue to be used for the 2025 and 2026 benefit year models.\52\
Although HHS has not analyzed the 2020 enrollee-level EDGE data yet, we
solicit comment on the future use of the 2020 enrollee-level EDGE data
for the annual recalibration of the HHS risk adjustment models.
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\52\ Consistent with the approach finalized in the 2022 Payment
Notice, use of the 3 most recent consecutive years of enrollee-level
EDGE data would result in the use of 2018, 2019, and 2020 enrollee-
level EDGE data for the recalibration of the 2024 benefit year
models; the use of 2019, 2020, and 2021 enrollee-level EDGE data for
recalibration of the 2025 benefit year models; and the use of 2020,
2021, and 2022 enrollee-level EDGE data for recalibration of the
2026 benefit year models.
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b. Risk Adjustment Model Updates
Beginning with the 2023 benefit year, we are proposing three
modeling updates to the risk adjustment models. Consistent with the
potential model updates discussed in the 2021 RA Technical Paper, we
propose the following model updates, which are the same as those
proposed but not finalized in the 2022 Payment Notice: \53\ (1) Adding
a two-stage weighted model specification to the adult and child models;
(2) removing the severity illness factors in the adult models and

[[Page 599]]

replacing them with new severity and transplant indicators interacted
with HCC count factors in the adult and child models; and (3) replacing
the current enrollment duration factors in the adult models with HCC-
contingent enrollment duration factors in the adult models.
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\53\ See 85 FR 78572 at 78583-78586. In the 2022 Payment Notice
Final Rule, in response to comments, we did not finalize the
proposed updates and announced that we would publish a technical
paper on the proposed model changes; see 86 FR 24140 at 24151-24162.
See also the 2021 HHS-Operated Risk Adjustment Technical Paper on
Possible Model Changes, available at https://www.cms.gov/files/document/2021-ra-technical-paper.pdf and the HHS-Operated Risk
Adjustment Technical Paper on Possible Model Changes: Summary
Results for Transfer Simulations, available at https://www.cms.gov/CCIIO/Programs-and-Initiatives/Premium-Stabilization-Programs.
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As described in prior rulemakings and in the 2021 RA Technical
Paper, the current HHS-HCC models, which are linear models,
underpredict plan liability for enrollees without HCCs and the lowest
expected expenditures, underpredict plan liability for enrollees with
the highest HCC counts and the highest expected expenditures, and
underpredict plan liability for partial-year enrollees with HCCs.\54\
The proposals in this proposed rule are intended to improve the risk
adjustment adult and child models' prediction for these subpopulations.
We released the 2021 RA Technical Paper in response to stakeholder
requests for more information on the impacts of these proposals before
they were adopted and released simulated transfer estimates reflecting
the combination of these proposed changes in December 2021.\55\ We
continue to believe the combination of these proposed model changes
will improve the current models' predictive accuracy for the lowest-
risk enrollees, certain partial-year adult enrollees, and the very
highest-risk enrollees, while limiting trade-offs in other areas of
model performance and complexity. As such, we are re-proposing these
combined model specification changes in this rule, and the following
sections describe these proposed model specification changes in detail.
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\54\ See, for example, 85 FR 29164 at 29188-29190; 85 FR 78572
at 78583-78586; and 86 FR 24140 at 24151-24162. See also the 2021
HHS-Operated Risk Adjustment Technical Paper on Possible Model
Changes, available at https://www.cms.gov/files/document/2021-ra-technical-paper.pdf.
\55\ See the 2021 HHS-Operated Risk Adjustment Technical Paper
on Possible Model Changes, available at https://www.cms.gov/files/document/2021-ra-technical-paper.pdf and the HHS-Operated Risk
Adjustment Technical Paper on Possible Model Changes: Summary
Results for Transfer Simulations, available at https://www.cms.gov/CCIIO/Programs-and-Initiatives/Premium-Stabilization-Programs.
Issuers that participated in the simulation also received issuer-
specific data, including risk score and transfer estimates for the
simulated results.
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i. Two-Stage Weighted Model Specification
We propose to use a two-stage weighted model specification to
recalibrate the adult and child risk adjustment models starting with
the 2023 benefit year to improve the underprediction of plan liability
for the lowest-risk enrollees (that is, enrollees in low risk deciles
and enrollees without HCCs).\56\ Since approximately 80 percent of
enrollees in the individual and small group (or merged) markets do not
have HCCs, this underprediction, while small in magnitude, represents a
large number of enrollees.\57\
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\56\ When we refer to the enrollees without HCCs, we are
referring to enrollees without payment HCCs.
\57\ See Chapter 2 of the 2021 HHS-Operated Risk Adjustment
Technical Paper on Possible Model Changes, available at https://www.cms.gov/files/document/2021-ra-technical-paper.pdf, and the HHS-
Operated Risk Adjustment Technical Paper on Possible Model Changes:
Summary Results for Transfer Simulations, available at https://www.cms.gov/CCIIO/Programs-and-Initiatives/Premium-Stabilization-Programs.
---------------------------------------------------------------------------

To improve prediction for the lowest-risk enrollees, we explored
calibrating the adult and child models in two stages to reweight the
healthier enrollees more heavily. 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
weighting enrollees in the recalibration sample by the capped
reciprocal of the predicted values of relative expenditures from the
first step estimation with the same model specification. More
specifically, the first stage of this proposed weighted estimation
method for the adult models involves a linear regression (weighted by
the person-specific eligibility fraction of the number of months
enrolled divided by 12) of simulated plan liability \58\ on age-sex
factors, payment HCC factors, severity illness factors,\59\ the
enrollment duration factors,\60\ and RXCs. For the child models, the
first stage of the proposed weighted estimation method involves a
linear regression of simulated plan liability on age-sex factors and
payment HCC factors.\61\ The methodology for conducting the proposed
first stage regression would be essentially identical to the current
adult and child risk adjustment recalibrations. The second stage of the
proposed two-stage weighted model specification involves using
recalibration sample enrollees' inverse (also referred to as
reciprocal) capped predictions from the first stage as weights for a
second linear regression. As such, this step has the material effect of
weighting healthier enrollees more heavily so that the statistical
model predicts their expenditures more accurately. It also
systematically reduces the influence of very expensive enrollees on the
final model factors.
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\58\ We simulate plan liability expenditures for each metal
level for each enrollee in the recalibration dataset (that is, we
apply different standardized benefit design parameters to the same
sample for each metal level). See https://www.cms.gov/mmrr/Downloads/MMRR2014_004_03_a03.pdf.
\59\ We are also proposing to remove the current severity
illness indicators in the adult models and add new severity and
transplant indicators interacted with HCC count factors in the adult
and child models, as described elsewhere in this proposed rule.
\60\ We are also proposing to modify the enrollment duration
factors in the adult models, as described elsewhere in this proposed
rule.
\61\ See supra note 58.
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To help provide stability to the proposed two-stage weighted model
specification, 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. This capped
weighted approach avoids excessively large or small weights for any
observations for the second stage estimation, and therefore mitigates
the potential to underpredict at the high end for expensive enrollees,
as well as any possible low-end overprediction of healthier enrollees.
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.\62\
---------------------------------------------------------------------------

\62\ See Section 2.2 in the 2021 HHS-Operated Risk Adjustment
Technical Paper on Possible Model Changes, available at https://www.cms.gov/files/document/2021-ra-technical-paper.pdf. Also see 85
FR at 78667 and 86 FR at 24283.
---------------------------------------------------------------------------

Additionally, in our consideration of the two-stage weighted model
specification, we tested various methods of determining weights for the
second stage, including reciprocals of the square root of predictions,
log of predictions, and residuals from the first stage estimation, but
the reciprocal of the capped predictions from the first stage resulted
in better predictive ratios for low-cost enrollees compared to any of
these alternative weighting functions.\63\
---------------------------------------------------------------------------

\63\ Ibid.
---------------------------------------------------------------------------

Our conceptual reasoning for pursuing the two-stage weighted model
specification is to retain the simple linear, additive structure of the
current models while forcing the model to better predict lowest-risk
enrollees, who our analyses identified as underpredicted in the current
adult and child models. Based on analyses using 2018 enrollee-level
EDGE data, the two-stage weighted approach significantly improves the
predictive ratios (PRs) of the lower deciles and the PRs for enrollees
without HCCs compared to the current models.\64\ Similar results were
also seen when using 2016 and 2017 enrollee-

[[Page 600]]

level EDGE data.\65\ In addition, the two-stage weighted approach
eliminated the overprediction observed in risk decile 8.\66\ We also
found that the two-stage weighted approach did not meaningfully change
factor coefficients for most HCCs, providing stability to the risk
adjustment model factors.
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\64\ See Figure 2.2 in the 2021 HHS-Operated Risk Adjustment
Technical Paper on Possible Model Changes, available at https://www.cms.gov/files/document/2021-ra-technical-paper.pdf.
\65\ The PRs calculated in the 2021 RA Technical Paper are
calculated using the same samples on which the models were
calibrated. However, as is common practice in evaluating model fit,
we also tested splitting the sample for calibration and validation
purposes and the results were unchanged. Further, for purposes of
the analysis in the 2021 RA Technical Paper, we calculated PRs for
at least three data years and the results always appear the same. We
therefore generally only reported results in the 2021 RA Technical
Paper from the 2018 data year, which was the most recently available
dataset at the time that we ran these analyses in preparation for
announcing the proposed model changes in the proposed 2022 Payment
Notice.
\66\ See Figure 2.2 in the 2021 HHS-Operated Risk Adjustment
Technical Paper on Possible Model Changes, available at https://www.cms.gov/files/document/2021-ra-technical-paper.pdf.
---------------------------------------------------------------------------

At the same time, we also considered whether the two-stage weighted
approach worsens the fit of the models along other dimensions,
identifying three areas that had minor, negative impacts on the model
fit. First, the two-stage weighted approach predicts plan liability by
age-sex factor less accurately than the current models, especially for
younger and older women. Overall, we considered this to be an
acceptable trade-off, because across all age and sex factors, most PRs
were within a tolerable threshold of +/-5 percent (for example, 0.95 to
1.05), and the two-stage weighted approach has the major benefit of
more accurately predicting the age-sex factors for the enrollees
without HCCs, which is a much larger population than enrollees with
HCCs. Second, the two-stage weighted approach is somewhat less accurate
at predicting certain HCCs, with the two-stage weighted approach
worsening adult model silver plan PRs by at least 5 percentage points
for 14 (out of 91) ungrouped HCCs and 3 (out of 18) grouped HCCs. For
the vast majority of HCCs, the impact is very small and most affected
HCCs or HCC groups have small sample sizes.\67\ Again, we considered
this reduced accuracy to be an acceptable trade-off because most of the
PRs for the two-stage weighted approach were within a tolerable
threshold of +/-5 percent (for example, 0.95 to 1.05), most enrollees
do not have HCCs, and the two-stage weighted approach predicts plan
liability better for those no HCC enrollees. Third, the two-stage
weighted approach had lower R-squared values compared to the current
models. However, the decrease in R-squared is at most 0.1 percentage
points for all metal levels, which is a minor reduction in fit across
models.\68\ Similar to the worsening of the age-sex cell and the HCC
PRs, we were not concerned about the lower R-squared as the reduction
in fit was minor at all metal levels, the values remained within the
range of R-squared statistics of other concurrent models predicting
expenditures for commercial insurance enrollees,\69\ and the proposed
two-stage weighted model specification better predicts plan liability
for enrollees with no HCCs, which is the majority of enrollees. After
considering the impact of the approach on model performance, we
determined that the proposed two-stage weighted model specification
does not have material unintended consequences in model performance and
achieves the aim of improving the predictive accuracy of the current
adult and child models for enrollees in the lowest risk deciles and for
enrollees without HCCs. For these reasons, we believe that the two-
stage weighted approach can improve prediction for lowest-risk
enrollees with limited trade-offs in other parts of the models'
performance. Therefore, we are proposing to add the two-stage weighted
model specification to the adult and child models beginning with the
2023 benefit year in combination with the proposed interacted HCC
counts model specification and the updated adult model enrollment
duration factors described later in this proposed rule.
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\67\ For example, only one HCC or HCC group whose PR was
identified in our analysis as worsening by at least 5 percentage
points was present in greater than 1 percent of the adult silver
plan enrollees in the 2018 enrollee-level EDGE dataset (HCC 142
Specified Heart Arrhythmias). Our analysis found that all other HCCs
had recalibration dataset frequencies of less than 0.5 percent of
enrollees. See Chapter 2.3 and Table 2.1 in the 2021 HHS-Operated
Risk Adjustment Technical Paper on Possible Model Changes, available
at https://www.cms.gov/files/document/2021-ra-technical-paper.pdf.
\68\ See Figure 2.6 in the 2021 HHS-Operated Risk Adjustment
Technical Paper on Possible Model Changes, available at https://www.cms.gov/files/document/2021-ra-technical-paper.pdf.
\69\ See Winkelman, R., & Mehmud, S. (2007). A Comparative
Analysis of Claims-Based Tools for Health Risk Assessment.
Schaumberg, IL: Society of Actuaries.
---------------------------------------------------------------------------

In the 2021 RA Technical Paper, we explained that we believe that
by addressing the underprediction of costs associated with lowest-risk
enrollees in the adult and child models, we could further encourage the
retention and offering of plans that enroll a higher proportion of this
subpopulation of enrollees. We believe issuers offering these types of
plans are at greater risk of exiting the market if transfers calculated
under the state payment transfer formula undercompensate for the true
plan liability of the lowest-risk enrollees. We received stakeholder
comments in this regard, noting that the underprediction of the lowest-
risk enrollees could disincentivize issuers from attracting healthy
enrollees to their plans, thereby undermining the goals of developing a
healthy and stable market and encouraging competition on the basis of
high quality rather than risk selection. However, other stakeholders
have questioned if we should focus model changes on improving
prediction for the lowest-risk enrollees when the risk adjustment
program is intended to reduce incentives for issuers to avoid enrolling
individuals with higher risk.
We also received comments concerned that the two-stage weighted
model would be redundant of other elements in the state payment
transfer formula, which stated that the administrative cost adjustment
to statewide average premium \70\ already addresses some of the
underprediction of the lowest-risk enrollees in the risk adjustment
models. We clarify that the proposed two-stage weighted model
specification and existing administrative cost adjustment to statewide
average premium are not redundant and address separate considerations.
As detailed in the 2018 Payment Notice, the purpose of the
administrative cost adjustment to statewide average premium is to
exclude fixed administrative costs that are not dependent on enrollee
risk, such as taxes.\71\ In contrast, and as previously described
elsewhere,\72\ the purpose of the proposed two-stage weighed model
specification is to improve the current adult and child models'
prediction for the lowest risk enrollees.
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\70\ 81 FR at 94099-94100.
\71\ See 81 FR at 61488-61489. Also see 81 FR at 94099-94100.
\72\ See Section 2.2 in the 2021 HHS-Operated Risk Adjustment
Technical Paper on Possible Model Changes, available at https://www.cms.gov/files/document/2021-ra-technical-paper.pdf. Also see 85
FR at 78667 and 86 FR at 24283.
---------------------------------------------------------------------------

We seek comment on the two-stage weighted model specification
proposal, specifically regarding whether we should implement the
proposed two-stage weighted model specification alone, independent of
the other proposed model specification changes outlined in this rule,
beginning with the 2023 benefit year; whether we should implement the
proposed two-stage weighted model specification in conjunction with
these other proposals; or whether we should not implement the two-stage
weighted model specification at all. Additionally, given the
stakeholder comments we received

[[Page 601]]

questioning the need for this type of model update, we also generally
solicit comments on whether we should seek to improve the current
models' prediction for the lowest-risk enrollees.
ii. Interacted HCC Counts Model Specification
In addition to the two-stage weighted approach, we are proposing to
add an interacted HCC counts model specification to the adult and child
risk adjustment models starting with the 2023 benefit year to address
the current models' underprediction of plan liability for the very
highest-risk enrollees (that is, those in the top risk percentile and
those enrollees with the most HCCs). While this highest-risk
subpopulation represents a small number of enrollees, it represents a
large portion of expenditures. As described in the 2021 RA Technical
Paper, enrollees in risk decile 10 represent roughly 74.29 percent of
actual plan liability, compared to only 1.36 percent for enrollees in
risk decile 1.\73\ We found that for enrollees with a high HCC count,
there is an increasing, non-linear effect that leads to higher costs
than are currently predicted by adding up the incremental effects of
each HCC.
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\73\ See Table 4.1 in the 2021 HHS-Operated Risk Adjustment
Technical Paper on Possible Model Changes, available at https://www.cms.gov/files/document/2021-ra-technical-paper.pdf.
---------------------------------------------------------------------------

Therefore, to address the underprediction of the highest-cost
enrollees, we explored the addition of severity and transplant factors
interacted with HCC counts in the adult and child models, wherein a
factor flagging the presence of at least one severe or transplant
payment HCC is interacted with counts of the enrollee's payment
HCCs.\74\ The purpose of adding severity and transplant factors
interacted with HCC count factors to the adult and child models is to
address the underprediction of the highest risk enrollees (as the
proposed two-stage-weighted model specification addresses the
underprediction of the healthiest enrollees) by accounting for the fact
that costs of certain HCCs rise significantly when they occur with
multiple other HCCs. Specifically, the goals of this approach were to:
---------------------------------------------------------------------------

\74\ For HCCs in a coefficient estimation group, the group is
counted at most once. These groups of HCCs in the HHS risk
adjustment adult and child models are detailed in the HHS-Developed
Risk Adjustment Model Algorithm ``Do It Yourself (DIY)'' Software
``Additional Adult Variables'' and ``Additional Child Variables''
table logic (Tables 6 and 7 in the 2021 Benefit Year DIY Software).
The August 3, 2021 version of the DIY software is available at
https://www.cms.gov/CCIIO/Resources/Regulations-and-Guidance.
---------------------------------------------------------------------------

1. Address the non-linearity in costs between enrollees without
HCCs or with very low costs and enrollees with multiple HCCs or with
high costs;
2. Empirically incorporate the cost impact of multiple complex
diseases; and
3. Reduce incentives for coding proliferation to mitigate the
gaming concerns with HCC counts models.
In developing this interacted HCC counts approach, we identified
common HCCs for enrollees with extremely high costs, as well as HCCs
that were being underpredicted in the current risk adjustment adult and
child models. We found that many of the HCCs that were flagged as being
underpredicted were the current severe illness HCCs, the transplant
HCCs, and other HCCs related to the severity of disease. Therefore, we
considered dropping the current severity illness factors in the adult
models and replacing them with severity and transplant factors
interacted with HCC count factors in the adult models, as well as
adding the severity and transplant factors interacted with HCC count
factors to the child models.
We propose the inclusion of the factors in Tables 1 and 2 as the
interacted severity and transplant factors in the adult and child
models starting with the 2023 benefit year. We separated out transplant
HCCs and severity HCCs into their own separate set of interacted
factors, as expressed in Tables 1 and 2, because we found that this
approach improved prediction for high-cost enrollees better than an
approach that combined severity and transplant HCCs into a single set
of factors. Furthermore, under the current risk adjustment models,
adult severity illness interaction factors are collapsed into a single
binary variable indicating the presence of any severity illness
interaction. In contrast, the proposed severity factors would not be
collapsed and would instead be separated out by the HCC count with
which the severity or transplant illness indicator was interacted.
We defined the new proposed interaction factors such that an
enrollee would receive one or more of these factors if they had any
HCCs in the severity or transplant indicator groups in Table 3 and
according to how many HCCs were recorded in the enrollee's data in
total. As such, the proposed severity and transplant interaction
factors would express the presence of one or more of the selected
severity or transplant HCCs in Table 3. That is, an enrollee must have
at least one HCC in the ``severity'' or ``transplant'' indicator groups
in Table 3 to receive the interacted HCC count factor toward their risk
score, but would not receive any additional flags for having more than
one of the ``severity'' or ``transplant'' HCCs in an indicator group
beyond the total HCC count.
The proposed severity-HCC-count-interaction factors were calculated
as 10 separate factors for the adult models, and seven separate factors
for the child models. In the adult models, the first nine factors
specified the presence of (1) an HCC in the severity list in Table 3
and (2) exactly one payment HCC in the enrollee's data, exactly two,
exactly three, and so on, up to exactly nine payment HCCs. The tenth
factor specified the presence of (1) an HCC in the severity list in
Table 3 and (2) ten or more payment HCCs in the enrollee's data. For
the child models, the first five factors represented the presence of
(1) an HCC in the severity list in Table 3 and (2) exactly one payment
HCC in the enrollee's data, exactly two, exactly three, and so on, but
the sixth factor represents the presence of (1) an HCC in the severity
list in Table 3 and (2) six to seven payment HCCs, and the seventh
factor represents the presence of (1) an HCC in the severity list in
Table 3 and (2) eight or more payment HCCs in the enrollee's data.
The proposed transplant-HCC-count-interaction factors were
calculated similarly. However, the transplant factors were calculated
using a different range of HCC counts. In the adult models, five
separate transplant interaction factors were created, representing the
presence of (1) an HCC in the transplant list in Table 3 and (2)
payment HCC counts of exactly four, exactly five, exactly six, exactly
seven, and eight or more payment HCCs in the enrollee's data. For the
child models, we created only one transplant interaction factor
indicating the presence of (1) an HCC in the transplant list in Table 3
and (2) a total of four or more payment HCCs in the enrollee's data. As
detailed later in this section, this treatment of transplant-HCC-count-
interaction factors stabilized the child model estimates by increasing
the sample size used to estimate the factor coefficients.
To illustrate how the proposed severity- (or transplant-) HCC-
count-interaction factors would be assigned to an enrollee, consider an
adult enrollee with four payment HCCs, one of which is HCC 34 ``Liver
Transplant Status/Complications''. Because HCC 34 appears in both the
severity and transplant indicator groups in Table 3, this enrollee
would receive the following factor coefficients toward their risk score
in the adult models: (1) The four factor coefficients for their
individual HCCs (the three non-transplant HCC factors and the HCC 34

[[Page 602]]

transplant HCC factor), (2) the factor coefficient for the severity-
HCC-count-interaction indicating four payment HCCs, and (3) the factor
coefficient for the transplant-HCC-count-interaction indicating four
payment HCCs.\75\ The child model would operate similarly. For a child
enrollee with a transplant HCC in the transplant factor group and three
other payment HCCs, the following would be used to calculate the
enrollee's risk score: (1) The factor coefficients for all four HCCs
(that is, the three non-transplant HCCs and the transplant HCC), (2)
the factor coefficient for the severity-HCC-count-interaction
indicating four payment HCCs, and (3) the factor coefficient for the
transplant-HCC-count-interaction indicating four or more payment HCCs.
---------------------------------------------------------------------------

\75\ This is in addition to other factors that the adult
enrollee has that are used to calculate their risk score (such as
the applicable demographic factors, RXCs (if any), and the
applicable enrollment duration factors).
---------------------------------------------------------------------------

To implement the severity- and transplant-HCC-count-interaction
factors in the regression model and estimate the value of their factor
coefficients, we are proposing to remove the current severity illness
factors in the adult models, and add severity- and transplant-HCC-
count-interaction factors for the adult and child models beginning with
the 2023 benefit year. Although the severity (or transplant) HCC-count-
interaction factor coefficients may be estimated as having negative
values, the combination of these interaction factor coefficients with
the factor coefficient of the HCC that triggered the severity factor
will always be positive. For example, the proposed adult silver metal
level model factor coefficient for Viral or Unspecified Meningitis (HCC
04), which is proposed as a severe illness HCC, is 6.914, when combined
with the proposed severity-HCC-count-interaction factor coefficient for
one HCC of -4.603 (indicating that the enrollee only has HCC 04 present
in their data), would increase the enrollee's risk score by 2.311.
Moreover, an increase in the count of HCCs would lead to a monotonic
increase in the enrollee risk score, because the severity-HCC-count-
interaction factor coefficients are less negative (and sometimes
positive) with a larger number of payment HCCs.
One potential concern with this proposed model specification change
is that the severity- and transplant-HCC-count-interaction factor
coefficients might be based on small sample sizes. In recognition of
this issue, we considered sample sizes of the various interacted HCC
count factors when developing this proposal and the proposed factor
coefficients. We explored alternative methods of interacting HCC counts
with severity and transplant HCCs, including interacting the HCC counts
with individual selected severity and transplant HCCs, but found that
interacting the HCC counts with a factor indicating the presence of at
least one of the selected HCCs in each group produced PR improvements
and sufficient sample sizes for reasonably stable factor coefficient
estimates. To that end, we analyzed 2016, 2017, and 2018 enrollee-level
EDGE data and chose the model specifications that grouped 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. 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 for the transplant interacted factors, instead of
10+ HCCs, addressed the small sample sizes of enrollees with a
transplant and 9 or more HCCs. For the child models, we found having
one transplant interacted factor for 4+ HCCs provided more stable
estimates given the smaller sample sizes for children than those for
adults. With the proposed structure for transplant and severity
interacted factors in place, the resulting sample sizes for both
proposed sets of factors in the child and adult models in the proposed
2022 Payment Notice and in this rule are consistent with the sample
sizes used for individual HCCs in the adult and child risk adjustment
models.
We also considered potential gaming concerns in developing the
proposed interacted HCC counts factors. We believe that the proposal to
restrict the incremental risk score adjustment to enrollees with at
least one severe illness HCC, which accounts for less than 2 percent of
the adult enrollee-level EDGE data population across the 2016, 2017,
and 2018 benefit years, helps mitigate the concern that issuers may
attempt to inflate HCC counts to influence their transfers under the
state payment transfer formula. In other words, the scope for
potentially inflating HCC coding frequency under this proposal would be
limited to a small fraction of total enrollees, in contrast to an
approach that would interact HCC counts for any payment HCC, where a
payment HCC is present in approximately 20 percent of the adult
enrollee population across the same three benefit years of enrollee-
level EDGE data.\76\ We also note that enrollees with interacted HCCs
are likely to have more HCCs and higher risk scores and therefore are
more likely to be sampled and have their risk scores reviewed in the
HHS-operated risk adjustment data validation (HHS-RADV) process due to
our use of stratified sampling and application of the Neyman
allocation.\77\
---------------------------------------------------------------------------

\76\ This analysis was based on 2016, 2017, and 2018 enrollee-
level EDGE data. See Chapter 4.2 in the 2021 HHS-Operated Risk
Adjustment Technical Paper on Possible Model Changes, available at
https://www.cms.gov/files/document/2021-ra-technical-paper.pdf.
\77\ For a discussion of our use of stratified sampling and
application of the Neyman allocation, see 79 FR at 13756-13758; and
84 FR at 17494-17495.
---------------------------------------------------------------------------

Our analysis of the proposed interacted HCC counts factors combined
with the proposed HCC-contingent enrollment duration factors in the
adult models (discussed in the following section) significantly
improves predictions across most deciles and HCC counts for the very
highest-risk enrollees, as well as the lowest-risk enrollees without
HCCs. Specifically, as described in the 2021 RA Technical Paper, the
proposed interacted HCC counts approach improves the PRs for enrollees
across most HCC counts, with significant improvements for enrollees
with high numbers of HCCs (greater than 6).\78\ The proposed interacted
HCC counts approach also demonstrated improved R-squared statistics
across all metal levels in the adult and child models using 2016, 2017,
and 2018 enrollee-level EDGE data.\79\
---------------------------------------------------------------------------

\78\ See Figure 4.3 in the 2021 HHS-Operated Risk Adjustment
Technical Paper on Possible Model Changes, available at https://www.cms.gov/files/document/2021-ra-technical-paper.pdf.
\79\ See Figure 4.4 in the 2021 HHS-Operated Risk Adjustment
Technical Paper on Possible Model Changes, available at https://www.cms.gov/files/document/2021-ra-technical-paper.pdf.
---------------------------------------------------------------------------

Some commenters on the 2021 RA Technical Paper were concerned about
potential data bias because of the exclusion of enrollees with
capitated claims from the analytic sample used to test the model
specification changes. As previously stated in the 2016 RA White
Paper,\80\ we have historically excluded enrollees with capitated
claims from the recalibration sample due to concerns that methods for
computing and reporting derived amounts from capitated claims would not
result in

[[Page 603]]

reliable data for recalibration or analysis.\81\
---------------------------------------------------------------------------

\80\ See the March 2016 Risk Adjustment Methodology White 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.
\81\ See Chapter 1.4 in the 2021 HHS-Operated Risk Adjustment
Technical Paper on Possible Model Changes, available at https://www.cms.gov/files/document/2021-ra-technical-paper.pdf.
---------------------------------------------------------------------------

Beyond the predictive improvements, an additional benefit of the
proposed interacted HCC count model specification is that it would not
overhaul the existing risk adjustment factors and would instead build
upon the current models. Additionally, the factors would remain fairly
stable, could be used in combination with other refinements and model
updates, and could be easily modified, adjusted, expanded, or
constrained in the future to include additional HCCs or to remove HCCs.
For all of these reasons, we are proposing to add the proposed
interacted HCC counts model specification as outlined above to the
adult and child risk adjustment models beginning with the 2023 benefit
year.
We seek comment on this proposal, specifically regarding whether we
should implement the proposed interacted HCC counts model specification
alone, independent of the other proposed model specification changes
outlined in this rule, beginning with the 2023 benefit year; whether we
should implement the proposed interacted HCC counts model specification
in conjunction with these other proposals; or whether we should not
implement the proposed interacted HCC counts model specification at
all. We also seek comment on the variations on the HCC counts model
specification discussed in this section, including whether we should
interact severity or transplant factors with individual HCCs, or should
interact HCC counts with individual selected severity and transplant
HCCs, rather than interacting HCC counts with only an indicator of the
presence of severity or transplant HCCs, as proposed. Finally, we seek
comment on the proposed list of severity and transplant HCCs in Table 3
that would be used to calculate the proposed interacted HCC count
factor coefficients and whether other HCCs should be to added to the
proposed list that trigger the interacted HCC count factor coefficients
or whether any of the HCCs on the proposed list should be removed.
iii. Changes to the Adult Model Enrollment Duration Factors \82\
---------------------------------------------------------------------------

\82\ 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. See 85 FR 7103-7104. 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 accuracy of the infant models.
Ibid. We therefore propose to continue to apply enrollment duration
factors to the adult models only.
---------------------------------------------------------------------------

In addition to the proposed two-stage weighted model specification
and the interacted HCC counts model specification, we are also
proposing to change the enrollment duration factors in the adult risk
adjustment models to improve the prediction for partial-year adult
enrollees with and without HCCs. Although the value for the factors
change from year to year as part of the annual recalibration of the
adult models, we have not made changes to the structure of the
enrollment duration factors since they were first adopted for the 2017
benefit year. To develop the current enrollment duration factors for
the adult models, we reviewed the annualized predicted expenditures,
actual expenditures, and PRs by enrollment duration groups (for each: 1
month, 2 months, and so on up to 12 months) for our risk adjustment
concurrent modeling sample, which was made up of adults in the 2014
MarketScan[supreg] data.\83\ This analysis found that actuarial risk
for adult enrollees with short enrollment periods tended to be
underpredicted in our methodology, and actuarial risk for adult
enrollees with full enrollment periods (12 months) tended to be
overpredicted. We therefore proposed and finalized in the 2018 Payment
Notice that, beginning for the 2017 benefit year, the adult models
would include enrollment duration factors that apply to all adults with
partial-year enrollment.\84\ The value for the enrollment duration
factors have generally decreased since they were first introduced in
the adult models for the 2017 benefit year, reflecting a reduced impact
of enrollment duration on risk scores of partial year enrollees. After
a slight increase between 2017 and 2018, the factors have decreased
significantly from 2018 to 2021, and in some cases (the 10- and 11-
month factors) the factors are now 0.000, relative to a 12-month
enrollment baseline.\85\
---------------------------------------------------------------------------

\83\ See pages 35-39 of the March 2016 Risk Adjustment
Methodology White 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.
\84\ 81 FR 94058 at 94071-94074.
\85\ In unconstrained models, these factors are negative;
therefore, we constrained them to zero because we do not believe
negative enrollment duration factors are appropriate, as this would
create inappropriate incentives. See Figure 3.1 in the 2021 HHS-
Operated Risk Adjustment Technical Paper on Possible Model Changes,
available at https://www.cms.gov/files/document/2021-ra-technical-paper.pdf.
---------------------------------------------------------------------------

As described in prior rulemakings and the 2021 RA Technical Paper,
we have been considering potential adjustments to the enrollment
duration factors and our more recent analysis of enrollee-level EDGE
data found that the current adult model enrollment duration factors
underpredicted plan liability for partial-year adult enrollees with
HCCs and overpredicted plan liability for partial-year adult enrollees
without HCCs.\86\ \87\ More specifically, our analysis of 2017 and 2018
enrollee-level EDGE data found that the current enrollment duration
factors are driven by enrollees with HCCs.\88\ That is, partial-year
enrollees with HCCs had higher per member, per month (PMPM)
expenditures on average as compared to full-year enrollees with HCCs,
and partial-year enrollees without HCCs were not significantly
different in PMPM expenditures compared to full-year enrollees without
HCCs.\89\
---------------------------------------------------------------------------

\86\ See 85 FR 29164 at 29188-29190.; 86 FR 24140 at 24151-
24162.; and the 2021 HHS-Operated Risk Adjustment Technical Paper on
Possible Model Changes, available at https://www.cms.gov/files/document/2021-ra-technical-paper.pdf.
\87\ When we refer to the enrollees with and without HCCs, we
are referring to enrollees without payment HCCs.
\88\ See, for example, Chapters 1.4 and 3.2 of the 2021 HHS-
Operated Risk Adjustment Technical Paper on Possible Model Changes,
available at https://www.cms.gov/files/document/2021-ra-technical-paper.pdf. Also see 85 FR at 7103-7104 and 85 FR at 78585-78586.
\89\ See Chapter 1.4 of the 2021 HHS-Operated Risk Adjustment
Technical Paper on Possible Model Changes, available at https://www.cms.gov/files/document/2021-ra-technical-paper.pdf.
---------------------------------------------------------------------------

Therefore, beginning with the 2023 benefit year, we are proposing
to eliminate the current monthly enrollment duration factors of up to
11 months for all enrollees in the adult models, and replace them with
new monthly enrollment duration factors of up to 6 months that would
apply only to adult enrollees with HCCs. If finalized as proposed, this
would mean there would be no enrollment duration factors for adult
enrollees without HCCs starting with the 2023 benefit year nor would
there be enrollment duration factors for adult enrollees with HCCs and
more than 6 months of enrollment.
While we considered other enrollment duration factor structures, we
are proposing to limit the enrollment duration factors to 6 months
because we found that the monthly average cost variation by number of
months enrolled is meaningfully reduced after 6 months for adult
enrollees with HCCs, and enrollment duration factors beyond 6 months
did not meaningfully improve

[[Page 604]]

prediction for the adult models. As part of our analysis of enrollment
duration factor options, 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 HCCs.\90\ We also considered HCC-type
contingent enrollment duration factors. Specifically, we found that the
distribution of enrollment duration and PMPM allowed charges by
enrollment duration is similar for adults with any acute HCCs versus
adults with only chronic HCCs.\91\ We therefore determined that, on
balance, it would add unnecessary complexity to introduce enrollment
duration factors by market type or that are contingent on types of HCCs
with little benefit. Therefore, we are not proposing enrollment
duration factors for the adult models by market type or that are
contingent on types of HCCs at this time.
---------------------------------------------------------------------------

\90\ See Chapter 3.3.2 of the 2021 HHS-Operated Risk Adjustment
Technical Paper on Possible Model Changes, available at https://www.cms.gov/files/document/2021-ra-technical-paper.pdf.
\91\ See Chapter 3.3.3 of the 2021 HHS-Operated Risk Adjustment
Technical Paper on Possible Model Changes, available at https://www.cms.gov/files/document/2021-ra-technical-paper.pdf.
---------------------------------------------------------------------------

We also considered previous comments we received that expressed
concerns that certain issuers--particularly small group market issuers,
small issuers, or Medicaid issuers--may have partial-year enrollees
with HCCs that are not coded. These commenters expressed concerns that
these issuers may have difficulty obtaining diagnoses for these
enrollees, creating cases where the issuer may pay claims, and incur
costs, for services associated with a condition for the partial-year
enrollee, but the issuer's limited time with the partial-year enrollee
may not be adequate to capture the diagnosis code associated with the
HCC.\92\ \93\ In response to the 2021 RA Technical Paper, we got
further comment from stakeholders who questioned whether the HCC-
contingent enrollment duration factors would have negative impacts on
small group market issuers that offer non-calendar year coverage and
take on new business later in the year. As we noted in the 2021 RA
Technical Paper, our analysis did not find evidence that issuers are
unable to capture cost-meaningful HCCs for partial-year enrollees in
the individual or small group (including merged) market.\94\
---------------------------------------------------------------------------

\92\ See Chapter 3.4 of the 2021 HHS-Operated Risk Adjustment
Technical Paper on Possible Model Changes, available at https://www.cms.gov/files/document/2021-ra-technical-paper.pdf.
\93\ This issue differs from situations where issuers may not
have a complete diagnostic profile for a partial-year enrollee
because the services received were not related to the diagnoses that
were not captured. For example, if an enrollee received services due
to a condition while enrolled with a different issuer, then the
current issuer may not have all diagnosis codes for a partial-year
enrollee. However, such cases do not have cost implications for the
current issuer since the partial-year enrollee received no services
associated with that diagnosis.
\94\ See Chapter 3.4 of the 2021 HHS-Operated Risk Adjustment
Technical Paper on Possible Model Changes, available at https://www.cms.gov/files/document/2021-ra-technical-paper.pdf.
---------------------------------------------------------------------------

We solicit comments on the proposed changes to the enrollment
duration factors for the adult models. We also solicit comments
regarding whether we should implement the proposed changes to
enrollment duration factors alone, independent of the other proposed
model specification changes outlined in this rule, beginning with the
2023 benefit year; whether we should implement the proposed changes to
enrollment duration factors in conjunction with these other proposals;
or whether we should not implement the proposed changes to enrollment
duration factors at all and maintain the current structure for these
factors.
iv. Combined Impact of the Proposed Model Changes
In sum, we are proposing to modify the HHS risk adjustment model
specifications for the adult and child models beginning with the 2023
benefit year by combining a two-stage weighted approach with the
removal of the current adult model severe illness interaction factors
and the addition of new severe illness and transplant interacted HCC
count factors to the adult and child models. We are also proposing to
replace the current enrollment duration factors in the adult models.
For the two-stage weighted approach, we propose 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 RXCs and the new proposed enrollment
duration factors for the adult models. The second stage would use the
reciprocal of prediction from the first step to weight a second stage
linear regression. To stabilize the weights from the first stage
predictions, we propose lower and upper bound caps on the predictions
used as weights 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 weighted approach would be combined with the new severity and
transplant indicators from the interacted HCC count factors. For the
severity indicator group, we propose to add separate count factors for
one to 10+ payment HCCs (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. For the transplant HCCs, we propose to
incorporate factors for 4 to 8+ payment HCCs (4, 5, 6, 7, 8+) for the
adult models and one factor for 4+ payment HCCs for the child models.
The proposed HCCs that would flag the transplant indicator are listed
in Table 3. The severity- (and transplant-) HCC-count-interaction
factors would be included in both stages of the regressions. We propose
to incorporate the two-stage weighted approach and the interacted HCC
count specification updates beginning with the 2023 benefit year HHS
risk adjustment adult and child models. We also propose to remove the
current severity illness factors in the adult models beginning with the
2023 benefit year. Lastly, we propose to remove the current 11
enrollment duration factors for all enrollees in the adult models and
replace them with new monthly enrollment duration factors of up to 6
months that only apply to enrollees with HCCs. We propose to
incorporate the new HCC-contingent enrollment duration factors
beginning with the 2023 benefit year adult models.
We tested combining these model specifications into an approach
that incorporated the two-stage weighted approach, the severity and
transplant factors interacted with HCC count factors, and the HCC-
contingent enrollment duration factors. We found that, together, these
changes are expected to improve model performance in comparison to the
current models. Our analysis found this combined approach generally
improved prediction for enrollees at both the low and high ends of
expected expenditures and had higher R-squared statistics across metal
levels than the current models, indicating a better individual-level
fit.\95\ Our analysis also found general improvement in PRs for the
models with the combined proposed model specification changes across
each decile of predicted plan liability, by age-sex factor for adult
enrollees with and without HCCs, and by enrollment

[[Page 605]]

length.\96\ We also found that the mean absolute error did not
materially differ between the current adult and child models and the
proposed adult and child models with the combined proposed model
specification changes incorporated.\97\ These observations support our
belief that the best way to comprehensively improve the predictive
accuracy of the current models across the risk spectrum is to implement
all three proposed model specification changes together. To further
assist issuers and other stakeholders with analyzing the impact of the
combination of these proposed model specification changes, HHS also
conducted a transfer simulation and provided summary-level and issuer-
specific risk score and transfer estimates.\98\ \99\
---------------------------------------------------------------------------

\95\ See Chapter 5.1 of the 2021 HHS-Operated Risk Adjustment
Technical Paper on Possible Model Changes, available at https://www.cms.gov/files/document/2021-ra-technical-paper.pdf.
\96\ Ibid.
\97\ Ibid.
\98\ See the 2021 HHS-Operated Risk Adjustment Technical Paper
on Possible Model Changes, available at https://www.cms.gov/files/document/2021-ra-technical-paper.pdf. See also the HHS-Operated Risk
Adjustment Technical Paper on Possible Model Changes: Summary
Results for Transfer Simulations, available at https://www.cms.gov/CCIIO/Programs-and-Initiatives/Premium-Stabilization-Programs.
Issuers that participated in the simulation also received detailed
issuer-specific data, including risk score and transfer estimates
for the simulated results.
\99\ If an issuer wishes to use the simulation results to assist
in assessing the impact of these model specification changes on
future benefit year transfer amounts, it should do so with caution
and in combination with other significant data.
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As detailed in the 2021 RA Technical Paper, this transfer
simulation applied the proposed model specification changes to 2020
benefit year EDGE data to illustrate and estimate what 2020 benefit
year risk adjustment transfers would have been if the combined model
specification changes were applied.\100\ The transfer simulation
provided issuers with detailed, plan-level simulated results.\101\ The
coefficients values presented in Tables 1 and 2 incorporate the
combination of these proposed model specification changes and Table 3
provides the list of the proposed severity and transplant HCCs that
would apply for the proposed interacted HCC counts factors. We seek
comment on the combination of these proposed model changes and the
adoption of these changes beginning with the 2023 benefit year.
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\100\ See Chapter 5.2 of the 2021 HHS-Operated Risk Adjustment
Technical Paper on Possible Model Changes, available at https://www.cms.gov/files/document/2021-ra-technical-paper.pdf.
\101\ See the HHS-Operated Risk Adjustment Technical Paper on
Possible Model Changes: Summary Results for Transfer Simulations,
available at https://www.cms.gov/CCIIO/Programs-and-Initiatives/Premium-Stabilization-Programs.
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We seek comment on finalizing each of these proposed model
specification changes as a whole, in part, or in combination or for
example, whether we should finalize the proposed interaction HCC counts
model specification and the proposed changes to the adult model
enrollment duration factors without the proposed two stage weighted
model specification. Finally, we seek comment on finalizing the 2023
models without the proposed model specification changes, but with
updates to the data years used for recalibration, (that is, to use
2017, 2018, and 2019 enrollee-level EDGE data, as detailed elsewhere in
this proposed rule); or, alternatively, using the updated final 2022
risk adjustment model coefficients \102\ for the 2023 benefit year risk
adjustment models, trended forward to project 2023 costs or not trended
forward to project 2023 costs.
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\102\ See ``Final 2021 Benefit Year Final HHS Risk Adjustment
Model Coefficients.'' May 12, 2020. Available at https://www.cms.gov/CCIIO/Resources/Regulations-and-Guidance/Downloads/Final-2021-Benefit-Year-Final-HHS-Risk-Adjustment-Model-Coefficients.pdf.
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c. Pricing Adjustment for the Hepatitis C Drugs
For the 2023 benefit year, we propose to continue applying a market
pricing adjustment to the plan liability associated with Hepatitis C
drugs in the risk adjustment models.\103\ Since the 2020 benefit year
risk adjustment models, we have been 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
models.\104\ This market pricing adjustment has been necessary 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 transfer results more favorable for the issuer. We have
committed to reassessing this pricing adjustment with additional years
of enrollee-level EDGE data, as data become available. As part of the
2023 benefit year model recalibration, we reassessed the Hepatitis C
RXC using available enrollee-level EDGE data (including 2019 benefit
year data) to consider whether the adjustment was still needed and if
it is still needed, whether it should be modified. We found that the
data for the Hepatitis C RXC that would be used for the 2023 benefit
year recalibration (that is, the 2017, 2018, and 2019 enrollee-level
EDGE data) still do not account for the significant pricing changes due
to the introduction of new Hepatitis C drugs and, therefore, do not
precisely reflect the average cost of Hepatitis C treatments applicable
to the benefit year in question.
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\103\ See, for example, 84 FR 17463 through 17466.
\104\ 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.
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Specifically, we are proposing to recalibrate the 2023 benefit year
risk adjustment models with the 2017, 2018, and 2019 enrollee-level
EDGE data. Generic Hepatitis C drugs did not become available on the
market until 2019.\105\ Due to the lag between the data years used to
recalibrate the risk adjustment models and the applicable benefit year
of risk adjustment, we do not believe that the data used for
recalibrating the models precisely reflect the average cost of
Hepatitis C treatments expected in the 2023 benefit year. Therefore, we
continue to believe a market pricing adjustment for the 2023 benefit
year is necessary 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 intend to continue to assess
this pricing adjustment in future benefit year recalibrations using
additional years of enrollee-level EDGE data. We seek comment on our
proposal to continue applying a market pricing adjustment to the plan
liability associated with Hepatitis C drugs for the 2023 benefit year.
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\105\ See https://www.gilead.com/news-and-press/company-statements/authorized-generics-for-hcv. See also https://news.abbvie.com/news/abbvie-receives-us-fda-approval-mavyret-glecaprevirpibrentasvir-for-treatment-chronic-hepatitis-c-in-all-major-genotypes-gt-1-6-in-as-short-as-8-weeks.htm.
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d. Risk Adjustment RXC Mapping for Recalibration
i. Inclusion and Exclusion Criteria for Drugs in RXC Mapping and
Recalibration
This section provides an overview of the inclusion and exclusion
criteria HHS uses to identify drugs for mapping to RXCs in the adult
risk adjustment models, reviews what version of the RXC mapping
document HHS uses when processing the enrollee-level EDGE data for a
benefit year for recalibration of the adult risk adjustment models, and
outlines the criteria that warrant consideration for changes to the
incorporation (or

[[Page 606]]

exclusion) of particular drugs from the RXC mappings in future benefit
year recalibrations. We also propose a change to the approach for
identifying the version of the RXC mapping document HHS would use to
process a given benefit year's enrollee-level EDGE data for
recalibration of the adult risk adjustment models.
In accordance with Sec. 153.320, HHS develops and publishes the
risk adjustment methodology applicable in states where HHS operates the
program, including the draft factors to be employed in the models for
the benefit year. This includes the annual recalibration of the adult
risk adjustment models' RXC coefficients using data from the applicable
prior benefit years trended forwarded to reflect the applicable benefit
year of risk adjustment. Drugs that appear on claims data, either
through National Drug Codes (NDCs) or Healthcare Common Procedural
Coding System (HCPCS), are cross walked to RxNorm Concept Unique
Identifiers (RXCUIs).\106\ RXCUI mappings are always matched to the
NDCs and HCPCS applicable to the particular EDGE data year as the NDC
and HCPCS reflect the drugs that were available in the market during
the benefit year.\107\ Currently, we use the most recent RXC mappings
(RXCUIs that map to RXCs) that are available when we first process the
enrollee-level EDGE data for a benefit year for recalibration of the
adult risk adjustment models. For example, for the 2022 benefit year,
we recalibrated the adult risk adjustment models using 2016, 2017, and
2018 enrollee-level EDGE data and applied the second quarter (Q2) 2018
RXC mapping document for both 2016 and 2017,\108\ and applied the Q2
2019 mapping document for 2018 for recalibration of the adult risk
adjustment models RXC factors.\109\
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\106\ See, for example, 81 FR at 94074-94080.
\107\ See, for example, Creation of the 2018 Benefit Year HHS-
Operated Risk Adjustment Models Draft Prescription Drug (RXCUIs) to
HHS Drug Classes (RXCs) Crosswalk Memorandum at https://www.cms.gov/CCIIO/Resources/Regulations-and-Guidance/Downloads/Draft-RxC-Crosswalk-Memo-9-18-17.pdf.
\108\ RXCs were not added to the risk adjustment models until
2018 benefit year; therefore, we used 2018 RXC mappings for both
2016 and 2017 enrollee-level EDGE data as there were no 2016 and
2017 RXC mapping documents. Note that, even though 2018 RXC mappings
were applied to these earlier years, they were cross walked to the
NDCs and HCPCS that describe the applicable drugs during those
earlier years.
\109\ Although the recalibration proposals are typically
released towards the end of the calendar year, we generally receive
the prior benefit year enrollee-level EDGE data in the summer or
fall, at which point we apply the most recently available mapping
document as we begin to prepare the data to recalibrate the models
for the applicable benefit year. This is why, for example, we used
the 2019 Q2 mapping document when processing the 2018 enrollee-level
EDGE data for recalibration of the 2022 benefit year adult models.
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As noted in the 2022 Payment Notice, 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.\110\ More
specifically, during a benefit year, HHS conducts quarterly reviews of
RXCUIs that map to RXCs in the adult risk adjustment models for that
benefit year. During our annual review of enrollee-level EDGE data for
recalibration purposes, and to a certain extent during quarterly
reviews of RXCUIs that map to RXCs in the adult risk adjustment models,
HHS evaluates the inclusion and exclusion of RXCUIs based on criteria
such as: (1) Whether costs for an individual drug are comparable to the
costs of other drugs in the same class, (2) whether a drug is a good
predictor of the presence of the diseases that map to the HCCs that an
RXC indicates (which can be evaluated through clinical expert review in
the absence of data), (3) whether clinical expert reviews of the
pharmacological properties and prescribing patterns are consistent with
treatment of a particular condition, and (4) stakeholder feedback.\111\
As a result of this on-going assessment, we may make quarterly updates
to the RXC Crosswalk, which identifies the list of NDCs and HCPCS
indicating the presence of an RXC in the current benefit year DIY and
EDGE reference data, to ensure drugs are mapped to RXCs, where
appropriate. This can include the addition or removal of drugs based on
market availability and the other criteria identified above. As such,
the risk adjustment mapping of RXCUIs to RXCs, along with the list of
NDCs and HCPCS that crosswalk to each RXCUI, may be updated throughout
a particular benefit year of risk adjustment. HHS provides information
to issuers on these updates through the DIY software, which is
published on the CCIIO website,\112\ as well as through the EDGE global
reference updates, which are published on the Distributed Data
Collection program page on the Registration for Technical Assistance
Portal (REGTAP).\113\
---------------------------------------------------------------------------

\110\ See 86 FR at 26164.
\111\ See, for example, the Creation of the 2018 Benefit Year
HHS-Operated Risk Adjustment Adult Models Draft Prescription Drug
(RXCUIs) to HHS Drug Classes (RXCs) Crosswalk (September 17, 2017),
available at https://www.cms.gov/CCIIO/Resources/Regulations-and-Guidance/Downloads/Draft-RxC-Crosswalk-Memo-9-18-17.pdf.
\112\ The August 3, 2021 version of the DIY software is
available at https://www.cms.gov/CCIIO/Resources/Regulations-and-Guidance.
\113\ Available at https://www.regtap.info/reg_library.php?libfilter_topic=3.
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This ongoing updating process occurs on a different timeline than
the annual model recalibration activities for a given benefit year.
In this rule, we propose to change the approach for identifying the
version of the RXC mapping document HHS would use to process a given
benefit year's enrollee-level EDGE data for the annual recalibration of
the adult risk adjustment models. More specifically, we propose to
recalibrate the adult risk adjustment models using the final, fourth
quarter (Q4) RXC mapping document that was applicable for each benefit
year of data that is included in the applicable benefit year's model
recalibration, while continuing to engage in annual and quarterly
review processes using the inclusion and exclusion criteria described
above. For example, if we recalibrate the 2024 benefit year adult risk
adjustment models using 2018, 2019, and 2020 benefit years of enrollee-
level EDGE data, we would use the Q4 RXC mapping document for each of
those benefit years (that is, Q4 2018, Q4 2019, and Q4 2020,
respectively) for recalibration purposes. We would also use the
criteria described above to evaluate the inclusion and exclusion of
RXCUIs and may make other updates to the 2024 benefit year RXC
Crosswalk to ensure drugs are mapped to RXCs, where appropriate.
We propose to begin to use this approach for recalibration of the
2023 adult risk adjustment models with the exception of the 2017
enrollee-level EDGE data year, for which we propose to use the most
recent RXC mapping document that was available when we first processed
the 2017 enrollee-level EDGE data (that is, Q2 2018). We propose to use
the applicable benefit year's Q4 RXC mapping documents for both the
2018 and 2019 benefit years of enrollee-level EDGE data for the
recalibration of the adult risk adjustment models for the 2023 benefit
year. Under this proposal, we would hold those mappings constant when
using the 2018 and 2019 enrollee level EDGE data years in future
benefit year model recalibrations--meaning that we would use the
applicable benefit year's Q4 RXC mapping documents when the 2018 or
2019 benefit year of enrollee-level EDGE data is used for future
benefit year model recalibrations.\114\

[[Page 607]]

The purpose of maintaining a specific version of the same RXC mapping
document for future recalibrations under this proposal is to limit the
volatility of some coefficients from year-to-year and to ensure that we
are capturing the utilization and costs observed for the underlying
drugs in use in that year for the condition. Because the final DIY
software update contains the Q4 list, this approach would also have the
added benefit of providing issuers the opportunity to see the mappings/
crosswalk that will be applied to that data year in the final DIY
software release before it is used for recalibration.
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\114\ Consistent with the approach finalized in the 2022 Payment
Notice, the 2018 and 2019 enrollee-level EDGE data would be used for
the recalibration of the 2024 benefit year models and the 2019
enrollee-level EDGE data would be used for the recalibration of the
2025 benefit year models. See, supra, note 47.
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For purposes of the 2023 benefit year recalibration, we are
proposing an exception for the 2017 benefit year enrollee-level EDGE
data and would instead use the most recent RXC mapping document that
was available when we first processed the benefit year's enrollee-level
EDGE data for recalibration purposes (that is, Q2 2018). We are
proposing this approach for the 2017 benefit year enrollee-level EDGE
data because we did not include RXCs in the adult risk adjustment
models until 2018 \115\ and therefore, we do not have a Q4 RXC mapping
for the 2017 benefit year. Thus, we propose to use the Q2 2018 RXC
mapping document for the 2017 benefit year enrollee-level EDGE data
year for 2023 model recalibration, consistent with the mapping used for
processing the 2017 data for recalibration of the 2021 and 2022 adult
models. We seek comment on this proposal to change the approach for
identifying the version of the RXC mapping document that would be used
to process a given benefit year's data for the annual recalibration of
the adult models, as well as the proposed applicability beginning with
the 2023 benefit year model recalibration and the proposed exception
for the mapping document for the 2017 benefit year enrollee-level EDGE
data.
---------------------------------------------------------------------------

\115\ See 81 FR at 94075.
---------------------------------------------------------------------------

Alternatively, we seek comment on whether we should take a
different approach to recalibration of the RXC mappings for the adult
risk adjustment models. Under this alternative, we would use the latest
RXC mapping document available at the time that we recalibrate the
adult risk adjustment models and apply it to all three underlying EDGE
data years used to recalibrate the models for the benefit year. This
alternative is in contrast to the current approach of using the most
recent RXC mappings (RXCUIs that map to RXCs) that are available when
we first process the enrollee-level EDGE data for recalibration of the
applicable benefit year's adult models and the above proposed approach
to use the final Q4 RXC mappings that was applicable for each benefit
year of data included in the applicable benefit year's model
recalibration. More specifically, under this alternative approach, we
would instead use the most recent RXCUI to RXC mapping document
available at the time of developing a benefit year's proposed model
factors for publication in the applicable benefit year's Payment
Notice. As the recalibration process typically begins several months
prior to the proposed Payment Notice being released, the most recently
available RXCUI to RXC mapping document available at the time of
developing a benefit year's proposed model factors would generally be
either the Q4 mapping from the prior benefit year (for 2023 benefit
year (BY) model recalibration that would have been the Q4 mapping for
BY 2020), or the Q1 or Q2 mapping document from the year in which
recalibration is occurring (for 2023 benefit year model recalibration
that would have been the Q1 or Q2 mapping for BY 2021). Under this
approach, the RXCUI to RXC mappings applied to the underlying data
years used in model recalibration would be updated each year of model
recalibration to reflect the most recently available decisions in the
quarterly mapping document about which RXCUIs map to RXCs in the adult
models. While this approach would represent what is most likely to map
to the RXCs in the upcoming benefit year of risk adjustment, the RXC
mapping document used would still lag behind what the RXC mapping
document will be in the applicable benefit year due to the inherent
time lag between when recalibration occurs for a benefit year and the
actual benefit year.\116\ Also, while we believe that the impact will
likely be minimal, this approach to remapping the RXCs every year may
contribute to volatility of some coefficients, as the RXC mappings for
the underlying data years would be updated each year during the annual
model recalibration. Another drawback of this approach is that the most
recent RXC mappings will be reflective of similarly recent costs,
clinical relevancies, and prescribing patterns. If changes to any of
these have occurred between an earlier data year and the most recent
year, RXC mappings reflecting the latter will generally be applied to
the former.\117\ We seek comment on all aspects of this alternative
approach.
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\116\ For example, the current recalibration activities (in
calendar year 2021) relate to the 2023 benefit year risk adjustment
models.
\117\ As noted elsewhere in this rule, in certain circumstances,
HHS may consider changes to the RXCUIs from the applicable data year
crosswalk as part of future benefit year model recalibration and
quarterly review processes.
---------------------------------------------------------------------------

ii. Targeted Changes to RXC Mappings for Recalibration
Regardless of the version of the RXC mapping document we use during
the annual adult risk adjustment model recalibration, there may be a
relatively small number of drugs that still require additional analysis
and consideration given the changes that can occur in the market
between the data year and the applicable benefit year of risk
adjustment. The targeted changes to particular drugs' mappings would
typically occur when performing recalibration for future benefit years.
Based on our experience since the incorporation of RXCs into risk
adjustment models in the 2018 benefit year, we do not believe that the
removal or addition of an RXCUI from the RXC mappings (and the
associated removal of the NDCs and HCPCS associated with that RXCUI)
are typically material to recalibration because most drug removals are
not associated with utilization and cost levels that would have a
meaningful impact on model coefficients.\118\ However, in extenuating
circumstances where HHS believes there will be a significant impact
from a change in an RXCUI to RXC mapping, such as: (1) Evidence of
significant off-label prescribing (as was the case with
hydroxychloroquine sulfate \119\); (2) abnormally large changes in
clinical indications or practice patterns associated with drug usage;
or (3) certain situations in which the cost of a drug (or biosimilars)
become much higher or lower than the typical cost of drugs in the same
prescription drug category, HHS will consider whether changes to the
RXCUI to RXC mapping from the applicable data year crosswalk are needed
for future benefit year recalibrations. In the following sections of
this proposed rule, we illustrate cases where we believe extenuating

[[Page 608]]

circumstances existed and our evaluation of whether to make targeted
changes to the mapping of select RXCUIs to RXCs due to those
extenuating circumstances as part of the annual recalibration process
for the 2023 benefit year adult models. In particular, we consider the
cases of RXCUI to RXC mapping of Descovy[supreg] and hydroxychloroquine
sulfate. We also note that, as discussed above, HHS may make other
exception-based adjustments during the recalibration process to reflect
changes in clinical practice and prescribing between recalibration and
the benefit year, such as the adjustment for Hepatitis C drugs, where
HHS determines it is necessary and appropriate to do so. We are not
proposing changes to this approach or the criteria used for these
reviews, but are sharing these examples to further promote transparency
about the process for targeted changes to mapping of select RXCUI to
RXCs.\120\
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\118\ For example, the average effect of the removal of a single
therapeutic drug ingredient in the 2019 Drug Removal Review on 2020
Q1 was an approximate decrease of 0.14% percent in total pharmacy
claims spending among RXC drugs, and the average effect of the
removal of a single non-hydroxychloroquine therapeutic drug
ingredient in the 2020 Drug Removal Review on 2021 Q1 was an
approximate decrease of 0.68 percent in total pharmacy claims
spending among RXC drugs.
\119\ See, for example, 86 FR at 24180.
\120\ As noted above, HHS also conducts quarterly reviews of
RXCUIs that map to RXCs in the adult models and may make targeted
changes to RXC mappings during a benefit year as a result of these
reviews. We are not proposing any changes to the quarterly update
process or the criteria used for such reviews.
---------------------------------------------------------------------------

(a) Descovy[supreg]
Descovy[supreg] has been included in RXC 01 (Anti-HIV Agents) since
RXCs were initially added to the adult risk adjustment models for the
2018 benefit year because it met the inclusion criteria of being a
reliable predictor of the presence of HIV and being representative of
the costs of other drugs associated with the treatment of HIV. However,
in October 2019, Descovy[supreg] was approved by the Food and Drug
Administration (FDA) for pre-exposure prophylaxis (PrEP).\121\ As noted
in the 2022 Payment Notice, HHS removed Descovy[supreg] from the Q4
2020 RXCUI to RXC mappings for consistency with the treatment of other
PrEP drugs.^{122 123} The 2023 benefit year model
recalibration, however, is the first benefit year recalibration that
will use the 2019 benefit year enrollee-level EDGE data. HHS therefore
considered removal of Descovy[supreg] from the RXC mappings applied to
the 2019 benefit year enrollee-level EDGE data year. The reason for
this consideration was that some enrollees in 2019 would have used
Descovy[supreg] for PrEP, which would have an impact on the
recalibration of the coefficients for RXC 01 (Anti-HIV Agents) and was
in keeping with the previously mentioned criteria of changes in
clinical indications or practice patterns associated with drug usage
for further evaluation for potential exception. However, our internal
analysis of available enrollee-level EDGE data indicated that most
Descovy[supreg] users in 2019 were using the drug as part of active HIV
treatment, rather than PrEP.\124\ This, supported by the fact that
Descovy[supreg] was approved for PrEP late in the calendar year of
2019, suggested that the benefits of keeping Descovy[supreg] mapped to
RXC 01 (Anti-HIV Agents) outweighed the tradeoffs of removing it.\125\
Similarly, the 2019 approval and subsequent change in Descovy[supreg]
use that triggered its removal from the crosswalk in Q4 BY 2020 was not
applicable to its use in 2017 or 2018 when it was not approved PrEP.
Therefore, we are not proposing to make an exception to the RXCUI to
RXC mappings to remove Descovy[supreg] from mapping to RXC 01 in 2017,
2018 and 2019 benefit year enrollee-level EDGE datasets used for the
2023 benefit year recalibration of the adult models. We further note
that, regardless of the mapping approach adopted for Descovy[supreg],
enrollees in risk adjustment covered plans that use Descovy[supreg] (or
other PrEP drugs) in combination with another HIV treatment drug that
maps to RXC 01 would still receive credit for RXC 01 in the 2023
benefit year of risk adjustment. If we adopt the alternative mapping
approach of using the latest RXC mapping document available at the time
that we recalibrate adult risk adjustment models and apply it to all
three underlying EDGE data years used to recalibrate the models for the
benefit year, Descovy[supreg] would not map to RXC 01 and we would have
to make an exception to include it in the mapping. We seek comment on
whether we should make such an exception to include and map
Descovy[supreg] to RXC 01 in the datasets used to recalibrate the 2023
benefit year adult models, should the alternative approach be
finalized.
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\121\ See https://www.fda.gov/news-events/press-announcements/fda-approves-second-drug-prevent-hiv-infection-part-ongoing-efforts-end-hiv-epidemic.
\122\ See 86 FR at 24164. Also 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.
\123\ We further explained that enrollees that use
Descovy[supreg] (or other PrEP drugs) in combination with other HIV
treatment drugs would still receive credit for RXC 01. See 86 FR at
24164.
\124\ Assessing the use of Descovy[supreg] for PrEP involved
identifying instances of the use of Descovy[supreg] without an
accompanying HIV diagnosis (as defined by the presence of HCC01) or
use of any other anti-HIV agent (as defined by the use of any drug
in RXC01 other than Descovy[supreg]). The reason the latter helps to
identify non-PrEP Descovy[supreg] use is because Descovy[supreg] for
active HIV-1 treatment is required to be co-administered with other
anti-HIV agents.
\125\ Consistent with the approach outlined in this rule,
Descovy[supreg] was mapped to RXC 01 in the Q4 2019 RXC mapping
applied to enrollee-level EDGE data that was used to develop the
proposed 2023 benefit year factors for the adult models in this
rule. If the alternative approach to RXC mapping is adopted, such
that the Q4 2020 RXC mapping is applied for the 2023 benefit year
recalibration of the adult models, Descovy[supreg] would not map to
RXC 01 unless an exception is made.
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(b) Hydroxychloroquine Sulfate
Hydroxychloroquine sulfate was initially mapped to RXC 09 (Immune
Suppressants and Immunomodulators) in the Q3 BY 2018 review because it
was believed to be a reliable predictor of the presence of conditions
associated with RXC 09. However, HHS removed the RXCU for
hydroxychloroquine sulfate from mapping to RXC 09 (Immune Suppressants
and Immunomodulators) in the Q4 BY 2020 RXC mappings because of
concerns regarding unrepresentative expenditures and off-label
prescribing during the COVID-19 PHE.\126\ This meant that beginning
with the 2020 benefit year of risk adjustment, hydroxychloroquine
sulfate no longer mapped to RXC 09.
---------------------------------------------------------------------------

\126\ 85 FR at 24180. Also see the 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.
---------------------------------------------------------------------------

Then, in part 2 of the 2022 Payment Notice final rule, we finalized
proposals for the 2022 benefit year model recalibration, including the
targeted removal of hydroxychloroquine sulfate for recalibration of the
adult models.\127\ As we explained, our analysis of pre-2020 data
showed that the cost of hydroxychloroquine sulfate drugs were much
lower than the costs of other drugs taken by enrollees assigned RXC
09.\128\ However, even though hydroxychloroquine sulfate was no longer
mapping to the RXC 09 in the Q4 2020 DIY software, hydroxychloroquine
sulfate was still mapping to RXC 09 in the 2018 enrollee-level EDGE
data that would be used for the 2022 benefit year model
recalibration.\129\ Additionally, after hydroxychloroquine sulfate was
removed from mapping to RXC 09 in the
---------------------------------------------------------------------------

\127\ 86 FR at 24180.
\128\ 86 FR at 24180.
\129\ The same concern was not present for the 2016 or 2017
enrollee-level EDGE datasets used for the 2022 benefit year model
recalibration because hydroxychloroquine sulfate was not mapped to
RXC 09 until the Q3 2018 crosswalk.

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[[Page 609]]

Q4 2020 RXC mapping, stakeholders expressed concern about the impact on
the coefficients for RXC 09, and associated interaction terms, of
including hydroxychloroquine sulfate in RXC mapping for recalibration
given that these drugs were such low-cost. After consideration of these
issues, HHS determined that hydroxychloroquine sulfate met the criteria
of significant off-label prescribing, changes in clinical practice
patterns associated with drug usage, and the cost of the drug being
much lower than the typical cost of drugs in the same prescription drug
category that warrants further consideration of whether an exception is
appropriate. After determining that hydroxychloroquine sulfate met
those criteria and considering the feedback from stakeholders, HHS made
the determination that it should be removed. Therefore, to effectuate
the targeted removal of hydroxychloroquine sulfate for the
recalibration of the 2022 benefit year adult risk adjustment models, we
only used 2016 and 2017 enrollee-level EDGE data, where
hydroxychloroquine sulfate was not mapped to RXC 09, for the limited
purpose of developing the coefficients for RXC 09 (Immune Suppressants
and Immunomodulators) 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).\130\
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\130\ 86 FR at 24180.
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Our consideration of the targeted removal of select drugs from RXC
mappings for purposes of the 2023 benefit year model recalibration
similarly identified hydroxychloroquine sulfate as a drug for further
consideration. It continues to meet the criteria of significant off-
label prescribing, changes in clinical practice patterns associated
with drug usage, and the cost of the drug being much lower than the
typical cost of drugs in the same prescription drug category. However,
unlike the 2022 benefit year model recalibration, the 2023 benefit year
updates involve two years of enrollee-level EDGE data (2018 and 2019
data years) where the inclusion of hydroxychloroquine sulfate could
impact the annual model recalibration updates to the coefficients and
associated interaction terms for RXC 09. Therefore, we determined that
the targeted removal of this drug from mapping to RXC 09 was again
appropriate, but to effectuate the targeted removal of this drug for
purposes of the 2023 benefit year recalibration of the adult models, we
would adopt a different approach than 2022 risk adjustment model
recalibration and would remove the RXCUI to RXC mapping in the 2018 and
2019 enrollee-level EDGE data for hydroxychloroquine sulfate to RXC 09
(Immune Suppressants and Immunomodulators) and the related RXC 09
interactions (RXC 09 x HCC056 or 057 and 048 or 041; RXC 09 x HCC056;
RXC 09 x HCC 057; RXC 09 x HCC048, 041). We would adopt a similar
approach for any future year that uses the enrollee-level EDGE data for
the 2018 and 2019 benefit years for purposes of the annual model
recalibration.\131\ We note that the same concern was not present for
the 2017 benefit year enrollee-level EDGE data--the other benefit year
of data that will be used for the 2023 benefit year model
recalibration--because hydroxychloroquine was not included in the RXC
crosswalk until the 2018 benefit year.
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\131\ Consistent with the approach finalized in the 2022 Payment
Notice, the 2018 and 2019 benefit year enrollee-level EDGE datasets
would continue to be used for recalibration of the 2024 benefit year
models; and the 2019 benefit year enrollee-level EDGE dataset would
also be used for recalibration of the 2025 benefit year models.
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We seek comment on these proposals.
e. List of Factors To Be Employed in the Risk Adjustment Models
The proposed 2023 benefit year risk adjustment model factors
resulting from the equally weighted (averaged) blended factors from
separately solved models using the 2017, 2018, and 2019 enrollee-level
EDGE data, including all of the model specification changes and
recalibration proposals detailed above, are shown in Tables 1 through
6. 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.\132\ Table 1 contains factor
coefficients for each adult model, including the age-sex, HCCs, RXCs,
RXC-HCC interactions, interacted HCC counts, and enrollment duration
coefficients. Table 2 contains the factor coefficients for each child
model, including the age-sex, HCCs, and interacted HCC counts
coefficients. Table 3 lists the proposed HHS-HCCs that have been
selected for the proposed interacted HCC counts factors that would
apply to the adult and child models. 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.
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\132\ We are not proposing changes to the high-cost risk pool
parameters for the 2023 benefit year. Therefore, we would maintain
the $1 million threshold and 60 percent coinsurance rate.
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f. Cost-Sharing Reduction Adjustments
We propose to continue including an adjustment for the receipt of
CSRs in the risk adjustment models in all 50 states and the District of
Columbia. While we continue to study and explore ways to update the CSR
adjustments to improve prediction for CSR enrollees,\136\ for the 2023
benefit year, to maintain stability and certainty for issuers, we are
proposing to maintain the CSR adjustment factors finalized in the 2019,
2020, 2021, and 2022 Payment Notices.\137\ See Table 7. We also propose
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.\138\ We seek comment on these
proposals.
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\136\ See Appendix A of the 2021 HHS-Operated Risk Adjustment
Technical Paper on Possible Model Changes, available at https://www.cms.gov/files/document/2021-ra-technical-paper.pdf.
\137\ See 83 FR 16930 at 16953; 84 FR 17454 at 17478 through
17479; 85 FR 29164 at 29190; and 86 FR 24140 at 24181.
\138\ See 81 FR 12203 at 12228.

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g. Model Performance Statistics
Each benefit year, to evaluate risk adjustment model performance,
we examine each model's R-squared statistic and PRs. The R-squared
statistic, which calculates the percentage of individual variation
explained by a model, measures the predictive accuracy of the model
overall. The PR 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 PR represents how well the model does on average
at predicting plan liability for that subpopulation.
A subpopulation that is predicted perfectly would have a PR of 1.0.
For each of the current and proposed HHS risk adjustment models, the R-
squared statistic and the PRs are in the range of published estimates
for concurrent risk adjustment models.\139\ As detailed in the 2021 RA
Technical Paper, the proposed model specification updates, when taken
together, generally demonstrate improvements in R-squared as well as
PRs.\140\ Because we propose to blend the coefficients from separately
solved models based on the 2017, 2018, and 2019 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 statistics for the proposed 2023 benefit models are shown in
Table 8.
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\139\ Hileman, Geof and Spenser Steele. ``Accuracy of Claims-
Based Risk Scoring Models.'' Society of Actuaries. October 2016.
\140\ See, for example, Chapter 5.1 in the 2021 HHS-Operated
Risk Adjustment Technical Paper on Possible Model Changes, available
at https://www.cms.gov/files/document/2021-ra-technical-paper.pdf.
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[[Page 625]]

BILLING CODE 4120-01-C
3. Overview of the HHS Risk Adjustment Methodology (Sec. 153.320)
In part 2 of the 2022 Payment Notice final rule, we finalized the
proposal to continue to use the state payment transfer formula
finalized in the 2021 Payment Notice for the 2022 benefit year and
beyond, unless changed through notice-and-comment rulemaking.\141\ We
explained that under this approach, we will no longer republish these
formulas in future annual HHS notice of benefit and payment parameter
rules unless changes are being proposed. We are not proposing any
changes to the formula in this rule and therefore are not republishing
the formulas in this rule. We would continue to apply the formula as
finalized in the 2021 Payment Notice in the states where HHS operates
the risk adjustment program in the 2023 benefit year.\142\
Additionally, as finalized in the 2020 Payment Notice, we will maintain
the high-cost risk pool parameters for the 2020 benefit year and
beyond, unless amended through notice-and-comment rulemaking.\143\ We
are not proposing any changes to the high-cost risk pool parameters for
the 2023 benefit year; therefore, we would maintain the $1 million
threshold and 60 percent coinsurance rate.
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\141\ See 86 FR at 24183-24186.
\142\ For an illustration and further details on the state
payment transfer formula, see 86 FR at 24183-24186.
\143\ See 84 FR at 17466-17468.
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4. Risk Adjustment State Flexibility Requests (Sec. 153.320(d))
We propose to repeal the ability of states to request a reduction
in risk adjustment state transfers starting with the 2024 benefit year,
with an exception for states that have requested such reductions in
prior benefit years. We also solicit comments on requests from Alabama
to reduce risk adjustment state transfers for the 2023 benefit year in
the individual (including the catastrophic and non-catastrophic risk
pools) and small group markets. In the 2019 Payment Notice, we provided
states the flexibility to request a reduction to the applicable risk
adjustment state transfers calculated by HHS using the state payment
transfer formula for the 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.\144\ We finalized that any requests we
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.\145\
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\144\ 83 FR 16955-16960.
\145\ 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. See
45 CFR 153.320(d)(3).
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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).\146\ 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.\147\
For the 2022 benefit year, the state of Alabama submitted 50 percent
risk adjustment transfer reduction requests for its individual
(including catastrophic and non-catastrophic risk pools) and small
group markets, and HHS approved both requests.\148\
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\146\ For an illustration of the state payment transfer formula,
see 86 FR at 24184.
\147\ See 84 FR 17484-17485 and 85 FR 29193-29194.
\148\ See 86 FR 24187-24189.
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a. Requests To Reduce Risk Adjustment Transfers for the 2023 Benefit
Year
For the 2023 benefit year, HHS received requests from Alabama to
reduce risk adjustment state transfers for its individual and small
group markets by 50 percent.\149\ Alabama asserts that the state
payment transfer formula produces imprecise results in Alabama because
of the extremely unbalanced market share in the individual and small
group markets. Specifically, Alabama asserts that the presence of a
dominant issuer 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, which Alabama
believes 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
issuers' financial data suggested that any premium increase resulting
from a reduction to risk adjustment payments of 50 percent in the
individual market for the 2023 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).
---------------------------------------------------------------------------

\149\ 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.
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In the small group market request, Alabama states that its review
of the issuers' financial data from the 2020 benefit year suggests that
any premium increase resulting from a reduction to risk adjustment
payments of 50 percent in the small group market for the 2023 benefit
year would exceed the de minimis threshold. However, Alabama asserts
that HHS should consider data for years prior to 2021 to analyze its
small group market request for the 2023 benefit year because the COVID-
19 PHE renders an analysis based on 2020 data unreliable. Alabama
further notes that there is no regulatory requirement to analyze the
request using the most recent available year of data. Alabama further
states that the de minimis regulatory threshold does not work when a
small issuer receives a risk adjustment payment, and that the test
should instead be based on what percentage market share the large
issuer in Alabama holds compared to the other issuers in the market.
We seek comment on the requests to reduce risk adjustment state
transfers in the Alabama individual and small group markets by 50
percent for the 2023 benefit year. The requests and additional
documentation submitted by Alabama are posted under the ``State
Flexibility Requests'' heading at https://www.cms.gov/CCIIO/Programs-and-Initiatives/Premium-Stabilization-Programs/index.html.
b. Repeal of Risk Adjustment State Flexibility To Request a Reduction
in Risk Adjustment State Transfers (Sec. 153.320(d))
We propose to generally repeal the flexibility for states to
request reductions of transfers calculated by HHS under the state
payment transfer formula in all state market risk pools starting with
the 2024 benefit year, with an exception for states that previously
requested a reduction in risk adjustment state transfers under Sec.
153.320(d). Section 3 of E.O. 14009 directs HHS, and the heads of all
other executive departments and agencies with authorities and
responsibilities related

[[Page 626]]

to Medicaid and the ACA, to review all existing regulations, orders,
guidance documents, policies, and any other similar agency actions to
determine whether they are inconsistent with policy priorities
described in Section 1 of E.O. 14009, to include protecting and
strengthening the ACA and making high-quality health care accessible
and affordable for all individuals.\150\ Consistent with this
directive, we have been considering whether the risk adjustment state
flexibility under Sec. 153.320(d) is inconsistent with policies
described in Sections 1 and 3 of E.O. 14009.
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\150\ E.O. 14009; 86 FR 7793 (Feb. 2, 2021).
---------------------------------------------------------------------------

In prior rulemakings, we received comments stating that this policy
does not strengthen the ACA and requesting that HHS repeal this policy,
as risk adjustment state flexibility may result in risk selection,
market destabilization, increased premiums, smaller networks, and worse
plan options. Specifically, these commenters stated that reducing
transfers to plans with higher-risk enrollees could create incentives
for issuers to avoid enrolling high-risk enrollees in the future
through distorting plan offering and designs, including by avoiding
broad network plans, not offering platinum plans at all, and only
offering limited gold plans. Commenters further stated that issuers
could also distort plan designs by excluding coverage or imposing high
cost sharing for certain drugs or services. Some commenters stated that
the risk adjustment state payment transfer formula already adjusts for
differences in types of individuals enrolled in different states and
aggregate differences in prices and utilization by using the statewide
average premium as a scaling factor, so state flexibility to account
for state-specific factors is unnecessary.\151\ The commenters also
generally noted that states that believe the HHS risk adjustment
methodology does not work properly in their markets have the option, if
they operate their Exchange, to operate a state-based risk adjustment
program.
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\151\ See https://www.brookings.edu/wp-content/uploads/2020/12/FiedlerLaytonCommentLetterNBPP2022.pdf.
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Moreover, since HHS finalized the risk adjustment state flexibility
policy in the 2019 Payment Notice, there have been changes in
Administration policy priorities. This Administration's stated
priorities include protecting and strengthening the ACA, of which the
risk adjustment program is an integral part, and supporting protections
for people with pre-existing conditions; \152\ in contrast, past
Administration priorities included reducing economic burden on states
and other entities and maximizing state flexibility.\153\ Market
participation has also stabilized in recent years, with new issuers
entering the market and premiums remaining stable since 2019.\154\
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\152\ Executive Order 14009; 86 FR 7793 (Feb. 2, 2021).
\153\ Executive Order 13765; 82 FR 8351 (Jan. 24, 2017).
\154\ See, for example, the 2019, 2020, and 2021 Unified Rate
Review Public Use Files, available at https://www.cms.gov/CCIIO/Resources/Data-Resources/ratereview. See also the Summary Report on
Permanent Risk Adjustment Transfers for the 2020 Benefit Year,
available at https://www.cms.gov/CCIIO/Programs-and-Initiatives/Premium-Stabilization-Programs/Downloads/RA-Report-BY2020.pdf. See
also the Summary Report on Permanent Risk Adjustment Transfers for
the 2019 Benefit year, available at https://www.cms.gov/CCIIO/Programs-and-Initiatives/Premium-Stabilization-Programs/Downloads/RA-Report-BY2019.pdf.
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Following our further consideration of this policy consistent with
the instructions in the E.O., prior comments on this policy, and the
earlier described changes, as well as the general low level of interest
states have expressed in the policy, we propose, beginning for the 2024
benefit year, to repeal the ability for states to request a reduction
in risk adjustment state transfers of up to 50 percent in any state
market risk pool with an exception for states who previously requested
this flexibility in prior benefit years. We propose to effectuate this
change by amending the introductory text to Sec. 153.320(d) to reflect
that this flexibility was available from the 2020 through 2023 benefit
years for all states and to add a new second sentence to the
introductory text in Sec. 153.320(d) to capture the proposal to permit
states that previously participated to request these reductions
beginning with the 2024 benefit year.
In addition, we propose to add new Sec. 153.320(d)(5) to define
prior participants as any state that previously submitted a risk
adjustment state flexibility request for any market risk pool. We are
proposing to create an exception for states that previously
participated because there is one state, Alabama, that requested this
flexibility since 2020 (the first benefit year these requests were
permitted). Alabama has generally been able to demonstrate a de minimis
impact on the market risk pool in which the reduction in transfers was
requested, meaning any impacted issuer would not need to increase their
premiums by more than 1 percent to account for the reduction to risk
adjustment transfers. As explained in the state's requests, Alabama has
unique state characteristics, in which there is an extremely unbalanced
market share in both its individual and small group markets, with one
very dominant issuer and a few very small competitors that produces
imprecise results under the HHS risk adjustment methodology, which is
calibrated on a national dataset.\155\ We do not believe that
continuing to permit a reduction in risk adjustment transfers in this
state, given its unique characteristics, undermines the efficacy of
risk adjustment. In addition, we believe that any minimal impact on
transfers in this state is outweighed by the benefit of maintaining and
taking steps to support the state's effort to maximize participation in
its state market risk pools that have developed as a result of this
flexibility in prior years, and that might otherwise only have a single
issuer offering coverage in the absence of this flexibility.
---------------------------------------------------------------------------

\155\ See Alabama requests for 2020 through 2022 under the Risk
Adjustment State Flexibility Requests heading at https://www.cms.gov/CCIIO/Programs-and-Initiatives/Premium-Stabilization-Programs. Some of the information in these requests is redacted in
accordance with 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.
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We note that this proposal to retain this flexibility for prior
participants is only intended to permit such states to continue to
request risk adjustment state flexibility in benefit year 2024 and
beyond, not to automatically apply previously approved transfer
reductions to future benefit years. Under this proposal, a prior
participant will still be required to submit its request(s) to reduce
risk adjustment state transfers each year in the timeframe, form, and
manner set forth in Sec. 153.320(d)(1) and (2), and HHS will continue
to evaluate risk adjustment state flexibility requests for approval as
set forth in Sec. 153.320(d)(4). If state requests do not meet the
applicable approval criteria, HHS will not approve the requests. The
flexibility for HHS to approve a reduction amount that is lower than
the amount requested by the State in Sec. 153.320(d)(4)(ii) would also
be retained.
Finally, for reduction requests for the 2024 benefit year and
beyond, we also propose to remove the option for the state to
demonstrate the state-specific factors that warrant an adjustment to
more precisely account for relative risk differences in the state
individual catastrophic, individual non-catastrophic, small group, or
merged

[[Page 627]]

market risk pool as one of the justifications for the state's request
and one of the criteria for HHS approval. Instead, we propose to
require prior participants to meet the other existing criterion that
the requested reduction would have de minimis impact on the necessary
premium increase to cover the transfers for issuers that would receive
reduced transfer payments, as the sole justification for the state's
request and criterion for HHS approval beginning with 2024 benefit year
requests. To effectuate this change, we propose to amend paragraph
(d)(1)(iii) of Sec. 153.320 to add the phrase ``For the 2020 through
2023 benefit years'' to reflect that state requests submitted for those
benefit years must include a justification for the reduction requested
demonstrating either of the existing criteria, that is, the state-
specific factors that warrant an adjustment to more precisely account
for relative risk differences in the state individual catastrophic,
individual non-catastrophic, small group, or merged market risk pool,
or that the requested reduction would have de minimis impact on the
necessary premium increase to cover the transfers for issuers that
would receive reduced transfer payments. We also propose to add a new
Sec. 153.320(d)(1)(iv) to capture the requirement that prior
participant requests beginning with the 2024 benefit year must include
a justification demonstrating the requested reduction would have de
minimis impact on the necessary premium increase to cover the transfers
for issuers that would receive reduced transfer payments. We similarly
propose to amend the standards for HHS approval under Sec.
153.320(d)(4)(i) to create a new paragraph (d)(4)(i)(A) to capture the
existing options available for 2020 through 2023 benefit year requests
and a new paragraph (d)(4)(i)(B) to capture the new proposed option
that would apply to prior participants' requests beginning with the
2024 benefit year. Retaining the de minimis standard as the only option
for prior participants to justify the reduction and for HHS to approve
a request would help ensure that consumers would not experience an
increase in premiums greater than 1 percent as the result of a state
requested reduction in transfers, which aligns with the priorities
under E.O. 14009 to ensure that health care remains affordable for
consumers. HHS would continue to publish any requests submitted under
this revised framework, make them available for public comment, and
announce any approved or denied reduction requests in the applicable
benefit year's HHS notice of benefit and payment parameters, as set
forth in Sec. 153.320(d)(3).
We seek comment on this proposal to generally repeal the state
flexibility to request reductions in the transfers calculated by HHS
under the state payment transfer formula beginning with 2024 benefit
year, with the exception of states that previously submitted a risk
adjustment state flexibility request for any market risk pool. We also
seek comment on whether we should limit this repeal to the individual
market catastrophic and non-catastrophic risk pools (including merged
market states whose issuers report risk adjustment data in the
individual market) and continue to permit the submission of these
requests in the small group market only (including merged market states
whose issuers report risk adjustment data in the small group market).
We further seek comment on the proposed prior participant exception,
including the proposed definition for prior participants. We also seek
comment on the proposal to retain as the only option for state
justification and HHS approval of requested reductions beginning with
the 2024 benefit year the demonstration that the requested reduction
would have de minimis impact on the necessary premium increase to cover
the transfers for issuers that would receive reduced transfer payments,
and to remove the criterion related to the state demonstrating the
state-specific factors that warrant an adjustment to more precisely
account for relative risk differences in the applicable state market
risk pool. Finally, we seek comment on the health equity impacts of
these proposals, especially for underserved and minority communities.
5. Risk Adjustment Issuer Data Requirements (Sec. Sec. 153.610,
153.700, and 153.710)
In this section, we propose that issuers collect and make available
for HHS' extraction from issuers' EDGE servers five new data elements--
ZIP code,\156\ race, ethnicity, an ICHRA indicator, and a subsidy
indicator (APTC indicator at the policy-level)--as part of the required
risk adjustment data that issuers must make accessible to HHS in states
where HHS operates the risk adjustment program,\157\ beginning with the
2023 benefit year. We also propose that beginning with the 2022 benefit
year, HHS would extract from issuers' EDGE servers the following three
data elements that issuers already are required to make accessible to
HHS as part of the required risk adjustment data: Plan ID (which
represents the HIOS ID, state, product ID, standard component number,
and variant), rating area, and subscriber indicator. We also propose to
exclude plan ID, ZIP code, and rating area from the limited data set
HHS makes available to requestors for research purposes, but include
race, ethnicity, ICHRA indicator, subsidy indicator, and subscriber
indicator in that limited data set once available. Lastly, we propose
to expand and clarify the scope of permissible HHS uses for the data
and the reports extracted from issuer EDGE servers (including data
reports and ad hoc query reports). Related to these proposals, we also
consider the burden associated with the proposed collection and
extraction of these data elements and whether there are any policies
that HHS could pursue to encourage the consistent use and reporting of
ICD-10-CM z codes. The following subsections provide further discussion
of these proposals.
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\156\ ZIP code\TM\ is a trademark of the United States Postal
Service.
\157\ HHS has been operating the risk adjustment program in all
50 states and the District of Columbia since the 2017 benefit year.
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a. Background
Section 1343(b) of the ACA provides that the Secretary, in
consultation with States, shall establish criteria and methods to be
used in carrying out the risk adjustment activities under this section.
Consistent with section 1321(c) of the ACA, the Secretary is
responsible for operating the risk adjustment program in any state that
fails to do so.\158\ 45 CFR 153.610(a) requires that health insurance
issuers of risk adjustment covered plans submit or make accessible all
required risk adjustment data in accordance with the data collection
approach established by HHS \159\ in states where HHS operates the
program on behalf of a state. In the 2014 Payment Notice, HHS
established an approach for obtaining the necessary data for risk
adjustment calculations in states where HHS operates the program
through a distributed data collection model that prevented the transfer
of individuals' personally identifiable information (PII).\160\ Since
the 2016 benefit year, HHS required issuers of risk adjustment covered
plans to submit 95 data elements to their EDGE servers

[[Page 628]]

to support the HHS' calculation of risk adjustment transfers.\161\
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\158\ In the 2014 through 2016 benefit years, HHS operated the
risk adjustment program in every state and the District of Columbia,
except Massachusetts. Beginning with the 2017 benefit year, HHS has
operated the risk adjustment program in all 50 states and the
District of Columbia.
\159\ Also see 45 CFR 153.700-153.740.
\160\ See 78 FR at 15497-15500 and 45 CFR 153.720.
\161\ The full list of required data elements can be found in
Appendix A of OMB control number 0938-1155 (Standards Related to
Reinsurance, Risk Corridors, and Risk Adjustment (CMS-10401)), which
is currently being updated. The current Appendix A is available at
https://omb.report/icr/201712-0938-015/doc/79644301.pdf. The
previous version is available at https://www.reginfo.gov/public/do/PRAViewICR?ref_nbr=201712-0938-015.
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Then, in the 2018 Payment Notice, we finalized policies for the
extraction and use of enrollee-level EDGE data beginning with the 2016
benefit year.\162\ The purpose of collecting and extracting enrollee-
level EDGE data was to provide HHS with more granular data to use to
recalibrate the HHS risk adjustment models and to use actual data from
issuers' individual and small group (and merged) market populations, as
opposed to the MarketScan[supreg] commercial database that approximates
these populations, for model recalibration purposes. We also finalized
the use of the extracted enrollee-level EDGE data to inform development
of the AV Calculator and methodology and noted the data could be a
valuable source for calibrating other HHS programs in the individual
and small group markets. In the 2020 Payment Notice, we expanded the
permitted uses of the extracted enrollee-level EDGE data to provide
that HHS may use these data and the reports extracted from issuers'
EDGE servers (including data reports and ad hoc query reports) to
calibrate and operationalize our individual and small group (including
merged) market programs, including to recalibrate the HHS risk
adjustment models, to inform updates to the AV Calculator, and to
conduct policy analysis for the individual and small group (including
merged) markets.\163\ These additional uses of the enrollee-level EDGE
data and reports enhance HHS' ability to develop and set policy for the
individual and small group (including merged) markets and avoid the
need to pursue alternative burdensome data collections from
issuers.\164\
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\162\ 81 FR 94058 at 94101.
\163\ 84 FR 17454, 17488.
\164\ We also clarified that our policies regarding HHS uses of
the enrollee-level EDGE data apply to the HHS components that
currently receive and use such data for purposes of the HHS risk
adjustment program. See ibid at 17488.
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b. Proposed Collection and Extraction of New Data Elements and
Extraction of Current Data Elements
Based on our experience accessing EDGE server data for the risk
adjustment model recalibration and analytics purposes, and as part of
our ongoing efforts to continuously improve HHS programs, we propose to
collect and extract new data elements from issuers' EDGE servers
through issuers' EDGE Server Enrollment Submission (ESES) files and
risk adjustment recalibration enrollment files, specifically: (1) ZIP
code, (2) race, (3) ethnicity, (4) subsidy indicator, and (5) ICHRA
indicator. For race and ethnicity data, we propose to require issuers
to report race and ethnicity in accordance with the October 30, 2011
HHS Implementation Guidance on Data Collection Standards for Race,
Ethnicity, Sex, Primary Language, and Disability Status (2011 HHS Data
Standards),\165\ which is collected at a granular level that would
allow HHS to better analyze more subpopulations than our current data
allows us to do, thereby allowing us to consider more areas of health
equity, as well as to better address discrimination in health care and
health disparities.\166\ We propose to require issuers of risk
adjustment covered plans to submit and make accessible these new data
elements to HHS in states where HHS operates the risk adjustment
program beginning with the 2023 benefit year. Extraction of these new
five data elements as part of the enrollee-level EDGE data and the
reports extracted from issuers' EDGE servers (including data reports
and ad hoc query reports) would begin with the 2023 benefit year.\167\
In addition to collecting and extracting these new data elements, we
also propose to extract plan ID, rating area, and subscriber indicator
as part of the enrollee-level EDGE data beginning with the 2022 benefit
year data and reports extracted from issuers' EDGE servers. For the
plan ID, rating area, and subscriber indicator, we note that issuers
are already required under current HHS program requirements to submit
these data elements to their EDGE servers.\168\
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\165\ https://aspe.hhs.gov/reports/hhs-implementation-guidance-data-collection-standards-race-ethnicity-sex-primary-language-disability-0.
\166\ As detailed further later in this preamble, issuers would
have the option of selecting ``unknown'' for this data element if
they do not have this information for a particular enrollee.
\167\ The deadline for submission of 2023 benefit year risk
adjustment data submissions is April 30, 2024. See 45 CFR 153.730.
\168\ The full list of required data elements can be found in
Appendix A of OMB control number 0938-1155 (Standards Related to
Reinsurance, Risk Corridors, and Risk Adjustment (CMS-10401)), which
is currently being updated. The current Appendix A is available at
https://omb.report/icr/201712-0938-015/doc/79644301.pdf. The
previous version is available at https://www.reginfo.gov/public/do/PRAViewICR?ref_nbr=201712-0938-015.
---------------------------------------------------------------------------

Collecting and extracting these new and current data elements would
allow HHS to further assess and analyze actuarial risk and risk
patterns in the individual, small group, and merged markets, and
determine if, based on future analysis, any refinements to the HHS risk
adjustment methodology, the AV Calculator, or other HHS individual or
small group (including merged) market programs should be proposed
through notice-and-comment rulemaking. For example, we propose to
collect and extract the ICHRA indicator to conduct analyses on whether
there are any unique actuarial characteristics of the ICHRA population
\169\ and to examine if employers with sicker enrollees are more
attracted to offering ICHRAs, and if ICHRA enrollment is impacting
state individual (or merged) market risk pools. We similarly want to
examine whether there are any risk patterns or impacts when analyzing
risk adjustment data using ZIP codes, race, ethnicity, and the subsidy
indicator. For example, we are interested in conducting analysis on
whether there are any cost differentials for certain conditions based
on race, ethnicity or subsidy indicator. For the three current data
elements that we are proposing to newly extract, our purpose would be
to similarly use these data to further assess risk patterns and the
impact of risk adjustment policies. For example, the extraction of
rating area data would provide HHS with more granular data to assess
risk patterns and impacts based on geographic differences. In addition,
the proposal to newly extract plan ID and subscriber indicator from
issuers' EDGE servers would allow HHS to be able to simulate transfers
using the enrollee-level data, which is currently not possible without
the plan ID.\170\
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\169\ Currently, HHS only collects information on an enrollee's
ICHRA status in connection with a special enrollment period
eligibility determination for Exchanges, which does not provide us
with complete data.
\170\ For the transfer simulation of the combined model
specification changes, HHS was not able to use the available
enrollee-level EDGE datasets. Instead, issuers needed to run
multiple EDGE Ad Hoc commands on their respective EDGE servers for
the simulation to be successful. See Section 5.2 of the 2021 RA
Technical Paper, available at https://www.cms.gov/files/document/2021-ra-technical-paper.pdf and the HHS-Operated Risk Adjustment
Technical Paper on Possible Model Changes: Summary Results for
Transfer Simulations, available at https://www.cms.gov/CCIIO/Programs-and-Initiatives/Premium-Stabilization-Programs.
---------------------------------------------------------------------------

We believe these proposed data collections and extractions would
serve the compelling government interest of promoting equity in health
coverage and care, as well as the ACA's goal of making high-quality
health care accessible and affordable for all individuals.
Specifically, we believe that the collection and extraction of these
new data elements would allow HHS to analyze and assess health equity

[[Page 629]]

impacts more than current data allow. Consistent with Executive Order
13985, ``Advancing Racial Equity and Support for Underserved
Communities Through the Federal Government,'' \171\ we believe this
proposal would facilitate our ability to assess the extent to which
specific communities experience barriers or challenges in accessing
benefits and opportunities available related to our individual, small
group, and merged market programs. This proposed data collection could
also facilitate our ability to assess whether new policies, regulation,
or guidance may be necessary or appropriate to further advance equity
within our programs in the individual, small group and merged markets.
We believe that the proposed collection and extraction of these data
elements is narrowly tailored to serve this compelling government
interest because this is the minimum data anticipated at this time that
would allow HHS to further assess and analyze actuarial risk and risk
patterns in the individual, small group, and merged markets. Consistent
with the policy adopted in the 2020 Payment Notice regarding the use of
data and reports extracted from issuer EGDE servers (including data
reports and ad hoc query reports), and our proposal below to expand the
permissible HHS uses of such data and reports, we would collect,
extract and use these new and current data elements to conduct policy
analysis for HHS programs in the individual and small group (including
merged) markets and to inform policy analyses and improve the integrity
of other HHS federal health-related programs to the extent such use is
otherwise authorized by, required under, or not inconsistent with
applicable federal law.
---------------------------------------------------------------------------

\171\ E.O. 13985 is 86 FR 7009 available at https://www.federalregister.gov/documents/2021/01/25/2021-01753/advancing-racial-equity-and-support-for-underserved-communities-through-the-federal-government.
---------------------------------------------------------------------------

In the proposed 2020 Payment Notice, we sought comment on the
advantages and disadvantages of extracting state and rating area data
as part of the enrollee-level EDGE data for use to recalibrate the HHS-
operated risk adjustment models, to inform updates to the AV Calculator
and methodology, and to conduct policy analyses for other HHS
individual and small group (including merged) market programs.\172\ We
explained that extracting these geographic details could enable HHS to
assess the impact of differences in geographic factors in the HHS risk
adjustment methodology and to better estimate the AV of plans based on
cost differences across regions. We also noted that extraction of
geographic details (state and rating area) could help support other HHS
programs and policy priorities, as well as provide additional data
elements for researchers. However, after consideration and review of
the public comments received on the proposed 2020 Payment Notice, we
did not finalize the proposed extraction of these data elements. We
explained that, at that time, in response to stakeholder feedback, we
did not believe that the benefits of these additional data element
extractions would outweigh the potential increased risk to issuers'
proprietary information and increased issuer burden.\173\
---------------------------------------------------------------------------

\172\ 84 FR 227 at 251.
\173\ 84 FR 17454 at 17488.
---------------------------------------------------------------------------

However, in light of E.O. 13985 and E.O. 14009, we have continued
to consider whether extraction of these data elements would support and
enhance HHS' policy analysis capabilities with regard to the HHS risk
adjustment program, as well as other HHS individual and small group
(including merged) market programs that seek to provide access to
health care to consumers. Based on this further analysis and
consideration, HHS has determined that the proposed extraction of
rating area data, along with the proposed collection and extraction of
the other data elements discussed in this proposal, align with the
policy goals in E.O. 13985 and E.O. 14009 and would provide HHS with
more granular data to help improve HHS' analytical capacity to assess
equity impacts of programs impacted by this proposed rule, including
our capacity to identify potential refinements to the HHS risk
adjustment methodology, consider policy and operational changes to
improve other HHS individual and small group (including merged) market
programs, and identify ways to address health equity issues in these
programs. For example, HHS believes that analysis of the additional
data elements proposed for collection and extraction from issuers' EDGE
servers would help HHS better monitor trends in the health insurance
markets, inform HHS analyses of whether updates to the QHP
certification review processes would be necessary or appropriate,\174\
and inform QHP compliance reviews and subregulatory guidance. HHS also
is of the view that the additional data elements proposed for
collection and extraction from EDGE servers could be valuable in
assessing policy and operational issues in connection with programs
that are not centered around the individual or small group (including
merged) commercial health insurance markets, such as the wrap-around
QHP coverage offered to Medicaid expansion populations in some states
\175\ and coverage offered by non-federal governmental plans.\176\
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\174\ Each year, HHS provides an overview of its QHP
certification review processes in the annual Letter to Issuers in
the FFEs. The 2022 Final Letter to Issuers in the FFEs is available
at https://www.cms.gov/CCIIO/Resources/Regulations-and-Guidance/Downloads/Final-2022-Letter-to-Issuers-in-the-Federally-facilitated-Marketplaces.pdf.
\175\ See, e.g., https://www.medicaid.gov/medicaid/downloads/wraparound-benefits.pdf.
\176\ Non-federal governmental plans are subject to many PHS Act
federal market reform requirements. See, e.g., 42 U.S.C. 300gg-
21(a)(1)(A). Also see 42 U.S.C. 300bb-1, et seq. HHS is generally
responsible for enforcement of provisions of the PHS Act that apply
to non-federal governmental plans. See, e.g., 42 U.S.C. 300gg-
22(b)(1)(B) and 45 CFR 150.301, et seq.
---------------------------------------------------------------------------

Additionally, HHS continually considers methods and mechanisms to
identify discriminatory practices in the commercial health insurance
markets and HHS federal health-related programs. The additional data we
propose to collect and extract from issuers' EDGE servers also would
inform future policy to better address discrimination and other
systemic barriers in health care and health disparities that may exist
in connection with coverage offered in the commercial health insurance
markets, as well as in other HHS federal health-related programs that
do not focus on commercial health insurance.
For all of the reasons discussed in this section, HHS proposes to
collect and extract the proposed five new data elements outlined above
as part of the required risk adjustment data issuers must make
accessible to HHS through their respective EDGE servers beginning with
the 2023 benefit year. We also propose to extract plan ID, rating area,
and subscriber indicator as part of the EDGE enrollee-level data set
beginning with the 2022 benefit year.\177\ We note that any changes to
the risk adjustment methodology or other policies based on HHS's
analysis of these data would be set forth in notice and comment
rulemaking.
---------------------------------------------------------------------------

\177\ We propose to extract plan ID, rating area, and subscriber
indicator for the 2022 benefit year, which is one year earlier than
we propose to extract the other five new data elements, because
issuers already submit plan ID, rating area, and subscriber
indicator to their EDGE servers.
---------------------------------------------------------------------------

We seek comments on these proposals, including feedback
specifically on whether we should extract only certain portions of the
plan ID, such as the five-digit HIOS ID, two-character state ID, three-
digit product number, four-digit standard component

[[Page 630]]

number, two-digit variant ID, or any combination thereof.\178\
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\178\ For additional explanation of the plan ID components, see
pg. 42 of the CMS Standard Companion Guide Transaction Information:
Instructions related to the ASC X12 Benefit Enrollment and
Maintenance (834) transaction, based on the 005010X220
Implementation Guide and its associated 005010X220A1 addenda for the
FFE, available at https://www.cms.gov/cciio/resources/regulations-and-guidance/downloads/companion-guide-for-ffe-enrollment-transaction-v15.pdf.
---------------------------------------------------------------------------

c. Limited Data Set
In conjunction with the proposed collection and extraction of the
new and current data elements in this proposed rule, we propose to
exclude plan ID, ZIP code, and rating area from the limited data set
containing enrollee-level EDGE data that HHS makes available to
qualified researchers.\179\ However, we propose to include race,
ethnicity, ICHRA indicator, subsidy indicator, and subscriber indicator
in the limited data set once they are available.\180\ In the 2020
Payment Notice, we finalized our proposal to create on an annual basis
a limited data set file using masked enrollee-level data submitted to
HHS from issuers' EDGE servers. The limited data set file is made
available to requestors who seek the data for research purposes
only.\181\ We adopted this policy because we believed making the
limited data set file available to qualified researchers upon request
would increase understanding of these markets and contribute to greater
transparency. HHS strictly adheres to all the requirements and CMS
guidelines related to providing the limited data set to qualified
researchers, including requiring the recipient of the limited data set
to enter into a data use agreement that establishes the permitted uses
or disclosures of the information and prohibits the recipient from
identifying the information. We believe that including race, ethnicity,
ICHRA indicator, subsidy indicator, and subscriber indicator would
enhance the usefulness of the limited data set for research and would
continue to protect enrollees' PII and issuers' proprietary
information. Although we believe that including plan ID, ZIP code, and
rating area in the limited data set similarly would enhance the
usefulness of the limited data set, we believe this would raise
significant concerns for issuers given previous comments noting the
competitive and proprietary nature of these geographic identifiers. We
therefore propose to not include these geographic identifiers as part
of the limited data set that HHS makes available to qualified
researchers upon request. We seek comments on the proposal to exclude
plan ID, ZIP code, and rating area, and to include race, ethnicity,
ICHRA indicator, subsidy indicator, and subscriber indicator as part of
the enrollee-level EDGE limited data set made available to qualified
researchers upon request. We seek comment on this proposal, including
about whether collecting race and ethnicity data in accordance with the
2011 HHS Data Standards would require systems changes and about any
costs associated with such changes. If finalized as proposed, race,
ethnicity, the ICHRA indicator, and the subsidy indicator would be
included beginning with the 2023 benefit year enrollee-level EDGE
limited data set. Subscriber indicator would be included beginning with
the 2022 benefit year enrollee-level EDGE limited data set if the
proposal to extract that data element is finalized as proposed. We
appreciate the sensitivities related to enrollee-level EDGE data and
the importance of ensuring that our policies continue to safeguard
enrollees' privacy and security and issuers' proprietary information.
Thus, we are particularly interested in feedback on any privacy or
confidentiality concerns with including these elements in the limited
data set made available to qualified researchers upon request.
---------------------------------------------------------------------------

\179\ See 84 FR at 17487.
\180\ As proposed, the subscriber indicator would be included in
the enrollee-level data HHS extracts from issuer EDGE servers
beginning with the 2022 benefit year; therefore, this new data field
would be included beginning with the 2022 benefit year limited data
set. As proposed, race, ethnicity, ICHRA indicator, and subsidy
indicator would be included in the enrollee-level data HHS extracts
from issuer EDGE servers beginning with the 2023 benefit year;
therefore, these data fields would be included beginning with the
2023 benefit year limited data set.
\181\ As explained in the 2020 Payment Notice, we do not
currently make the limited data set available to requestors for
public health or health care operation activities. See 84 FR at
17488.
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d. Proposal To Expand Permissible Uses of EDGE Data
We also propose to expand the permitted uses of the data and
reports (including data reports and ad hoc query reports) extracted
from issuers' EDGE servers to include other HHS federal health-related
programs outside of the commercial individual and small group
(including merged) markets. This proposed expansion would apply to data
that HHS already collects as well as the proposed collection and
extraction of ZIP code, race, ethnicity, subsidy indicator, ICHRA
indicator, plan ID, rating area, and subscriber indicator as outlined
in this rule. The proposed expansion to the permitted uses of the EDGE
data and reports would apply as of the effective date of the final
rule. Specifically, HHS proposes to expand the uses of the data and
reports HHS extracts from issuers' EDGE servers to include not only the
specific uses for purposes we identified in the 2020 Payment Notice
\182\--that is, to calibrate and operationalize our individual and
small group (including merged) market programs (including assessing
risk in the market for risk adjustment purposes and informing updates
to the AV Calculator), and to conduct policy analysis for the
individual and small group (including merged) markets--but also for the
purposes of informing policy analyses and improving the integrity of
other HHS federal health-related programs, to the extent such use of
the data is otherwise authorized by, required under, or not
inconsistent with applicable federal law. For example, certain states
have wrap-around coverage that include enrolling their Medicaid
expansion populations in QHPs and those enrollees are currently
reflected in the enrollee-level EDGE data. Under this proposal to
expand the permitted uses of EDGE data and reports, it would be clear
that HHS could use this information to inform policy analyses and
improve the integrity of these Medicaid expansion population
approaches. Similarly, to the extent appropriate, this proposal would
allow HHS to use the EDGE data and reports to inform policy analyses
related to PHS Act requirements enforced by HHS that are applicable
market-wide \183\ and those that are applicable to non-federal
governmental plans.\184\ Consistent with our current policy, the
proposals in this rule related to HHS use of the enrollee-level EDGE
data and reports would apply to the HHS components that currently
receive and use such data for purposes of the HHS risk adjustment
program. Other government components would be able to request the
enrollee-level EDGE limited data set file for research, as that term is
defined under Sec. 164.501. We also note that the enrollee-level EDGE
data, including the data elements proposed for collection and
extraction in this rule, may be subject to disclosure as otherwise
required by law.\185\
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\182\ See 84 FR 17488.
\183\ See, for example, 42 U.S.C. 300gg-300gg-28.
\184\ Non-federal governmental plans are subject to many PHS Act
federal market reform requirements. See, e.g., 42 U.S.C. 300gg-
21(a)(1)(A). Also see 42 U.S.C. 300bb-1, et seq. HHS is generally
responsible for enforcement of provisions of the PHS Act that apply
to non-federal governmental plans. See, e.g., 42 U.S.C. 300gg-
22(b)(1)(B) and 45 CFR 150.301, et seq.
\185\ See, for example, 2 U.S.C. 601(d).

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[[Page 631]]

We note that any changes to our policies that result from analysis
of these data, such as using the data to modify the state payment
transfer formula, would be subject to notice and comment rulemaking.
Furthermore, we would not use the additional data elements or any
analysis of them to pursue changes to our policies until we conduct
thorough data quality checks. For example, in submitting data on race
and ethnicity, issuers would have the option of selecting ``unknown''
for these data elements and we would ensure an adequate response rate
before conducting analyses that could inform policy decisions. We would
similarly ensure an adequate response rate with respect to submission
of the ICHRA indicator before conducting analyses that could inform
policy decisions.\186\ We solicit comment on this proposal to expand
the permitted uses of the enrollee-level EDGE data.
---------------------------------------------------------------------------

\186\ As detailed later, we propose to adopt a transition
approach for the ICHRA indicator, which would make this data field
optional for the 2023 and 2024 benefit years.
---------------------------------------------------------------------------

e. Burden for Collecting and Extracting Additional Data Elements
As stated above, we propose to extract plan ID, rating area, and
subscriber indicator from issuers' EDGE servers to consider for use in
risk adjustment model recalibration and other potential refinements to
the HHS-operated risk adjustment program, as well as to conduct policy
analysis for HHS federal health-related programs, including those
related to the individual and small group (including merged) health
insurance markets and HHS non-commercial market programs, beginning
with the 2022 benefit year. While collecting additional data elements
may represent increased burden for issuers, there would be little to no
additional issuer burden related to extracting these three proposed
data elements because HHS extracts and stores the data, and issuers
would only be required to execute a command provided by HHS to generate
the EDGE report(s) containing all required data elements. Since issuers
are already required to include these three data elements (plan ID,
rating area, and subscriber indicator) as part of the required risk
adjustment submissions to their respective EDGE servers, we believe
there would be little to no additional burden associated with the
proposed extraction of these three data elements beginning with the
2022 benefit year.
As stated above, we also propose to require issuers to include five
new data elements--ZIP code, race, ethnicity, an ICHRA indicator, and a
subsidy indicator--as part of their risk adjustment submissions to
issuer EDGE servers beginning with the 2023 benefit year. We believe
issuers currently collect ZIP codes; therefore, the burden associated
with the proposed collection of this data element through issuer EDGE
servers would only be the additional effort and expense for issuers to
compile and submit this additional data element to their EDGE servers,
as well as to retain this data element as part of their risk adjustment
records as required under Sec. 153.620(b). Because the subsidy
indicator is derived from existing data,\187\ we believe the burden
would again only be the additional effort and expense for issuers to
compile and submit this data element to their EDGE servers, as well as
to retain this data element as part of their risk adjustment records as
required under Sec. 153.620(b). In contrast, we do not believe
information to populate the ICHRA indicator is routinely collected by
all issuers at this time; therefore, in recognition of the burden that
collection of this new data element potentially would pose for some
issuers, we propose to make submission of the ICHRA indicator on
issuers' EDGE servers optional for the 2023 and 2024 benefit years.
This transitional approach for the ICHRA indicator would be similar to
how we have handled other new data collection requirements \188\ and
would allow issuers additional time to develop processes for
collection, validation and submission of this new data field before it
is required.
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\187\ Subsidy indicator is derived from the Marketplace
enrollment data communicated to issuers where this data provides the
APTC amount for an enrollee. Issuers would be able to use this
information to derive the subsidy indicator for each enrollee.
\188\ For example, HHS did not penalize issuers for temporarily
submitting a default value for the in/out-of-network indicator for
the 2018 benefit year in order to give issuers time to make the
necessary changes to their operations and systems to comply with the
new data collection requirement, but required issuers to provide
full and accurate information for the in/out-of-network indicator
beginning with the 2019 benefit year.
---------------------------------------------------------------------------

We believe that most issuers currently collect race and ethnicity
data in some manner, and therefore the burden associated with the
collection of this information through issuer EDGE servers would only
be the additional effort and expense for issuers to compile and submit
these additional data elements to their EDGE servers and retain these
data elements as part of their risk adjustment records as required
under Sec. 153.620(b). However, we are interested in comments on the
collection of these data elements, issuers' rate of collections of
these data elements in accordance with the 2011 HHS Data Standards
\189\ and whether there are any considerations about the availability
and current collection of these data elements that HHS should be aware
of, given that these data fields are often an optional field on health
insurance application and enrollment forms.\190\ We also acknowledge
that some of these new proposed data elements, such as race and
ethnicity and the ICHRA indicator, may be collected by HHS from FFE or
SBE-FP enrollees through the QHP application process and from State
Exchange enrollees through the State Exchange enrollment and payment
files and our intention would be to structure these data elements
similar to current collections, where possible. However, this proposal
would require all issuers of risk adjustment covered plans to make
these data elements accessible to HHS through their EDGE servers as
part of the required risk adjustment data submissions in states where
HHS operates the risk adjustment program. The data that issuers submit
to their EDGE servers would be more uniform and comprehensive than
information submitted by FFE and SBE-FP enrollees on a QHP application
and by State Exchange enrollees through enrollment and payment files,
as it would represent all enrollees in risk adjustment covered plans,
including coverage offered inside and outside of Exchanges. By
collecting these data as part of the required risk adjustment data
issuers submit to their respective EDGE servers, HHS would also have
the ability to extract and aggregate these data elements with other
claims and enrollment data accessible through issuer EDGE servers,
which would not be possible with the data collected from consumers
through other processes because the EDGE data is masked \191\ and
therefore cannot be linked with other sources. We considered the
possibility of using data imputation methods with existing
HealthCare.gov application data to construct a simulated dataset and
conduct preliminary exploratory analysis, but once again determined
that

[[Page 632]]

we would be unable to impute data from the applications due to the EDGE
data being masked. We therefore do not view this as a duplicative data
collection. Our proposal also would ensure HHS has access to the same
information in the same format for on- and off-Exchange enrollments, as
well as across all Exchange types--FFEs, SBE-FPs and State Exchanges--
for the individual, small group and merged markets.
---------------------------------------------------------------------------

\189\ HHS Implementation Guidance on Data Collection Standards
for Race, Ethnicity, Sex, Primary Language, and Disability Status
[bond] ASPE See HHS Implementation Guidance on Data Collection
Standards for Race, Ethnicity, Sex, Primary Language, and Disability
Status [bond] ASPE, available at https://aspe.hhs.gov/reports/hhs-implementation-guidance-data-collection-standards-race-ethnicity-sex-primary-language-disability-0.
\190\ Race and ethnicity questions, for example, are optional on
the HealthCare.gov application. See https://www.reginfo.gov/public/do/PRAICList?ref_nbr=201903-0938-016 (Attachment A, page 27-28).
\191\ 45 CFR 153.720.
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To fully assess the additional issuer burden resulting from this
proposal, we seek comment on the relative value of the additional data
elements we propose to require when compared to other data elements we
could propose to collect. For instance, we seek comment on whether HHS
should consider collecting county data in lieu of ZIP code, and also
solicit comment on whether HHS should consider requiring issuers to
report census tract data, instead of ZIP codes or county data.
Specifically, we understand that five-digit ZIP codes can change on a
regular basis, which could limit the usefulness of this data element
when comparing data across benefit years. Census tract data or county
data, therefore, may be more useful. We also clarify that, while race
and ethnicity would be required data submission elements under these
proposals, issuers would have the option of selecting ``unknown'' for
this data element, which aligns with the approach taken for application
and enrollment forms. In other words, issuers would not be penalized if
they did not have the data for a particular enrollee. Instead, this
proposal is designed to require the submission of race and ethnicity
data if a particular enrollee provided it to their respective issuer.
We also seek comment on how issuers may already be collecting data on
race and ethnicity in order to identify alternatives that HHS could
consider to further ease the burden of this collection while also
meeting the stated goals of collecting data to analyze more
subpopulations than the current data allows, consider more areas of
health equity, and better address discrimination in health care and
health disparities.
f. Encouraging the Use of Z Codes
We seek comment on the collection and extraction of z codes
(particularly Z55-Z65), a subset of ICD-10-CM encounter reason codes
used to identify, analyze, and document social determinants of
health.\192\ We are currently collecting z codes in the enrollee-level
EDGE data and have started analyzing those codes.\193\ However, we
understand there have been reports of a lack of consistent use of z
codes by providers \194\ and we want to encourage consistent use of z
codes to help further assess risk in the individual, small group and
merged market risk pools. We solicit comment on whether there are
policies that HHS should pursue that could encourage consistent use of
z codes by providers to support collection and use of the data for the
HHS-operated risk adjustment program. In light of E.O. 13985 and E.O.
14009, HHS is interested in analyzing z code data to learn about the
relationship between risk and the social determinants of health.
Finally, we seek comment on whether there are other data elements HHS
should consider collecting and extracting to support the operation of
the HHS-operated risk adjustment program.
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\192\ See CMS Infographic: Using Z Codes: The Social
Determinants of Health; Data Journey to Better Outcomes, available
at https://www.cms.gov/files/document/zcodes-infographic.pdf, last
accessed Nov. 5, 2021. See also Utilization of Z Codes for Social
Determinants of Health Among Medicare Fee-for-Service Beneficiaries,
2019, available at https://www.cms.gov/files/document/zcodes-infographic.pdf.
\193\ Using the 2019 enrollee-level EDGE data, we found that
only 0.49 percent of the population had a code within Z55-Z65 range.
These enrollees had higher costs than enrollees without a Z55-Z65
code across all age/sex and market/metal/CSR categories.
\194\ See https://journals.lww.com/lww-medicalcare/Fulltext/2020/12000/Utilization_of_Social_Determinants_of_Health.2.aspx.
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6. Risk Adjustment User Fee for 2023 Benefit Year (Sec. 153.610(f))
HHS proposes a risk adjustment user fee for the 2023 benefit year
of $0.22 per member per month (PMPM). Under Sec. 153.310, 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 proposed rule, for the 2023 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'
operation of risk adjustment on behalf of states is funded through a
risk adjustment user fee.\195\ 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.
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\195\ 78 FR 15409 at 15416-15417.
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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 HHS-
operated risk adjustment program provides special 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 part 2 of the 2022 Payment Notice final rule, we calculated the
federal administrative expenses of operating the risk adjustment
program for the 2022 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.\196\ For the 2023 benefit
year, HHS proposes to use the same methodology to estimate our
administrative expenses to operate the risk adjustment 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' projected total costs for
administering the risk adjustment program 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 2023 benefit year.
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\196\ 86 FR 24140 at 24195-24196.
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We estimate that the total cost for HHS to operate the risk
adjustment program on behalf of states for the 2023 benefit year will
be approximately $60 million, and therefore, the proposed risk
adjustment user fee is $0.22 PMPM. The risk adjustment user fee costs
for the 2023 benefit year are expected to remain steady from the prior
2022 benefit year estimates. However, we project a small increase in
billable member months in the individual and small group (including
merged) markets overall in the 2023 benefit year based on the
enrollment increases observed in the 2020 benefit year prior to
implementation of the ARP in 2021. The

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assumption that the enhanced premium tax credit subsidies in section
9661 of the ARP will expire after the 2022 benefit year significantly
influenced our development of the 2023 enrollment and premium
projections used to develop the proposed risk adjustment user fee for
the 2023 benefit year. We expect the expiration of this ARP provision
to revert enrollment projections to the pre-ARP level observed in the
2020 benefit year. We seek comment on the proposed risk adjustment user
fee for the 2023 benefit year.
7. Compliance With Risk Adjustment Standards; High-Cost Risk Pool
Funds--Audits of Issuers of Risk Adjustment Covered Plans (Sec.
153.620(c))
HHS proposes that whenever HHS recoups high-cost risk pool funds as
a result of audits of risk adjustment covered plans under Sec.
153.620(c)(5)(ii), the high-cost risk pool funds recouped from an
issuer in an applicable national high-cost risk pool \197\ would be
used to reduce high-cost risk pool charges for that national high-cost
risk pool beginning for the current benefit year, if high-cost risk
pool payments have not already been calculated for that benefit year.
If high-cost risk pool payments have already been calculated for the
current benefit year, we propose to use the recouped high-cost risk
pool funds to reduce the next applicable benefit year's high-cost risk
pool charges for all issuers owing high-cost risk pool charges for that
national high-cost risk pool.
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\197\ The high-cost risk pool calculation under the HHS risk
adjustment methodology involves two national risk pools--one for the
individual market (including catastrophic and non-catastrophic
plans, and merged market plans), and another for the small group
market. See, for example, 81 FR at 94080-94082.
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In part 2 of the 2022 Payment Notice final rule, HHS codified
several requirements related to the audits and compliance reviews of
risk adjustment covered plans.\198\ We did not finalize our
disbursement proposal for high-cost risk pool payments or charges
recovered by HHS during an audit of a risk adjustment covered plan
under Sec. 153.620(c), but stated our intention to address this issue
in future rulemaking.\199\ As such, we are proposing here that any
high-cost risk pool funds recouped through an audit under Sec.
153.620(c)(5)(ii) would be disbursed in the next benefit year for which
high-cost risk pool payments have not already been calculated, in the
form of reduced charges for all issuers owing high-cost risk pool
charges in the applicable national high-cost risk pool. If HHS recoups
high-cost risk pool funds after the current benefit year's high-cost
risk pool payments have been calculated, we propose to apply the high-
cost risk pool funds recouped through an audit under Sec.
153.620(c)(5)(ii) to reduce the next applicable benefit year's high-
cost risk pool charges for all issuers owing high-cost risk pool
charges for the applicable national high-cost risk pool. For example,
if a 2018 high-cost risk pool audit results in funds being recouped for
the national high-cost risk pool for the individual market in March
2022, then these recouped funds would be disbursed in the form of
reduced 2021 benefit year high-cost risk pool charges for issuers in
the national high-cost risk pool for the individual market because
high-cost risk pool payments for the 2021 benefit year are not
calculated until June 2022. Notwithstanding any reduction to a national
high-cost risk pool's charges for a given benefit year, this proposed
policy would not impact the amount of high-cost risk pool payments made
to eligible issuers, because the reduction in charges is due to the
recoupment of funds as the result of an audit of a prior benefit year
rather than a change in payments for the given benefit year. In
addition, the calculation of high-cost risk pool charges and payments
will continue to be calculated in accordance with the established
policies, terms and factors.^{200 201} We believe this proposal
is consistent with our general policy that HHS would not rerun or
otherwise recalculate high-cost risk pool charges and payments for the
applicable benefit year if monies are recouped as a result of an audit
under Sec. 153.620(c).\202\
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\198\ See 86 FR 24140 at 24287.
\199\ We proposed 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 high-cost risk pool in the form of a reduced
high-cost risk pool charge in the applicable benefit year. See 85 FR
78572 at 78604.
\200\ See 81 FR 94058, 94081. Also see 84 FR 17454, 17467 (We
are finalizing the $1 million threshold and 60 percent coinsurance
rate for 2020 benefit year and beyond without requiring notice and
comment on the high-cost risk pool thresholds each year.). We are
not proposing changes to the high-cost risk pool parameters for the
2023 benefit year. Therefore, we would maintain the $1 million
threshold and 60 percent coinsurance rate.
\201\ For a visual illustration of the high-cost risk pool terms
and factors, see 86 FR at 24184-24185.
\202\ 86 FR 24140 at 24193.
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We also clarify that when HHS recoups high-cost risk pool funds as
a result of an audit, the issuer subject to the audit would then be
responsible for reporting that adjustment to its high-cost risk pool
payments or charges in the next MLR reporting cycle consistent with the
applicable instructions in Sec. 153.710(h). Additionally, for any
benefit year in which high-cost risk pool charges are reduced as a
result of recouped audit funds, issuers whose charge amounts are
reduced would report the high-cost risk pool charges paid for that
benefit year net of recouped audit funds in the next MLR reporting
cycle consistent with Sec. 153.710(h).
We also propose that any high-cost risk pool funds recouped as a
result of an actionable discrepancy or successful administrative appeal
filed pursuant to Sec. Sec. 153.710(d) and 156.1220, respectively,
would be treated the same way, that is, any high-cost risk pool funds
recouped based on an actionable discrepancy or successful appeal would
be used to reduce high-cost risk pool charges for that national high-
cost risk pool for the next benefit year for which high-cost risk pool
payments have not already been calculated. Additionally, issuers would
similarly be responsible for reporting any high-cost risk pool related
adjustments that result from the recoupment of funds due to an
actionable discrepancy or successful administrative appeal in the next
MLR reporting cycle consistent with Sec. 153.710(h).
We seek comment on these proposals.
8. Risk Adjustment Data Validation Requirements When HHS Operates Risk
Adjustment (HHS-RADV) (Sec. Sec. 153.350 and 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. \203\ 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 assesses charges to issuers with plans with lower-
than-average actuarial risk while making payments to issuers with plans
with higher-than-average actuarial risk. HHS-RADV consists of an IVA
and an SVA. Under Sec. 153.630, each issuer of a risk

[[Page 634]]

adjustment covered plan must engage an independent IVA entity. The
issuer provides demographic, enrollment, prescription drug, and medical
record documentation for a sample of enrollees selected by HHS to the
issuer's IVA entity. Each issuer's IVA is followed by an SVA, which is
conducted by an entity HHS retains to verify the accuracy of the
findings of the IVA. Based on the findings from the IVA and SVA as
applicable, HHS conducts error estimation to calculate an error rate.
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\203\ HHS has operated the risk adjustment program in all 50
states and the District of Columbia since the 2017 benefit year.
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In the 2020 HHS-RADV Amendments Rule,\204\ we described and
finalized the error rate calculation methodology for HHS-RADV
applicable for benefit years 2019 and onward. In this rule, we propose
further refinements to the HHS-RADV error rate calculation methodology
beginning with the 2021 benefit year and beyond to: (1) Extend the
application of Super HCCs to also apply to coefficient estimation
groups throughout the HHS-RADV error rate calculation processes, (2)
specify that the Super HCC will be defined separately according to the
age group model to which an enrollee is subject, and (3) constrain to
zero any outlier negative failure rate in a failure rate group,
regardless of whether the outlier issuer has a negative or positive
error rate.
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\204\ 85 FR 76979.
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HHS is committed to ensuring the integrity and reliability of HHS-
RADV and continuously improving the error rate calculation methodology
and program requirements. As part of our ongoing efforts to explore
potential modifications to the HHS-RADV error rate calculation
methodology, we have identified through our own analysis, and through
feedback from stakeholders, these areas for further refinement. We
believe these proposals will better align the calculation and
application of error rates with the intent of the HHS-RADV program,
thereby enhancing the integrity of HHS-RADV and the HHS-operated risk
adjustment program.
a. Coefficient Estimation Groups in Error Estimation
First, we propose to modify our process for grouping coefficient
estimation groups in error estimation. In the 2020 HHS-RADV Amendments
Rule,\205\ we finalized a policy to ensure that HCCs that share a
coefficient estimation group used in the risk adjustment models are
sorted into the same failure rate groups by first aggregating any HCCs
that share a coefficient estimation group into Super HCCs before
applying the HHS-RADV failure rate group sorting algorithm. Since
implementing the Super HCC policy, we found there are rare occasions
where there is a minor misalignment between the calculation of risk
adjustment plan liability risk score (PLRS) values and HHS-RADV error
estimation. To address these rare situations, in this rule we propose
to modify the Super HCC policy to apply the coefficient estimation
group logic as expressed in the applicable benefit year's DIY software
throughout the HHS-RADV error rate calculation methodology, as they are
in risk adjustment. We propose to adopt these changes beginning with
the 2021 benefit year of HHS-RADV.
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\205\ See 85 FR 76979 at 76984-76989.
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The majority of HCCs in a coefficient estimation group are in the
same hierarchy, but in rare instances an individual enrollee may be
recorded on an issuer's EDGE server as having multiple HCCs in an HCC
coefficient estimation group that do not have a direct hierarchical
relationship to one another. For example, based on the 2021 DIY
software Tables 4 and 6,\206\ HCC 61 Osteogenesis Imperfecta and Other
Osteodystrophies shares coefficient estimation group G04 with HCC 62
Congenital/Developmental Skeletal and Connective Tissue Disorders in
the adult risk adjustment models, but the two HCCs are not
hierarchically related. However, even if an enrollee has both unrelated
conditions, the enrollee only receives the coefficient for one of those
conditions in the enrollee's risk adjustment risk score calculation
because both conditions share the same coefficient estimation group.
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\206\ See, for example, the August 3, 2021 version of the DIY
software is available at https://www.cms.gov/CCIIO/Resources/Regulations-and-Guidance.
---------------------------------------------------------------------------

To further explain, when such HCCs share a direct hierarchical
relationship, the presence of the more severe condition nullifies the
presence of the less severe condition; that is, the enrollee will
receive credit in risk adjustment and HHS-RADV for only the most severe
of the two conditions. Similarly, in risk adjustment, when HCCs that
share a coefficient estimation group do not share a direct hierarchical
relationship, an enrollee will have both HCCs nullified and replaced
with a single instance of a variable indicating the presence of HCCs in
that coefficient estimation group, as seen in DIY software Tables 6 and
7, leading to the enrollee only receiving one indicator of risk across
both conditions. However, in this latter case, the process of
nullifying and replacing the HCCs with the variable representing the
coefficient estimation group is not currently replicated in the
calculation of HHS-RADV failure rates, group adjustment factors, or
enrollee adjustment factors, so it is possible for an enrollee to be
recorded in their EDGE, IVA, or SVA data as having both conditions for
the purposes of HHS-RADV.
The nullification and replication process in the risk adjustment
risk score calculation de-duplicates conditions in coefficient
estimation groups in the same way that multiple HCCs that share a
hierarchical relationship are de-duplicated. However, there is no
analogous de-duplication process for coefficient estimation groups in
HHS-RADV.\207\ As such, it is possible for an enrollee to be recorded
as having multiple conditions in a coefficient estimation group for
HHS-RADV, requiring the issuer to be able to validate both conditions
to avoid receiving an HHS-RADV adjustment to the enrollee's risk score,
even though the enrollee only received the coefficient for one of those
conditions in the enrollee's risk adjustment risk score calculation.
Therefore, beginning with the 2021 benefit year of HHS-RADV, we are
proposing to extend the Super HCC policy finalized in the 2020 HHS-RADV
Amendments Rule, such that HHS will apply the coefficient estimation
group logic as expressed in the applicable benefit year's DIY software
\208\ throughout HHS-RADV error estimation, rather than just at the
sorting step that assigns HCCs to failure rate groups. This change
would mean that an issuer would only need to validate one HCC in a
coefficient estimation group to avoid further impacting an adjustment
to an enrollee's risk score in HHS-RADV, aligning with how an
enrollee's risk score \209\ would be calculated under the state payment
transfer formula.
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\207\ It is rare for an enrollee to have two HCCs in the same
coefficient estimation group that are not also in a hierarchical
relationship. This situation occurred in no more than 0.1 percent of
enrollees sampled for 2017 and 2018 HHS-RADV.
\208\ In section III.C.8.b. of this proposed rule, we propose
how the coefficient estimation group logic would be applied to
adult, child, and infant enrollees and discuss alternative
application methodologies.
\209\ In the application of the coefficient estimation group
logic to HHS-RADV, the definition of coefficient estimation groups
for the infant models depends upon proposals in section III.C.8.b.
of this proposed rule. If the approach in section III.C.8.b. is
finalized as proposed, Super HCCs for the infant models would be
based on the calculated model factors used for the infant models, as
described in the applicable benefit year's DIY software ``Additional
Infant Variables'' table logic (Table 8 of the 2021 Benefit Year DIY
Software). In section III.C.8.b. of this rule, we also briefly
describe alternative approaches wherein Super HCCs for infants would
be identical to those for the child models, or identical to those
for the adult models, and would involve additional steps analogous
to those described in Chapter 11.3.4 of the 2020 Benefit Year HHS-
RADV Protocols, available at https://www.regtap.info/uploads/library/2020_RADV_Protocols__042921_5CR_060421.pdf. These additional
steps would not be necessary if the Super HCCs proposals in this
rule to define Super HCCs separately for adults, children, and
infants are finalized as proposed.

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[[Page 635]]

If finalized as proposed, this update to the Super HCC policy would
necessitate a change to the policy finalized in the 2021 Payment Notice
\210\ which amended the outlier identification process to not consider
an issuer as an outlier in any failure rate group in which that issuer
has fewer than 30 HCCs.\211\ That policy was developed based on results
of analysis that showed that if the number of EDGE HCCs per sample of
enrollees was below 30 HCCs, the implied alpha of our statistical tests
for outliers was higher than our 5 percent target, thereby failing to
meet the threshold for statistical significance. Moreover, statistical
practice often relies on a standard recommendation regarding the
determination of sample size, which states that sample sizes below 30
observations are often insufficient to assume that the sampling
distribution is normally distributed.\212\
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\210\ 85 FR at 29196 through 29198.
\211\ Under the outlier identification policy finalized in the
2021 Payment Notice, data from an issuer who has fewer than 30 HCCs
in a failure rate group is included in the calculation of national
metrics for that failure rate group, including the national mean
failure rate, standard deviation, and upper and lower confidence
interval bounds. However, the issuer does not have its risk score
adjusted for that group, even if the magnitude of its failure rate
appeared to otherwise be very large relative to other issuers. In
addition, we clarified that this issuer may be considered an outlier
in other failure rate groups in which it has 30 or more HCCs.
\212\ For example, David C. Howell, ``Hypothesis Tests Applied
to Means'' In Statistical Methods for Psychology (8th Ed.), 177-228.
Belmont, CA: Wadsworth, 2010.
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The 2021 Payment Notice policy was developed when individual HCCs
were the unit of analysis for calculating failure rates. However, the
proposed policy in this rule to de-duplicate coefficient estimation
groups in HHS-RADV would alter the unit of analysis of failure rates to
be de-duplicated Super HCCs,\213\ rather than individual HCCs. Although
the unit of analysis would have changed, the underlying issue with
sample size in the outlier identification process would remain the
same. As such, as a part of this proposal, we propose to generally
maintain the outlier identification approach adopted in the 2021
Payment Notice and propose to not consider an issuer as an outlier in
any failure rate group in which that issuer has fewer than 30 de-
duplicated EDGE Super HCCs (which would include, as proposed below,
maturity-severity factors for infant enrollees) beginning with 2021
benefit year HHS-RADV. Consistent with the policies adopted in the 2021
Payment Notice,\214\ we also propose to continue to include data from
an issuer who has fewer than 30 de-duplicated EDGE Super HCCs in a
failure rate group in the calculation of national metrics for that
failure rate group, including the national mean failure rate, standard
deviation, and upper and lower confidence interval bounds. However, the
issuer would not have its risk score adjusted for that group, even if
the magnitude of its failure rate appeared to otherwise be very large
relative to other issuers. In addition, we clarify that under this
proposal this issuer may be considered an outlier in other failure rate
groups in which it has 30 or more de-duplicated EDGE Super HCCs.
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\213\ If the approach in section III.C.8.b. is finalized as
proposed, Super HCCs for the infant models would be based on the
calculated model factors used for the infant models, as described in
the applicable benefit year's DIY software ``Additional Infant
Variables'' table logic (Table 8 of the 2021 Benefit Year DIY
Software). In section III.C.8.b. of this rule, we also briefly
describe alternative approaches under which Super HCCs for infants
would be identical to those for the child models, or identical to
those for the adult models, and would involve additional steps
analogous to those described in Chapter 11.3.4 of the 2020 Benefit
Year HHS-RADV Protocols (available at). These additional steps would
not be necessary if the Super HCCs proposals in this rule proposed
to define Super HCCs separately for adults, children, and infants
are finalized as proposed.
\214\ 85 FR at 29196 through 29198.
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We seek comment on this proposal and whether HCCs in coefficient
estimation groups should be de-duplicated before they are sorted into
failure rate groups and in all subsequent stages of HHS-RADV error
estimation.
b. Defining Super HCCs Separately for Adults, Children, and Infants
In conjunction with our proposal to modify the application of
coefficient estimation groups in section III.C.8.a. of this proposed
rule, we also propose to modify the Super HCC policy to apply
coefficient estimation groups to enrollees according to the risk
adjustment model to which they are subject. Under the current Super HCC
policy, coefficient estimation group logic from the adult models is
applied to all enrollees, including those subject to the child and
infant models.\215\ As detailed in the 2020 HHS-RADV Amendments Rule,
we adopted this approach because the adult models' HCC coefficient
estimation groups will be applicable to the vast majority of enrollees
\216\ and our belief that the use of HCC coefficient estimation groups
present in the adult risk adjustment models sufficiently balances the
representativeness and accuracy of HCC failure rate estimates across
the entire population in aggregate.\217\
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\215\ See 85 FR at 76984 through 76900.
\216\ The majority of the population with HCCs in the HHS-RADV
samples are subject to the adult models (88.3 percent for the 2017
benefit year; 88.7 percent for the 2018 benefit year). For 2017,
this was calculated after removing issuers in Massachusetts and
incorporating cases where issuers failed pairwise and the SVA
subsample was used.
\217\ See 85 FR at 76987.
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However, there are some differences in the structure of the risk
adjustment model coefficient estimation groups between the adult,
child, and infant models that the current approach does not take into
account. For example, the child and adult risk adjustment models'
coefficient estimation groups for the 2021 benefit year and onward
\218\ are almost identical with the exception of two adult-only
coefficient estimation groups and five child-only coefficient
estimation groups (Table 9).
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\218\ Starting in 2021 benefit year, the HHS risk adjustment
models use Version 07 for the HHS-HCC classification. Prior to the
2021 benefit year, the HHS risk adjustment models used Version 05
for HHS-HCC classification.
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BILLING CODE 4120-01-P

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[GRAPHIC] [TIFF OMITTED] TP05JA22.023

BILLING CODE 4120-01-C
The infant models also are composed of variables that function
analogously to coefficient estimation groups in that they can represent
the presence of a large number of HCCs, or just a single HCC. However,
these variables in the infant models, the severity-maturity interaction
factors, are structured completely differently from the coefficient
estimation groups in the adult and child models. We have continued to
consider these issues as we gained more experience with operating HHS-
RADV and had access to additional years of HHS-RADV data to analyze.
In recognition of the differences in each age group model's
definitions, and based on the results of further analysis on the year-
over-year stability of sorting Super HCCs into three failure rate
groups, described below, we propose to define Super HCCs as:
The HCC-derived adult model variables after the
application of the relevant rows in the applicable benefit year's DIY
software adult variable logic (for example, for 2021 HHS-RADV, in the
2021 Benefit Year DIY Software,\219\ the ``HCC group'' rows in Table 6:
Additional Adult Variables),
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\219\ See, for example, the August 3, 2021 version of the DIY
software is available at https://www.cms.gov/CCIIO/Resources/Regulations-and-Guidance.
---------------------------------------------------------------------------

The HCC-derived child model variables after the
application of the relevant rows in the applicable benefit year's DIY
software child variable logic (for example, for 2021 HHS-RADV, in the
2021 Benefit Year DIY Software, the ``HCC group'' rows in Table 7:
Additional Child Variables), and
The HCC-derived infant model variables after the
application of the relevant rows in the applicable benefit year's DIY
software infant variable logic (for example, for 2021 HHS-RADV, in the
2021 Benefit Year DIY Software, the ``Severity level'', ``Maturity
level'', ``Assign as IHCC AGE1 if needed'', ``Impose hierarchy'', and
``Maturity x severity level interactions'' rows in Table 8: Additional
Infant Variables). Under this approach, we would sort the adult and
child coefficient estimation groups into failure rate groups together,
when they are identical in definition between the adult and child
models, and independently from one another when they are not identical.
For infant enrollees, rather than have individual HCCs sorted into
failure rate groups, or use the adult or child coefficient estimation
group (Super HCC) definitions, we would sort the infant enrollees'
maturity-severity level interaction factors themselves into failure
rate groups as Super HCCs after they have been de-duplicated. In short,
for the risk adjustment models for 2021 benefit year and onward, using
each age group's model factors to define Super HCCs, and sorting adult
and child Super HCCs together when they have identical definitions,
would increase the number of factors used in sorting from 110 under the
current Super HCC grouping policy established in the 2020 RADV
Amendments Rule to 146 under this approach. We propose to adopt these
changes to the Super HCC policy beginning with the 2021 benefit year of
HHS-RADV.
When we established the current Super HCC grouping policy in the
2020 HHS-RADV Amendments Rule,\220\ we acknowledged the possibility of
defining Super HCCs based on each model separately. Nevertheless, we
proposed and finalized Super HCCs based on only the adult models due to
concerns that using the child and infant models separately would result
in some infant model Super HCCs with very small sample sizes, leading
to less stable failure rate group assignments year-over-year. We also
finalized a policy to use the adult models to create Super HCCs because
the adult models' HCC coefficient estimation groups will be applicable
to the vast majority of enrollees (including most children, considering
the strong overlap between the structure of the adult and child models)
and our belief that the use of HCC coefficient estimation groups
present in the adult risk adjustment models sufficiently balances the
representativeness and accuracy of HCC failure rate estimates across
the entire population in aggregate. However, simulations run using 2018
HHS-RADV data \221\ have shown that if we were to use each model's
factor definitions separately as proposed in this rule, with adult and
child coefficient estimation groups that have identical definitions
being sorted together, we would expect 93.4 percent of factors for one
benefit year of HHS-RADV to be sorted into the same failure rate group
for the subsequent benefit year of HHS-RADV. Similarly, according to
our simulation of 1,000 subsequent years of HHS-RADV, if we were to
base Super HCCs on the adult models for adults and the child models for
children and infants, the percentage of factors whose sorting would
remain stable between subsequent years would be 93.2 percent. In
contrast, and contrary to expectations, if Super HCCs were only based
on the definitions in the adult

[[Page 638]]

models, we would expect only 91.4 percent of factors to remain in the
same failure rate group across subsequent benefit years.
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\220\ See 85 FR at 76984-76900.
\221\ The 2018 risk adjustment models, to which the 2018 HHS-
RADV data were subject, were based on the V05 HHS-HCC classification
for the HHS risk adjustment models, which is the version of the HHS-
HCC classification that applies through the 2020 benefit year. The
2021 risk adjustment models, to which the 2021 HHS-RADV data will be
subject, were based on the V07 HHS-Condition Categories, which
applies for the 2021 benefit year and beyond.
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This analysis demonstrates that the very small sample sizes for
enrollees subject to the infant models would not lead to more overall
instability if the Super HCC policy was modified to use each age
group's model factor definitions separately, except for where child and
adult coefficient estimation groups have identical definitions, to
define Super HCCs. In fact, our continued study of these issues found
that using each model's factor definitions separately, except for where
child and adult coefficient estimation groups have identical
definitions, to define Super HCCs could provide more stability than
using only the adult models, or a combination of the child and adult
models. In addition, we note that beginning with the 2021 benefit year,
the risk adjustment models were updated based on Version 07 (V07) of
the HHS-HCC classification.\222\ When the Super HCC policy was first
implemented in the 2020 HHS-RADV Amendments Rule,\223\ the risk
adjustment models for the earliest HHS-RADV benefit years to which the
policy was effective (HHS-RADV benefit years 2019 and 2020) were based
on Version 05 (V05) of the HHS-HCC classification.\224\ Due to the
change in the HHS-HCC hierarchies in the V07 classification,\225\ the
structure of the coefficient estimation groups for the child models for
the 2021 benefit year and beyond differs further from the structure of
the coefficient estimation groups for the adult models than it did for
the 2019 and 2020 benefit years. For these reasons, we are proposing to
define Super HCCs based on each age group's model factor definitions
separately, except for where child and adult coefficient estimation
groups have identical definitions, as described in the relevant rows in
the applicable benefit year's DIY software adult variable logic (for
example, for 2021 HHS-RADV, in the 2021 Benefit Year DIY Software,\226\
the ``HCC group'' rows in Table 6: Additional Adult Variables), the
relevant rows in the applicable benefit year's DIY software child
variable logic (for example, for 2021 HHS-RADV, in the 2021 Benefit
Year DIY Software, the ``HCC group'' rows in Table 7: Additional Child
Variables), and the relevant rows in the applicable benefit year's DIY
software infant variable logic (for example, for 2021 HHS-RADV, in the
2021 Benefit Year DIY Software, the ``Severity level'', ``Maturity
level'', ``Assign as IHCC AGE1 if needed'', ``Impose hierarchy'', and
``Maturity x severity level interactions'' rows in Table 8: Additional
Infant Variables).
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\222\ 85 FR 29164.
\223\ See 85 FR 76984-76990.
\224\ See Table 4 of the 2019 DIY software tables, available at
https://www.cms.gov/CCIIO/Resources/Regulations-and-Guidance/Downloads/DIY-Tables-2019.04.2020.xlsx. See also Table 4 of the 2020
DIY software tables, available at https://www.cms.gov/files/document/hhs-hcc-software-v0520128q2-tables-04132021.xlsx.
\225\ For a discussion of these changes, see 85 FR at 7098-7101
and 85 FR at 29175-29185. Also see the 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.
\226\ The August 3, 2021 version of the DIY software is
available at https://www.cms.gov/CCIIO/Resources/Regulations-and-Guidance.
---------------------------------------------------------------------------

These relevant rows of the applicable benefit year's DIY software
tables would be applied such that each instance of a Super HCC is only
counted once per enrollee, even if that enrollee has multiple HCCs in
that Super HCC. Furthermore, any payment HCCs that are not modified by
the DIY software table logic rows referenced above would be treated as
individual Super HCCs, such that all Super HCCs are aligned with how
their component HCCs are treated in the risk adjustment models for the
applicable benefit year. We propose to apply this change beginning with
the 2021 benefit year of HHS-RADV.
We seek comment on these proposals and whether Super HCCs should
continue to be defined for all enrollees based on only the adult
models,\227\ should be defined for adult enrollees based on the adult
models and for child and infant enrollees based on the child
models,\228\ or should be defined for each age group according to the
age group risk adjustment model to which they are subject, as proposed.
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\227\ If this alternative approach is adopted, for infant
enrollees, Super HCCs would not align with the structure of the
infant risk adjustment models, as such the HHS-RADV process would
involve additional steps analogous to those described in Chapter
11.3.4 of the 2020 Benefit Year HHS-RADV Protocols (available at
https://www.regtap.info/uploads/library/2020_RADV_Protocols__042921_5CR_060421.pdf). The additional steps
described in Chapter 11.3.4 of the 2020 Benefit Year HHS-RADV
Protocols would not be necessary if the Super HCCs proposals in this
rule are finalized as proposed such that infant enrollee Super HCCs
are based on the calculated model factors used for the infant
models.
\228\ Ibid.
---------------------------------------------------------------------------

c. Negative Failure Rate Constraint
In the 2020 HHS-RADV Amendments Rule,\229\ we finalized a policy to
constrain outlier issuers' error rate calculations to zero in cases
when an issuer is a negative error rate outlier and its failure rate is
negative, beginning with 2019 benefit year HHS-RADV. We finalized this
policy in order to distinguish between low failure rates due to
accurate data submission and failure rates that have been depressed
through the presence of HCCs in the audit data that were not present in
the EDGE data. If a negative failure rate is due to a large number of
found HCCs, it does not reflect accurate reporting through the EDGE
server for risk adjustment.
---------------------------------------------------------------------------

\229\ 85 FR at 76994-76998.
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In this rule, we propose modifying the application of that policy
beginning with the 2021 benefit year of HHS-RADV to constrain to zero
the failure rate of any issuer who is a negative failure rate outlier
in a failure rate group, regardless of whether the outlier issuer has a
negative or positive error rate. We believe this proposed policy is
appropriate and necessary to account for the fact that, because there
are three failure rate groups in HHS-RADV, it is possible for a
positive error rate outlier issuer to have a negative failure rate in
one failure rate group and a positive failure rate in another failure
rate group. To address those cases, we propose to amend the application
of the negative failure rate constraint policy such that, for the
purposes of calculating the group adjustment factor (GAF), we would
constrain to zero the failure rate of any failure rate group in which
an issuer is a negative failure rate outlier, regardless of whether the
outlier issuer has an overall negative or positive error rate. We
propose to adopt this policy beginning with the 2021 benefit year HHS-
RADV. Although our experience to date leads us to believe that this
scenario is unlikely to occur often, this refinement is consistent with
the intent of the policy to reduce potential incentives for issuers to
use HHS-RADV to identify more HCCs than were reported to their EDGE
servers for an applicable benefit year.
We seek comment on this proposal.
9. Disbursement of Recouped High-Cost Risk Pool Funds--Discrepancies of
Issuers of Risk Adjustment Covered Plans (Sec. 153.710(d))
HHS proposes that any funds recouped as a result of an actionable
high-cost risk pool-related discrepancy under Sec. 153.710(d) would be
used to reduce high cost-risk pool charges for that national high-cost
risk pool for the current benefit year if high-cost risk pool payments
have not already been calculated for that benefit year. If high-cost
risk pool payments have already been calculated for that benefit year,
we propose to use the high-cost risk pool funds recouped based on an
actionable

[[Page 639]]

discrepancy to reduce the next applicable benefit year's high-cost risk
pool charges for all issuers owing high-cost risk pool charges for that
national high-cost risk pool. As elsewhere discussed in this preamble,
under ``High-Cost Risk Pool Funds--Audits of Issuers of Risk Adjustment
Covered Plans (Sec. 153.620(c))'' and ``Disbursement of Recouped High-
Cost Risk Pool Funds--Administrative Appeals of Issuers of Risk
Adjustment Covered Plans (Sec. 156.1220),'' we also propose similar
disbursement policies for high-cost risk pool funds HHS recoups as a
result of audits of risk adjustment covered plans under Sec.
153.620(c)(5)(ii) and successful administrative appeals under Sec.
156.1220(a)(1)(ii). We propose to treat funds recouped as a result of
an actionable high-cost risk pool-related discrepancy the same way.
That is, the recouped discrepancy funds would be used to reduce high-
cost risk pool charges for that market for the next benefit year for
which high-cost risk pool payments have not already been calculated. We
also clarify that when HHS recoups high-cost risk pool funds as a
result of an actionable discrepancy, the issuer that filed the
discrepancy would then be responsible for reporting that adjustment to
its high-cost risk pool payments or charges in the next MLR reporting
cycle consistent with the applicable instructions in Sec. 153.710(h).
Additionally, for any benefit year in which high-cost risk pool charges
are reduced as a result of high-cost risk pool funds recouped as a
result of an actionable discrepancy, issuers whose charge amounts are
reduced would be required to report the high-cost risk pool charges
paid for that benefit year net of recouped audit funds in the next MLR
reporting cycle consistent with Sec. 153.710(h).
We seek comment on this proposal.
10. Medical Loss Ratio Reporting Requirements (Sec. 153.710(h))
HHS established a framework in prior rulemakings to guide issuer
treatment of certain payments and charges that could be subject to
reconsideration for purposes of risk corridors and MLR reporting.\230\
For example, because risk adjustment transfer amounts are factors in an
issuer's MLR calculations, a delay in resolving final risk adjustment
payments and charges, including HHS-RADV adjustments to transfers,
could make it difficult for issuers to comply with reporting
requirements under the MLR program. A delay in resolving final risk
adjustment transfer amounts could occur due to audits, actionable
discrepancies, or successful appeals. Therefore, we clarified in Sec.
153.710(h) \231\ how issuers should report certain ACA program amounts
that could be subject to reconsideration for risk corridors and MLR
reporting purposes. In this rule, we propose to amend the introductory
sentence in Sec. 153.710(h)(1) and to add a proposed new paragraph
(h)(1)(v) to separately address and explicitly capture a reference to
HHS-RADV adjustments to make clear that HHS expects issuers to report
HHS-RADV adjustments as part of their MLR reports in the same manner as
they report risk adjustment payment and charge amounts (including high-
cost risk pool payments and charges). That is, notwithstanding any HHS-
RADV discrepancy filed under Sec. 153.630(d)(2), or any HHS-RADV
request for reconsideration under Sec. 156.1220(a)(1)(vii) and (viii),
unless the dispute has been resolved, issuers must report, as
applicable, the HHS-RADV adjustment to a risk adjustment payment or
charge as calculated by HHS in the applicable benefit year's Summary
Report of Benefit Year Risk Adjustment Data Validation Adjustments to
Risk Adjustment Transfers.\232\ We also propose to add a reference to
HHS-RADV discrepancies under Sec. 153.630(d)(2) to the introductory
sentence in Sec. 153.710(h)(1).
---------------------------------------------------------------------------

\230\ See 45 CFR 153.710(h). Also see 79 FR at 13789-13790 and
81 FR at 12235-12236.
\231\ These instructions were previously codified in 45 CFR
153.710(g) and recently redesignated to 45 CFR 153.710(h). See 79 FR
at 13789-13790 and 86 FR at 24194-24195.
\232\ See Table 9 in the part 2 of the 2022 Payment Notice, 86
FR at 24201. For example, the 2019 and 2020 benefit year HHS-RADV
Summary Report for non-exiting issuers will be published in early
summer of 2022 and those issuers would be expected to report those
amounts in their 2021 MLR Reports (filed by July 31, 2022).
---------------------------------------------------------------------------

We propose conforming amendments to paragraph (h)(2) to add a
reference to HHS-RADV adjustments to address situations where there
could be subsequent changes to HHS-RADV adjustments calculated by HHS
in the applicable benefit year's HHS-RADV Summary Report of Benefit
Year Risk Adjustment Data Validation Adjustments to Risk Adjustment
Transfers, such as modifications resulting from an actionable
discrepancy or successful appeal. In these situations, an issuer would
be required to report during the current MLR reporting year any
adjustment to an HHS-RADV adjustment made or approved by HHS before
August 15, or the next applicable business day, of the current
reporting year unless otherwise instructed by HHS. Issuers would be
required to report any adjustment to an HHS-RADV adjustment made or
approved by HHS where such adjustment has not been accounted for in a
prior MLR Reporting Form, in the following reporting year. For example,
if an issuer's successful administrative appeal results in changes to
HHS-RADV adjustments for a state market risk pool and issuers in that
state market risk pool are notified of those modifications in
September, those issuers would be required to report these adjusted
amounts in the next MLR reporting cycle, after the appeal has been
resolved and they receive notice of the adjusted amounts. However, if
an appeal is resolved and issuers are notified about modifications to
HHS-RADV adjustments for a given benefit year as a result of that
appeal before August 15, or the next applicable business day, those
issuers must report the adjusted amounts in the current MLR reporting
year.
Recognizing that flexibility is often needed in reporting these
amounts on MLR forms, consistent with existing framework in Sec.
153.710(h)(3), HHS would have the ability to modify these instructions
in guidance in cases where HHS reasonably determines that these
reporting instructions would lead to unfair or misleading financial
reporting. Our intent in issuing any such guidance would be to avoid
having the application of the instructions in exceptional circumstances
lead to unfair or misleading financial reporting.\233\
---------------------------------------------------------------------------

\233\ See, for example, Treatment of Risk Corridors Recovery
Payments in the Medical Loss Ratio and Rebate Calculations (December
30, 2020), available at https://www.cms.gov/files/document/mlr-guidance-rc-recoveries-and-mlr-final.pdf.
---------------------------------------------------------------------------

Finally, we propose a technical amendment to Sec. 153.710(h)(3) to
replace the current cross-reference to paragraph (g)(1) and (2) of this
section with a reference to paragraph (h)(1) and (2) of this section to
point to the correct sections that contain the relevant reporting
instructions. We inadvertently omitted this update as part of the
amendments in the 2022 Payment Notice to incorporate an EDGE
materiality threshold as part of Sec. 153.710 that redesignated the
risk corridors and MLR reporting instructions provisions from paragraph
(g) to paragraph (h).\234\
---------------------------------------------------------------------------

\234\ See 85 FR at 78604-78605 and 86 FR at 24194-24195.
---------------------------------------------------------------------------

We seek comments on these proposals.
11. Deadline for Submission of Data (Sec. 153.730)
A risk adjustment covered plan must submit data to HHS in states
where HHS is operating the risk adjustment program that is necessary
for HHS to calculate

[[Page 640]]

risk adjustment payments and charges.^{235 236} In the 2014
Payment Notice, HHS established that the deadline for issuers to submit
the required risk adjustment data is April 30 of the year following the
applicable benefit year.\237\ For example, the deadline for issuers of
risk adjustment covered plans to submit the required 2020 benefit year
risk adjustment data was April 30, 2021. HHS explained that this
deadline provides ample time to allow for claims run-out from the prior
benefit year to ensure that diagnoses for the benefit year are
captured, while also providing HHS sufficient time to calculate
payments and charges and meet the June 30 deadline for notifying
issuers of risk adjustment transfer amounts at Sec. 153.310(e).\238\
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\235\ See 45 CFR 153.610 and 153.710. Since the 2017 benefit
year, HHS has operated the risk adjustment program in all 50 states
and the District of Columbia.
\236\ Issuers of reinsurance-eligible plans in states where HHS
operated the reinsurance program were similarly required to submit
the data necessary for HHS to calculate reinsurance payments. See,
for example, 45 CFR 153.420 and 153.710. The reinsurance program
under section 1341 of the ACA was a temporary program that applied
to the 2014-2016 benefit years. The risk adjustment program under
section 1343 of the ACA is a permanent program and therefore is the
primary focus of this discussion.
\237\ See 78 FR 15410 at 15434.
\238\ Ibid.
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We are not proposing to change this deadline but propose to amend
Sec. 153.730 to address situations when April 30 does not fall on a
business day. Currently, when April 30 falls on a non-business day, HHS
has exercised enforcement discretion to extend the deadline to the next
applicable business day.\239\ This occurred in the past for the 2016
and 2017 benefit year data submissions and will occur again for the
2022 benefit year data submissions. Recognizing there will be future
benefit years when April 30 does not fall on a business day, HHS
proposes to amend Sec. 153.730 to provide that when April 30 of the
year following the applicable benefit year falls on a non-business day,
the deadline for issuers to submit the required risk adjustment data
would be the next applicable business day. We solicit comments on this
proposal.
---------------------------------------------------------------------------

\239\ See 81 FR 12204 at 12234 n.20; see also Evaluation of EDGE
Data Submissions for 2016 Benefit Year at 1 (Dec. 23, 2016),
available at https://www.cms.gov/CCIIO/Resources/Regulations-and-Guidance/Downloads/EDGE-2016-Q_Q-Guidance_20161222v1.pdf.
---------------------------------------------------------------------------

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

1. Non-Interference With Federal Law and Non-Discrimination Standards
(Sec. 155.120(c))
We propose to amend 45 CFR 155.120(c) such that its
nondiscrimination protections would explicitly prohibit discrimination
based on sexual orientation and gender identity. HHS previously
codified such nondiscrimination protections at Sec. 155.120(c), but
amendments made in 2020 to Sec. 155.120(c) removed any reference to
sexual orientation and gender identity. If finalized, this proposal
would revert Sec. 155.120(c) to the pre-2020 nondiscrimination
protections.
Section 155.120(c) currently provides that in order to avoid
interference and comply with applicable non-discrimination statutes,
the states and the Exchanges must not discriminate based on race,
color, national origin, disability, age, or sex. Previously, in the
final rule ``Patient Protection and Affordable Care Act; Establishment
of Exchanges and Qualified Health Plans; Exchange Standards for
Employers'' (Exchange Standards final rule), pursuant to the authority
provided in section 1321(a)(1)(A) of the ACA to regulate the
establishment and operation of an Exchange, we finalized Sec.
155.120(c) to also prohibit discrimination based on sexual orientation
and gender identity.\240\ However, in the 2020 final rule related to
section 1557 of the ACA, HHS revised certain CMS regulations, including
those at Sec. 155.120(c), by removing sexual orientation and gender
identity as bases of discrimination subject to the CMS regulations'
nondiscrimination protections.\241\
---------------------------------------------------------------------------

\240\ 77 FR 18310 (March 27, 2012).
\241\ 85 FR 37160 (June 19, 2020). See also id. at 37218-21 (the
2020 section 1557 final rule revised the following CMS regulations:
45 CFR 147.104, 155.120, 155.220, 156.200, and 156.1230).
---------------------------------------------------------------------------

CMS possesses statutory authority independent of section 1557 of
the ACA to prohibit discrimination in Exchanges pursuant to the
authority to establish requirements with respect to the operation of
Exchanges in section 1321(a)(1)(A) of the ACA.\242\ Pursuant to this
authority, HHS finalized in the Exchange Standards final rule that a
State must comply with any applicable non-discrimination statutes,
specifically finalizing that a State must not operate an Exchange in
such a way as to discriminate on the basis of race, color, national
origin, disability, age, sex, gender identity, or sexual orientation.
CMS proposes to exercise that same authority here to amend Sec.
155.120(c) to again prohibit states and Exchanges carrying out Exchange
requirements from discriminating based on sexual orientation and gender
identity. Section 1321(a)(1)(A) of the ACA is the same authority CMS
relies upon for implementation of existing nondiscrimination
protections at Sec. 155.120(c). Utilizing this same authority to again
prohibit discrimination based on sexual orientation and gender identity
at Sec. 155.120(c) would be consistent with the authority CMS relies
upon for the existing protections at Sec. 155.120(c) that currently
prohibit discrimination on the basis of race, color, national origin,
disability, age, or sex. We believe such amendments are warranted in
light of the existing trends in health care discrimination and are
necessary to better address barriers to health equity for LGBTQI+
individuals.
---------------------------------------------------------------------------

\242\ 85 FR 37218-21 (June 19, 2020).
---------------------------------------------------------------------------

A more in-depth discussion of these developments and other factors
considered in proposing these amendments to CMS nondiscrimination
protections is included earlier in the preamble to Sec. 147.104 under
section III.B.1.b. of this preamble. For brevity, we refer back to
Sec. 147.104 under section III.B.1.b. of the preamble rather than
restating the issues here.
We seek comment on this proposal.
3. Civil Money Penalties for Violations of Applicable Exchange
Standards by Consumer Assistance Entities in Federally-Facilitated
Exchanges (Sec. 155.206)
We propose to make a technical correction to 45 CFR 155.206(i) to
add language that would cross-reference to the authority to implement
annual inflation-related increases to civil money penalties (CMPs)
pursuant to the Federal Civil Penalties Inflation Adjustment Act
Improvements Act of 2015 (2015 Act).\243\ Because of an oversight, this
language was not added to Sec. 155.206(i) as part of prior efforts and
rulemaking to implement the 2015 Act.\244\ Additionally, a reference to
Sec. 155.206 and any accompanying CMP amounts have not been included
in HHS's annual inflation update

[[Page 641]]

rulemakings.\245\ Therefore, in this rule, we propose to amend Sec.
155.206(i) to add the phrase ``as adjusted annually under 45 CFR part
102'' after the phrase ``$100 for each day'' in order to correct this
oversight. The associated CMP table in 45 CFR 102.3 is updated
annually, and Sec. 155.206(i) will be included in the next annual
update. To date, no CMPs have been imposed under this authority, but
any that are will reflect the current inflationary adjusted amount as
required by the 2015 Act and will be calculated in accordance with
applicable OMB guidance to all Executive Departments on the
implementation of the 2015 Act.
---------------------------------------------------------------------------

\243\ Sec. 701 of the Bipartisan Budget Act of 2015, Public Law
114-74, which amended the Federal Civil Penalties Inflation
Adjustment Act of 1990, Public Law 101-410, 104 Stat. 890 (1990).
\244\ See, e.g., Department of Health and Human Services;
Adjustment of Civil Monetary Penalties for Inflation; Interim Final
Rule, 81 FR 61538 (Sept. 6, 2016), available at https://www.govinfo.gov/content/pkg/FR-2016-09-06/pdf/2016-18680.pdf.
\245\ See, e.g., the Department of Health and Human Services;
Annual Civil Monetary Penalties Inflation Adjustment; Final Rule, 85
FR 2869 (Jan. 17, 2020), available at https://www.govinfo.gov/content/pkg/FR-2020-01-17/pdf/2020-00738.pdf. See also the
Department of Health and Human Services; Adjustment of Civil
Monetary Penalties for Inflation and the Annual Civil Monetary
Penalties Inflation Adjustment for 2021, 86 FR 62928 (Nov. 15,
2021), available at https://www.govinfo.gov/content/pkg/FR-2021-11-15/pdf/2021-24672.pdf and 45 CFR 102.3.
---------------------------------------------------------------------------

4. Ability of States To Permit Agents and Brokers and Web-Brokers To
Assist Qualified Individuals, Qualified Employers, or Qualified
Employees Enrolling in QHPs (Sec. 155.220)
a. Required QHP Comparative Information on Web-Broker Websites and
Related Disclaimer
We propose to amend Sec. 155.220(c)(3)(i)(A) to include at
proposed new Sec. Sec. 155.220(c)(3)(i)(A)(1) through (c)(3)(i)(A)(5)
a list of the QHP comparative information web-broker non-Exchange
websites are required to display consistent with Sec. 155.205(b)(1).
We also propose to revise the disclaimer requirement in Sec.
155.220(c)(3)(i)(A) so that web-broker non-Exchange websites would be
required to prominently display a standardized disclaimer provided by
HHS stating that enrollment support is available on the Exchange
website and provide a web link to the Exchange website where enrollment
support for a QHP is not available using the web-broker's non-Exchange
website.
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 \246\ and final \247\ 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. Section
155.220(c)(3)(i)(D) similarly 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 (DE) program (whether Classic
DE or enhanced direct enrollment (EDE)).
---------------------------------------------------------------------------

\246\ See 78 FR at 37046.
\247\ See 78 FR at 54077.
---------------------------------------------------------------------------

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 information that could be used to
satisfy the display requirements. Display of the data elements from the
QHP limited file, 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.\248\
---------------------------------------------------------------------------

\248\ 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 the proposed 2022 Payment Notice, we proposed to establish an
exception to the web-broker display requirements captured at paragraphs
(c)(3)(i)(A) and (D).\249\ 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
when a web-broker's website does not support enrollment in a QHP. We
proposed a similar revision to Sec. 155.220(c)(3)(i)(D). 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, we proposed to require web-brokers to display the following
limited, minimum information for such QHPs: Issuer marketing name, plan
marketing name, product network type, metal level, and premium and
cost-sharing information. To take advantage of this proposed
flexibility, we also proposed that web-broker non-Exchange websites
would be required to identify to consumers the QHPs, if any, for which
the web-broker websites did 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.
We noted that it also would minimize burdens for web-brokers by not
requiring them to develop 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. We invited comments
on the proposed limited, minimum QHP details that would be required to
be displayed for those QHPs that the web-broker does not facilitate
enrollment in through its non-Exchange website. We 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.\250\
---------------------------------------------------------------------------

\249\ See 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 at
78614 (December 4, 2020).
\250\ 45 CFR 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.

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[[Page 642]]

Almost all public comments received in response to the proposal in
the proposed 2022 Payment Notice advocated for requiring that web-
broker non-Exchange websites display more QHP information than the rule
proposed to require, even in cases in which 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. After consideration of the comments
received, we did not finalize the proposed amendments to Sec.
155.220(c)(3)(i)(A) and (c)(3)(i)(D). We agreed 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, consistent with
the views of a majority of commenters who advocated for requiring that
web-broker non-Exchange websites display all of the comparative
information listed in Sec. 155.205(b)(1). We also noted our belief
that 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.
As a result, we communicated in the preamble of part 2 of the 2022
Payment Notice final rule our intent, pending future rulemaking when
these issues could be further clarified, to limit our current use of
enforcement discretion that permits web-brokers to only display issuer
marketing name, plan marketing name, product network type, and metal
level for all available QHPs, beginning with the PY 2022 open
enrollment period.\251\ We stated that web-broker non-Exchange websites
would be required to display all QHP information consistent with Sec.
155.205(b)(1) and (c), with the exception of MLR information and
transparency of coverage measures under Sec. 155.205(b)(1)(vi) and
(vii), for all available QHPs, beginning with the PY 2022 open
enrollment period. We indicated we would 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 MLR 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). We also explained that prior to the start
of the open enrollment period for PY 2022, if a web-broker's non-
Exchange website did not display all QHP information consistent with
the requirements of Sec. 155.205(b)(1) and (c), other than MLR
information and transparency of coverage measures, it would be required
to prominently display the plan detail disclaimer and provide a link to
the Exchange website. We noted that this interim approach did not
establish new requirements and instead represented 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 in the
proposed 2022 Payment Notice.
---------------------------------------------------------------------------

\251\ See Patient Protection and Affordable Care Act; HHS Notice
of Benefit and Payment Parameters for 2022 and Pharmacy Benefit
Manager Standards; Final Rule, 86 FR 24140 at 24206 (May 5, 2021).
---------------------------------------------------------------------------

We now propose to revise Sec. 155.220(c)(3)(i)(A) to incorporate a
general requirement that web-broker non-Exchange websites display the
QHP comparative information from Sec. 155.205(b)(1), consistent with
our forecast in the preamble of part 2 of the 2022 Payment Notice final
rule.\252\ Specifically, we propose to codify new Sec. Sec.
155.220(c)(3)(i)(A)(1) through (5) to require web-broker websites to
display premium and cost-sharing information, the summary of benefits
and coverage established under section 2715 of the PHS Act;
identification of the metal level of the QHP as defined by section
1302(d) of the ACA or whether it is a catastrophic plan as defined by
section 1302(e) of the ACA; the results of the enrollee satisfaction
survey as described in section 1311(c)(4) of the ACA; quality ratings
assigned in accordance with section 1311(c)(3) of the ACA; and the
provider directory made available to the Exchange in accordance with
Sec. 156.230 as the minimum QHP comparative information web-broker
non-Exchange websites must display for all available QHPs. Including
this information within Sec. 155.220, instead of through a cross-
reference to Sec. 155.205(b)(1), would provide better clarity and ease
of reference and establish a list of required QHP comparative
information consistent with our current enforcement approach, which, as
discussed above, does not require the display of MLR information and
transparency of coverage measures.
---------------------------------------------------------------------------

\252\ Ibid.
---------------------------------------------------------------------------

In addition, we propose to modify the language in Sec.
155.220(c)(3)(i)(A) that served as the basis for the plan detail
disclaimer requirement to instead require web-broker non-Exchange
websites that do not support enrollment in all available QHPs to
provide notice to consumers of that fact, and direct consumers to the
Exchange website where they may obtain enrollment support. We propose
to revise Sec. 155.220(c)(3)(i)(A) to state that web-broker websites
must disclose and display the following QHP information provided by the
Exchange or directly by QHP issuers consistent with the requirements of
Sec. 155.205(c), and to the extent that enrollment support for a QHP
is not available using the web-broker's website, prominently display a
standardized disclaimer provided by HHS stating that enrollment support
for the QHP is available on the Exchange website, and provide a web
link to the Exchange website. Historically the plan detail disclaimer
served as the mechanism and visual cue to convey to consumers where
they may find additional information about particular QHPs and how they
may enroll in those QHPs (that is, using HealthCare.gov). However,
requiring the continued display of the plan detail disclaimer is
unnecessary and would be confusing as the plan detail disclaimer states
more information about QHPs is available on HealthCare.gov when in fact
web-broker non-Exchange websites will be displaying the same QHP
comparative information as HealthCare.gov.\253\ In the absence of the
plan detail disclaimer, the secondary function of conveying those QHPs
for which enrollment support is not available through the web-broker's
non-Exchange website and how consumers may obtain enrollment support is
lost. This proposal to modify the disclaimer requirement in Sec.
155.220(c)(3)(i)(A) to convey to consumers those QHPs for which a web-
broker website does not provide enrollment support and to direct them
to where they can obtain enrollment support would serve the function
lost by

[[Page 643]]

the elimination of the plan detail disclaimer requirement.
---------------------------------------------------------------------------

\253\ The 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 p.53 Federally-
Facilitated Exchanges (FFEs) and Federally-Facilitated Small
Business Health Options Program (FF-SHOP) Enrollment Manual, section
5.3.2, August 18, 2021, available at https://www.regtap.info/uploads/library/ENR_FFEFFSHOPEnrollmentManual2020_5CR_090220.pdf
https://www.cms.gov/files/document/ffeffshop-enrollment-manual-2021.pdf.
---------------------------------------------------------------------------

We seek comment on these proposals.
b. Prohibition of QHP Advertising on Web-Broker Websites
Section 155.220(c)(3)(i)(L) prohibits web-broker non-Exchange
websites from displaying QHP recommendations based on compensation an
agent, broker, or web-broker receives from QHP issuers. We propose to
amend Sec. 155.220(c)(3)(i)(L) to make clear that web-broker non-
Exchange websites are also prohibited from displaying QHP
advertisements, or otherwise providing favored or preferred placement
in the display of QHPs, based on compensation agents, brokers, or web-
brokers receive from QHP issuers. We have observed a web-broker
marketing to QHP issuers on its website the option for their QHPs to
receive ``preferred placement'' on the web-broker website for a fee.
The marketing materials indicated preferred placement on the web-
broker's website would position selected QHPs at the forefront of the
user experience on the website. The marketing materials also suggested
that users would not be made aware that preferred plan placements were
purchased for a fee, and such placements were not assigned based on the
specific attributes of the plans in relation to other available plans
for which issuers did not purchase preferred placement.
We believe QHP advertising on web-broker websites, whether or not
characterized as such or using other terms such as ``preferred
placement,'' is not in the best interest of consumers. QHP
advertisements on web-broker websites could be perceived by consumers,
and agents and brokers assisting consumers, as permissible QHP
recommendations by the web-broker based on the best interests of the
consumer rather than on the basis of payment from the QHP issuer to the
web-broker. Consumers, and agents and brokers assisting consumers, may
also inadvertently perceive advertisements placing a QHP in a favored
position on a web-broker's website as the result of a neutrally applied
filter of all available QHPs. These risks are substantially increased
if the advertisements are not clearly identified as advertisements.
However, even if QHP advertisements are clearly identified, we believe
it is not in the interest of consumers to allow them on web-broker
websites. In light of the many different approaches to advertising that
exist now or may be adopted in the future, we do not believe that
attempting to identify which advertising practices are permissible and
which are not is practical or sufficiently protective of consumers'
interests. Advertising is intended to bias consumer, agent, or broker
perceptions in a way that benefits the advertiser, rather than the
consumer or client. QHP advertisements on web-broker websites could
take forms other than favored or preferred placement among a list of
other QHPs (for example, obscuring the availability of other QHPs),
including forms that could be more confusing or deceptive to consumers,
in particular those consumers who may have limited familiarity with
health insurance products and terminology and may be easily misled by
advertising claims.
Although Sec. 155.220(c)(3)(i)(L) prohibits web-broker websites
from displaying QHP recommendations based on compensation an agent,
broker, or web-broker receives from QHP issuers, it does not explicitly
prohibit QHP advertising, or otherwise providing favored or preferred
placement in the display of QHPs, based on compensation an agent,
broker, or web-broker receives from QHP issuers. Therefore, we propose
to amend Sec. 155.220(c)(3)(i)(L) to make clear that when a web-broker
website is used to complete the QHP selection, the website must not
display QHP advertisements or recommendations, or otherwise provide
favored or preferred placement in the display of QHPs, based on
compensation the agent, broker, or web-broker receives from QHP
issuers. For purposes of this proposal, we intend for advertisements to
include any form of marketing or promotion of QHPs based on
compensation from QHP issuers, as opposed to the application of a
neutral filter or sorting methodology that may promote particular QHPs
and that are not based on compensation an agent, broker, or web-broker
receives from QHP issuers.
We seek comment on this proposal.
c. Explanation of Rationale for QHP Recommendations on Web-Broker
Websites
We propose to amend Sec. 155.220 to add a proposed new paragraph
(c)(3)(i)(M) that would require web-broker websites to prominently
display a clear explanation of the rationale for explicit QHP
recommendations and the methodology for the default display of QHPs on
their websites (for example, alphabetically based on plan name, from
lowest to highest premium, etc.). We believe this proposed new
requirement would provide consumers with a better understanding of the
information being presented to them on web-broker websites, thereby
enabling them to make better informed decisions and shop for and select
QHPs that best fit their needs.
Web-broker websites typically begin their consumer experiences with
a series of screening questions. Often these screening questions are
intended to assist consumers with determining whether they may qualify
for insurance affordability programs (for example, APTC or Medicaid).
Sometimes the screening questions request additional information
unrelated to potential eligibility for insurance affordability
programs, such as asking about preferred providers, prescription drug
needs, or expected need for health care services in the coming year.
Some web-brokers use the information collected in response to the
preliminary screening questions to recommend one or more QHPs to
consumers, or to rank all available QHPs from most to least
recommended. Web-broker websites may recommend QHPs so long as they do
not do so based on compensation an agent, broker, or web-broker
receives from QHP issuers, consistent with Sec. 155.220(c)(3)(i)(L),
as described above. Current rules do not require web-broker websites to
include an explanation of the rationale for QHP recommendations. All
web-broker websites must adopt a default display of QHPs by virtue of
providing consumers a list of available QHPs, and the default display
implicitly recommends those QHPs displayed at the top of the list.\254\
In addition, many web-broker websites offer filtering tools that
consumers may use to adjust the default display of QHPs (for example,
reordering the QHPs from lowest to highest deductible or limiting the
display to silver metal level QHPs). In cases in which QHP display
filtering tools are available and prominently displayed on a web-broker
website, and when the default application of a filter produces the
default ordering of QHPs displayed, the methodology for the default QHP
display may be apparent. However, in other cases, consumers may not
realize the implications of the default display of QHPs or may find it
difficult to understand the methodology underlying the default display.
Current rules do not require web-broker websites to include an
explanation of the methodology used for their default displays of QHPs.
---------------------------------------------------------------------------

\254\ 45 CFR 155.220(c)(3)(i)(B) requires web-broker websites to
provide consumers the ability to view all QHPs offered through the
Exchange.
---------------------------------------------------------------------------

We support web-broker websites' use of innovative decision-support
tools for consumers to help them shop for and select QHPs that best fit
their needs. However, web-broker websites that explicitly recommend or
rank QHPs do

[[Page 644]]

not always provide an explanation for their recommendations or
rankings. Similarly, web-broker websites may not include an explanation
of the methodology used for their default displays of QHPs, and it may
not otherwise be apparent what methodologies are used. The absence of
such explanations may cause some consumers to misunderstand the bases
for the recommendations displayed to them on web-broker websites
(whether explicit or implicit), or may prevent them from assessing the
value of the recommendations (for example, whether a recommendation is
based on the factors most important to them). In addition, the lack of
explanations for QHP recommendations on web-broker websites may obscure
that the web-broker is recommending QHPs based on compensation the web-
broker receives from QHP issuers in violation of Sec.
155.220(c)(3)(i)(L). For these reasons, we propose to amend Sec.
155.220 to add proposed new paragraph (c)(3)(i)(M) that would require
web-broker websites to prominently display a clear explanation of the
rationale for QHP recommendations and the methodology for its default
display of QHPs.
We seek comment on this proposal.
d. Federally-Facilitated Exchange Standards of Conduct (Sec.
155.220(j))
We propose to amend Sec. 155.220(j)(2)(i) such that its
nondiscrimination protections would explicitly prohibit discrimination
based on sexual orientation and gender identity. HHS previously
codified such nondiscrimination protections at Sec. 155.220(j), but
amendments made in 2020 to Sec. 155.220(j) removed any reference to
sexual orientation and gender identity. If finalized, this proposal
would revert Sec. 155.220(j) to the pre-2020 nondiscrimination
protections.
Section 155.220(j)(2)(i) describes that an individual or entity
described in paragraph (j)(1) must provide consumers with correct
information, without omission of material fact, regarding the FFE, QHPs
offered through the FFE, and insurance affordability programs, and
refrain from marketing or conduct that is misleading (including by
having a direct enrollment website that HHS determines could mislead a
consumer into believing they are visiting HealthCare.gov), coercive, or
discriminates based on race, color, national origin, disability, age,
or sex. Previously, in the 2017 Payment Notice final rule, we finalized
Sec. 155.220(j)(2)(i) to also prohibit discrimination based on sexual
orientation and gender identity.\255\ However, in the 2020 final rule
related to section 1557 of the ACA, HHS revised certain CMS
regulations, including Sec. 155.220(j)(2)(i), by removing sexual
orientation and gender identity as bases of discrimination subject to
the CMS regulations' nondiscrimination protections.\256\
---------------------------------------------------------------------------

\255\ 80 FR 12204 (March 8, 2016).
\256\ 85 FR 37160 (June 19, 2020); See id. at 37218-21 (the 2020
section 1557 final rule revised the following CMS regulations: 45
CFR 147.104, 155.120, 155.220, 156.200, 156.1230).
---------------------------------------------------------------------------

CMS possesses statutory authority independent of section 1557 of
the ACA to prohibit discrimination in the group and individual market
pursuant to the Secretary's authority to establish procedures for
States to permit agents and brokers to enroll consumers in QHPs through
the FFEs, as described in sections 1312(e) of the ACA,\257\ and the
authority to establish requirements with respect to the operation of
Exchanges, the offering of QHPs through such Exchanges, and other
requirements as the Secretary determines appropriate under sections
1321(a)(1)(A), (B), and (D) of the ACA. Pursuant to this authority, in
the 2017 Payment Notice final rule, HHS finalized at Sec. 155.220
standards of conduct for agents and brokers that assist consumers to
enroll in coverage through the FFEs to protect consumers and ensure the
proper administration of the FFEs, including nondiscrimination
standards at Sec. 155.220(j)(2)(i) that prohibited agents, brokers and
web-brokers described in paragraph (j)(1) from discriminating based on
sexual orientation and gender identity. CMS further explained that such
standards of conduct were necessary to protect against agent and broker
conduct that is harmful towards consumers, or that prevents the
efficient operation of the FFEs. CMS proposes to exercise that same
authority here to amend Sec. 155.220(j)(2)(i) to again prohibit an
individual or entity described in paragraph (j)(1) from discriminating
based on sexual orientation and gender identity. Sections 1312(e) and
1321(a)(1)(A), (B), and (D) of the ACA are the same authorities CMS
relies upon for implementation of existing nondiscrimination
protections at Sec. 155.220(j)(2)(i). Utilizing these same authorities
to again prohibit discrimination based on sexual orientation and gender
identity at Sec. 155.220(j)(2)(i) would be consistent with the
authority CMS relies upon for the existing protections at Sec.
155.220(j)(2)(i) that currently prohibit discrimination on the basis of
race, color, national origin, disability, age, or sex. We believe such
amendments are warranted in light of the existing trends in health care
discrimination and are necessary to better address barriers to health
equity for LGBTQI+ individuals.
---------------------------------------------------------------------------

\257\ 85 FR 37218-21 (June 19, 2020).
---------------------------------------------------------------------------

A more in-depth discussion of these developments and other factors
considered in proposing amendments to CMS nondiscrimination protections
is included earlier in the preamble to Sec. 147.104 under section
III.B.1.b. of this preamble. For brevity, we refer back to Sec.
147.104 under section III.B.1.b. of the preamble rather than restating
the issues here.
We seek comment on this proposal.
i. Providing Correct Information to the FFEs
Section 155.220(j)(2) sets forth the standards of conduct for
agents, brokers, or web-brokers that assist with or facilitate
enrollment of qualified individuals, qualified employers, or qualified
employees in coverage in a manner that constitutes enrollment through
an FFE or that assist individuals in applying for APTC and CSRs for
QHPs sold through an FFE. As explained in the 2017 Payment Notice
proposed rule, these standards are designed to protect against agent,
broker, and web-broker conduct that is harmful towards consumers or
prevents the efficient operation of the FFEs.\258\ Pursuant to Sec.
155.220(j)(2)(ii), agents, brokers, or web-brokers must provide the
FFEs with ``correct information under section 1411(b) of the Affordable
Care Act.'' Section 1411(b) of the ACA details the information required
to be provided by applicants to the Exchange to determine eligibility
for Exchange coverage, APTC, CSRs, and individual responsibility
exemptions, including the applicant's name, address, and information
regarding household income.\259\ Section 1411(h) of the ACA provides
for the imposition of civil penalties if any person fails to provide
correct information under section 1411(b) to the Exchange. Consistent
with Sec. 155.220(l), agents, brokers and web-brokers that assist with
or facilitate enrollment of qualified individuals, qualified employers,
or qualified employees in states with SBE-FPs must comply with all
applicable FFE standards. This includes, but is not limited to,
compliance with the FFE standards of conduct in Sec. 155.220(j). We
propose to amend Sec. 155.220(j)(2)(ii) to add proposed new Sec.
155.220(j)(2)(ii)(A) through (D) to codify additional details regarding
the requirement that agents,

[[Page 645]]

brokers, and web-brokers provide correct information to FFEs and SBE-
FPs. More specifically, we propose to capture specific examples of what
it means to provide correct information to the FFEs and SBE-FPs with
respect to the consumer's email address, mailing address, telephone
number, and household income projection based on our experience
operating the FFEs and the Federal platform on which certain State-
based Exchanges rely.
---------------------------------------------------------------------------

\258\ 80 FR at 75526-75527.
\259\ Also see 45 CFR 155.285(a)(1)(i) and (ii).
---------------------------------------------------------------------------

HHS has frequently observed applications submitted to the FFEs that
contain incorrect consumer information, including applications that
contain incorrect email addresses, telephone numbers, and mailing
addresses. As administrator of the FFEs, HHS also has received
applications that contain incorrect consumer household income
projections that do not accurately reflect future consumer household
income. These practices can harm consumers and prevent the efficient
operation of the FFEs. Therefore, we propose to add language to Sec.
155.220(j)(2)(ii) to address these common problems occurring on
Exchange applications and provide clear standards intended to
substantially reduce the occurrence of those problems to protect
consumers and the efficient operation of the Exchanges. We also propose
to amend Sec. 155.220(j)(2)(ii) to make clear that the proposed
standards of conduct related to agents, brokers, and web-brokers
providing the FFEs and SBE-FPs with correct information that are listed
in proposed new Sec. 155.220(j)(2)(ii)(A) through (D) are not
exhaustive, but are simply the areas where HHS has thus far identified
a need for more direct and clear guidance.
First, we propose to add proposed new Sec. 155.220(j)(2)(ii)(A),
which would provide that an agent, broker, or web-broker may only enter
an email address on an application for Exchange coverage or for APTC
and CSRs for QHPs sold through an FFE or SBE-FP that is secure, not
disposable, and belongs to the consumer or the consumer's authorized
representative designated in compliance with Sec. 155.227. We also
propose to clarify that email addresses may only be entered on Exchange
applications with the consent of the consumer or the consumer's
authorized representative, and that properly entered email addresses
would be required to adhere to the following guidelines pursuant to
proposed new Sec. 155.220(j)(2)(ii)(A)(1) through (3): (1) The
consumer's email addresses may not have domains that remove email from
an inbox after a set period of time; (2) the consumer's email address
must be accessible by the consumer, or the consumer's authorized
representative designated in compliance with Sec. 155.227, and may not
be accessible by the agent, broker, or web-broker, and (3) the
consumer's email addresses may not have domains that belong to the
agent, broker, or web-broker or their business or agency. These
proposed standards align with existing guidance provided to agents,
brokers, and web-brokers.\260\
---------------------------------------------------------------------------

\260\ https://www.regtap.info/uploads/library/AB_Slides_Compliance_052021_5CR_062221.pdf See Compliance with
Marketplace Requirements: Reminders for Agents and Brokers, May 20,
2021, available at https://www.regtap.info/uploads/library/AB_Slides_Compliance_052021_5CR_062221.pdf.
---------------------------------------------------------------------------

HHS is proposing to codify these standards because it has observed
numerous Exchange applications that contain email addresses that are
disposable (where emails disappear after a set number of days),
unsecure (where emails may be accessed without a password), or
temporary (where the email address will cease to receive messages after
a set time). HHS' concern arises from the fact that it has observed
agents, brokers, and web-brokers submitting unauthorized Exchange
applications on behalf of consumers without their knowledge or consent
that contain these types of email addresses. HHS recognizes that such
email addresses may be used by consumers to avoid receiving spam emails
to a main inbox, but the use of these email addresses on Exchange
applications defeats the purpose of entering an email address and
occurs at a higher rate on applications assisted by agents, brokers,
and web-brokers, many of which are unauthorized. Consumers who wish to
avoid receiving emails from the Exchange and who are being assisted by
an agent, broker, or web-broker may simply omit a contact email address
from their Exchange application.
The email address provided as part of an Exchange application
should provide a secure place for a consumer to receive vital
information from the Exchange about their application. Emails sent to
consumers through the Exchange often contain important information. As
such, the consumer's email address entered on an Exchange application
should be secure and only accessible by the consumer or the consumer's
authorized representative designated in compliance with Sec. 155.227.
Allowing the use of email addresses that are disposable, unsecure, or
temporary may harm the consumer by preventing the consumer from
receiving important information from the Exchange regarding their
Exchange application. It also could prevent the efficient operation of
the Exchange. We therefore propose in this rule to clarify and codify
that if an email address is included on the Exchange application, it
must be the consumer's, or that of the consumer's authorized
representative designated in compliance with Sec. 155.227, to comply
with the FFE standard of conduct under Sec. 155.220(j)(2)(ii) to
provide correct information to the Exchange.
Second, we propose to add proposed new Sec. 155.220(j)(2)(ii)(B),
which would provide that an agent, broker, or web-broker may only enter
a telephone number on an application for Exchange coverage or an
application for APTC and CSRs for QHPs that belongs to the consumer or
their authorized representative designated in compliance with Sec.
155.227. We also propose to provide that telephone numbers entered on
Exchange applications may not be the personal number or business number
of the agent, broker, or web-broker assisting with or facilitating
enrollment through an FFE or assisting the consumer in applying for
APTC and CSRs for QHPs, or their business or agency, unless the
telephone number is actually that of the consumer or their authorized
representative. These proposed standards align with existing guidance
provided to agents, brokers, and web-brokers.\261\
---------------------------------------------------------------------------

\261\ Ibid.
---------------------------------------------------------------------------

Similar to email addresses, a telephone number belongs to the
consumer if they, or their authorized representative, are accessible at
the number and have access to the number. A telephone number provides a
way for the consumer or their authorized representative to be contacted
if there is an issue or question with the Exchange application.
Allowing an agent, broker, or web-broker to list their telephone number
or a telephone number associated with their business or agency in the
place of the consumer's telephone number would not serve or benefit the
consumer, but may harm the consumer by preventing the consumer from
receiving important information from the Exchange regarding their
Exchange application. It also could prevent the efficient operation of
the Exchange. In addition, unlike email addresses, a telephone number
is a required field when creating and submitting an Exchange
application. We therefore propose in this rule to clarify and codify
that the telephone number included on the Exchange application must be
the consumer's, or that of the consumer's authorized representative as
designated in compliance with Sec. 155.227, to comply with the FFE
standard of conduct under Sec. 155.220(j)(2)(ii) to provide correct
information to the Exchange.

[[Page 646]]

Third, we propose to add proposed new Sec. 155.220(j)(2)(ii)(C),
which would provide that an agent, broker, or web-broker may only enter
a mailing address on an application for Exchange coverage or an
application APTC and CSRs for QHPs that belongs to, or is primarily
accessible by, the consumer or their authorized representative
designated in compliance with Sec. 155.227. Further, the mailing
address entered on the Exchange application must not be for the
exclusive or convenient use of the agent, broker, or web-broker, and
must be an actual residence or a secure location where the consumer or
their authorized representative may receive correspondence, such as a
P.O. Box or homeless shelter. These proposed standards align with
existing guidance provided to agents, brokers, and web-brokers.\262\ We
also propose to provide that mailing addresses entered on Exchange
applications may not be that of the agent, broker, or web-broker, or
their business or agency, unless it is the rare situation where that
address is the actual residence of the consumer or their authorized
representative. HHS is proposing this change because it has observed
numerous instances in which agents, brokers, or web-brokers have
engaged in unauthorized enrollments of consumers in Exchange coverage
without their knowledge or consent that involve the use of the same
common mailing address on multiple Exchange applications that are not
the actual residence of the consumer or their authorized
representative.
---------------------------------------------------------------------------

\262\ Ibid.
---------------------------------------------------------------------------

As with telephone numbers, Exchange applications must provide a
mailing address where the consumer or their authorized representative
may be reached. Application or plan information may be sent to this
mailing address, which is why it is important that the mailing address
be the actual residence or a secure location where the consumer or
their authorized representative may receive correspondence. Entering an
incorrect mailing address on a consumer's Exchange application would
result in situations where the consumer would not receive this
information. This would harm consumers and prevent the efficient
operation of the Exchange. We therefore propose in this rule to clarify
and codify that the mailing address included on the Exchange
application must be the consumer's, or the consumer's authorized
representative as designated in compliance with Sec. 155.227, to
comply with the FFE standard of conduct under Sec. 155.220(j)(2)(ii)
to provide correct information to the Exchange.
Fourth, to minimize consumer harm stemming from the IRS
reconciliation process, as well as to protect Exchange operations from
inaccurate APTC and CSR determinations, we propose to add proposed new
Sec. 155.220(j)(2)(ii)(D), which would provide that when submitting
household income projections on applications submitted to the Exchange
to determine a tax filer's eligibility for APTC in accordance with
Sec. 155.305(f) or CSRs in accordance with Sec. 155.305(g), an agent,
broker, or web-broker may only enter a household income projection for
a consumer that the consumer or the consumer's authorized
representative designated in compliance with Sec. 155.227, has
authorized and confirmed is an accurate estimate. We propose to require
that household income projections on Exchange applications must be
attested to by the consumer or their authorized representative, and
clarify that the agent, broker, or web-broker may answer questions
posed by the consumer or their authorized representative related to
household income projection, such as helping determine what qualifies
as household income.
HHS is proposing this change because it has observed several
instances in which agents, brokers, and web-brokers have provided
inaccurate consumer household income projections on Exchange
applications to obtain the lowest monthly premium rate for QHP
coverage. This is problematic in situations when consumers are enrolled
without their knowledge or consent because if a consumer is enrolled in
an Exchange policy with a zero-dollar monthly payment, the consumer may
not be aware they have been enrolled because there would not be a
monthly bill. HHS has observed several instances where consumers have
gone months without realizing they are enrolled in a QHP with APTC,
typically finding out about the unauthorized enrollment when the IRS
contacts them regarding money they owe due to not qualifying for all or
part of the APTC paid for this coverage or when the IRS delays release
of a tax refund.
Pursuant to Sec. 155.305(f), a tax filer is, in general, not
eligible for APTC unless the Exchange determines that the tax filer is
expected to have household income, as defined in 26 CFR 1.36B-1(e), of
greater than or equal to 100 percent but not more than 400 percent of
the FPL for the year for which coverage is requested.\263\ It is
crucial that consumers applying for a QHP or applying for APTC and CSRs
for QHPs provide an estimate of their projected household income that
is as accurate as possible for an Exchange to be able to determine
their eligibility for APTC. Failure to provide correct information on
household income can harm consumers by creating liability during the
reconciliation process or delaying the issuance of a tax refund, as
well as prevent the efficient operation of the Exchange. More
specifically, although eligible consumers may use APTC to lower their
monthly premiums for QHP coverage through an Exchange if a consumer's
projected household income on his or her Exchange application
submission is inaccurate and lower than the actual household income,
the consumer is likely to have excess APTC (the extent to which APTC
exceeds the allowed PTC), all or a portion of which must be repaid when
the consumer files his or her federal income tax return for the year of
coverage as required under 26 U.S.C. 36B(f) and 26 CFR 1.36B-4. Each
year, consumers for whom APTC is paid must submit Form 8962 with their
annual federal income tax return to the IRS. On Form 8962, the consumer
must reconcile the APTC paid on his or her behalf with the PTC \264\
the consumer is allowed. Generally, consumers whose projected household
annual income at enrollment is less than the actual annual household
income will have excess APTC that must be repaid, subject to a
repayment limit for consumers with household income below 400 percent
of the FPL. Consumers are required to repay excess APTC by increasing
their tax liability for the year by all or a portion of the excess
APTC. Good-faith income projections, versus an income projection
designed to achieve the lowest monthly rate, better protect the
consumer from the unexpected cost and burden of repaying large amounts
of APTC. Additionally, per Sec. 155.305(b), Exchange enrollees must
report changes that may impact their eligibility for financial
assistance or coverage, including their projected annual household
income, within 30 days of the change.
---------------------------------------------------------------------------

\263\ Section 9661 of the American Rescue Plan Act of 2021 makes
individuals with household incomes above 400 percent of the FPL who
meet all other eligibility criteria eligible for APTC, but only
through PY 2022.
\264\ https://www.irs.gov/pub/irs-pdf/p974.pdf.
---------------------------------------------------------------------------

CSRs are similarly tied to a consumer's household income and they
lower the amount that certain eligible individuals have to pay for
deductibles, copayments, and coinsurance. Incorrect projections of a
consumer's household income would also lead to incorrect CSR
determinations, which would harm

[[Page 647]]

QHP issuers and prevent the efficient operation of the Exchange.
An estimate of a consumer's household income is required on the
Exchange application if the consumer is applying for APTC and CSRs. As
outlined above, agents, brokers, or web-brokers who are intentionally
or negligently entering inaccurate household income projections on a
consumer's Exchange application can harm consumers and prevent the
efficient operation of the Exchange. We therefore propose in this rule
to clarify and codify that if household income projections are included
on the Exchange application, the estimate must be attested to by the
consumer or the consumer's authorized representative as designated in
compliance with Sec. 155.227 to comply with the FFE standard of
conduct under Sec. 155.220(j)(2)(ii) to provide correct information to
the Exchange.
As noted previously in this rule, the proposal to amend Sec.
155.220(j)(2)(ii) to add proposed new Sec. 155.220(j)(2)(ii)(A)
through (D) is not intended to constitute an exhaustive list of
practices that govern providing correct information to the Exchange
under Sec. 155.220(j)(2)(ii); rather, these are areas where HHS has
thus far identified a need for more direct and clear guidance to
protect consumers and the efficient operation of the Exchanges.
We seek comment on these proposals.
ii. Prohibited Business Practices
We propose to amend Sec. 155.220(j)(2) to add several new
standards of conduct for agents, brokers, and web-brokers that assist
consumers with applying for and enrolling in coverage through an FFE or
SBE-FP, with or without APTC and CSRs. Similar to the standards first
established in the 2017 Payment Notice, these additional standards are
also intended to protect against agent, broker, and web-broker conduct
that is harmful towards consumers or frustrates the efficient operation
of the Exchange. More specifically, we propose to codify standards
related to the use of scripting and other automation interactions with
CMS Systems or the DE Pathways (including both Classic DE and EDE),
identity proofing consumer accounts on HealthCare.gov, and providing
assistance with SEP enrollments. HHS is proposing these new FFE
standards of conduct for agents, brokers, and web-brokers assisting
consumers in FFEs and SBE-FPs because it has observed practices in
these areas that have caused or can cause harm to consumers, as well as
impede the efficient operation of the Exchange.
iii. Prohibited Automated Interactions With CMS Systems
In order to enroll qualified individuals in a QHP in a manner that
constitutes enrollment through the Exchange and assist individuals in
applying for APTC and CSRs for QHPs, agents, brokers, and web-brokers
must comply with the regulatory requirements contained in Sec.
155.220, including the requirement that such agents, brokers, and web-
brokers comply with the terms of applicable agreements between the
agent, broker, or web-broker and the Exchange.\265\ One such agreement,
the ``Agent Broker General Agreement for Individual Market Federally-
Facilitated Exchanges and State-Based Exchanges on the Federal platform
(IM General Agreement),'' \266\ sets forth requirements related to
automation. Specifically, section IV(c)(i)(4) of the IM General
Agreement provides that scripting and other automation of interactions
with CMS Systems or the DE Pathways are strictly prohibited, unless
approved in advance by CMS. While these requirements are addressed in
the IM General Agreement, they are not currently explicitly set forth
in regulation. Therefore, we propose to amend Sec. 155.220(j)(2) to
add proposed new Sec. 155.220(j)(2)(vi) to codify requirements and
limitations on the use of automation and align the regulation with the
IM General Agreement. New proposed Sec. 155.220(j)(2)(vi) would
provide that an agent, broker, or web-broker that assists with or
facilitates enrollment of qualified individuals, qualified employers,
or qualified employees, in coverage in a manner that constitutes
enrollment through an FFE or SBE-FP, or assists individuals in applying
for APTC and CSRs for QHPs sold through an FFE, or SBE-FP must not
engage in scripting and other automation of interactions with CMS
Systems or DE Pathways, unless approved in advance in writing by CMS.
---------------------------------------------------------------------------

\265\ 45 CFR 155.220(d).
\266\ https://www.hhs.gov/guidance/sites/default/files/hhs-guidance-documents/ab_py2020_im_general_agreement_final_1.pdf.
_____________________________________-

CMS Systems to which CMS-registered agents, brokers, and web-broker
may have access include HealthCare.gov, and the CMS Enterprise Portal.
Codifying a regulation that addresses the use of automation in relation
to these systems and platforms would help to establish clear and
enforceable standards that would govern the behavior of agents,
brokers, and web-brokers when assisting Exchange applicants. It would
also clarify CMS' authority to take enforcement action against agents,
brokers, and web-brokers for violations of these requirements.
HHS is proposing this standard of conduct because it has observed
instances where unauthorized automated browser-based interactions with
Exchange systems have led to unauthorized enrollments, unauthorized
application changes, or unauthorized access to consumer PII. The risk
of harm to consumers and the efficient operation of the Exchange is
heightened when automated interactions occur because more consumer
information can be downloaded using automation than through a manual
process. Automated browser-based interactions with Exchange systems can
lead to increases in unauthorized enrollments, unauthorized application
changes, or unauthorized access to consumer PII because agents,
brokers, and web-brokers could find far more consumer information using
automation, which could result in the unauthorized taking, use, or sale
of significant amounts of consumer PII for unlawful purposes. Allowing
automation would also create significant traffic in the system, which
could result in increased risk of system speed slowdowns and stability
issues, as these automated interactions would cause a lot more system
activity per user than anticipated and planned for. We seek comments on
these concerns and this proposal. While this proposed rule is under
consideration, CMS will continue to take appropriate enforcement action
in response to situations resulting from unauthorized use of automation
in connection with CMS Systems.\267\
---------------------------------------------------------------------------

\267\ See 45 CFR 155.220(g), (k), and (m).
---------------------------------------------------------------------------

We note that certain web-broker interactions with the Exchange were
created with the intention of being automated, including the plan
finder Application Program Interface (API) and Marketplace API. Thus,
this proposal to prohibit use of automation in other circumstances is
sufficiently narrowly tailored to accommodate these limited instances
when automation is permitted in connection with CMS Systems or DE
Pathways when approved in advance in writing by CMS. CMS believes that
other uses of automation beyond what is currently approved may have
appropriate business use cases. We therefore seek comment on
appropriate uses of automation that may contribute to the efficient
operation of the FFEs and SBE-FPs, and the DE Pathways.
iv. Identity Proofing
HealthCare.gov utilizes identity proofing to verify the identity of
a consumer when a new Exchange

[[Page 648]]

account is created. We propose to amend Sec. 155.220(j)(2) to add
proposed new Sec. 155.220(j)(2)(vii), which would provide that when
identity proofing accounts on HealthCare.gov, agents, brokers, or web-
brokers must only use an identity that belongs to the consumer.
Currently, identity proofing is required when a consumer creates an
account on HealthCare.gov via an EDE site, and when a consumer works
with an agent or broker in person.\268\ When a consumer creates an
account on HealthCare.gov or an EDE site, they go through a remote
identity proofing (RIDP) process. The RIDP process is an Experian
service that takes basic demographic information regarding the consumer
and requires the consumer to answer multiple choice questions correctly
to proceed. This is done to ensure the consumer is a real person, to
protect the consumer's personal information, and to prevent someone
else from creating an Exchange account and applying for Exchange
coverage in another's name without their knowledge or consent.
---------------------------------------------------------------------------

\268\ Section 1411(g)(1) of the ACA.
---------------------------------------------------------------------------

We are proposing this amendment to Sec. 155.220(j)(2), as we have
observed situations in which agents have used the same identity
information to complete the identity proofing process for multiple
consumer Exchange accounts, which can harm to consumers and prevent the
efficient operation of the Exchange, undermines the purpose of identity
proofing consumers and is often associated with unauthorized
enrollments, identity theft, and fraud.
We seek comment on this proposal.
v. Providing Information to Federally-Facilitated Exchanges in
Connection With Special Enrollment Periods
Finally, Sec. 155.420(a)(1) provides that the Exchange must
provide SEPs during which qualified individuals may enroll in QHPs and
enrollees may change QHPs. We propose to amend Sec. 155.220(j)(2) to
add proposed new Sec. 155.220(j)(2)(viii), which would state that when
providing information to FFEs that may result in a determination of
eligibility for an SEP under Sec. 155.420, agents, brokers, and web-
brokers must obtain authorization from the consumer to submit the
request for a determination of eligibility for a SEP (although this
authorization does not need to be in writing) and make the consumer
aware of the specific triggering event and SEP for which the agent,
broker, or web-broker will be submitting an eligibility determination
request on the consumer's behalf. Under this new proposed standard of
conduct, agents, brokers, and web-brokers providing assistance with SEP
enrollments would be required to make reasonable, good faith efforts to
ascertain the consumer's eligibility for the SEP, consistent with the
existing standard under Sec. 155.220(j)(3). We propose this
requirement to address circumstances HHS has observed under which
consumers who apply for QHP enrollment through an SEP with the
assistance of an agent, broker, or web broker are not made aware of the
basis upon which their QHP application claims entitlement to an SEP, or
who otherwise did not authorize an agent, broker, or web-broker to
enroll them in a QHP or make a change to their current QHP enrollment.
The purpose of SEPs is to promote access to health insurance
coverage and continuous coverage by allowing individuals to enroll
outside of the open enrollment period only if they experience certain
SEP triggering events; this helps to avoid and control against adverse
selection that would destabilize the Exchanges. The purpose of
proposing to codify this requirement in proposed new Sec.
155.220(j)(2)(viii) is to ensure the validity and integrity of the SEP
process, avoid Exchange destabilization, and to create clear,
enforceable standards to help mitigate consumer harm by establishing
that agents, brokers, and web-brokers are responsible for providing
information to the FFE that is accurate to the best of their knowledge,
and to which the consumer has attested.
We seek comment on these proposals.
5. Premium Calculation (Sec. 155.240(e))
HHS proposes to add language at Sec. 155.240(e)(2) to apply the
premium calculation methodology currently applicable in the FFEs and
SBE-FPs to all Exchanges, beginning with PY 2024. This proposed
amendment to Sec. 155.240(e), along with the proposed amendments to
Sec. Sec. 155.305(f)(5) and 155.340, support HHS's proposal to clarify
that an Exchange is required to prorate the calculation of premiums for
individual market policies and the calculation of APTC in cases where
an enrollee is enrolled in a particular policy for less than the full
coverage month, including when the enrollee is enrolled in multiple
policies within a month, each lasting less than the full coverage
month. We further discuss these proposed changes in the Administration
of Advance Payments of the Premium Tax Credit and Cost-Sharing
Reductions (Sec. 155.340) section of this proposed rule where we
propose to require all Exchanges to prorate premium and APTC amounts in
cases where an enrollee is enrolled in a particular policy for less
than the full coverage month. We seek comment on these proposals.
6. Eligibility Standards (Sec. 155.305)
We are proposing a technical amendment to Sec. 155.305(f)(1)(i) to
clarify that the income eligibility standards used by the Exchange for
determining whether an individual is an applicable taxpayer for
purposes of APTC eligibility are the same as the income thresholds at
IRS regulation 26 CFR 1.36B-2(b). Whereas the current regulation states
expected household income must be ``greater than or equal to 100
percent but not more than 400 percent of the FPL for the benefit year
for which coverage is requested,'' the proposed amendment specifies the
individual must have an expected household income which will qualify
the tax filer as an applicable taxpayer according to 26 CFR 1.36B-2(b).
In turn, 26 CFR 1.36B-2(b) outlines the FPL percentage thresholds that
are used for determining PTC eligibility. In practice, the federal and
state Exchanges have always relied on thresholds outlined in 26 CFR
1.36B-2(b) to determine APTC eligibility, but we note that this
proposed change allows for greater regulatory consistency and minimizes
the need to update Sec. 155.305(f)(1)(i) in response to legislative
changes that may alter FPL percentage thresholds, as occurred for
certain years under the ARP.
7. Eligibility for Advance Payments of the Premium Tax Credit (Sec.
155.305(f)(5))
HHS proposes to amend Sec. 155.305(f)(5) to require that APTC must
be calculated in accordance with 26 CFR 1.36B-3 and would be subject to
the prorating methodology at proposed Sec. 155.340(i). This proposed
amendment to Sec. 155.305(f)(5), along with the proposed amendments at
Sec. Sec. 155.240(e), and 155.340, detailed elsewhere in this rule,
support HHS's proposal to clarify that an Exchange is required to
prorate the calculation of premiums for individual market policies and
the calculation of APTC in cases where an enrollee is enrolled in a
particular policy for less than the full coverage month, including when
the enrollee is enrolled in multiple policies within a month, each
lasting less than the full coverage month. We further discuss these
proposals in the Administration of Advance Payments of the Premium Tax
Credit and Cost-Sharing Reductions (Sec. 155.340) section of this
proposed rule. We seek comment on this proposal.

[[Page 649]]

8. Verification Process Related to Eligibility for Insurance
Affordability Programs--Employer Sponsored Plan Verification (Sec.
155.320)
Strengthening program integrity with respect to subsidy payments in
the individual market continues to be a top HHS priority. Accordingly,
we propose to revise Sec. 155.320(d)(4) to provide each Exchange with
the flexibility to tailor its employer sponsored plan verification
process based on its assessment of the risk of inappropriate payments
of APTC and CSRs as a result of associated risk and composition of
their enrolled population.
Currently, Exchanges must verify whether an applicant for APTC and
CSRs is eligible for or enrolled in an eligible employer sponsored plan
for the benefit year for which coverage is 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 Sec. 155.320(d)(2)(i)
through (iii), an alternate procedure applies. Specifically, Exchanges
must select a random sample of applicants and meet the requirements
under Sec. 155.320(d)(4). For benefit years 2016 through 2019,
Exchanges also could use an alternative process approved by HHS.
In the 2021 Payment Notice final rule, we finalized the policy that
for PYs 2020 and 2021, HHS would not take enforcement action against
Exchanges that do not perform random sampling as required by Sec.
155.320(d)(4), when the Exchange does not reasonably expect to obtain
sufficient verification data as described in Sec. 155.320(d)(2)(i)
through (iii). This policy was designed to reduce burden on Exchanges
while HHS finalized the results of a study to determine the potential
risk and risk factors, if any, that may be associated with applicants
that choose to enroll in an Exchange QHP with APTC/CSRs, rather than
coverage offered through their employer. In the 2022 Payment Notice
Final Rule, we extended this non-enforcement to PY 2022.
As we will discuss later in this preamble, HHS reviewed the results
of the 2019 study and found that the risk for inappropriate eligibility
or payment of APTC and CSRs based on applicant eligibility for or
enrollment in qualifying employer sponsored coverage was low.
Therefore, we are now proposing a new optional alternate procedure to
replace the current procedures under Sec. 155.320(d)(4). Under this
proposed option, an Exchange would have flexibility to design its
verification process based on the Exchange's assessment of risk for
inappropriate eligibility or payment for APTC or CSRs. Until a new
alternate procedure becomes effective, Exchanges must continue to use
the procedures set forth under Sec. 155.320(d)(4)(i), subject to the
enforcement policy in effect for PYs 2021 and 2022.
HHS' experience conducting random sampling revealed that the burden
associated with the verification activity far outweighed the activity's
value to the integrity of the program. We found that employer response
rates to HHS' requests for information were low. We further found that
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 did not appear to outweigh the costs of
conducting the work because only a small percentage of sampled
enrollees had been determined by HHS to have received APTC or CSRs
inappropriately. Based on our experiences with the random sampling
methodology under Sec. 155.320(d)(4)(i), HHS concluded that the
methodology may not be the best approach for all Exchanges to assess
the risk for inappropriate payment of APTC/CSRs associated with
applicants who may be eligible for or enrolled in qualifying employer
sponsored coverage.
As a result, 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. The results of this study were finalized in
early 2020 and aligned with HHS' previous findings from past studies
that there is likely a very low volume of applicants with offers of
affordable coverage through their employer that choose to
inappropriately enroll in an Exchange QHP with APTC and CSRs.
Specifically, the study found that no more than 2 percent of
enrollees received APTC/CSR inappropriately, and that lower income
individuals and families had the most incentive to enroll in an
Exchange QHP with APTC/CSR rather than coverage offered through an
employer. HHS is therefore of the view that the risk for inappropriate
payment of APTC and CSRs is low; thus, we propose to provide each
Exchange with the flexibility to tailor its verification process based
on its assessment of the risk of inappropriate payments of APTC/CSRs as
a result of associated risk and composition of their enrolled
population. This includes the ability of State Exchanges that operate
their own eligibility and enrollment platform and have implemented, or
are finalizing their implementation of, the current random sampling
requirements under Sec. 155.320(d)(4)(i), to continue employing the
random sampling process and requirements and refining the process, as
needed, under the proposed risk-based approach under Sec.
155.320(d)(4)(i). HHS believes that these changes will serve to protect
the integrity of the Exchange program by allowing all Exchanges to
proactively identify risk factors attendant to QHP enrollees' receipt
of APTC/CSRs for which they may not be eligible.
Specifically, we propose to allow Exchanges to implement a
verification method that utilizes an approach based on a risk
assessment identified through analysis of an Exchange's experience in
relation to APTC/CSRs payments. HHS expects that this risk assessment
would be informed by and identified through research and analysis of an
Exchange's experiences with current and past enrollments, and not
solely based on previously published research or literature.
Furthermore, there are certain standards that HHS requires that all
Exchanges adhere to when designing a risk-based approach to verify an
applicant's offer of employer sponsored coverage. As such, HHS requires
that any risk-based verification process be reasonably designed to
ensure the accuracy of the data and is based on the activities or
methods used by an Exchange such as studies, research, and analysis of
an Exchange's own enrollment data. For example, if an Exchange's
experience is that applicants from large companies that have different
classes of employees, who may or may not qualify for employer sponsored
coverage due to the number of hours they work per week, represent a
higher risk of improper APTC/CSR payments, then the Exchange may
implement a risk-based verification process to confirm whether
applicants employed by such companies appropriately received APTC/CSRs.
Given that the proposed risk-based approach to verify whether an
applicant has received an offer of coverage through an employer or is
enrolled in employer sponsored coverage depends largely on an
Exchange's assessment of risk and unique populations, HHS believes that
there are various ways in which a risk-based approach can be

[[Page 650]]

operationalized. Below we outline a few scenarios to provide
illustrative examples of the procedures an Exchange may follow.
The first scenario concerns Exchanges that do not have access to an
approved trusted data source that provides accurate and up-to-date
information regarding enrollment or pre-enrollment in coverage offered
through an employer and have determined that manual verification, such
as conducting random sampling of enrollees to determine if any had an
offer of affordable coverage through their employer but chose to enroll
in an Exchange QHP with APTC/CSR instead, requires significant
resources to conduct and have determined that the risk for improper
APTC/CSR payment is low. In this scenario, Exchanges may make a
reasonable determination and decide to accept a consumer(s)'
attestation without any further manual verification, similar to current
procedures to accept attestation only for residency and incarceration
status. Conversely, if an Exchange has determined a high risk for
improper APTC/CSR payment exists within its enrolled population, but
also doesn't have access to an approved trusted data source for
electronic verification, an Exchange may make a reasonable
determination that conducting manual verification as part of its risk-
based approach, such as conducting random sampling, is the appropriate
risk-based approach to conduct employer sponsored coverage
verification. Finally, there may be Exchanges that have determined that
they do have access to an approved, accurate, and up-to-date trusted
data source that allows for electronic verification of offers of
employer sponsored coverage. In this scenario, an Exchange may choose
to conduct electronic verification of their entire population through
that trusted data source to verify offers of employer sponsored
coverage. HHS believes that any of these approaches will serve to
satisfy the requirement to conduct employer sponsored coverage
verification using a risk-based approach while providing flexibility
for all Exchanges to determine the process that best meets the needs of
their populations.
Because HHS found that the risk for improper APTC payment is low in
Exchanges using the federal eligibility and enrollment platform, such
Exchanges would leverage the current attestation questions on the
single, streamlined application and accept attestation without further
verification against other trusted data sources. The attestation
questions include, ``Are any of these people currently enrolled in
health coverage?'' and ``Will any of these people be offered health
coverage through their job, or through the job of another person, like
a spouse or parent?''. HHS would also accept attestations related to
employer sponsored coverage because HHS currently lacks access to
another approved data source to verify whether an applicant has an
offer of employer sponsored coverage that is affordable and meets
minimum value standards. In the 2019 study referenced earlier in the
preamble, HHS examined whether the use of other data sources would be
feasible to verify offers and affordability of employer sponsored
coverage, such as the National Directory of New Hires (NDNH) database.
HHS determined that all available data sources were insufficient and
did not provide the necessary information to satisfy the requirement,
or would require legislative changes to give Exchanges permission to
access and use them for verification of employer sponsored coverage.
CMS notes that additional data source access, such as the NDNH, would
improve accuracy and reduce administrative burden to consumers for the
income verification step during the eligibility process.
Finally, under this proposal, we clarify that since SBE-FPs use the
HealthCare.gov platform for eligibility and enrollment determinations,
SBE-FPs would be required to follow the approach outlined above
consistent with CMS regulations and the agreements SBE-FPs sign with
CMS. Current Federal platform agreements require that SBE-FPs adhere to
the same policy and operations as Exchanges that use the federal
eligibility and enrollment platform regarding eligibility for and
enrollment in QHP coverage.
Furthermore, in accordance with Sec. 155.120(c), an Exchange's
verification program cannot be discriminatory in nature, and State
Exchange's verification processes will be monitored by HHS in
accordance with its authority under Sec. Sec. 155.1200 and 155.1210.
In designing their verification program, Exchanges should pay special
attention to known risks, including risk pool manipulation or steering
high risk employees from the group health market into the Exchanges.
The goal of this proposed policy is to ensure that only applicants
eligible to receive APTC/CSRs receive these subsidies, and we would
exercise our oversight authorities to ensure an Exchange's verification
policies are not used to prevent any particular class of applicants
from enrolling in QHP coverage with APTC/CSRs. We believe this approach
would allow Exchanges to proactively identify and target applicants who
may, for example, have an incentive to enroll in Exchange coverage with
APTC/CSRs rather than their employer sponsored plan that meets minimum
value and affordability standards. Further, we believe that a risk-
based approach for verification of eligibility for employer sponsored
eligibility or coverage verification would allow Exchanges to identify
a larger population of Exchange enrollees who would be ineligible for
APTC/CSRs due to an offer of employer sponsored coverage, as compared
to the random sampling method. We believe the new policy we propose
would more effectively protect the integrity of Exchange programs, as
Exchanges would be able to mitigate the risk of improper federal
payments in the form of APTC during the year more effectively.
Therefore, we propose to revise Sec. 155.320(d)(4) by removing the
requirement that the Exchange select a random sample of applicants for
whom the Exchange does not have data as specified in Sec.
155.320(d)(2)(i) through (iii) effective upon the finalization of the
final rule. we encourage State Exchanges to submit comments on the
proposed timing, especially if the proposal causes operational
challenges or undue hardship as a result. We propose adding new
language at Sec. 155.320(d)(4) under which an Exchange would be
permitted to design its verification process for enrollment in or
eligibility for qualifying coverage in an eligible employer sponsored
plan based on the Exchange's assessment of risk for inappropriate
payment of APTC/CSRs or eligibility for CSRs, as appropriate. The
proposed language at Sec. 155.320(d)(4) would provide all Exchanges
with the flexibility to determine the best means to design and
implement a process to verify an applicant's enrollment in or
eligibility for employer sponsored coverage, through analyses of
relevant Exchange data, research, studies, and other means appropriate
and necessary to identify risk factors for inappropriate payment of
APTC or eligibility for CSRs. As previously discussed earlier in this
rule, Exchanges must continue to use the procedures set forth in Sec.
155.320(d)(4)(i) until a new alternate procedure becomes effective. We
also propose to retain the current requirement at Sec.
155.320(d)(4)(i)(A) that the Exchange provide notice to the applicant,
but amend it such that it is contingent on whether the Exchange will be
contacting the employer of an applicant to verify whether an applicant
is enrolled in an

[[Page 651]]

eligible employer sponsored plan or is eligible for qualifying coverage
in an eligible employer sponsored plan for the benefit year for which
coverage is requested. Second, to provide more flexibility for
Exchanges, we propose no longer applying the requirement at Sec.
155.320(d)(4)(i)(D), which requires the Exchange to make reasonable
attempts to contact an employer listed on an applicant's Exchange
application to verify whether an applicant is enrolled in an employer
sponsored plan or is eligible for qualifying coverage in an eligible
employer sponsored plan.
As we explained above, HHS' experience has been that employer
compliance with these notices was low, which led to the proposal to
remove the random sampling requirement. However, Exchanges may continue
to send notification to employers as part of their risk-based
verification processes if they so choose. Third, we propose removing
the requirement at Sec. 155.320(d)(4)(i)(F), which states that after
90 days from the date on which the Exchange first provides notice to an
applicant as described in Sec. 155.320(d)(4)(i)(A), the Exchange must
redetermine eligibility for APTC and CSRs if the Exchange is unable to
obtain the necessary information from an applicant's employer regarding
enrollment in or eligibility for qualifying coverage in an employer
sponsored plan. We believe these proposed changes provide Exchanges
with the flexibility to implement a verification process for enrollment
in or eligibility for an employer sponsored plan that is tailored to
risks observed in their respective populations. As previously discussed
earlier in preamble, Exchanges must continue to use the procedures set
forth in Sec. 155.320(d)(4)(i) until a new alternate procedure becomes
effective.
Finally, we propose to remove the option for Exchanges to follow
the procedures outlined in Sec. 155.320(d)(4)(ii) to develop an
alternative verification process that is approved by HHS. The revisions
to Sec. 155.320(d)(4)(i) provide enough flexibility for Exchanges to
develop a risk-based verification process for eligibility for or
enrollment in employer sponsored coverage. Therefore, extending Sec.
155.320(d)(4)(ii) indefinitely would prove to be redundant in light of
the proposed changes discussed earlier in preamble.
We seek comment on these proposals.
9. Annual Eligibility Redetermination (Sec. 155.335)
We solicit comments on incorporating the net premium, MOOP,
deductible, and annual out-of-pocket costs (OOPC) of a plan into the
re-enrollment hierarchy as well as additional criteria or mechanisms
HHS could consider to ensure the Exchange hierarchy for re-enrollment
aligns with plan generosity and consumer needs, such as, re-enrolling a
current bronze QHP enrollee into an available silver QHP with a lower
net premium and higher plan generosity offered by the same QHP issuer.
In the Patient Protection and Affordable Care Act; Annual
Eligibility Redeterminations for Exchange Participation and Insurance
Affordability Programs; Health Insurance Issuer Standards Under the
Affordable Care Act, Including Standards Related to Exchanges final
rule, we established the renewal and re-enrollment hierarchy at Sec.
155.335(j) to minimize potential enrollment disruptions. Under Sec.
155.335(j), we modified the standards for re-enrollment in coverage
through Exchanges by proposing, in paragraph (j)(1), that if an
enrollee remains eligible for enrollment in a QHP through the Exchange
upon annual redetermination, and the product under which the QHP in
which he or she was enrolled remains available for renewal, consistent
with Sec. 147.106 such enrollee will have his or her enrollment in a
QHP through the Exchange under the product renewed unless he or she
terminates coverage, including termination of coverage in connection
with voluntarily selecting a different QHP, in accordance with Sec.
155.430. In this situation, we proposed that the QHP in which the
enrollee will be renewed will be selected according to the following
order of priority: (1) In the same plan as the enrollee's current QHP;
(2) if the enrollee's current QHP is not available, the enrollee's
coverage will be renewed in a plan at the same metal level as the
enrollee's current QHP; (3) if the enrollee's current QHP is not
available and the enrollee's product no longer includes a plan at the
same metal level as the enrollee's current QHP, the enrollee's coverage
will be renewed in a plan that is one metal level higher or lower than
the enrollee's current QHP; and (4) if the enrollee's current QHP is
not available and the enrollee's product no longer includes a plan that
is at the same metal level as, or one metal level higher or lower than
the enrollee's current QHP, the enrollee's coverage will be renewed in
any other plan offered under the product in which the enrollee's
current QHP is offered in which the enrollee is eligible to enroll.
Under paragraph (j)(2), we finalized standards to address re-
enrollment in situations in which no plans under the product under
which an enrollee's QHP is offered are available through the Exchange
for renewal, consistent with Sec. 147.106. In this situation, the
enrollee may be enrolled in a QHP under a different product offered by
the same issuer, to the extent permitted by applicable state law,
unless the enrollee terminates coverage including termination of
coverage in connection with voluntarily selecting a different QHP, in
accordance with Sec. 155.430. In such cases, the re-enrollment will
occur according to the following order of priority: (1) In a QHP
through the Exchange at the same metal level as the enrollee's current
QHP in the product offered by the issuer that is the most similar to
the enrollee's current product; (2) if the issuer does not offer
another QHP through the Exchange at the same metal level as the
enrollee's current QHP, the enrollee will be re-enrolled in a QHP
through the Exchange that is one metal level higher or lower than the
enrollee's current QHP in the product offered by the issuer through the
Exchange that is the most similar to the enrollee's current product;
and (3) if the issuer does not offer another QHP through the Exchange
at the same metal level as, or one metal level higher or lower than the
enrollee's current QHP, the enrollee will be re-enrolled in any other
QHP offered through the Exchange by the QHP issuer in which the
enrollee is eligible to enroll.
In the 2017 Payment Notice, we finalized the rule that provides for
auto-reenrollment in a QHP offered by another issuer through the
Exchange, as opposed to permitting a QHP issuer that no longer has a
QHP available to an enrollee through an Exchange to reenroll the
enrollee outside the Exchange in order to maintain coverage with APTC
and CSRs for the majority of Exchange enrollees who are receiving these
subsidies. Under this rule, we established, beginning in PY 2017, that
if no QHP from the same issuer is available to enrollees through the
Exchange, then to the extent permitted by applicable State law, the
Exchange could direct alternate enrollments for such enrollees into a
QHP from a different issuer unless the enrollee terminates coverage,
including termination of coverage in connection with voluntarily
selecting a different QHP, in accordance with Sec. 155.430. If the
applicable State regulatory authority declines to act to direct this
activity, such alternate enrollments would be directed by the Exchange.
With regard to how Exchanges will determine which plans such enrollees
should be auto-

[[Page 652]]

reenrolled into, we noted that this policy provided considerable
flexibility to Exchanges to implement this rule, in recognition of the
operational realities of implementing a re-enrollment hierarchy in the
often unique circumstances in which an issuer no longer has QHPs
available to an enrollee through the Exchange.
HHS is aware of stakeholder concerns that the enrollees in the FFEs
may fail to return to the Exchange to make an active plan selection in
situations in which changing plans could be beneficial to the enrollee,
and that re-enrollment rules may default enrollees into less beneficial
plans than other available plans.
We solicit comments on whether factors such as net premium, MOOP,
deductible, and OOPC should be reflected in a revised re-enrollment
hierarchy for all Exchanges, with consideration for the potential
impact of the actuarial value de minimis guidelines proposed in this
rule at Sec. Sec. 156.135 and 156.140 on cost-sharing. For example,
HHS could consider re-enrolling a current bronze QHP enrollee into an
available silver QHP with a lower net premium and higher plan
generosity offered by the same QHP issuer. Additionally, HHS could
consider re-enrolling a current silver QHP enrollee into another
available silver QHP, under the enrollee's current product and with a
service area that is serving the enrollee that is issued by the same
QHP issuer, that has lower OOPC. We also solicit comments on additional
criteria or mechanisms HHS could consider to ensure the hierarchy for
re-enrollment in all Exchanges takes into account plan generosity and
consumer needs beyond merely the retention of the most similar plan
available.
10. Administration of Advance Payments of the Premium Tax Credit and
Cost-Sharing Reductions (Sec. 155.340)
HHS is proposing to amend Sec. Sec. 155.240(e), 155.305(f)(5), and
155.340 to clarify that an Exchange is required to prorate the
calculation of premiums for individual market policies and the
calculation of the APTC in cases where an enrollee is enrolled in a
particular policy for less than the full coverage month, including when
the enrollee is enrolled in multiple policies within a month, each
lasting less than the full coverage month. HHS would require all
Exchanges, including the Exchanges on the Federal platform and State
Exchanges that operate their own eligibility and enrollment platforms
to implement the proposed proration methodology in the PY 2024 benefit.
HHS is limiting this proposed requirement to individual market policies
because many SHOP Exchanges, particularly those that operate in a
leaner fashion, like the federally-facilitated SHOP Exchanges, do not
calculate premiums. Additionally, APTC are not available through SHOPs.
Currently, Exchanges apply APTC to an applicable taxpayer's monthly
premium based on calculation, eligibility, and administration
requirements from two sources: (1) IRS regulations at 26 CFR 1.36-B-1
through 1.36B-3, and (2) HHS regulations at 45 CFR part 155. IRS
regulation at 26 CFR 1.36B-3(d) calculates PTC eligibility for a
partial month of coverage as the lesser of the premiums for the month
(reduced by any amount of such premiums refunded), or the monthly
premium for the second lowest cost silver plan (SLCSP) reduced by the
taxpayer's monthly contribution amount. Although 26 CFR 1.36B-3(d)
defines the calculation of the premium assistance amount for a coverage
month, and thus defines the calculation of the maximum APTC amount an
applicable taxpayer may apply to their monthly premium, it does not
describe how APTC is administered, which is regulated by HHS. When
administering APTC, Exchanges must adhere to requirements at 45 CFR
155.305(f), which establishes eligibility and calculation requirements
for APTC, 45 CFR 155.310(d)(2)(i), which requires the Exchange to
permit an applicable taxpayer to accept less than the full amount of
APTC for which they are eligible, and 45 CFR 155.340, which defines how
Exchanges must administer and allocate APTC amounts applied to
enrollees' monthly premiums.
Calculating maximum APTC as required under Sec. 155.305(f)
obligates the Exchange to calculate payments of the APTC in accordance
with the way PTC is calculated at 26 CFR 1.36B-3. The IRS methodology
described at 26 CFR 136.B-3 is appropriate for PTC, as PTC is
calculated retrospectively and can account for the changes in an
applicable taxpayer's premium across the entire tax year before the
applicable final amount is calculated at the time of tax filing.
Conversely, Exchanges administer APTC prospectively to issuers by
advancing premium assistance to issuers based on enrollees' eligibility
determinations and elections, which could change month-to-month before
final reconciliation occurs. Currently, HHS regulations governing APTC
eligibility and administration do not contain specific requirements on
how APTC should be administered for a policy in which an enrollee is
enrolled for less than the full coverage month. While the FFEs and SBE-
FPs already prorate APTC and premium amounts, State Exchanges presently
handle this scenario inconsistently, which may result in over-payment
of APTC to issuers that exceeds the monthly PTC amount for which an
applicable taxpayer will be eligible, thereby potentially triggering a
federal income tax liability for the applicable taxpayer.\269\
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\269\ HHS notes that an applicable taxpayer's excess APTC and
accompanying tax liability for such excess APTC is determined after
the taxpayer's PTC for the year of coverage has been calculated.
Consequently, the potential to incur income tax liability for excess
APTC is not limited to situations in which a consumer is enrolled in
a policy for less than a full coverage month and our proposed policy
will not completely eliminate an applicable taxpayer's risk of
incurring tax liability from excess APTC.
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By amending Sec. Sec. 155.240(e), 155.305(f)(5) and 155.340 to
require that the Exchange prorate the calculation of premiums and APTC
in cases where an enrollee is enrolled in a particular policy for less
than the full coverage month, HHS would provide needed clarification
for all Exchanges, resulting in greater consistency in APTC
administration and the consumer experience.
As explained earlier in this preamble, HHS proposes to add language
at Sec. 155.240(e)(2) to apply the methodology currently applicable in
the FFEs and SBE-FPs to all Exchanges, beginning with PY 2024. This
proposed amendment to Sec. 155.240(e) would support the accurate and
consistent calculation of partial-month enrollment premium amounts in a
way that aligns with the method of administering the APTC that we
propose in Sec. Sec. 155.305(f)(5) and 155.340.
HHS also proposes to amend Sec. 155.305(f)(5) by adding that APTC
must be calculated in accordance with 26 CFR 1.36B-3, subject to the
prorating methodology at proposed Sec. 155.340(i). This would create
uniform standards for taxpayers on how the APTC will be calculated for
months in which an enrollee is enrolled in a particular policy for less
than the full coverage month.
Finally, HHS proposes to amend Sec. 155.340 by adding paragraph
(i) to establish that, beginning with the PY 2024 benefit, all
Exchanges would be required to calculate applied APTC when an enrollee
is enrolled in a particular policy for less than the full coverage
month, including when the enrollee is enrolled in multiple policies
within a month, each lasting less than the full coverage month, as
equal to the product of (1) the APTC applied on the

[[Page 653]]

policy for 1 month of coverage divided by the number of days in the
month, and (2) the number of days for which coverage is provided on
that policy during the applicable month. This methodology would align
with the prorated calculation of premium amounts under Sec.
155.240(e). Furthermore, this proposed methodology would provide
Exchanges with a consistent method of prorating applied APTC amounts
that aligns with the calculation of PTC under 26 CFR 1.36B-3(d) while
ensuring that the calculation of APTC in situations in which an
enrollee is enrolled in a particular policy for less than the full
coverage month, including when the enrollee is enrolled in multiple
policies within a month, each lasting less than the full coverage
month, does not cause the APTC to exceed the PTC for the month as
calculated per 26 CFR 1.36B-3(d). This proposal would create
consistency for issuers across all Exchanges, help the enrollee by
keeping the enrollee's share of premiums stable, and reduce the
instances in which a taxpayer would have to repay excess APTC during
tax filing per section 36B(f)(2) of the Code and 26 CFR 1.36B-4. If the
proposal results in an excess of PTC over the amount of APTC paid for
an enrollee's coverage (net PTC), the applicable taxpayer would claim
the net PTC as a refundable tax credit.
These proposals are intended to protect consumers. State Exchanges
are not currently required to prorate APTC for mid-month policy changes
and, as a result, HHS may overpay APTC amounts to issuers in State
Exchanges not currently prorating in this manner. Income tax liability
due to excess APTC could pose significant financial burden to
applicable taxpayers, particularly low-income taxpayers, and creates
confusion about the affordability of health care coverage offered by an
Exchange.
Additionally, E.O. 14009 \270\ calls for a review of policies or
practices that may present unnecessary barriers to individuals and
families attempting to access Medicaid or ACA coverage, or that may
reduce the affordability of coverage or financial assistance for
coverage. Low-income populations are more likely to qualify for many
federal and state health and human services programs, including
APTC.\271\ The proposed methodology aligns with the goals of E.O.
14009, as it would promote consumer protection, encourage continuity of
coverage for individuals, and ensure consistent application of APTC
which makes Exchange coverage more affordable.
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\270\ Executive Order 14009; 86 FR 7793 (Feb. 2, 2021).
\271\ See https://familiesusa.org/wp-content/uploads/2021/04/2021-79_ARP-Coverage-Summary_Analysis_03_2021.pdf.
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Establishing a proration methodology that would apply universally
across all Exchange types--FFEs, SBE-FPs, and State Exchanges--would
ensure all Exchanges and issuers report and pay APTC similarly when
enrollees are enrolled in a particular policy for less than the full
coverage month, including when the enrollee is enrolled in multiple
policies within a month, each lasting less than the full coverage
month. HHS notes that this proposal would codify a methodology that the
FFEs, SBE-FPs, and some State Exchanges already utilize to prorate
APTC.
We are proposing to require this proposed proration methodology for
all Exchanges to implement beginning with the PY 2024 benefit, as HHS
acknowledges that implementing this proposed methodology will require
implementation and operational costs and time on the part of most State
Exchanges. HHS seeks comment on this proposal. HHS also seeks comment
on whether PY 2023 benefit implementation is feasible.
10. Special Enrollment Periods--Special Enrollment Period Verification
(Sec. 155.420)
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 Exchanges on the Federal
platform.\272\ HHS also clarified its intention to not establish a
regulatory requirement that all Exchanges conduct special enrollment
period verifications in order to allow State Exchanges additional time
and flexibility to adopt policies that fit the needs of their
state.\273\ However, all State Exchanges conduct verification of at
least one special enrollment period type, and most State Exchanges have
implemented a process to verify the vast majority of special enrollment
periods requested by consumers.
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\272\ 82 FR at 18355 through 18358.
\273\ Ibid.
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We are now proposing to amend Sec. 155.420 to add new paragraph
(g) to state that Exchanges may conduct pre-enrollment verification of
eligibility for special enrollment periods, at the option of the
Exchange, and that Exchanges may provide an exception to pre-enrollment
special enrollment period verification for special circumstances, which
could include natural disasters or public health emergencies that
impact consumers or the Exchange. This is in order to encourage State
Exchanges to conduct special enrollment period verification but also
allow the FFEs, SBE-FPs, and State Exchanges to maintain flexibility in
implementing and operating special enrollment period verification.
Since 2017, Exchanges on the Federal platform implemented pre-
enrollment special enrollment period verification for certain special
enrollment period types commonly used by consumers to enroll in
coverage. New consumers, meaning consumers who are not currently
enrolled in coverage through the Exchange, who apply for coverage
through a special enrollment period type that requires pre-enrollment
verification by the Exchanges on the Federal platform must have their
eligibility electronically verified using available data sources or
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, pre-enrollment
special enrollment period verification is only conducted for consumers
newly enrolling due to the potential for additional burden on issuers
and confusion for consumers if required for existing enrollees.\274\
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\274\ 82 FR at 18355 through 18360.
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While pre-enrollment special enrollment period verification can
decrease the risk for adverse selection and improve program integrity,
it can also deter eligible consumers from enrolling in coverage through
a special enrollment period because of the barrier of document
verification. Younger, often healthier consumers submit acceptable
documentation to verify their special enrollment period eligibility at
much lower rates than older consumers, which can negatively impact the
risk pool. Additionally, our experience operating the FFEs and the
Federal platform shows that pre-enrollment special enrollment period
verification disproportionately negatively impacts Black and African
American consumers who submit acceptable documentation to verify their
special enrollment period eligibility at much lower rates than White
consumers.
To support program integrity and streamline the consumer
experience, we are also proposing that the Exchanges on the Federal
platform would only continue to conduct pre-enrollment verification of
eligibility for one type of special enrollment period: The special

[[Page 654]]

enrollment period for new consumers who attest to losing minimum
essential coverage.\275\ The loss of minimum essential coverage special
enrollment period type comprises the majority, about 58 percent, of all
special enrollment period enrollments on the Exchanges on the Federal
platform and has electronic data sources that can be leveraged for
auto-verification. By verifying eligibility for this special enrollment
period type and not for other special enrollment periods, the Exchanges
on the Federal platform could limit the negative impacts of special
enrollment period verification and decrease overall consumer burden
without substantially sacrificing program integrity.
---------------------------------------------------------------------------

\275\ See 45 CFR 155.420(d)(1)(i).
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We seek comment on these proposals.
11. General Program Integrity and Oversight Requirements (Sec.
155.1200)
The Payment Integrity Information Act of 2019 (PIIA) \276\ requires
federal agencies to annually identify, review, measure, and report on
the programs they administer that are considered susceptible to
significant improper payments. Pursuant to the PIIA, HHS is in the
planning phase of establishing a State Exchange Improper Payment
Measurement (SEIPM) program, as HHS has determined that APTC payments
may be susceptible to significant improper payments and are subject to
additional oversight. Therefore, we announced that we would be
implementing the SEIPM program and establishing requirements, which are
laid out in proposed provisions in a new subpart P.\277\
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\276\ Public Law 116-117 (Mar. 2, 2020).
\277\ Presentation and materials provided to the then
operational State Exchanges as part of ``All States'' meeting held
on February 21, 2019.
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The SEIPM program would allow for the accurate calculation of an
improper payment rate through the development of annual improper
payment estimates and subsequent reporting of improper payments. To
ensure improper payments can be calculated accurately, the SEIPM
program would require State Exchanges to provide HHS with access to
certain State Exchange data, including eligibility determinations and
enrollment information. State Exchanges with significant improper
payments may also be required to develop corrective action plans (CAP)
to correct the causes of the identified improper payments.
Currently, HHS approves or conditionally approves a state's
Blueprint Application to establish a State Exchange based on an
assessment of a state's attested compliance with relevant Exchange
statutory and regulatory requirements at section 1311 of the ACA and 45
CFR part 155. Thereafter, State Exchanges must meet specific program
integrity and oversight requirements specified at section 1313(a) of
the ACA, as well as Sec. Sec. 155.1200 and 155.1210. These
requirements provide HHS with the authority to oversee the Exchanges
after their establishment. There are various annual reporting
requirements for State Exchanges at Sec. 155.1200(b) including the
annual submission of: (1) A financial statement presented in accordance
with generally accepted accounting principles (GAAP); (2) an annual
report showing compliance with Exchange requirements; (3) performance
monitoring data; and (4) the annual submission of a report on instances
in which the State Exchange did not reduce an enrollee's premium by the
amount of the APTC in accordance to Sec. 155.340(g)(1) and (2).
Additionally, under Sec. 155.1200(c), each State Exchange is
required to engage or contract with an independent qualified auditing
entity that follows generally accepted government auditing standards
(GAGAS) to perform annual independent external financial and
programmatic audits. State Exchanges are required to provide HHS with
the results of the audits, to inform HHS of any material weakness or
significant deficiency identified in the audit, to develop and inform
HHS of any CAPs for such material weakness or significant deficiency,
and to make a public summary of the results of the external audit. The
CAPs are monitored by HHS until the findings are resolved.
Specifically, for the annual programmatic audit requirement, State
Exchanges must ensure that auditors address compliance with subparts D
and E under 45 CFR part 155, and other requirements under part 155, as
specified by HHS. This allows HHS to oversee compliance with
eligibility and enrollment standards to ensure that State Exchanges are
conducting accurate eligibility determinations and enrollment
transactions.
We propose to add new Sec. 155.1200(e) to permit a State Exchange
to meet the requirement to conduct an annual independent external
programmatic audit, as described at Sec. 155.1200(c), by completing
the required annual SEIPM program process. Therefore, HHS would
generally accept a State Exchange's completion of the SEIPM process for
a given benefit year as acceptable to meet the annual programmatic
audit requirement for that benefit year. We also propose to amend Sec.
155.1200(c) to cross-reference proposed Sec. 155.1200(e) to ensure the
coordination of these two requirements. We believe that these proposed
changes would ensure HHS retains necessary oversight authority of the
State Exchanges, particularly in the event that there are changes to
the SEIPM program in future benefit years. However, we would strive to
provide ample advance notice of any potential changes to the SEIPM
program, or to potentially allow for flexibility to satisfy
requirements at paragraph (c) in the event the SEIPM program is
unexpectedly suspended. These proposed changes would eliminate
duplicate efforts specific to the annual programmatic audit requirement
and reduce burden on the State Exchanges. They would also allow HHS to
continue to require programmatic audits of other subparts beyond
eligibility and enrollment, should HHS deem it necessary in future
years to ensure programmatic oversight and program integrity.
As described in new proposed subpart P, section 14, HHS intends to
implement the SEIPM program beginning with the 2023 benefit year. Thus,
measurement of improper payments for the 2023 benefit year would take
place in benefit year 2024, and reporting of the improper payment rate
would not occur until November 2025, at the earliest. Thereafter, State
Exchanges that HHS determines must submit CAPs would do so no sooner
than 2026. We would continue to closely coordinate with State Exchanges
as these timeframes are finalized and provide as much advance notice as
possible of relevant deadlines as they come due.
We seek comment on these proposals.
12. State Exchange Improper Payment Measurement Program (Sec. Sec.
155.1500 Through 155.1540)
In 2016, HHS completed a risk assessment of the APTC program.
Similar to other public-facing benefit programs, HHS determined that
the APTC program is susceptible to significant improper payments, and
as a result, HHS announced plans to increase the oversight of the APTC
program through the development and reporting of annual improper
payment estimates, and facilitating corrective actions.\278\ At that
time, we also announced that we would undertake rulemaking before
implementing the improper payment measurement methodology.
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\278\ Ibid.

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[[Page 655]]

In line with our prior announcement \279\ HHS is establishing a
pilot program and, as mentioned in section 12, is proposing regulations
governing HHS' SEIPM program. The SEIPM program would address all HHS
and State Exchange responsibilities so that HHS can accurately
calculate the SEIPM improper payment rate. Specifically, these proposed
regulations would pertain to State Exchanges that operate their own
eligibility and enrollment platform. These proposed regulations would
not pertain to State Exchanges that use the Federal platform to conduct
eligibility determinations and enrollment transactions. Additionally,
the proposed regulations would contain key SEIPM program definitions
and specify the manner in which HHS would collect information from
State Exchanges in order to estimate the SEIPM improper payment rate.
The proposed regulations would also account for the State Exchanges'
obligation to provide the required information and the manner in which
State Exchanges can contest HHS' findings regarding errors. Also, the
proposed regulations would convey State Exchange responsibilities
regarding CAPs that State Exchanges must submit to HHS for approval in
order to correct improper payments.
---------------------------------------------------------------------------

\279\ Ibid.
---------------------------------------------------------------------------

We would calculate the SEIPM improper payment rate for each benefit
year and expect the first calculation beginning with the 2023 benefit
year. Since the rate cannot be calculated until all SEIPM appeals are
resolved, we anticipate that the improper payment rate for the 2023
benefit year would be published in approximately November 2025. The
proposed regulations are necessary for HHS to properly oversee the
State Exchanges and ensure that errors resulting in improper payments
are corrected.
Current regulations found at 45 CFR 155.1200 and 155.1210 require
that a State Exchange have financial and operational safeguards in
place to avoid making inaccurate eligibility determinations, including
those related to APTC, CSR, and enrollments. However, as we stated in
our 2013 regulation, Sec. Sec. 155.1200 and 155.1210 were not intended
to be a part of any measurement program that may have been required
under the Improper Payments Elimination and Recovery Act of 2010,\280\
as updated by PIIA.\281\ Current program integrity audits, especially
as they relate to subparts D (eligibility) and E (enrollment) of part
155, focus on the processes and procedures that a State Exchange has
established to verify that a qualified individual meets eligibility
requirements. Current regulations at Sec. 155.1200(c) require State
Exchanges to hire an independent qualified auditing entity and submit
the external audit results to HHS. These programmatic audits do not
review, estimate, or report on the amounts or rates of improper
payments as the result of eligibility determination errors made by
State Exchanges. To meet the requirements of PIIA, to reduce burden on
State Exchanges, and to ensure consistency across State Exchanges in
terms of our review methodology, we propose to update programmatic
auditing requirements such that the completion of the annual SEIPM
program, as required by this subpart P, would satisfy the current
auditing requirements prescribed in Sec. 155.1200(c). As we
transition, we would coordinate our efforts with the CMS Center for
Consumer Information and Insurance Oversight and the CMS Office of
Financial Management. The goal of this coordination is to gain
efficiencies and avoid duplicative requirements that would
unnecessarily increase State Exchanges' workload, as well as the
requirement and burden of hiring independent qualified auditing
entities. Doing so would enable HHS and its Federal contractors to
obtain consistent information across all State Exchanges and to meet
our statutory mandate under PIIA. Therefore, we propose to establish a
new subpart P under 45 CFR part 155 (containing Sec. Sec. 155.1500
through 155.1540) to codify the SEIPM program requirements.
---------------------------------------------------------------------------

\280\ Public Law 111-204, 124 Stat. 2224 (July 22, 2010). The
original Improper Payment Information Act, Public Law 107-300 (2002)
has been updated by it successors, which include the Improper
Payment Elimination and Recovery Act, Public Law 111-204 (2010), the
Improper Payment Elimination and Recovery Improvement Act, Public
Law 112-248 (2012), and the Payment Integrity Information Act,
Public Law 116-117 (2020).
\281\ Patient Protection and Affordable Care Act; Program
Integrity: Exchange, SHOP, Premium Stabilization Programs, and
Market Standards, Proposed Rule, 78 FR 37032 at 37053 (Jun. 19,
2013).
---------------------------------------------------------------------------

We propose that the proposed regulations at subpart P would be
applicable in 2023 when the SEIPM program is proposed to begin its
operations.
a. Purpose and Definitions (Sec. 155.1500)
We are proposing to add new subpart P to part 155, which would
address various State Exchange and HHS responsibilities. HHS may use
Federal contractors as needed to support the performance of
statistical, review, or other activities.
We are proposing to add new Sec. 155.1500 to convey the purpose of
subpart P and definitions that are relevant to the SEIPM program.
At paragraph (a), we are proposing the purpose of subpart
P as setting forth the requirements of the SEIPM program for State
Exchanges.
At paragraph (b), we are proposing to codify the
definitions that are specific to the SEIPM program and key to
understanding the process requirements.
We are proposing the definition of ``Appeal of
redetermination decision (or appeal decision)'' to mean HHS' appeal
decision resulting from a State Exchange's appeal of a redetermination
decision.
We are proposing the definition of ``Corrective action
plan (CAP)'' to mean the plan a State Exchange develops in order to
correct errors resulting in improper payments.
We are proposing the definition of ``Error'' to mean a
finding by HHS that a State Exchange did not correctly apply a
requirement in subparts D and E of part 155 regarding eligibility for
and enrollment in a qualified health plan; APTC, including the
calculation of APTC; redeterminations of eligibility determinations
during a benefit year; or annual eligibility redeterminations.
We are proposing the definition of ``Error findings
decision'' to mean HHS' enumeration of errors made by a State Exchange,
including a determination of how the enumerated errors inform improper
payment estimation and reporting requirements.
We are proposing the definition of ``Redetermination of an
error findings decision (or redetermination decision)'' to mean HHS'
decision resulting from a State Exchange's request for a
redetermination of HHS' error findings decision.
We are proposing the definition of ``Review'' to mean the
process of analyzing and assessing data submitted by a State Exchange
to HHS in order for HHS to determine a State Exchange's compliance with
subparts D and E of part 155 as it relates to improper payments.
We are proposing the definition of ``State Exchange
improper payment measurement (SEIPM) program'' to mean the process for
determining

[[Page 656]]

estimated improper payments and other information required under the
PIIA, and implementing guidance, for APTC, which includes a review of a
State Exchange's determinations regarding eligibility for and
enrollment in a QHP; the calculation of APTC; redeterminations of
eligibility determinations during a benefit year; and annual
eligibility redeterminations.
b. Program Notification and Planning Process (Sec. 155.1505)
We are proposing to add new Sec. 155.1505 to outline the annual
program notification requirements related to the SEIPM program.
At paragraph (a), we are proposing the requirements
associated with HHS' responsibility to notify the State Exchanges prior
to the start of the measurement year regarding information pertinent to
the SEIPM program and the program's upcoming measurement cycle, which
may include but would not be limited to review criteria; key changes
from prior measurement cycles, where applicable; or other modifications
regarding specific SEIPM activities. This notification would occur
during the benefit year (that is, the year under review for which data
would be collected), which immediately precedes the measurement year
(that is, the year in which the measurement will be completed). The
measurement cycle would conclude with the reporting year during which
all data issues would be resolved and the improper payment rate would
be calculated and published.
At paragraph (b), we are proposing the requirements
associated with HHS' responsibility to notify the State Exchanges prior
to the measurement year regarding SEIPM schedules, which will include
relevant timelines. For example, among other things, the SEIPM annual
program schedule would detail the time period during which HHS would
provide the SEIPM data request form to State Exchanges with
instructions regarding how to complete each part of the form. The SEIPM
annual program schedule would also provide the deadlines prescribed for
State Exchanges to complete each part of the form.
At paragraph (c), we are proposing the requirements
associated with information to be provided by State Exchanges to HHS
regarding the operations and policies of the State Exchange, and
changes that have been made by the State Exchange which could impact
the SEIPM review process such as changes to business rules, business
practices, policies, and information systems (for example, data
elements and table relationships), which are used to review the State
Exchange's execution of consumer verifications, verification
inconsistency resolutions, eligibility determinations, enrollment
management, and APTC calculations. HHS anticipates that State Exchanges
may make changes periodically that could affect a State Exchange's
eligibility determinations or other decisions relating to the SEIPM
program. For example, HHS would need to be made aware of changes to the
State Exchange's technical platform or modifications to its policies or
procedures as these changes may impact specific review criteria, the
data to be reviewed and ultimately a State Exchange's eligibility
determinations. Other decisions or changes by a State Exchange could
affect the SEIPM program, including any changes regarding items such as
naming conventions or definitions of specific data elements used in the
SEIPM program, since any lack of clarity in how determinations and
payment calculations are being made could impact HHS' decisions
regarding errors made by the State Exchanges.
c. Data Collection (Sec. 155.1510)
We are proposing to add new Sec. 155.1510 to address the data
collection requirements to support the SEIPM process. Consistent with
this, we are establishing an SEIPM data request form that would
incorporate two basic parts: (1) The pre-sampling data request; and (2)
the sampled unit data request. We would use this form to compile
information from each State Exchange in an ongoing manner.
At paragraph (a)(1), we are proposing the requirement that
the State Exchange annually provide pre-sampling data to HHS by the
deadline provided in the annual program schedule. The pre-sampling data
request would provide HHS with essential information about the
composition of the State Exchange's application population in order to
appropriately stratify and sample the population. In the pre-sampling
data request, HHS would provide each State Exchange with a list of
policy identifications (that is, policy ID, which is a unique
identifier for a policy) that would have been analyzed to produce an
aggregate applied APTC greater than $0. HHS would request each State
Exchange to map the given policy IDs for their State Exchange to a tax
household identifier (or a proxy if the State Exchange does not have an
equivalent identifier) and provide characteristics of the population,
which include counts of (or an indication of the presence in) different
verification inconsistency types and the number of tax household
members. HHS would then analyze these characteristics and select a
statistically valid sample according to OMB requirements for estimating
improper payments. For these sampled units, HHS would also request
associated application and enrollment data and supporting consumer
documentation, which will be used to conduct its review. HHS has
submitted a PRA package to OMB for approval as detailed in ICR sections
IV.G.1. and 2 of this proposed rule.
As explained below in section IV, Collection of Information
Requirements, the SEIPM data request form has been submitted to the OMB
for review and approval. The pre-sampling data are a building block for
the development of the sampled unit data, which associate consumer
attestation documentation to each sampled unit. As such, the timely
receipt of the completed pre-sampling data from the State Exchange is
imperative.
The cumulative sample size across all State Exchanges and the
associated State Exchange-specific sample size would be determined
using a statistically valid sampling and estimation methodology, in a
manner that is consistent with Appendix C of OMB Circular A-123 and
that would be designed to produce an aggregate estimated improper
payment rate across all State Exchanges with a 3 percent margin of
error and a 95 percent confidence interval.\282\ HHS researched various
sampling methodologies, for example, simple random sampling, stratified
random sampling, and probability proportional to size sampling, taking
into account level of burden, (for example, time and resources), on
State Exchanges as well as enabling meaningful reviews for each State
Exchange. Based on information currently available, we expect that a
sample size of approximately 100 tax households for each State Exchange
will be necessary to achieve this precision level. HHS will provide
State Exchanges with an annual program notification that may include
sampling methodology and sample size. Burden estimates contained within
this document have been created using that sample size estimate. There
are a variety of factors that we may consider each review cycle to
determine the sample size and

[[Page 657]]

methodology. Such factors may include the size of the State Exchange
measured either by the number of payments or by the total dollar
amount, specific factors that drive the improper payment rate, the
number of State Exchanges under measurement for a given review cycle,
or improper payment rates and margins of error from previous benefit
years. Regardless of potential variations from one review cycle to the
next, we would continue to use a methodology that supports
statistically valid sampling and estimation.
---------------------------------------------------------------------------

\282\ While OMB Memorandum M-21-19, dated March 5, 2021 at
https://www.whitehouse.gov/wp-content/uploads/2021/03/M-21-19.pdf no
longer includes the requirements of a 95 percent confidence interval
or a 3% margin of error, we are using those measures that were
included in Appendix C to the OMB circular prior to the 2021
changes.
---------------------------------------------------------------------------

As stated previously, we would provide to each State
Exchange an SEIPM data request form that includes the sampled unit data
request. At paragraph (a)(2) we are proposing the requirement that
annually the State Exchange provide to HHS, in a manner and within a
deadline specified by HHS in the annual program schedule, sampled unit
data. To meet this requirement, a State Exchange can submit consumer-
submitted documentation in one or more batches so long as all of the
batches are provided to HHS within the deadline specified in the annual
program schedule. The sampled unit data request would include the list
of sampled units and the associated information specific to each unit.
The information required for the sampled units would include data and
supporting documentation regarding various State Exchange functions,
for example, electronic verifications, manual reviews of data matching
inconsistencies, special enrollment period verifications, eligibility
determinations, redeterminations, enrollment reconciliation, and plan
management.
At paragraph (b), we are proposing language regarding
requests for extension which may be submitted by State Exchanges. Given
the importance of the time frames associated with the measurement
process, we do not anticipate granting extensions in most situations.
The approval of extension requests would be reserved for extreme
circumstances that directly impact operations of the particular State
Exchange. This includes situations such as natural disasters,
interruptions in business operations such as major system failures, or
other extenuating circumstances.
At paragraph (c), we are proposing language regarding
potential consequences as a result of a State Exchange's failure to
timely provide the information in accordance with the schedule and
deadlines detailed in the annual program schedule, or in response to a
request for extension in paragraph (b). As a result of not timely
providing required data, we may cite errors due to lack of
documentation to support the state's eligibility or payment decisions,
inadvertently resulting in an increase in the State Exchange's improper
payment rate.
d. Review Process and Improper Payment Rate Determination (Sec.
155.1515)
We are proposing to add new Sec. 155.1515 to address the review
process and the determination of the improper payment rate.
At paragraph (a), we are proposing that HHS would keep a
record of the status of receipt for information requested from each
State Exchange for a minimum of 10 years.
At paragraph (b), we are proposing to review the following
for compliance with subparts D and E of part 155: A State Exchange's
determinations regarding eligibility for and enrollment in a QHP; APTC,
including the calculation of APTC; redeterminations of eligibility
determinations during a benefit year; and annual eligibility
redeterminations. As part of the review process, HHS would issue error
findings decisions and render redeterminations of error findings
decisions within the timeframe specified in the annual program
schedule.
At paragraph (c), we are proposing to notify each State
Exchange of HHS' error findings decisions for that State Exchange and
HHS' calculation of that State Exchange's improper payment rate.
e. Error Findings Decisions (Sec. 155.1520)
We are proposing to add new Sec. 155.1520 to address the issuance
of error findings decisions and the content of error findings
decisions.
At paragraph (a), we are proposing that HHS will issue
error findings decisions to each State Exchange. While we anticipate
that error findings decisions would be issued at regular and recurring
points of time within the measurement year during each review cycle, we
recognize that certain events could result in necessary delays, for
example, public health emergencies, natural disasters, interruptions in
business practices, or other extenuating circumstances. Thus, should
these types of events warrant additional time, we would notify State
Exchanges of the delay via the CMS website. In the situation where no
errors are found during the course of the review, HHS will still issue
an error findings decision to the State Exchange indicating that no
errors were identified. The error findings decisions are intended to be
communicated to each respective State Exchange only and would not be
published publicly.
At paragraph (b), we are proposing language regarding the
specific information that would be included in error findings
decisions. We propose that, at a minimum, error findings decisions will
include HHS' findings regarding errors made by the State Exchange and
information about the State Exchange's right to request a
redetermination of the error findings decision in accordance with
proposed Sec. 155.1525. We anticipate that these are the key items to
be conveyed through the error findings decision. However, should we
determine that other information is warranted, the language of proposed
Sec. 155.1520 does not prohibit additional information from being
included within the error findings decision.
f. Redetermination of Error Findings Decisions (Sec. 155.1525)
We are proposing to add new Sec. 155.1525 to address a State
Exchange's request for a redetermination as well as HHS' issuance of
the redetermination decision and the content of that decision.
At paragraph (a), we are proposing language indicating a
State Exchange's ability to request a redetermination of the error
findings decision within the deadline prescribed in the annual program
schedule. During the period for a State Exchange to request a
redetermination of the error findings decision, HHS would consider a
request for an extension in extreme circumstances, which includes but
is not limited to situations such as natural disasters, interruptions
in business operations such as major system failures, or other extreme
circumstances. While we recognize that each State Exchange has a
multitude of responsibilities, HHS would not otherwise accept any
request for a redetermination received after the expiration of the
deadline prescribed by the annual program schedule, which is designed
to enable HHS to meet deadlines for publication of the improper payment
rate.
At paragraph (a)(1), we are proposing language requiring
that the State Exchange identify the specific error(s) for which the
State Exchange is requesting a redetermination. This identification may
pertain to a single individual's application or to a type of error
affecting a class of applications. Since this redetermination
constitutes a review of the initial decision and not a de novo
investigation, the State Exchange must base its request on
documentation and other information

[[Page 658]]

already submitted to HHS (for example, if the application lacked income
information, the State Exchange may not retrospectively seek this
documentation and add it to the record). Any issues that do not relate
to an error identified by HHS in the initial error findings decision
would not be addressed.
At paragraph (a)(2), we are proposing language that the
State Exchange must include all data and information that support the
State Exchange's request for a redetermination. Note that while State
Exchanges are able to submit data and information in requesting a
redetermination, new information submitted as part of the request for
redetermination should supplement data previously submitted as part of
the SEIPM data request form for the benefit year under review and would
be accepted at HHS' discretion. State Exchanges may not use the
redetermination process as a means to circumvent prior deadlines for
submitting data or information to HHS.
At paragraph (a)(3), we are proposing language that would
require a State Exchange to provide an explanation of how the data and
information submitted under paragraph (a)(2) pertains to the error(s)
identified in the error findings decision. The State Exchange should
clearly articulate how the data and information is related to HHS'
findings, and also how it impacts HHS findings. If a State Exchange
does not provide this explanation, HHS would not anticipate or assume a
State Exchange's reasoning in requesting a redetermination on a
particular error.
At paragraph (b), we are proposing language regarding the
issuance of redetermination decision. The redetermination of an error
findings decision would be issued within the deadline prescribed in the
annual program schedule. Our goal is to ensure that each State Exchange
has ample time to assess the error findings decision, give HHS adequate
time to thoroughly evaluate a State Exchange's request for a
redetermination, and calculate an improper payment rate in adequate
time to publish aggregate findings across all State Exchanges in the
Agency Financial Report. As with the error findings decision, we
anticipate HHS' redetermination decisions would be issued at regular
and recurring points of time within the measurement year during each
review cycle and in accordance with the annual program schedule.
However, we also recognize that certain circumstances could result in
necessary delays, for example, public health emergencies, natural
disasters, interruptions in business operations, or other extenuating
circumstances. Thus, we are proposing that if these types of
circumstances result in HHS needing additional time to render the
redetermination decisions, a state Exchange would be notified of the
delay.
At paragraph (c), we are proposing language conveying the
minimum content requirements for HHS' redetermination decision.
At paragraph (c)(1), we are proposing language specifying
that HHS' decision must address its findings regarding the impact of
any additional data and information provided by the State Exchange on
the error(s) for which the State Exchange requested a redetermination.
At paragraph (c)(2), we are proposing language that would
establish HHS' responsibility to give a State Exchange information
about the right to request an appeal of the redetermination of error
findings decision in accordance with proposed Sec. 155.1530.
g. Appeal of Redetermination Decision (Sec. 155.1530)
We are proposing to add new Sec. 155.1530 to address a State
Exchange's ability to request an appeal of the redetermination
decision. Appeals will be administered by HHS.
At paragraph (a), we are proposing language regarding a
State Exchange's right to request an appeal of a redetermination within
the deadline prescribed in the annual program schedule. Moreover, we
are proposing that, in the request for an appeal, the State Exchange
must indicate the specific error(s) identified in the redetermination
decision for which the State Exchange is requesting an appeal. In
accordance with proposed Sec. 155.1530(d), which specifies that
findings would be restricted to those errors for which a
redetermination was sought, this proposed language also indicates that
a State Exchange is prohibited from requesting an appeal of any
error(s) that were not specified in a State Exchange's redetermination
request.
At paragraph (b), we are proposing language that conveys
the appeal entity's review would be an on-the-record review, meaning
that the appeal entity would only review data and information provided
at the time of a State Exchange's redetermination request. No
additional new data or information submitted in support of the request
for appeal would be considered.
At paragraph (c), we are proposing language that the
appeal decision would be issued within the deadline prescribed in the
annual program schedule. Again, as with the earlier time frames set in
the annual program schedule, the time frame for appeal allows HHS
adequate time to review information provided by the State Exchange,
assess errors, and calculate an improper payment rate in adequate time
to publish findings in the Agency Financial Report. We also acknowledge
that unforeseen circumstances could result in necessary delays in the
issuance of the appeal decision for example, public health emergencies,
natural disasters, interruptions in business practices, or other
extenuating circumstances. Thus, we are proposing that if these types
of circumstances necessitate the appeals entity's need for additional
time in rendering an appeal decision, the State Exchange would be
notified about the delay.
At paragraph (d), we are proposing the content of the
appeal decision.
At paragraph (d)(1), we are proposing that the appeal
decision would include the final disposition of the on-the-record
review and that findings would be restricted to those error(s) for
which an appeal was sought.
At paragraph (d)(2), we are proposing that the appeal
decision would include the estimated improper payment rate for the
State Exchange.
At paragraph (e), we are proposing that upon completion of
the review and the closure of all appeals, HHS would issue to each
individual State Exchange, a report containing the error findings and
the estimated improper payment rate for their respective program. That
report will not be made public. The estimated improper payment rates
for each State Exchange will be used to estimate an aggregate improper
payment rate across all State Exchanges. That aggregate rate will be
published in the agency's Annual Financial Report.
h. Corrective Action Plan (Sec. 155.1535)
We propose to add new Sec. 155.1535 to address the scenario in
which a State Exchange's improper payment rate for a given benefit
year, in HHS's reasonable discretion, necessitates a CAP to correct the
causes of any payment errors. Our goal is to lay out a set of minimum
requirements in future rulemaking, using the standards provided under
Appendix C to OMB Circular No. A-123, to support State Exchanges in
satisfying the requirement of developing, implementing, and monitoring
a CAP. Otherwise, State Exchanges should have the flexibility to
conduct these activities in a manner that is tailored to their specific
needs, including any standard practices, policies and procedures, or
business needs. We also anticipate that there

[[Page 659]]

would be collaboration required between HHS and the State Exchange to
ensure the effectiveness of any CAP, and we underscore the importance
of maintaining open lines of communication on significant CAP-related
updates. As needed, a State Exchange should be prepared to consult with
HHS and provide timely responses to any requests for clarification or
additional information regarding the CAP.
As we gather additional information and data, and observe trends
based on experience with implementing the SEIPM program, we will detail
CAP parameters or requirements in future rulemaking. We note, as well,
that the first improper payment report would not be released until
November 2025 at the earliest, and so the first SEIPM program CAP
likely would not be due until early 2026.
At paragraph (a), we propose that, depending on a State
Exchange's error rate for a given benefit year, we may require the
State Exchange to develop and submit a CAP to HHS to correct errors
resulting in improper payments. In future rulemaking, we may define a
threshold error rate, dollar amount, or other scenarios that could
necessitate a CAP. We do not, however, anticipate that these standards
would deviate significantly from the standards of other improper
payment measurement programs, such as the standards under the Medicaid
and CHIP Payment Error Rate Measurement (PERM) program.
At paragraph (b), we propose that Appendix C to OMB
Circular No. A-123 would serve as a minimum set of guidelines to any
State Exchange that is developing a CAP. The State Exchange otherwise
has broad discretion to utilize a format tailored to its specific
needs, so long as it can demonstrate that the CAP is effectively and
timely correcting error causes.
At paragraph (c), we propose that a State Exchange would
be required to develop an implementation schedule to accompany its CAP,
and implement any CAP initiatives in accordance with that schedule. In
conjunction with completing CAP initiatives timely, a State Exchange
would be required to regularly evaluate whether those initiatives are
effective at correcting errors identified. It is critical that the
State Exchange maintains regular communications with HHS of any
evaluation findings, particularly for any CAP initiatives that are not
correcting errors. In this situation a State Exchange may need to
revise or discontinue these initiatives, or develop new ones.
At paragraph (d), we propose the recourse HHS has in the
event that a State Exchange that is required to submit a CAP fails to
timely do so by stating that HHS may take actions consistent with Sec.
155.1540.
i. Failure To Comply (Sec. 155.1540)
We propose to add new Sec. 155.1540 that would address failures to
comply with SEIPM requirements. At paragraph (a), we propose that HHS
would have discretion to address failures of compliance with audit data
submission and CAP requirements contained in subpart P, consistent with
authorities HHS possesses under title I of the ACA or any other Federal
law.
Based on experiences with other audit programs, HHS is of the view
that without measures to ensure State Exchanges' compliance with SEIPM
requirements, the audit program could easily become frustrated and
inefficient, needlessly burdensome to the government and wasteful of
government funds and resources, as well as ineffective to detect and
prevent improper payments of APTC in State Exchanges. HHS finds that
such failures would undermine or prohibit HHS's efficient
administration of Exchange activities, including the administration of
APTC. For this reason, we propose that if a State Exchange fails to
substantially comply with the data collection requirements or the CAP
provisions contained in subpart P, HHS may implement measures or
procedures in relation to the State Exchange that HHS determines are
appropriate to secure compliance with data collection and CAP
provisions contained in subpart P of this part, and to detect, prevent,
or reduce abuses in the administration of APTC under title I of the
ACA, so long as such actions are within HHS's authorities under title I
of the ACA or any other Federal law.
The ACA grants HHS broad discretion to ensure the effective and
efficient administration of Exchange activities through audits and
other authorized means, such as those HHS proposes in this rule to
support its compliance with the PIIA.\283\ Section 1313(a)(5) of the
ACA authorizes HHS to implement any measure or procedure it determines
appropriate to reduce fraud and abuse in the administration of title I
of the ACA, which includes the conduct of APTC eligibility
determinations and the administration of APTCs. HHS is considering
exercising this authority to ensure State Exchange compliance with
SEIPM program data collection and CAP requirements. For instance, upon
a State Exchange's failure to substantially comply with data collection
requirements, HHS could require the State Exchange to provide on-site
access to required data and Exchange personnel capable of displaying
requested data directly to HHS personnel or contractors.\284\ If a
State Exchange failed to substantially comply with requirements under
an existing CAP, HHS could require the State Exchange to revise the CAP
and its related implementation plan to contain revised or additional
requirements specifically designed to address the State Exchange's
compliance failures and ensure the State Exchange's future compliance
with CAP requirements. We seek comment on these measures and invite
suggestions for other measures HHS might undertake in relation to State
Exchanges to incentivize compliance with data collection and CAP
requirements (or cure non-compliance) and to ensure the efficient
administration of APTCs.
---------------------------------------------------------------------------

\283\ Although proposed Sec. 155.1540 and other rules we
propose to codify in part 155, subpart P, are specifically intended
to support compliance with requirements under the PIIA, section
1313(a)(3) also authorizes HHS to subject State Exchanges to annual
financial audits.
\284\ See, for example, section 1313(a)(2) of the ACA (HHS may
investigate the affairs of an Exchange, may examine the properties
and records of an Exchange, and may require periodic reports in
relation to activities undertaken by an Exchange, and an Exchange
must fully cooperate in any investigation conducted under this
paragraph).
---------------------------------------------------------------------------

We note that if the proposed SEIPM program requirements are
finalized, HHS does not anticipate broad or willful noncompliance with
data collection and CAP requirements by State Exchanges. Rather, we
expect that HHS and State Exchanges would continue to work
collaboratively to ensure the accuracy and integrity of APTC
eligibility determinations and payments during SEIPM audits. Where a
State Exchange's compliance failure is due to impediments outside of
the Exchange's control or due to its need for technical assistance, HHS
would provide such technical assistance and, when appropriate, could
grant reasonable accommodations (such as additional time to submit data
or implement elements of a CAP), in order to provide the State Exchange
the resources and support it needs to meet SEIPM audit requirements.
Considering the extremely close working relationships between HHS and
State Exchanges and their combined interests in ensuring the integrity
of APTC eligibility determinations, HHS does not anticipate that it
would need to exercise its authority under title I of the ACA to impose
financial penalties for substantial noncompliance resulting from
serious or willful noncompliance with SEIPM requirements. Rather, we

[[Page 660]]

expect that such penalties would be necessary to address only the most
egregious situations that would amount to serious misconduct in
relation to a State Exchange's administration of APTCs and its failure
to comply with audit requirements.\285\
---------------------------------------------------------------------------

\285\ See, for example, section 1313(a)(4) of the ACA (in such
cases, the Secretary may rescind from payments due to the State an
amount not to exceed one percent of such payments until corrective
actions are taken by the State and determined to be adequate by the
Secretary).
---------------------------------------------------------------------------

We invite comment on these proposals.

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

1. FFE and SBE-FP User Fee Rates for the 2023 Benefit Year (Sec.
156.50)
Section 1311(d)(5)(A) of the ACA permits an Exchange to charge
assessments or user fees on participating health insurance issuers as a
means of generating funding to support its operations. If a state does
not elect to operate an Exchange or does not have an approved Exchange,
section 1321(c)(1) of the ACA directs HHS to operate an Exchange within
the state. Accordingly, in Sec. 156.50(c), we specified that a
participating issuer offering a plan through an FFE or SBE-FP must
remit a user fee to HHS each month that is equal to the product of the
annual user fee rate specified in the annual HHS notice of benefit and
payment parameters for FFEs and SBE-FPs for the applicable benefit year
and the monthly premium charged by the issuer for each policy where
enrollment is through an FFE or SBE-FP.
OMB Circular No. A-25 established federal policy regarding user
fees; it specifies that a user fee charge will be assessed against each
identifiable recipient of special benefits derived from federal
activities beyond those received by the general public.
a. FFE User Fee Rates for the 2023 Benefit Year
Activities performed by the federal government that do not provide
issuers participating in an FFE with a special benefit are not covered
by the FFE user fee. As in benefit years 2014 through 2022, issuers
seeking to participate in an FFE in the 2023 benefit year will receive
two special benefits not available to the general public: (1) The
certification of their plans as QHPs; and (2) the ability to sell
health insurance coverage through an FFE to individuals determined
eligible for enrollment in a QHP. For the 2023 benefit year, issuers
participating in an FFE will receive special benefits from the
following federal activities:
Provision of consumer assistance tools;
Consumer outreach and education;
Management of a Navigator program;
Regulation of agents and brokers;
Eligibility determinations;
Enrollment processes; and
Certification processes for QHPs (including ongoing
compliance verification, recertification, and decertification).
To provide additional transparency into HHS' user fee calculation,
we set forth below the costs, premium, and enrollment projections that
went into calculating the proposed 2023 FFE user fee rates based on the
best available data at the time of this proposed rulemaking, to the
extent that none of this information is considered proprietary for
issuers or confidential for the federal government. For the 2023
benefit year, we anticipate that spending on consumer outreach and
education, eligibility determinations, and enrollment process
activities will increase by approximately $140 million above the 2022
benefit year level. We anticipate spending on consumer assistance
tools, management of a Navigator program, regulation of agents and
brokers, and certification of QHPs activities will be similar to what
was estimated for the 2022 benefit year. We do not anticipate any new
services or contracts will fall under the FFE user fees for the 2023
benefit year.
Additionally, we considered a range of premium and enrollment
projections in setting the proposed 2023 benefit year FFE user fee
rates.\286\ The weighted average premium projections that we considered
ranged from $618 to $625 per month. The annual enrollment percentage
change projections that we considered ranged from -1 percent to 2
percent. We took a number of factors into consideration in choosing
which premium and enrollment projections should inform the proposed
2023 FFE user fee rates. The assumption that the enhanced premium tax
credit subsidies in section 9661 of the ARP will expire after the 2022
benefit year significantly influenced our development of the 2023
enrollment and premium projections.\287\ We expect the expiration of
this provision of the ARP to revert enrollment and premium projections
to the pre-ARP level observed in the 2020 benefit year. Our 2023
enrollment estimates also account for the 2021 benefit year transition
(and projected transitions through the 2023 benefit year) of states
from FFEs or SBE-FPs to State Exchanges, as well as the enrollment
impacts of section 1332 state innovation waivers. We project that 2023
benefit year premiums will generally increase at the rate of medical
inflation after expiration of the enhanced premium tax credit subsidies
in section 9661 of the ARP. After considering the range of costs,
premium and enrollment projections, we propose a 2023 user fee rate
that will not result in a substantial increase to consumer premiums
from prior years, and that also ensures adequate funding for federal
Exchange operations.
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\286\ We used the most recent projections from the Congressional
Budget Office, the Office of Management and Budget, the Office of
the Actuary, and the Office of Financial Management.
\287\ Public Law 117-2.
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As such, based on estimated costs, enrollment, and premiums for the
2023 benefit year, we propose a 2023 benefit year user fee rate for all
participating FFE issuers of 2.75 percent of total monthly premiums.
This is the same user fee rate that we established for the 2022 benefit
year.\288\ We seek comment on this proposal.
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\288\ Part 3 of the 2022 Payment Notice (86 FR 53412).
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b. SBE-FP User Fee Rates for the 2023 Benefit Year
As discussed above, OMB Circular No. A-25 established federal
policy regarding user fees, and specified that a user charge will be
assessed against each identifiable recipient for special benefits
derived from federal activities beyond those received by the general
public. SBE-FPs enter into a Federal platform agreement with HHS to
leverage the systems established for the FFEs to perform certain
Exchange functions, and to enhance efficiency and coordination between
state and federal programs. Accordingly, in Sec. 156.50(c)(2), we
specified that an issuer offering a plan through an SBE-FP must remit a
user fee to HHS, in the timeframe and manner established by HHS, equal
to the product of the monthly user fee rate specified in the annual HHS
notice of benefit and payment parameters for the applicable benefit
year and the monthly premium charged by the issuer for each policy
where enrollment is through an SBE-FP, unless the SBE-FP and HHS agree
on an alternative mechanism to collect the funds from the SBE-FP or
state instead of direct collection from SBE-FP issuers.
The benefits provided to issuers in SBE-FPs by the federal
government include use of the federal Exchange

[[Page 661]]

information technology and call center infrastructure used in
connection with eligibility determinations for enrollment in QHPs and
other applicable state health subsidy programs, as defined at section
1413(e) of the ACA, and QHP enrollment functions under 45 CFR part 155,
subpart E. The user fee rate for SBE-FPs is calculated based on the
proportion of user fee eligible FFE costs that are associated with the
FFE information technology infrastructure, the consumer call center
infrastructure, and eligibility and enrollment services, and allocating
a share of those costs to issuers in the relevant SBE-FPs. To calculate
the proposed SBE-FP rates for the 2023 benefit year, we used the same
assumptions on contract costs, enrollment, and premiums as the proposed
FFE user fee rates. We calculated the SBE-FP user fee rate based on the
proportion of all FFE functions that are also conducted for SBE-FPs.
The final SBE-FP user fee rate for the 2022 benefit year of 2.25
percent of premiums was based on HHS' calculation of the percent of
costs of the total FFE functions utilized by SBE-FPs--the costs
associated with the information technology, call center infrastructure,
and eligibility determinations for enrollment in QHPs and other
applicable state health subsidy programs, which we estimate to be
approximately 80 percent. Based on this methodology, we propose to
charge issuers offering QHPs through an SBE-FP a user fee rate of 2.25
percent of the monthly premium charged by the issuer for each policy
under plans offered through an SBE-FP for the 2023 benefit year. This
is the same user fee rate that we established for the 2022 benefit
year. We seek comment on this proposal.
2. User Fees for FFE-DE and SBE-FP-DE States
Consistent with the removal of Sec. 155.221(j) and the repeal of
the Exchange DE option in part 3 of the 2022 Payment Notice,\289\ we
propose a technical correction to remove from Sec. 156.50 all
references to the Exchange DE option and cross-references to Sec.
155.221(j). In that rule, we also finalized the repeal of the
accompanying user fee rate for FFE-DE and SBE-FP-DE states for 2023;
however, HHS inadvertently did not amend the accompanying regulatory
text in Sec. 156.50 related to the Exchange DE option user fees.\290\
As such, we propose to make conforming changes to Sec. 156.50(c) and
(d) to remove all references to the Exchange DE option and Sec.
155.221(j). Specifically, we propose to remove Sec. 156.50(c)(3), and
amend Sec. Sec. 156.50(d)(1); (d)(2)(i)(A) and (B); (d)(2)(ii);
(d)(2)(iii)(B); (d)(3); (d)(4); (d)(6); and (d)(7) to remove the
references to the Exchange DE option. We seek comment on these proposed
technical amendments.
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\289\ 86 FR 53412 at 53424-53429, 53445. We also clarified that
the repeal of the Exchange DE option is specific to removing the
Exchange DE option codified at Sec. 155.221(j) and the accompanying
FFE-DE and SBE-FP-DE user fees, and that the other federal
requirements applicable to the FFE DE Pathways, as outlined in
Sec. Sec. 155.220, 155.221, and 156.1230, remain intact. See 86 FR
at 53427.
\290\ 86 FR at 53429.
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3. State Selection of EHB-Benchmark Plan for Plan Years Beginning on or
After January 1, 2020 (Sec. 156.111)
a. States' EHB-Benchmark Plan Options
At Sec. 156.111(a), we allow a state to modify its EHB-benchmark
plan by: (1) Selecting the EHB-benchmark plan that another state used
for PY 2017; (2) replacing one or more EHB categories of benefits in
its EHB-benchmark plan used for PY 2017 with the same categories of
benefits from another state's EHB-benchmark plan used for PY 2017; or
(3) otherwise selecting a set of benefits that would become the state's
EHB-benchmark plan. In implementing this section, we stated in the 2019
Payment Notice that we would propose EHB-benchmark plan submission
deadlines in the HHS annual Notice of Benefit and Payment Parameters.
Since we finalized that rule, we have set an early-May deadline for
the submission of EHB-benchmark plans by states for each year from PY
2021-2024.\291\ We believe that requiring these submissions in the
first week of May that is two years before the effective date of the
new EHB-benchmark plan has worked well. The feedback received from
states that have submitted new EHB-benchmark plans indicates that this
timeframe provides the states with enough time to prepare EHB-benchmark
submissions. It also provides CMS with sufficient time to review and
respond to these submissions in advance of issuers needing to make
changes to plan design to conform with EHB changes.
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\291\ For PY 2021, the deadline was May 6, 2019 (see 84 FR at
17534); for PY 2022, it was May 8, 2020 (84 FR at 17534); for PY
2023, it was May 7, 2021 (85 FR at 29226); for PY 2024 it is May 6,
2022 (86 FR at 24232).
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Thus, we do not believe it is necessary to continue proposing
deadlines for EHB-benchmark submissions under Sec. 156.111 in each
annual Notice of Benefit and Payment Parameters. We believe that it is
in the interest of states and issuers that we formalize a consistent,
permanent annual deadline in early-May for EHB-benchmark submissions.
Accordingly, we propose that the first Wednesday in May that is two
years before the effective date of the new EHB-benchmark plan to be the
deadline for states to submit the required documents for the state's
EHB-benchmark plan selection for that PY. For example, under this
proposal, the deadline for PY 2025 would be May 3, 2023, and the
deadline for PY 2026 would be May 4, 2024. We propose corresponding
edits to Sec. 156.111(d) and (e) to reflect this proposed deadline.
If finalized, this proposed deadline would obviate the need to
propose deadlines in future annual Notices of Benefit and Payment
Parameters. We invite comment on this approach, including whether there
are any unforeseen consequences to establishing this perpetual
deadline.
We again emphasize that this would be a firm deadline, 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
deadline with any questions. Although not a requirement, we recommend
states submit applications 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 and submit a complete application by the
deadline. We seek comment on the proposed deadline.
b. Annual Reporting of State-Required Benefits
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

[[Page 662]]

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.
Pursuant to Sec. 156.111(d)(2), 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 PY.
In the 2021 Payment Notice, we finalized July 1, 2021 as the first
deadline for states to submit annual reports to HHS. Additionally, in
the 2022 Payment Notice, HHS finalized July 1, 2022 as the deadline for
states to submit to HHS their annual reports for the second year of
annual reporting. However, we simultaneously announced our intent to
exercise enforcement discretion with regard to the first annual
reporting submission deadline of July 1, 2021 due to delays in
finalizing the reporting templates that states are required to use for
their submissions, delays in issuing additional technical assistance on
defrayal, and the added burden of the COVID-19 PHE on states. Pursuant
to this enforcement posture, we explained that we would not take
enforcement action against states that do not submit an annual report
in 2021. Rather, we would begin enforcing the annual reporting
requirement on July 1, 2022.
Since finalizing the annual reporting requirement in the 2021
Payment Notice, we have received consistent feedback from states and
stakeholders restating the concerns raised by the majority of public
comments on the annual reporting requirement in the 2021 and 2022
Payment Notices. Although we received some comments agreeing that this
policy is important to ensure states are defraying state benefit
requirements consistently, most commenters objected to the policy as
unnecessary, burdensome on states, and without adequate justification.
Several commenters explained that, contrary to HHS' concerns expressed
in the 2021 and 2022 Payment Notices, states are already regularly
making careful assessments about whether their state benefit
requirements are in addition to EHB and are doing so in accordance with
federal requirements. Commenters opposing the reporting policy as
unnecessary also stated that existing regulations already establish
robust requirements for states and issuers to follow when a state
benefit requirement is in addition to EHB and requires defrayal,
including performing actuarially sound analyses of costs associated
with state benefit requirements in addition to EHB when calculating
APTCs. Commenters noted that HHS already has existing authority to
investigate states that are not complying with defrayal requirements
and that, as such, imposing a reporting requirement on states is not
necessary for federal oversight purposes. Other commenters 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 and releases additional
guidance clarifying its defrayal policies.
We have reassessed the value of the annual reporting policy in
light of these comments and other stakeholder feedback and believe it
is important to explore whether there may be ways to achieve compliance
with the defrayal policy without imposing a requirement on states to
submit detailed annual reports on state-required benefits. We therefore
propose to eliminate the requirement at Sec. 156.111(d) and (f) to
require states to annually notify 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'' and any benefits the state has
identified as not in addition to EHB and not subject to defrayal. We
also propose to revise the section heading to Sec. 156.111 to reflect
the proposed removal of the annual reporting requirements such that it
would instead read, ``State selection of EHB-benchmark plan for PYs
beginning on or after January 1, 2020.''
Under this proposal, we would continue to engage 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 also intend to provide additional written technical assistance and
outreach 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 believe this approach
would still effectively promote state compliance with the defrayal
requirement in the interim as we reassess whether or when an annual
reporting policy may be warranted.
Although this proposal would relieve states of the annual reporting
requirements, it would 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 proposal, 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. We also 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).
We solicit comment on this proposal, including on whether we should
retain the reporting requirement or make it voluntary.
4. Provision of EHB (Sec. 156.115)
In the 2019 Payment Notice, we finalized flexibility through which
states may opt to permit issuers to substitute benefits between EHB
categories. In the preamble to that rule, we stated that this option
would promote greater flexibility, consumer choice, and plan innovation
through coverage and plan design options. Under this policy, a state
must notify HHS if will permit issuers to substitute benefits between
EHB categories by the deadlines specified by HHS in future Payment
Notices.
To date, no state has ever notified HHS that it would permit
issuers to substitute benefits between EHB categories. To our
knowledge, no state has ever even approached HHS to discuss the merits
of allowing this flexibility. In addition, we have received feedback
from consumer advocates that the potential for between-category
substitution could be particularly harmful to people living with
chronic conditions and disabilities. Given that this policy has never
been utilized, it has not promoted greater flexibility, consumer
choice, or plan innovation through coverage and plan design options as
intended. Rather, HHS is of the view that it may only create potential
harm for consumers with chronic conditions and disabilities.
Accordingly, whatever theoretical flexibility this policy could have
afforded to states, such untapped flexibility is not justified given
the potential negative effects on consumers. Thus, we propose to
withdraw this flexibility by amending Sec. 156.115 to no longer allow
states to permit issuers to substitute benefits between EHB categories.
In the event we do not finalize this proposal to eliminate the
state option

[[Page 663]]

for between-category substitution, we propose to publish in guidance
future deadlines for states to notify HHS that they wish to permit
issuers to substitute benefits between EHB categories. We believe that
it is in the interest of states and issuers that we establish a static,
permanent annual deadline for such notifications. Accordingly,
consistent with the deadline proposed for state submission of EHB-
benchmark plans, we propose the first Wednesday in May to be the
deadline for states to submit notifications to HHS that they wish to
permit issuers to substitute benefits between EHB categories for the PY
that is 2 years before the PY that the state wishes to permit. For
example, under this alternate proposal, the deadline for issuers to
notify HHS that they wish to permit issuers to substitute benefits
between EHB categories for PY 2025 would be May 3, 2023; and the
deadline for PY 2026 would be May 4, 2024. States wishing to make such
an election must continue to do so via the EHB Plan Management
Community. For additional discussion of this proposed deadline, see the
preamble to Sec. 156.111.
We seek comment on these proposals.
5. Prohibition on Discrimination (Sec. 156.125)
If the proposed nondiscrimination protections are finalized at
Sec. 156.200(e) that would explicitly prohibit discrimination based on
sexual orientation and gender identity; Sec. 156.125(b) would
accordingly require issuers providing EHB to comply with such
nondiscrimination requirements. Specifically, Sec. 156.125(b) states
that an issuer providing EHB must comply with the requirements of Sec.
156.200(e), which currently states that a QHP issuer must not, with
respect to its QHP, discriminate on the basis of race, color, national
origin, disability, age, or sex. Elsewhere in this rule we propose to
amend Sec. 156.200(e) to prohibit discrimination based on sexual
orientation and gender identity. HHS previously codified such
nondiscrimination protections at Sec. 156.200(e), simultaneously
requiring that issuers providing EHB comply with such requirements by
virtue of the cross-reference in Sec. 156.125(b) to Sec. 156.200(e).
However, amendments made in 2020 to Sec. 156.200(e) removed any
reference to sexual orientation and gender identity. If the proposals
at Sec. 156.200(e) are finalized, issuers providing EHB would again be
required under Sec. 156.125(b) to comply with nondiscrimination
protections in Sec. 156.200(e) that prohibit discrimination on the
basis of sexual orientation and gender identity.
In the March 27, 2012 Exchange Standards final rule, we finalized
Sec. 156.200(e) to also prohibit discrimination based on sexual
orientation and gender identity.\292\ In the February 2013 ``Patient
Protection and Affordable Care Act; Standards Related to Essential
Health Benefits, Actuarial Value, and Accreditation; Final Rule'' (EHB
final rule), we finalized at Sec. 156.125 that the nondiscrimination
requirements in Sec. 156.200 also apply to all issuers required to
provide coverage of EHB, thereby prohibiting discrimination based on
factors such as sexual orientation and gender identity.\293\ In the
2020 section 1557 final rule, HHS revised certain CMS regulations,
including Sec. 156.200(e), by removing sexual orientation and gender
identity as bases of discrimination subject to the CMS regulations'
nondiscrimination protections.\294\ As a result, Sec. 156.200(e)
currently prohibits a QHP issuer from discriminating on the basis of
race, color, national origin, disability, age, or sex with respect to
its QHP, but does not reference sexual orientation or gender identity.
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\292\ 77 FR 18310 (March 27, 2012).
\293\ 78 FR 12834 (February 25, 2013).
\294\ 85 FR 37160 (June 19, 2020); See id. at 37218-21 (the 2020
section 1557 final rule revised the following CMS regulations: 45
CFR 147.104, 155.120, 155.220, 156.200, 156.1230).
---------------------------------------------------------------------------

CMS possesses statutory authority independent of section 1557 of
the ACA to prohibit discrimination in the small group and individual
markets pursuant to the authority to define EHB at section 1302(b) of
the ACA.\295\ The statute specifies that in defining EHB the Secretary
must take into account the health care needs of diverse segments of the
population, including women, children, persons with disabilities, and
other groups. The EHB requirements apply to non-grandfathered health
insurance coverage in the individual and small group markets under
section 2707(a) of the PHS Act. CMS has the authority to interpret and
implement these provisions under its general rulemaking authorities in
sections 1321(a)(1)(B) and (D) of the ACA and section 2792 of the PHS
Act. Pursuant to those authorities, HHS finalized in the EHB final rule
that Sec. 156.125 prohibits benefit discrimination on the grounds
articulated by Congress in section 1302(b)(4) of the ACA, as well as
those in Sec. 156.200(e), which at the time included race, color,
national origin, disability, age, sex, gender identity, and sexual
orientation. It is under that same exercise of authority here that
Sec. 156.125 would again prohibit discrimination on the basis of
sexual orientation and gender identity if the proposed changes to
include such factors in the nondiscrimination protections at Sec.
156.200(e) are finalized. Sections 1302(b) and 1321(a)(1)(B) and (D) of
the ACA and section 2707(a) and 2792 of the PHS Act are the same
authorities CMS relies upon for implementation of existing
nondiscrimination protections at Sec. 156.125. Utilizing these same
authorities to again prohibit discrimination based on sexual
orientation and gender identity at Sec. 156.125 by cross-reference to
the nondiscrimination protections at Sec. 156.200(e) would be
consistent with the authority CMS relies upon for the existing
protections at Sec. 156.125 that prohibit discrimination on the basis
of race, color, national origin, disability, age, or sex by cross-
reference to Sec. 156.200(e). We believe such protections are
warranted in light of the existing trends in health care discrimination
and are necessary to better address barriers to health equity for
LGBTQI+ individuals.
---------------------------------------------------------------------------

\295\ 85 FR 37218-21 (June 19, 2020).
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[[Page 664]]

156.125(b) provides that issuers must also comply with Sec. 156.200(e)
which states that ``a QHP issuer must not, with respect to its QHP,
discriminate on the basis of race, color, national origin, disability,
age, or sex.'' \297\ Section 156.110(d) states that an EHB benchmark
plan may not include discriminatory benefit design that contravenes
Sec. 156.125. In the 2016 Payment Notice, we provided examples of
potentially discriminatory practices, and in the 2017 Payment Notice we
noted that we would consider providing further guidance regarding
discriminatory benefit designs in the future.\298\
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\296\ ACA section 1302(b)(4) prohibits discrimination based on
``age, disability, or expected length of life'' and requires that
benefits not be subject to denial based on ``age or expected length
of life, present or predicted disability, degree of medical
dependency, or quality of life.''
\297\ 45 CFR 156.200(e) states that a QHP issuer may not
discriminate based on ``race, color, national origin, disability,
age, or sex.''
\298\ 80 FR 10750 (Feb. 27, 2015). The examples of potentially
discriminatory practices were: (1) Attempting to circumvent coverage
of medically necessary benefits by labeling the benefit as a
``pediatric service,'' thereby excluding adults; (2) refusing to
cover a single-tablet drug regimen or extended release product that
is customarily prescribed and is just as effective as a multi-tablet
regimen, absent an appropriate reason for such refusal; and (3)
placing most or all drugs that treat a specific condition on the
highest cost tiers; 81 FR 12244.
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First, we propose revisions to Sec. 156.125.The proposed revisions
are intended to ensure that benefit designs, and particularly benefit
limitations and plan coverage requirements are based on clinical
evidence. Specifically, we propose that a nondiscriminatory benefit
design that provides EHB is one that is clinically based, that
incorporates evidence-based guidelines into coverage and programmatic
decisions and relies on current and relevant peer-reviewed medical
journal article(s), practice guidelines, recommendations from reputable
governing bodies, or similar sources. Uniformity of applying this
policy will ensure that enrollees are able to access covered benefits
fairly, regardless of the coverage or issuer they choose. Although this
proposal specifically applies to issuers that are required to provide
EHB, we expect that states and other entities will also find this
standard illustrative and helpful when, for example, conducting form
review, issuing guidance, and drafting bills for mandated benefits.
Furthermore, because providing a nondiscriminatory benefit design is a
prerequisite to issuers fulfilling EHB requirements, we would expect
that issuer questions and concerns regarding whether a particular
benefit design may be discriminatory would be addressed the same way as
other EHB issues--by issuers working primarily and cooperatively with
states, where applicable. While states are generally the primary
enforcers of EHB requirements, CMS will be available to assist states
with their enforcement efforts by providing relevant technical
assistance, available data, research, or other information. CMS will
continue to monitor issuer compliance with EHB nondiscrimination
requirements and states' oversight and enforcement activities to
discern whether additional CMS assistance, policy changes, or
rulemaking is necessary.
Under this proposal, unscientific \299\ evidence, disreputable
sources, and other bases or justifications that lack the support of
relevant, clinically based evidence would be an unacceptable basis upon
which to dispute a claim that an issuer's benefit design is
discriminatory. Examples of peer-reviewed medical journals that we
would generally consider reputable for purposes of disputing a
discriminatory benefit design claim include the Journal of the American
Medical Association (JAMA), published by the American Medical
Association; Anesthesia, published by the Association of Anesthetists;
Pediatrics, published by the American Academy of Pediatrics; Physical
Therapy and Rehabilitation Journal, published by the American Physical
Therapy Association; the New England Journal of Medicine (NEJM),
published by the Massachusetts Medical Society; and the American
Journal of Psychiatry, published by the American Psychiatric
Association. We do not propose limiting the scope of acceptable peer-
reviewed journal articles to those authored by persons who have earned
the degree Doctor of Medicine (or M.D.). Rather, we would consider
sufficient peer-reviewed articles authored by other relevant, licensed
health professionals, including, for example, doctors of osteopathy,
chiropractors, optometrists, nurses, occupational therapists,
pharmacists, and dentists.
---------------------------------------------------------------------------

\299\ See Merriam-Webster.com Dictionary, s.v. ``unscientific,''
accessed November 5, 2021, https://www.merriam-webster.com/dictionary/unscientific (defining `unscientific' as ``not based on
or exhibiting scientific knowledge or scientific methodology: Not in
accord with the principles and methods of science'').
---------------------------------------------------------------------------

We would not consider to be acceptable articles that are not peer-
reviewed or that are written primarily for a lay audience. For example,
we would not find relevant or consider a WebMD article or blog
acceptable, in and of itself, even where it cites and provides links to
supporting peer-reviewed journal materials. We would also not consider
sufficient a peer-reviewed journal article that has not been accepted
for publication in a reputable medical publication. For example, Health
Affairs would not provide sufficient and reliable support for this
purpose because, although it is peer-reviewed, it is not a medical
journal.
We also believe current evidence-based practice guidelines,
sometimes called clinical guidelines, and recommendations from
reputable governing bodies that are applicable to be a credible source.
For example, we believe that practice guidelines from U.S. government
bodies and government-created bodies, such as the HHS Agency for
Healthcare Research and Quality (AHRQ) and the U.S. Preventive Services
Task Force to be sufficient. Similarly, practice guidelines by health
professional associations such as the American Academy of Family
Physicians, American Academy of Pediatrics, American Society for
Reproductive Medicine, and American Occupational Therapy Association
would be relevant and credible. We also believe that any applicable
source representing current thinking and subject to the previously
discussed criteria would be relevant, since medicine is a constantly
evolving field.
We seek comment on the types of clinically based justifications and
level of clinical evidence that should be acceptable. Specifically, we
seek comment on whether we should further define the types of
acceptable clinical evidence.
Second, we are providing examples that illustrate presumptively
discriminatory practices that HHS believes amount to prohibited
discrimination. Individuals enrolled in health plans that have
discriminatory benefit designs have been negatively impacted by the
inherent design of such health plans. We are concerned that individuals
with significant health needs have been discouraged from enrolling in
such health insurance coverage altogether. Individuals may experience
substantial improvements in health insurance coverage if the EHB
nondiscrimination policy is refined.
In addition, we explain the rationale of why an example benefit
design is presumptively discriminatory under Sec. 156.125. HHS
identified these examples as presumptively discriminatory practices
based on clinical evidence related to each circumstance. We believe
providing examples of presumptively discriminatory benefit designs will
clarify EHB nondiscrimination policy and lead to greater protections
for individuals seeking medically necessary treatment.
These presumptively discriminatory practice examples may point to a
state's

[[Page 665]]

benchmark plan, state law, or an issuer's application of a state's
benchmark plan or law as being the source of the discriminatory benefit
design. A benefit design that is discriminatory and inconsistent with
Sec. 156.125 must be cured regardless of how it originated. Thus, for
example, if a state EHB-benchmark plan has a discriminatory benefit
design, that state may issue guidance to issuers in the state
explaining that to be compliant plans providing benefits that are
substantially equal to the EHB-benchmark plan must not replicate this
design. Similarly, if a state-mandated benefit has a discriminatory
benefit design, the state may attempt to remedy this through revising
the mandate or issuing guidance. Regardless, plans required to provide
EHB would need to alter the benefit design or justify their approach
with clinical evidence when designing plans that meet EHB standards. We
seek comment on whether there are any unforeseen barriers in the
ability to remedy inconsistencies with this refined EHB
nondiscrimination policy.
In ensuring that benefit designs are not discriminatory, issuers
should also consider the method that EHB are delivered and not
inadvertently discriminate based on the service delivery model.
Accessibility to EHB delivered virtually has significantly increased
during the COVID-19 PHE as enrollees had limited options for in-person
health care visits. We note that some issuers have designed health
plans that deliver services virtually with no copay compared to in-
person health care services with a copay. This type of health plan
design could inadvertently incentivize enrollees to access EHB in a
certain delivery method. Although this approach may not be a
discriminatory practice pursuant to Sec. 156.125, such a health plan
design could influence whether an enrollee seeks medically-necessary
in-person care due to the variation in the amount of copayment,
potentially leading to adverse health outcomes. We intend to monitor
the issue and remind issuers that while we encourage expanded use of
EHB virtually, it should be done in a nondiscriminatory manner.
The following is a non-exhaustive list of examples of presumptively
discriminatory benefit designs that address some of the issues that we
have seen most frequently.
Examples: Discrimination Based on Age
1. Limitation on Hearing Aid Coverage Based on Age
a. Background: The National Institute on Deafness and Other
Communication Disorders (NIDCD) defines a hearing aid as a small
electronic device that you wear in or behind the ear. It makes some
sounds louder so that a person with hearing loss can listen,
communicate, and participate more fully in daily activities.\300\ The
FDA defines a hearing aid as ``any wearable instrument or device
designed for, offered for the purpose of, or represented as aiding
persons with or compensating for, impaired hearing.'' \301\
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\300\ National Institute on Deafness and Other Communication
Disorders FAQ on Hearing Aids: https://www.nidcd.nih.gov/health/hearing-aids#hearingaid_01.
\301\ 21 CFR 801.420.
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b. Circumstance: We note that some states have included age limits
in their benefit mandates that require coverage for hearing aids by
specifying in the mandate that such coverage applies only to enrollees
in a certain age group. For example, a state has required hearing aid
coverage for enrollees only up to age 21 with certain cost-sharing
conditions.
c. Rationale: Individuals can experience hearing loss at any stage
of life, and therefore the limitation in coverage would impact an
individual in a different age group who has impaired hearing. Neither
the FDA definition of hearing aid nor NIDCD specifies an age when
individuals need hearing aids. However, the definitions explain that a
hearing aid is for ``a person with hearing loss'' and as ``aiding
persons with or compensating for, impaired hearing.'' Access to hearing
aids can positively affect an individual's communication abilities,
quality of life, social participation, and health.\302\
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\302\ National Academies of Sciences, Engineering, and Medicine.
2016. Hearing Health Care for Adults: Priorities for Improving
Access and Affordability. Washington, DC: The National Academies
Press. https://doi.org/10.17226/23446.
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d. Conclusion: Age limits, when applied to services that have been
found clinically indicated for all ages, are presumed to be
discriminatory under Sec. 156.125. Therefore, limiting coverage of
hearing aids that are medically necessary to enrollees based on age
presumptively conflicts with the prohibition under Sec. 156.125
against discriminatory health plan design. For example, it would be
arbitrary and discriminatory to limit a hearing aid to a subset of
individuals such as enrollees who are 6 years of age and younger since
there may be some older enrollees for whom a hearing aid is medically
necessary.\303\
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\303\ In the 2016 Payment Notice (which finalized as proposed),
we cautioned ``both issuers and States that age limits are
discriminatory when applied to services that have been found
clinically effective at all ages. For example, it would be arbitrary
to limit a hearing aid to enrollees who are 6 years of age and
younger since there may be some older enrollees for whom a hearing
aid is medically necessary.''
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2. Autism Spectrum Disorder (ASD) Coverage Limitations Based on Age
a. Background: According to the American Psychiatric Association,
``[p]eople with ASD may have communication deficits, such as responding
inappropriately in conversations, misreading nonverbal interactions, or
having difficulty building friendships appropriate to their age. In
addition, people with ASD may be overly dependent on routines, highly
sensitive to changes in their environment, or intensely focused on
inappropriate items.'' \304\
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\304\ https://www.psychiatry.org/File%20Library/Psychiatrists/Practice/DSM/APA_DSM-5-Autism-Spectrum-Disorder.pdf.
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b. Circumstance: We note that some states have mandated coverage
for the diagnosis and treatment for ASD up to a certain age. For
example, a state has required coverage for enrollees up to age 18 with
certain cost-sharing conditions. Similarly, some states' benchmark
plans that cover applied behavior analysis (ABA therapy) include age
limits.
c. Rationale: The CDC recognizes the American Psychiatric
Association's fifth edition of the Diagnostic and Statistical Manual of
Mental Disorders (DSM-5) as standardized criteria to help diagnose
ASD.\305\ Under the DSM-5 criteria, individuals with ASD must show
symptoms from early childhood, but may not be fully recognized until
later in life.\306\ We note that screening for ASD is usually done at a
young age although an individual may not be diagnosed until later in
life. The CDC estimates that 2.21 percent of adults in the U.S. have
ASD.\307\
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\305\ https://www.cdc.gov/ncbddd/autism/hcp-dsm.html.
\306\ American Psychiatric Association. Diagnostic and
statistical manual of mental disorders. 5th ed. Arlington, VA:
American Psychiatric Association; 2013.
\307\ https://www.cdc.gov/ncbddd/autism/features/adults-living-with-autism-spectrum-disorder.html.
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d. Conclusion: Limiting coverage of the diagnosis and treatment of
ASD in a plan benefit design on the basis of the individual's age is
presumed to be discriminatory under Sec. 156.125. Limiting coverage
that is medically necessary in a subset of individuals presumptively
conflicts with the prohibition under Sec. 156.125 against
discriminatory benefit design.
3. Age Limits for Infertility Treatment Coverage When Treatment Is
Clinically Effective for the Age Group
a. Background: The National Center for Health Statistics reported
that 8.8 percent of couples in the U.S. have

[[Page 666]]

experienced infertility issues while 9.5 percent have received
infertility services (for example, medical assistance, counseling,
testing for the woman and man, ovulation drugs, fallopian tube surgery,
artificial insemination, assisted reproductive technology, and
miscarriage preventive services).\308\
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\308\ https://www.cdc.gov/nchs/nsfg/key_statistics/i_2015-2017.htm#infertility.
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b. Circumstance: We note that some states have defined
``infertility'' in state law, which impacts insurance companies,
hospitals, medical service corporations, and health care centers
providing coverage for medically necessary expenses of the diagnosis
and treatment of infertility. For example, a state restricted coverage
for treatment of infertility to individuals who are ``presumably
healthy,'' thus excluding from coverage of treatment for infertility
those who are not presumably healthy.
c. Rationale: We note that an individual's age is an important
factor for reproductive health and development. Fertility, especially
in women, declines with age, which makes natural conception more
unlikely as women get older.\309\ However, we also note that the mean
age for individuals experiencing their first childbirth has increased
in recent years.\310\ We also understand that not all individuals would
be eligible for infertility treatment if they are not at the stage of
development for reproduction or have certain medical conditions.
Younger individuals, for example, who are not at the stage of
reproductive development would reasonably not require treatment for
infertility. Older adults as well would not need treatment for
infertility, for example women who have reached post-menopause.
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\309\ https://www.acog.org/womens-health/faqs/having-a-baby-after-age-35-how-aging-affects-fertility-and-pregnancy.
\310\ Mean Age of Mothers is on the Rise: United States, 2000-
2014, NCHS Data Brief No. 232, January 2016, https://www.cdc.gov/nchs/products/databriefs/db232.htm.
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d. Conclusion: Age limits are presumptively discriminatory when
applied to services that have been found clinically effective in
certain age groups under Sec. 156.125. Limiting coverage of the
treatment of infertility in a plan benefit design based on age
presumptively conflicts with the prohibition under Sec. 156.125
against discriminatory benefit design unless clinical evidence
acceptable under the proposed refinements to Sec. 156.125 demonstrates
that such a limitation is justifiable considering an individual's
reproductive health and development. We would expect an issuer to be
able to rebut a presumption that the plan's age limit on coverage for
treatment of infertility is discriminatory by demonstrating clinical
evidence that infertility treatments have low efficacy for the excluded
age groups and/or are not clinically indicated for the excluded age
groups.
Examples: Discrimination Based on Health Conditions
4. Limitation on Foot Care Coverage Based on Diagnosis (Whether
Diabetes or Another Underlying Medical Condition)
a. Background: Routine foot care includes cutting or removing corns
and calluses; trimming, cutting, or clipping or debriding of nails; and
hygienic or other preventive maintenance care, such as using skin
creams, cleaning and soaking the feet.\311\ Although basic foot care is
part of an individual's personal self-care, a health care provider in
certain situations may perform routine foot care for a patient to the
degree that is medically necessary to prevent perpetuation of chronic
conditions.
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\311\ Medicare Benefit Policy Manual. Routine Foot Care. https://www.cms.gov/Regulations-and-Guidance/Guidance/Manuals/Downloads/bp102c15.pdf.
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b. Circumstance: We note that some issuers have restricted coverage
for routine foot care to individuals diagnosed with diabetes. For
example, several issuers have limited coverage for routine foot care to
diabetes care only.
c. Rationale: The American Diabetes Association estimates that over
10 percent of the American population has diabetes, which costs $237
billon for direct medical costs.\312\ The annual cost of diabetic foot
ulcer treatment, for example, is significantly greater than non-
diabetic foot ulcer treatment, estimated at $1.38 billion versus $0.13
billion.\313\ Although diabetes is a vast medical expenditure in the
United States, individuals may need routine foot care to treat other
conditions associated with metabolic, neurologic, or peripheral
vascular disease.\314\
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\312\ https://www.diabetes.org/resources/statistics/statistics-about-diabetes.
\313\ Hicks CW, Selvarajah S, et al. Burden of infected diabetic
foot ulcers on hospital admissions and costs. Ann Vasc Surg
2016;33:149-58. 10.1016/j.avsg.2015.11.025.
\314\ https://wayback.archive-it.org/2744/20191012061156/https:/www.cms.gov/Outreach-and-Education/Medicare-Learning-Network-MLN/MLNMattersArticles/Downloads/SE1113.pdf.
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d. Conclusion: Limiting coverage of routine foot care in a health
plan based on an individual's diagnosis, whether for diabetes or
another underlying medical condition, is presumed to be discriminatory
under Sec. 156.125. Limiting coverage of routine foot care that is
medically necessary for a subset of individuals with other health
conditions presumptively conflicts with the prohibition under Sec.
156.125 against discriminatory benefit designs.
Examples: Discrimination Based on Sociodemographic Factors
5. Coverage of EHB for Gender-Affirming Care
a. Background: We refer to other nondiscrimination proposed
provisions in Sec. 156.200(e) of this rulemaking related to protecting
individuals from discrimination based on sexual orientation and gender
identity. If the proposed provisions in that section are finalized, the
below example will be illustrative of a presumptively discriminatory
benefit design that denies coverage of medically necessary gender-
affirming care on the prohibited basis of gender identity. This example
of presumptive discrimination also aligns with Executive Order 13988,
which stated the Administration's policy on preventing and combating
discrimination on the basis of gender identity and sexual
orientation.\315\
---------------------------------------------------------------------------

\315\ American Psychiatric Association. Diagnostic and
statistical manual of mental disorders. 5th ed. Arlington, VA:
American Psychiatric Association; 2013; Executive Order 13988 on
Preventing and Combating Discrimination on the Basis of Gender
Identity or Sexual Orientation, January 20, 2021, see 86 FR 7023.
---------------------------------------------------------------------------

b. Circumstance: The American Psychiatric Association describes
``gender dysphoria'' in transgender individuals as an experience of
psychological distress that results from an incongruence between one's
sex assigned at birth and one's gender identity.\316\ HeathCare.gov
notes that many health plans have unclear terms of coverage for
transgender individuals.\317\ Several states' EHB-benchmark plans
contain either no language addressing coverage for gender dysphoria or
limits coverage for specific gender-affirming services. Some states
have updated their benchmark plan to add specific gender-affirming care
benefits while other states prohibit discrimination based on sexual
orientation and gender identity. We also note that issuers have
published policies \318\ related to specific coverage of gender
affirming-care.
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\316\ https://www.psychiatry.org/patients-families/gender-dysphoria/what-is-gender-dysphoria.
\317\ HealthCare.gov states that ``many health plans are still
using exclusions such as `services related to sex change' or `sex
reassignment surgery' to deny coverage to transgender people for
certain health care services. Coverage varies by state.'' ``These
transgender health insurance exclusions may be unlawful sex
discrimination.'' https://www.HealthCare.gov/transgender-health-care/.
\318\ See, for example, Aetna Gender Affirming Surgery http://www.aetna.com/cpb/medical/data/600_699/0615.html.

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[[Page 667]]

c. Rationale: As discussed in more detail in the preamble to Sec.
147.104(e), transgender individuals face health and health care
disparities, and are at higher risk for many concomitant
conditions.\319\ Clinical evidence supports medically necessary gender
affirming care and demonstrates that such coverage can significantly
improve the health and well-being of individuals accessing medically
necessary care. For example, for individuals diagnosed with gender
dysphoria, the American Medical Association's Council on Science and
Public Health supports the use of hormone therapy and supports health
care providers that prescribe hormone therapy based on scientific
evidence or sound medical opinion.\320\ In addition, other professional
societies have published criteria for guidelines in treating gender
dysphoria and gender-affirming care for transgender people.\321\
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\319\ See, for example, Lesbian, Gay, Bisexual, and Transgender
Health, Healthy People 2020, https://www.healthypeople.gov/2020/
topics-objectives/topic/lesbian-gay-bisexual-and-transgender-
health#:~:text=Research%20suggests%20that%20LGBT%20individuals,%2C2%2
C%203%20and%20suicide; Hafeez, Hudaisa et al. ``Healthcare
Disparities Among Lesbian, Gay, Bisexual, and Transgender Youth: A
Literature Review.'' Cureus vol. 9,4 e1184. 20 Apr. 2017,
doi:10.7759/cureus.1184 (https://www.ncbi.nlm.nih.gov/pmc/articles/PMC5478215/); Fredriksen-Goldsen KI, Kim H-J, Barkan SE, Muraco A
and Hoy-Ellis CP (2013) Health disparities among lesbian, gay, and
bisexual older adults: Results from a population-based study.
American Journal of Public Health 103, 1802-1809; Billy A. Caceres
et al. ``A Systematic Review of Cardiovascular Disease in Sexual
Minorities'', American Journal of Public Health 107, no. 4 (April 1,
2017): pp. e13-e21.
\320\ Report of the Council on Science and Public Health, AMA.
Hormone Therapies: Off-Label Uses and unapproved Formulations
(Resolution 512-A-15). https://www.ama-assn.org/sites/ama-assn.org/files/corp/media-browser/2016-interim-csaph-report-4.pdf.
\321\ World Professional Assn for Transgender Health, Standards
of Care Version 7 (2018), available at https://www.wpath.org/publications/. J Clin Endocrinol Metab, November 2017, 102(11):3869-
3903 https://academic.oup.com/jcem.
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d. Conclusion: Pursuant to Sec. Sec. 156.125 and 156.200(e), as we
have proposed to amend these provisions, benefit designs that restrict
coverage of EHB due to gender identity are presumptively
discriminatory. A health plan design, for example, is presumed to be
discriminatory Sec. Sec. 156.125 and 156.200(e) if it limits coverage
of an EHB based on gender identity in treating gender dysphoria when
clinical evidence demonstrates that such coverage is medically
necessary to provide gender-affirming care. For example, excluding
coverage of medically necessary hormone therapy for treatment of gender
dysphoria where hormone therapy is otherwise a covered EHB is
presumptively discriminatory.
6. Access to Prescription Drugs for Chronic Health Conditions: Adverse
Tiering
Adverse tiering of prescription drugs presents unique issues
different from presumptively discriminatory benefit designs in other
categories of EHB. We acknowledge that cost is often an important
factor in how plans and issuers, and their pharmacy benefit managers
(PBMs) where applicable, tier their drugs and note that plans and
issuers are permitted to use reasonable medical management practices
and consider cost in structuring plan designs and cost sharing.
However, we clarify that relying on cost alone is an insufficient basis
to defend an otherwise discriminatory benefit design. An issuer
providing EHB must not discriminate in its prescription drug tiering
structure by discouraging enrollment of individuals with significant
health needs. As proposed in Sec. 156.125(a), in order to not
discriminate, the issuer's EHB prescription drug benefit design must be
clinically based. Factors that might be relevant to successfully
demonstrating to CMS that the prescription drug tiering is not
discriminatory would be demonstrating that neutral principles were used
in assigning tiers to drugs and that those principles were consistently
applied across types of drugs, particularly as related to other drugs
in the same class (for example, demonstrating that the issuer or PBM
weighed both cost and clinical guidelines in setting tiers).
a. Background: QHP issuers are allowed to structure and offer
tiered prescription drug formularies. As a result, QHPs will have
different tier structures depending on decisions, including on the
basis of cost, that issuers make about their formulary structures.
However, there is concern that formulary tiers may also be structured
to discourage enrollment by consumers with certain chronic conditions.
One approach to this, called adverse tiering, occurs when plans
structure the formulary by assigning all or the majority of drugs for
certain medical conditions to a high-cost prescription drug tier.\322\
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\322\ Jacobs, Douglas B. and Sommers, Benjamin D. ``Using Drugs
to Discriminate--Adverse Selection in the Insurance Marketplace.''
New England Journal of Medicine. 372:399-402. 29 Jan 2015. <http://www.nejm.org/doi/citedby/10.1056/NEJMp1411376#t=citedby>.
---------------------------------------------------------------------------

b. Circumstance: Individuals with certain chronic health
conditions, for example, have reported that the majority of their
prescription drugs have been designated as specialty drugs and placed
in the highest cost tier. Individuals have also seen most or all
prescription drugs in the same therapeutic class, used to treat their
chronic health condition, placed on the highest cost tiers.
c. Rationale: More than half of U.S. adults are diagnosed with a
chronic condition. In 2018, prevalence of multiple chronic conditions
was higher among women, non-Hispanic white adults, older adults, adults
aged 18-64 enrolled in Medicaid, adults dually eligible for Medicare
and Medicaid, and adults in rural areas.\323\ Adults with certain high-
cost chronic conditions require long-term treatment to manage their
chronic health conditions. Health benefit designs with adverse tiering
may discriminate based on an individual's present or predicted
disability or other health conditions in a manner prohibited by Sec.
156.125(a).
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\323\ Boersma P, Black LI, Ward BW. Prevalence of Multiple
Chronic Conditions Among U.S. Adults, 2018. Prev Chronic Dis
2020;17:200130. DOI: http://dx.doi.org/10.5888/pcd17.200130.
---------------------------------------------------------------------------

d. Conclusion: The 2016 Payment Notice provides that if an issuer
places most or all drugs that treat a specific condition on the highest
cost tiers, that such plan designs possibly discriminate against,
individuals who have those chronic high cost conditions under Sec.
156.125. We are clarifying that such instances of adverse tiering are
presumptively discriminatory and that issuers and PBMs assigning tiers
to drugs should weigh cost of drugs on their formulary with clinical
guidelines for any such drugs used to treat high-cost chronic health
conditions to avoid tiering such drugs in a manner that would
discriminate based on an individual's present or predicted disability
or other health conditions in a manner prohibited by Sec. 156.125(a).
In addition, we indicated in the 2014 Letter to Issuers that we
will notify an issuer when we see an indication of a reduction in the
generosity of a benefit in some manner for subsets of individuals that
is not based on clinically indicated, reasonable medical management
practices.\324\ Issuers should expect to cover and provide sufficient
access to treatment recommendations that have the highest degree of
clinical consensus based on available data, such as professional
clinical practice guidelines. Placing all drugs for a high cost chronic
condition on the highest formulary tier is a presumed discriminatory
benefit design, even when those drugs are costly. Plans and issuers
that tier specialty drugs higher

[[Page 668]]

for certain chronic conditions should expect to demonstrate that
neutral principles were used in assigning tiers to such drugs and that
those principles were consistently applied across types of drugs (for
example, that the issuer weighed both cost and clinical guidelines in
setting tiers).
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\324\ Letter to Issuers on Federally-facilitated and State
Partnership Exchanges, April 5, 2013, page 15 and 2015 Letter to
Issuers in the Federally facilitated Marketplaces, March 14, 2014,
page 29.
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For example, a generic drug requiring no special handling that is
inexpensive to obtain might be rightly placed on a generic tier or the
lowest tier whereas a specialty drug requiring special handling and
counseling, and that is also very costly, might be rightly placed on
specialty tier that has the highest cost sharing. However, a generic
drug or common brand drug that does not require special handling,
counseling, or medication management, and is not expensive, should not
be placed on a specialty tier just because it is used to treat a
condition that is a high-cost chronic condition. Furthermore, issuers
and PBMs should pay close attention to any instances where all drugs to
treat chronic conditions are placed on the highest-cost tiers.
In relation to the proposed refinement of the nondiscrimination
standard under Sec. 156.125, we propose that the policy become
effective 60 days after publication of the final rule in the Federal
Register. We seek comment on this proposed effective date.
In addition, we recognize that other nondiscrimination and civil
rights law may apply. These laws are distinct from the
nondiscrimination requirements in CMS regulations, and compliance with
Sec. 156.125 is not determinative of compliance with any other
applicable requirements, nor is additional enforcement precluded.
Section 156.125 does not apply to the Medicaid and CHIP programs, but a
parallel provision applies to EHB furnished by Medicaid Alternative
Benefit Plans.\325\ We intend to provide additional examples and
illustrative fact patterns of benefit designs that are discriminatory
pursuant to Sec. 156.125 in the future, as warranted. We seek comment
on the nondiscrimination examples in this proposal and whether the
proposed effective date is sufficient to implement the refined policy.
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\325\ 42 CFR 440.347(e).
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7. Publication of the 2023 Premium Adjustment Percentage, Maximum
Annual Limitation on Cost Sharing, Reduced Maximum Annual Limitation on
Cost Sharing and Required Contribution Percentage in Guidance (Sec.
156.130)
As established in part 2 of the 2022 Payment Notice, HHS will
publish the premium adjustment percentage, the required contribution
percentage, and maximum annual limitations on cost sharing and reduced
maximum annual limitation on cost sharing, in guidance annually
starting with the 2023 benefit year. We note that these parameters are
not included in this rulemaking, as HHS does not propose to change the
methodology for these parameters for the 2023 benefit year and
therefore, HHS is required to publish these parameters in guidance no
later than January 2022.
8. Levels of Coverage (Actuarial Value) (Sec. Sec. 156.140, 156.200,
156.400)
HHS proposes to change the de minimis ranges at Sec. 156.140(c)
beginning in PY 2023 to +2/-2 percentage points for all individual and
small group market plans subject to the AV requirements under the EHB
package, other than for expanded bronze plans,\326\ for which HHS
proposes a de minimis range of +5/-2. Under Sec. 156.200, HHS
proposes, as a condition of QHP certification, to limit the de minimis
range to +2/0 percentage points for individual market silver QHPs; HHS
also proposes under Sec. 156.400 to specify a de minimis range of +1/0
percentage points for income-based silver CSR plan variations.
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\326\ Expanded bronze plans are bronze plans currently
referenced in Sec. 156.140(c) that cover and pay for at least one
major service, other than preventive services, before the deductible
or meet the requirements to be a high deductible health plan within
the meaning of section 223(c)(2) of the Code.
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Section 2707(a) of the PHS Act and section 1302 of the ACA direct
issuers of non-grandfathered individual and small group health
insurance plans (including QHPs) to ensure that these plans adhere to
the levels of coverage specified in section 1302(d)(1) of the ACA. A
plan's level of coverage, or actuarial value (AV), is determined based
on its coverage of the EHB for a standard population. Section
1302(d)(1) of the ACA requires a bronze plan to have an AV of 60
percent, a silver plan to have an AV of 70 percent, a gold plan to have
an AV of 80 percent, and a platinum plan to have an AV of 90 percent.
Section 1302(d)(2) of the ACA directs the Secretary of HHS to issue
regulations on the calculation of AV and its application to the levels
of coverage. Section 1302(d)(3) of the ACA authorizes the Secretary to
develop guidelines to provide for a de minimis variation in the
actuarial valuations used in determining the level of coverage of a
plan to account for differences in actuarial estimates.
In the EHB Rule at Sec. 156.140(c), we established that the
allowable de minimis variation in the AV of a health plan that does not
result in a material difference in the true dollar value of the health
plan was +2/-2 percentage points. In the 2018 Payment Notice, we
revised Sec. 156.140(c) to permit a de minimis variation of +5/-2
percentage points for bronze plans that either cover and pay for at
least one major service other than preventive services before the
deductible or meet the requirements to be a high deductible health
plans (HDHP) within the meaning of section 223(c)(2) of the Code. In
the 2017 Market Stabilization final rule, effective for PY 2018, we
expanded the de minimis range for standard bronze, silver, gold, and
platinum plans to +2/-4.\327\ In that final rule, we stated that we
believed that flexibility was needed for the AV de minimis range for
metal levels to help issuers design new plans for future PYs, thereby
promoting competition in the market.\328\ In addition, we noted that
changing the de minimis range would allow more plans to keep their cost
sharing the same as well as provide additional flexibility for issuers
to make adjustments to their plans within the same metal level. We
stated our view that a de minimis range of +2/-4 percentage points
provided the flexibility necessary for issuers to design new plans
while ensuring comparability of plans within each metal level.
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\327\ We did not in that rule modify the de minimis range for
the income-based silver CSR plan variations (the plans with an AV of
73, 87 and 94 percent) under Sec. Sec. 156.400 and 156.420. The de
minimis variation for an income-based silver CSR plan variation is a
single percentage point. In the Actuarial Value and Cost-Sharing
Reductions Bulletin (2012 Bulletin) issued on February 24, 2012, we
explained why we did not intend to require issuers to offer a silver
CSR plan variation with an AV of 70 percent; to align with this
change, we also modified the de minimis range for expanded bronze
plans from +5/-2 to +5/-4.
\328\ 82 FR at 18369.
---------------------------------------------------------------------------

Since we finalized these de minimis ranges in the 2018 Payment
Notice and the 2017 Market Stabilization final rule, we have observed
an increasing percentage of bronze plans offered on HealthCare.gov with
AVs in the upper end of the current de minimis range. In PY 2018, 8.45
percent of all bronze plans offered on HealthCare.gov had an AV between
64 and 65 percent. In PYs 2019 and 2020, this number grew to 14.29
percent and 24.44 percent, respectively. For PY 2021, 67.55 percent of
bronze plans offered on HealthCare.gov had an AV between 64 and 65
percent. As the cost of health care services continues to increase, we

[[Page 669]]

expect more bronze plans to have an AV of at least 64 percent in future
PYs.
[GRAPHIC] [TIFF OMITTED] TP05JA22.024

During PYs 2018 through 2021, as the percentage of bronze plans
within the upper limit of the +5/-4 percentage point range increases,
the percentage of silver plans offered on HealthCare.gov within the
lower end of the current +2/-4 percentage point range has remained
consistent, with less than a third of silver plans having an AV between
66 and 68 percent.
[GRAPHIC] [TIFF OMITTED] TP05JA22.025

Despite the consistency of silver plan distribution by AV
percentage, the number of enrollees in silver plans on HealthCare.gov
within the lower end of the current +2/-4 percentage point range has
decreased each year since 2018, while the number of enrollees in bronze
plans within the upper end of the current +5/-4 percentage point range
has increased each year since 2018.
[GRAPHIC] [TIFF OMITTED] TP05JA22.026

As the availability of and enrollment in bronze plans within the
upper end of the current de minimis range increases and the enrollment
in silver plans within the lower end of the current de minimis range
decreases, we believe that it is increasingly important for consumers
to be able to distinguish the levels of coverage between bronze plans
and silver plans and be assured that the level of coverage of their
plan corresponds to the relevant metal tier. We are not confident that
consumers can reliably distinguish plans that have similar AV
percentages, but significantly different cost sharing. Despite their
similar AVs, there is generally a 10 percentage point difference in
median coinsurance per EHB between expanded bronze and base silver
plans offered on HealthCare.gov. The difference between copayment
amounts for expanded bronze plan and base silver plan is also apparent.
[GRAPHIC] [TIFF OMITTED] TP05JA22.027

[[Page 670]]

Thus, we are no longer of the view that a silver de minimis range
of +2/-4 percentage points ensures the meaningful comparison of plans
between the silver and bronze levels of coverage. However, we continue
to recognize the importance of permitting issuers to offer expanded
bronze plans because the rationale for expanding the upper limit of the
de minimis range for these plans to +5 still applies to the current
market: Issuers continue to require greater flexibility for bronze plan
design to assist with innovation, premium impact, and future impacts to
the AV Calculator methodology, to ensure that bronze plans can continue
to be more generous than catastrophic plans, and to ensure that HDHPs
can be offered at the bronze level. At the same time, the 2017 Market
Stabilization final rule also noted the narrow difference in bronze and
silver QHPs and therefore, to improve a consumer's ability to
meaningfully compare the bronze and silver levels of coverage, pursuant
to our authority under sections 1302(d)(3) and 1321(a)(1)(A) and (D) of
the ACA, and sections 2707 and 2792 of the PHS Act, we propose changing
the de minimis range for standard silver plans.
Additionally, as shown in Tables 14 and 15, we have observed a
shift in enrollment for gold plans in 2021 and bronze plans since 2019
within the +2/-4 de minimis towards the center of the de minimis (+2/-
2).
[GRAPHIC] [TIFF OMITTED] TP05JA22.028

[GRAPHIC] [TIFF OMITTED] TP05JA22.029

Because of this shift, and for consistency across the metal levels,
which would help reduce potential consumer confusion, we believe it is
appropriate to propose, starting with PYs beginning in 2023, to change
the de minimis ranges for the standard bronze, gold, and platinum
levels of coverage from +2/-4 percentage points to +/-2 percentage
points. Likewise, we have observed a similar shift in enrollment for
expanded bronze plans that currently utilize a +5/-4 de minimis range.
Because of this shift, and to align with the proposal above, we also
propose, starting with PYs beginning in 2023, to change the de minimis
range for expanded bronze plans from +5/-4 to +5/-2.
Further, states generally remain the primary enforcers of the
requirement to meet AV requirements, including, to the extent required
by Sec. 156.135, the use of the federal AV Calculator or an AV
Calculator that utilizes state-specific data under Sec. 156.135(e). In
the 2017 Market Stabilization rule, we stated that states are the
primary enforcers of AV requirements and can apply stricter AV
standards that are consistent with federal law.\329\ We also stated
that a state cannot require issuers to design plans that apply an AV
range that is not consistent with our implementation of section
1302(d)(1) and (d)(3) of the ACA (which defines the metal levels and de
minimis ranges). We reiterate those statements here. Under this
proposal, a state cannot apply an AV range that exceeds +2/-2
percentage points, except for under the proposed expanded bronze range
originally provided for in Sec. 156.140(c).
---------------------------------------------------------------------------

\329\ 82 FR at 18369.
---------------------------------------------------------------------------

In addition to the proposal applicable to non-grandfathered
individual and small group market health insurance coverage market-
wide, we also propose to amend Sec. 156.200(b)(3) to state that,
beginning with year PY 2023, as a requirement for certification, the
allowable variation in AV for individual market silver QHPs would be +
2/0 percentage points. Through the authority granted to HHS in sections
1311(c) and 1321(a) of the ACA to establish minimum requirements for
QHP certification, we propose this narrower de minimis range for
individual market silver QHPs in order to maximize PTC and APTC for
subsidized enrollees. Narrowing the de minimis range of individual
market silver QHPs would influence the generosity of the SLCSP, the
benchmark plan used to determine an individual's PTC. A subsidized
enrollee who has a SLCSP that is currently below 70 percent AV would
see the generosity of their current SLCSP increase, likely accompanied
by a corresponding increase in premium, resulting in an increase in
PTC. As shown in Table 12, since 2018, enrollment in 66.00 to 69.99
percent AV silver plans has decreased and enrollment in 62 to 64.99
percent AV bronze plans has increased; enrollees in such bronze plans
now outnumber enrollees in such silver plans by more than 10 to 1. In
addition, after implementation of the ARP enhanced financial subsidies,
there are even fewer enrollees remaining in silver QHPs with AVs
between 66.00 and 69.99 percent offered through Exchanges that use the
Federal platform. Approximately 248,000 enrollees remain, of which
about 91,000 are unsubsidized. By comparison, enrollment for the
income-based silver CSR variations corresponding to the above silver
QHPs has increased to about 4.2 million. This proposal would reduce the
cost of insurance coverage for an increasing population of subsidized
enrollees. It would also mitigate the net burden of the additional cost
to a decreasing population of unsubsidized enrollees by incentivizing
healthier, subsidy-eligible enrollees to participate in the
Marketplaces.
Thus, we believe maximizing PTC for all subsidized enrollees
justifies a narrower de minimis range on

[[Page 671]]

individual market silver QHPs that have fewer enrollments each year. We
solicit comment on other cost implications the proposal might have.
Finally, we propose changing the de minimis variation for
individual market income-based silver CSR plan variations from +1/-1 to
+1/0 with a proposed revision to the definition of ``De minimis
variation for a silver plan variation'' at Sec. 156.400. Similar to
the +2/0 de minimis proposal for individual market silver QHPs, this
proposal would deliver further subsidization of premiums via increased
APTC and PTC for subsidized enrollees in the income-based silver CSR
plan variations and increase the generosity of these plans. While there
would be an expected increase to the premium for the CSR plan
variations as a result of the increased generosity, it would be
substantially offset by increases to the APTC and PTC. We do not
propose edits to the minimum AV differential in Sec. 156.420(f) for
silver QHPs and 73 percent income-based plan variations, where the AVs
must differ by at least 2 percentage points. We would note for issuers
that, similar to the current de minimis ranges, standard silver QHPs
with plan AVs between 71 and 72 percent would require the corresponding
73 percent income-based plan variation AV to be at least 2 percentage
points above the standard plan's AV.
We seek comment on this proposal.
9. QHP Issuer Participation Standards (Sec. 156.200)
We propose to amend 45 CFR 156.200(e) such that its
nondiscrimination protections would explicitly prohibit discrimination
based on sexual orientation and gender identity. HHS previously
codified such nondiscrimination protections at Sec. 156.200(e), but
amendments made in 2020 to Sec. 156.200(e) removed any reference to
sexual orientation and gender identity. If finalized, this proposal
would revert Sec. 156.200(e) to the pre-2020 nondiscrimination
protections.
Section 156.200(e) states that a QHP issuer must not, with respect
to its QHP, discriminate on the basis of race, color, national origin,
disability, age, or sex. Previously, in the March 27, 2012 Exchange
Standards final rule, we finalized Sec. 156.200(e) to also prohibit
discrimination based on sexual orientation and gender identity.\330\
However, in the 2020 final rule related to section 1557, HHS revised
certain CMS regulations, including Sec. 156.200(e), by removing sexual
orientation and gender identity in Sec. 156.200(e) as bases of
discrimination subject to the CMS regulations' nondiscrimination
protections.\331\
---------------------------------------------------------------------------

\330\ 77 FR 18310 (March 27, 2012).
\331\ 85 FR 37160 (June 19, 2020); See id. at 37218-21 (the 2020
section 1557 final rule revised the following CMS regulations: 45
CFR 147.104, 155.120, 155.220, 156.200, 156.1230).
---------------------------------------------------------------------------

CMS possesses statutory authority independent of section 1557 of
the ACA to prohibit discrimination by issuers of QHPs. Pursuant to
section 1311(c)(1)(A) of the ACA, QHP issuers are required to comply
with applicable state laws and regulations regarding marketing by
health insurance issuers and not employ marketing practices or benefit
designs that will have the effect of discouraging the enrollment of
individuals with significant health needs. CMS is authorized to
interpret and implement this requirement, and to set additional
requirements for QHPs under its authority to establish requirements
with respect to the offering of QHPs through the Exchanges in section
1321(a)(1)(B) of the ACA.\332\ Pursuant to this authority to set QHP
standards in section 1321(a)(1)(B) of the ACA, HHS finalized in the
2012 Exchange Standards final rule requirements at Sec. 156.200(e)
intended to protect enrollees and potential enrollees from
discriminatory practices, including on the basis of sexual orientation
and gender identity. CMS proposes to exercise that same authority here
to amend Sec. 156.200(e) to again prohibit QHPs from discriminating
based on sexual orientation and gender identity. Section 1321(a)(1)(B)
of the ACA is the same authority CMS relies upon for implementation of
existing nondiscrimination protections at Sec. 156.200(e). Utilizing
this same authority to again prohibit discrimination based on sexual
orientation and gender identity at Sec. 156.200(e) would be consistent
with the authority CMS relies upon for the existing protections at
Sec. 156.200(e) that currently prohibit discrimination on the basis of
race, color, national origin, disability, age, or sex. We believe such
amendments are warranted in light of the existing trends in health care
discrimination and are necessary to better address barriers to health
equity for LGBTQI+ individuals.
---------------------------------------------------------------------------

\332\ 85 FR 37218-37221 (June 19, 2020).
---------------------------------------------------------------------------

A more in-depth discussion of these developments and other factors
considered in proposing amendments to CMS nondiscrimination protections
is included earlier in the preamble to Sec. 147.104 under section
III.B.1.b. of this preamble. For brevity, we refer readers back to
Sec. 147.104 under section III.B.1.b. of the preamble, rather than
restating the issues here.
We seek comment on this proposal.
10. Standardized Options (Sec. 156.201)
Section 1311(c)(1) of the ACA directs the Secretary to establish
criteria for the certification of health plans as QHPs. Section
1321(a)(1)(B) of the ACA directs the Secretary to issue regulations
that set standards for meeting the requirements of title I of the ACA
with respect to, among other things, the offering of QHPs through such
Exchanges. HHS proposes to exercise these authorities to require
issuers of QHPs in FFEs and SBE-FPs, for PY 2023 and beyond, to offer
through the Exchange standardized QHP options at every product network
type, as described in the definition of ``product'' at Sec. 144.103,
metal level, and throughout every service area that they offer non-
standardized QHP options. For example, if an issuer offers a non-
standardized gold health maintenance organization (HMO) plan in a
particular service area, that issuer must also offer a standardized
gold HMO plan in that same service area. HHS does not propose to limit
the number of non-standardized QHP options that issuers of QHPs in FFEs
and SBE-FPs can offer through the Exchange in PY 2023. As discussed
later, HHS is considering whether for future years it would be
appropriate to limit the number of non-standardized QHP options that
issuers of QHPs in FFEs and SBE-FPs can offer through the Exchange.
Standardized options were first introduced in the 2017 Payment
Notice. In the first iteration of standardized options, HHS proposed
one set of standardized options designed to be similar to the most
popular QHPs in the 2015 individual market FFEs at the bronze, silver,
and gold metal levels. Issuers were not required to offer standardized
options. To facilitate plan shopping and to educate consumers about the
distinctive cost sharing features of standardized options, standardized
options were differentially displayed on HealthCare.gov per the
authority at Sec. 155.205(b)(1). Specifically, consumers had the
ability to filter plan options to view only standardized options and
received an accompanying message explaining how standardized options
differed from non-standardized options.
In the 2018 Payment Notice, HHS proposed three new sets of
standardized options. The original standardized options from the 2017
Payment Notice were updated to reflect changes in QHP enrollment data
in 2016, to include

[[Page 672]]

SBE-FP data, and to account for state cost sharing laws. Standardized
options were once more differentially displayed, but this time, they
were also labeled ``Simple Choice'' plans to make them more easily
distinguishable from non-standardized options. HHS also established
display requirements for approved web-brokers and QHP issuers using a
direct enrollment pathway to facilitate enrollment through an FFE or
SBE-FP--including both the Classic DE and EDE Pathways--at Sec. Sec.
155.220(c)(3)(i)(H) and 156.265(b)(3)(iv), respectively.
^{333 334} Per these requirements, these entities were required
to differentially display standardized options in accordance with the
requirements under Sec. 155.205(b)(1) in a manner consistent with how
standardized options were displayed on HealthCare.gov, unless HHS
approved a deviation.
---------------------------------------------------------------------------

\333\ See 81 FR at 94117--94118, 94148.
\334\ See 45 CFR 155.220(l) and 155.221(i).
---------------------------------------------------------------------------

Standardized options were then discontinued in the 2019 Payment
Notice, but the discontinuance was challenged in the United States
District Court for the District of Maryland. On March 4, 2021, the
court decided City of Columbus, et al. v. Cochran.\335\ The court
reviewed nine separate policies HHS had promulgated in the 2019 Payment
Notice, vacating four of them. The court specifically vacated the
portion of the 2019 Payment Notice that ceased HHS's practice of
designating some plans in the FFEs as ``standardized options,'' a
policy that the 2019 Payment Notice stated was seeking to maximize
innovation by issuers in designing and offering a wide range of plans
to consumers.\336\ As such, HHS announced its intent to engage in
rulemaking under which it would propose to resume standardized options
in time for PY 2023.\337\ More recently, President Biden's Executive
Order on Promoting Competition in the American Economy directed HHS to
implement standardized options in order to facilitate the plan
selection process for consumers on the Exchanges.\338\
---------------------------------------------------------------------------

\335\ 523 F. Supp. 3d 731 (D. Md. 2021).
\336\ 83 FR 16974--16975.
\337\ In part 3 of the 2022 Payment Notice final rule, we
explained that we would not be able to fully implement those aspects
of the court's decision regarding standardized options in time for
issuers to design plans and for Exchanges to be prepared to certify
such plans as QHPs for PY 2022, and therefore intended to address
these issues in time for plan design and certification for PY 2023.
See 86 FR 24140, 24264.
\338\ Executive Order 14036 on Promoting Competition in the
American Economy, July 9, 2021, see 86 FR 36987.
---------------------------------------------------------------------------

The standardized options that we are proposing are as follows: One
bronze plan, one bronze plan that meets the requirement to have an AV
up to 5 points above the 60 percent standard, as specified in Sec.
156.140(c) (known as an expanded bronze plan), one standard silver
plan, one version of each of the three income-based silver CSR plan
variations, one gold plan, and one platinum plan. We do not propose to
require FFE and SBE-FP issuers to offer standardized options for the
Indian CSR plan variations given that the cost sharing parameters for
these variations are already largely standard. Further, we do not
propose to require State Exchange issuers to offer the standardized
options in this proposal. We also propose that FFE and SBE-FP issuers
that are already required to offer standardized options under state
action taking place on or before January 1, 2020, such as issuers in
the state of Oregon,\339\ be exempt from the standardized options
requirements in this proposal.
---------------------------------------------------------------------------

\339\ See Or. Admin. R. 836-053-0009.
---------------------------------------------------------------------------

Additionally, in an approach similar to that taken in the 2018
Payment Notice, we propose two sets of standardized options to
accommodate different states' cost sharing laws. Specifically, we
propose that the first set of standardized options apply to all FFE and
SBE-FP issuers, excluding Delaware and Louisiana, and we propose that
the second set of standardized options apply to issuers in Delaware and
Louisiana in order to accommodate these two states' specialty tier
prescription drug cost sharing laws.
In conjunction with our standardized options proposal, we are
considering exercising the existing authority under Sec. 155.205(b)(1)
to differentially display standardized options on HealthCare.gov.
Similarly, we are considering resuming enforcement of the standardized
options display requirements for approved web-brokers and QHP issuers
using a direct enrollment pathway to facilitate enrollment through an
FFE or SBE-FP--including both the Classic DE and EDE Pathways--at
Sec. Sec. 155.220(c)(3)(i)(H) and 156.265(b)(3)(iv), respectively. If
we were to resume enforcement of these requirements, these entities
would be required to differentially display standardized options
beginning with the PY 2023 open enrollment period \340\ in accordance
with the requirements under Sec. 155.205(b)(1) in a manner consistent
with how standardized options are displayed on HealthCare.gov, unless
HHS approves a deviation. Any requests from web-brokers and QHP issuers
seeking approval for an alternate differentiation format would be
reviewed based on whether the same or similar level of differentiation
and clarity is being provided under the requested deviation as is
provided on HealthCare.gov.
---------------------------------------------------------------------------

\340\ The PY 2023 OEP is scheduled from November 1, 2022 to
January 15, 2023. See 45 CFR 155.410(e)(3).
---------------------------------------------------------------------------

We continue to believe that the differential display of
standardized options will not require significant modification of web-
broker and QHP issuer platforms, but that such display would provide an
important service and information for consumers seeking to enroll in
Exchange coverage. However, consistent with the approach finalized in
the 2018 Payment Notice,\341\ we also continue to recognize that system
constraints may prevent some web-brokers and QHP issuers from precisely
mirroring the HealthCare.gov display, which is why we would continue to
allow these entities to submit a request to deviate from the manner in
which standardized options are differentially displayed on
HealthCare.gov.
---------------------------------------------------------------------------

\341\ See 81 FR at 94118.
---------------------------------------------------------------------------

If we were to resume enforcement of these requirements, we reaffirm
that a QHP issuer using a direct enrollment pathway to facilitate
enrollment through an FFE or SBE-FP--including both the Classic DE and
EDE Pathways--would only need to differentially display those
standardized options it offers.\342\ Additionally, we intend to provide
access to information on standardized options to web-brokers and QHP
issuers through the Health Insurance Marketplace Public Use Files
(PUFs) and QHP Landscape file to further minimize burden on these
entities. We seek comment on this potential approach to display
requirements.
---------------------------------------------------------------------------

\342\ Ibid.
---------------------------------------------------------------------------

We are proposing this approach for several reasons. The 2019
Payment Notice eliminated standardized options with the intention of
maximizing innovation and variety at a time when the individual market
was considered to be at risk of destabilization. We believe that
current market conditions differ significantly from the market
conditions that defined the individual market when standardized options
were eliminated. For example, the number of issuers offering plans on
the Exchanges has increased considerably, the number of counties with a
single issuer offering plans through the Exchange has decreased
significantly, and the number of plan options that consumers have
access to on the Exchanges has increased substantially since
standardized options were discontinued in the 2019 Payment Notice. With

[[Page 673]]

increased enrollment, increased issuer participation, decreased single
issuer counties, and increased plan options available to consumers, we
believe that resuming standardized options at this time can play a
constructive role in enhancing consumer experience, increasing consumer
understanding, simplifying the plan selection process, combatting
discriminatory benefit designs that disproportionately impact
disadvantaged populations, and advancing health equity.
We are proposing to require issuers offering QHPs through FFEs and
SBE-FPs to offer standardized options, as opposed to allowing them to
choose to offer these standardized options, as was done in the past,
due in large part to the enhanced stability of the market as well as
the consumer benefits derived from the ability to compare the same
plans across different issuers. For example, in the FFEs and SBE-FPs in
PY 2019, there was an enrollee-weighted average of 1.2 catastrophic
plans, 7.9 bronze plans, 12.3 silver plans, 4.6 gold plans, and 1.1
platinum plans available per enrollee, amounting to a total of 25.9
plans available per enrollee. In the FFEs and SBE-FPs in PY 2022, based
on current filing data, it is expected that there will be an enrollee-
weighted average of 2.7 catastrophic plans, 40.4 bronze plans, 45.3
silver plans, 19.2 gold plans, and 1.6 platinum plans available per
enrollee, amounting to a total of 106.5 plans available per enrollee.
The proliferation of choices available to consumers on the Exchanges
that makes it more difficult to meaningfully assess all available plan
options.
The significant increase of plan offerings available on the
Exchanges over the last several PYs highlights the need to facilitate
the plan selection process for consumers. This is because when
consumers are faced with an overwhelming amount of plan choices, each
with slightly different cost sharing structures, these consumers can
experience choice paralysis. Along with plan standardization, there are
additional ways to facilitate more meaningful consumer choice, for
example though directly limiting the number of allowable offerings by
metal level or the imposition of strong meaningful difference
standards. For example, six states limit the number of plans that
issuers can offer through the Exchanges. We believe that requiring
issuers to offer these standardized options will play a constructive
role in facilitating the plan selection process, and we believe it will
enable consumers to make more meaningful comparisons between plan
offerings, thus optimizing the plan selection process. We also believe
that given the large number of plan offerings on the Exchanges, a
sufficiently diverse range of plan offerings exists for consumers to
continue to select innovative plans that meet their unique health
needs. We thus do not believe that requiring issuers to offer
standardized options will hamper innovative plan designs, as we noted
in the preamble to the 2017 Payment Notice.
We are proposing to require issuers in FFEs and SBE-FPs, but not
issuers in State Exchanges to offer standardized options for several
reasons. Eight State Exchanges already require or will require issuers
to offer standardized options by PY 2023. Imposing duplicative federal
standardized options requirements on issuers in State Exchanges that
already have existing state standardized options requirements runs
counter to the aforementioned goals of enhancing the consumer
experience, increasing consumer understanding, simplifying the plan
selection process, combatting discriminatory benefit designs, and
advancing health equity.
Second, we believe State Exchanges are uniquely positioned to best
understand the nature of their respective markets as well as the
consumers in these markets. The eight State Exchanges that require or
will require issuers to offer standardized options by PY 2023 have
conducted extensive stakeholder engagement in designing standardized
options that meet the unique needs of their respective consumers and
stakeholders. As such, we believe State Exchanges are best positioned
to design standardized options for their respective markets. We further
believe that states that have invested the necessary time and resources
to become State Exchanges have done so in order to implement innovative
policies that differ from those on the FFEs. We do not wish to impede
this innovation, so long as these innovations comply with existing
legal requirements. However, because we propose to impose this
requirement in the FFEs, and because the SBE-FPs use the same platform
as the FFEs, we propose to apply the requirements equally on FFEs and
SBE-FPs. Changing the platform to permit distinction on this proposal
between FFEs and SBE-FPs would require a very substantial financial and
operational burden that we believe outweighs the benefit of permitting
such a distinction.
We propose one exemption to the above requirement for FFE and SBE-
FP issuers to offer the specific standardized options that we propose
in this rule. Specifically, we propose that FFE and SBE-FP issuers that
are subject to existing state standardized options requirements under
state action taking place on or before January 1, 2020, such as issuers
in the state of Oregon, be exempt from being required to offer the
specific standardized options that we propose in this rule. We do not
wish to impose duplicative requirements that could conflict with these
existing state standardized options requirements and the QHP plan
designs applicable in such states. Regardless, HHS intends to
differentially display these existing state standardized options on the
Federal platform in the same manner as it displays the specific
standardized options that we propose in this rule.
We also believe that requiring FFE and SBE-FP issuers to offer
standardized options at every product network type, metal level, and
throughout every service area that they also offer non-standardized
options will ensure consumers have access to plans that have greater
pre-deductible coverage, as the standardized options included in this
proposal have greater pre-deductible coverage than most of the most
popular QHPs in the FFEs and SBE-FPs in PY 2021. Additionally, the fact
that these plans have standardized cost sharing parameters will enable
consumers to more meaningfully compare other meaningful plan
attributes, such as networks, formularies, and quality ratings during
the plan selection process, optimizing the plan selection process.
We are not proposing standardized options for the Indian CSR plan
variations at Sec. Sec. 156.420(b)(1) and (2) for several reasons.
First, the cost sharing parameters for the zero cost-sharing Indian CSR
plan variations are already designated. Specifically, in the zero cost-
sharing Indian CSR plan variations, eligible consumers do not have to
pay for any out-of-pocket costs for EHB. Second, in the limited cost-
sharing Indian CSR plan variations, eligible consumers also pay no out-
of-pocket costs for EHB, but only when they receive them from an Indian
health care provider or from another provider with a referral from an
Indian health care provider.
Similar to how we have not specified the cost-sharing parameters
for more than one tier of in-network providers or for out-of-network
providers for the standardized option plan designs that we are
proposing, we are proposing to not specify the cost-sharing parameters
for EHBs received from non-Indian health care providers for limited
cost-sharing Indian CSR plan variations. This is because eligible
consumers will also pay no costs for EHBs provided by

[[Page 674]]

Indian health care providers or from another provider with a referral
from an Indian health care provider, obviating the need to specify the
cost-sharing parameters for this type of plans. Altogether, we believe
that proposing standardized options for the two Indian CSR plan
variations, as well as applying the aforementioned requirements to the
two Indian CSR plan variations, would impose duplicative requirements
with little potential benefit since the cost sharing parameters for
these plans are already specified.
We believe that not limiting the number of non-standardized QHPs
that issuers can offer through the FFEs and SBE-FPs in PY 2023 will
ensure that consumers continue to have access to a range of plans that
meet their unique health needs. Furthermore, we do not wish to cause an
excessive amount of disruption, particularly in too condensed a
timeframe, and we do not wish to cause an excessive number of consumers
to have their coverage under their current plan discontinued for a
future plan year due to limits on the number of non-standardized
options. Therefore, to address choice overload and enhance consumer
choice-making ability, we are considering whether to limit the number
of non-standardized QHPs that issuers can offer through the FFEs and
SBE-FPs in future PYs, particularly in light of the significant growth
in the number of plan choices offered.
We also believe concurrently resuming differential display of
standardized options on HealthCare.gov per the authority at Sec.
155.205(b)(1) as well as resuming enforcement of the accompanying
display requirements applicable to approved web-brokers and QHP issuers
using a direct enrollment pathway to facilitate enrollment through an
FFE or SBE-FP--including both the Classic DE and EDE Pathways--at
Sec. Sec. 155.220(c)(3)(i)(H) and 156.265(b)(3)(iv), respectively, is
important considering that a steadily increasing number of consumers
are enrolling in Exchange plans via these pathways. In addition, it
will further streamline the plan selection and enrollment process for
Exchange consumers, aid consumers in distinguishing standardized
options from non-standardized options, and enhance consumer
understanding of the benefits of standardized options, such as having
more pre-deductible coverage, regardless of whether the consumer uses
HealthCare.gov or a non-Exchange website.
We also note that the comments we received in response to part 3 of
the 2022 Payment Notice informed our decision to resume the designation
of standardized options as well as our specific approach for doing so.
We received substantial comment from diverse stakeholders and carefully
considered these comments. Many commenters recommended requiring
issuers to offer standardized options and differentially or
preferentially displaying standardized options. Commenters explained
the importance of simplifying the complex process of purchasing
insurance and the role that standardized options could play in that
simplification.
Specifically, commenters explained that there is significant
variation in the cost sharing structures of non-standardized options,
much of which cannot be identified without a detailed analysis of
benefit designs. Commenters explained that many individuals do not have
the time, resources, or health literacy necessary for this level of
analysis. Commenters explained that enrollees instead typically choose
plans based on more readily available comparison points, like premiums,
rather than factors that would be illuminated by a more detailed
examination of plan designs, like expected out-of-pocket costs.
Commenters further explained that selecting a plan solely based on its
premium without taking into consideration other attributes of its
design, such as its cost sharing structure, deductible, or expected
out-of-pocket costs, can result in unexpected costs and financial harm
for consumers.
Commenters also explained that barriers to conducting a detailed
analysis of plan designs are particularly pronounced for those whose
resources are already severely constrained, including those with
limited English proficiency, those with inadequate internet access, and
those with complex health needs. Commenters explained that facilitating
consumer understanding and streamlining decision-making in the plan
selection process would benefit these populations as well as
populations with disproportionately high rates of chronic diseases.
Commenters also explained that standardized options could help
individuals more easily identify plans that may have potentially
discriminatory benefit designs. These commenters explained that
discriminatory benefit designs target individuals with particular
disabilities or health conditions by leaving them with substantial out-
of-pocket costs. Commenters explained that conditions that are
typically targeted, including HIV, diabetes, cancer, and mental health
conditions, disproportionately affect individuals of color. Commenters
explained that discriminatory benefit designs continue to violate the
PPACA's protections for people with preexisting conditions and its
prohibition on discrimination based on race, sex, and disability.
All of these considerations informed our decision to resume the
designation of standardized options as well as our specific approach
for designing and implementing standardized options requirements.
Regarding the methodology employed in designing these standardized
options, similar to the approach taken in past iterations of
standardized options in the 2017 and 2018 Payment Notices, we designed
these plans to be similar to the most popular QHPs in FFEs and SBE-FPs
in PY 2021.Several comments we received in response to part 3 of the
2022 Payment Notice proposed rule expressed support for continuing to
use this methodology in our approach to standardized options.
Commenters explained that continuing to use this methodology and
designing plans to be similar to the most popular QHPs in FFEs and SBE-
FPs would minimize the degree of disruption when these requirements are
implemented.
We designed the proposed standardized options to be similar to the
most popular QHPs based on an examination of the proportion of
consumers enrolled in plans with different cost sharing types
(including copay exempt from the deductible, copay subject to the
deductible, coinsurance exempt from the deductible, and coinsurance
subject to the deductible) for every benefit category in the actuarial
value calculator (AVC) at each metal level. We chose the cost sharing
type with the majority or plurality of enrollees. We then chose the
enrollee-weighted median values for this cost sharing type as the copay
amount or coinsurance rate for each benefit category before modifying
these plans to have an AV near the lower end of the de minimis range
for each metal level to ensure the competitiveness of these plans.
Nothing in the design of these standardized options supersedes the
obligation to cover certain benefits, such as the preventive services
required under Sec. 147.130, without cost sharing, even if such
benefits would also fall into a category for which cost sharing is
specified for the standardized option.
We applied this same methodology in selecting the deductible MOOPs
for the proposed plans at each metal level. Specifically, we selected
the enrollee-weighted median values for deductibles

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and MOOPs to ensure these plans would be similar to plans that the
majority or plurality of consumers are already currently enrolled in.
In addition to designing the proposed standardized options to be
similar to the enrollee-weighted medians for each benefit category, we
designed two sets of standardized options to accommodate applicable
state cost sharing laws in different sets of FFE and SBE-FP states.
This is similar to the approach taken the last time standardized
options were offered. Specifically, In the 2018 Payment Notice, we
designed three sets of plans tailored to unique cost sharing laws in
different states. The second and third sets of these standardized
options differed from the first set only to the extent necessary to
comply with state cost sharing laws. The second set of standardized
options in the 2018 Payment Notice was designed to work in states that:
(1) Require that cost sharing for physical therapy, occupational
therapy, and speech therapy be no greater than the cost sharing for
primary care visits; (2) limit the cost-sharing amount that can be
charged for a 30-day supply of prescription drugs by tier; or (3)
require that all drug tiers carry a copayment rather than coinsurance.
The second set of standardized options applied to Arkansas, Delaware
Iowa, Kentucky, Louisiana, Missouri, Montana, and New Hampshire. The
third set was designed to work in a state with maximum deductible
requirements and other cost sharing standards. The third set of
standardized options was designed to work in the Exchange in New
Jersey, which has since transitioned to become a State Exchange and is
thus outside the intended scope of this rulemaking for reasons
described above.
We included several of the defining features of the second set of
standardized options from the 2018 Payment Notice in the first set of
standardized options we are proposing in this rulemaking. As a result,
in the first set of standardized options, there is cost sharing parity
between the primary care visit, the speech therapy, and the
occupational and physical therapy benefit categories. There are also
copays for all prescription drug tiers, including the non-preferred
brand and specialty tiers, instead of coinsurance rates. Finally, the
copayment for the mental health/substance use disorder in-network
outpatient office visit sub-classification is equal to the least
restrictive level for copayments for medical/surgical benefits in the
in-network, outpatient office visit sub-classification (and copayments
apply to substantially all medical/surgical benefits in this sub-
classification), to ensure issuers are able to design plans that comply
with the Paul Wellstone and Pete Domenici Mental Health Parity and
Addiction Equity Act of 2008 (MHPAEA) and its implementing
regulations.\343\ We propose that this first set of standardized
options apply to all FFE and SBE-FP issuers, excluding issuers in
Delaware and Louisiana.
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\343\ In general, MHPAEA requires that the financial
requirements (such as coinsurance and copays) and treatment
limitations (such as visit limits) imposed on mental health or
substance use disorder benefits cannot be more restrictive than the
predominant financial requirements and treatment limitations that
apply to substantially all medical/surgical benefits in a
classification.
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We included all of the defining features of the second set of
standardized options from the 2018 Payment Notice in the second set of
standardized option plan designs we are proposing in this rule. As a
result, in this set of standardized options, similar to the first set
of standardized options, there is cost sharing parity between the
primary care visit, the speech therapy, and the occupational and
physical therapy benefit categories, and there are copays for all
prescription drug tiers, including the non-preferred brand and
specialty tiers, instead of coinsurance rates. Finally, the copayment
for the mental health/substance use disorder in-network outpatient
office visit sub-classification is equal to the least restrictive level
for copayments for medical/surgical benefits in the in-network,
outpatient office visit sub-classification (and copayments apply to
substantially all medical/surgical benefits in this sub-
classification), to ensure issuers are able to design plans that comply
with MHPAEA and its implementing regulations.
The feature that distinguishes the first set of standardized
options from the second is that the second set of standardized options
have copays of $150 or less for the specialty drug tiers of
standardized options at all metal levels. This feature was included in
the second set of standardized options to accommodate relevant
specialty tier prescription drug cost sharing laws in Delaware and
Louisiana. We therefore propose that this set of standardized options
apply to issuers in these two specific states.
The list of states for which these sets of standardized options
apply differs slightly from the list of states for which the sets
applied in the 2018 Payment Notice. Specifically, in the 2018 Payment
Notice, the second set of standardized options applied to Arkansas,
Delaware, Iowa, Kentucky, Louisiana, Missouri, Montana, and New
Hampshire (with the first set applying to the rest of the FFE and SBE-
FP states), whereas in the current proposal, we propose that the second
set of standardized options apply only to Delaware and Louisiana (with
the first set applying to the rest of the FFE and SBE-FP states).
This is because we incorporated the other two defining features of
the second set of standardized options in the 2018 Payment Notice (that
is, cost sharing parity between the physical therapy, occupational
therapy, and speech therapy AVC benefit categories with the primary
care visit AVC benefit category, and all drug tiers carry a copayment
rather than coinsurance) in both sets of standardized options in the
current proposal. We made this decision primarily because incorporating
these two design features into the plan designs had a negligible impact
to these plans' AVs, and including these features in both sets of
standardized options decreases operational complexity and allows plan
designs targeted to these specific states. As a result, the first set
of standardized options can now be used in Arkansas, Iowa, Kentucky,
Missouri, Montana, and New Hampshire.
We seek comment on this proposal, including comment on (1)
requiring FFE and SBE-FP issuers to offer standardized options at every
product network type, metal level, and throughout every service area
that they offer non-standardized options; (2) not limiting the number
of non-standardized options that issuers can offer through the
Exchanges; (3) the feasibility, advantages, and disadvantages of
gradually limiting the number of plan options over the course of
several PYs; (4) whether standardized options should be differentially
displayed on HealthCare.gov as well as the best manner for doing so;
(5) whether web-brokers and issuers using the Classic DE and EDE
Pathways should remain subject to differential display requirements;
(6) the continuation of an exceptions process that allows these
entities to deviate from the display of standardized options on
HealthCare.Gov; (7) exempting State Exchange issuers from these
requirements; (8) whether these plan designs should apply to State
Exchanges that do not use the Federal platform and that have not
implemented their own standardized options; (9) exempting FFE and SBE-
FP issuers that are subject to existing state standardized options
requirements under state action taking place on or before January 1,
2020 from being required to offer the standardized options in this
proposal; (10) the

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methodology used to design these standardized options; (11) if these
standardized options are compliant with state cost sharing laws in FFE
and SBE-FP states; (12) the cost sharing parameters and plan designs
for these standardized options; (13) how these plans can be designed in
a way that maximizes the likelihood that plans will be able to comply
with MHPAEA; (14) the policy approach for PYs 2023 and beyond; and (15)
having two sets of standardized options (that is, a separate set for
Delaware and Louisiana).
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BILLING CODE 4120-01-C
11. Network Adequacy (Sec. 156.230)
We propose to adopt FFE QHP certification standards that would
ensure that QHP enrollees would have sufficient access to providers.
HHS is of the view that strong network adequacy standards are necessary
to achieve greater equity in health care and enhance consumer access to
quality, affordable care through the Exchanges. We have engaged and
received feedback from numerous stakeholders representing diverse
perspectives in developing these policy proposals.
a. Background of Network Adequacy Standards
Section 1311(c)(1)(B) of the ACA directs HHS to establish by
regulation certification criteria for QHPs, including criteria that
require QHPs to ensure a sufficient choice of providers (in a manner
consistent with applicable provisions under section 2702(c) of the PHS
Act), and provide information to current and prospective enrollees on
the availability of in-network and out-of-network providers. Federal
network adequacy standards were first detailed in the Patient
Protection and Affordable Care Act; Establishment of Exchanges and
Qualified Health Plans; Exchange Standards for Employers \344\ and
codified at Sec. 156.230. HHS seeks to ensure that quantitative,
prospective network adequacy reviews \345\ occur for QHPs offered
through the FFEs so that enrollees have reasonable, timely access to
health care providers.
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\344\ https://www.federalregister.gov/documents/2012/03/27/2012-6125/patient-protection-and-affordable-care-act-establishment-of-exchanges-and-qualified-health-plans.
\345\ Prospective network adequacy reviews would occur during
the QHP certification process.
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The FFEs conducted network adequacy reviews of time and distance
standards for QHPs for PYs 2015-2017. The Market Stabilization \346\
final rule deferred reviews of network adequacy for QHPs to states that
HHS determined to have a sufficient network adequacy review process, an
approach that was extended by the 2019 Payment Notice.\347\
Specifically, CMS deferred to states that possessed sufficient
authority to enforce standards that were at least equal to the
reasonable access standard defined in Sec. 156.230 and that had the
means to assess the adequacy of plans' provider networks. For PYs 2018-
2022, HHS determined that all states had sufficient legal authority and
means to assess the adequacy of plans' provider networks. On March 4,
2021, as noted previously, the United States District Court for the
District of Maryland decided City of Columbus, et al. v. Cochran.\348\
One of the policies the court vacated was the 2019 Payment Notice's
elimination of the Federal Government's reviews of the network adequacy
of QHPs and plans seeking QHP certification to be offered through the
FFEs.
---------------------------------------------------------------------------

\346\ https://www.federalregister.gov/documents/2017/04/18/2017-07712/patient-protection-and-affordable-care-act-market-stabilization.
\347\ https://www.federalregister.gov/documents/2018/04/17/2018-07355/patient-protection-and-affordable-care-act-hhs-notice-of-benefit-and-payment-parameters-for-2019.
\348\ 523 F. Supp. 3d 731 (D. Md. 2021).
---------------------------------------------------------------------------

As such, we announced in Parts 2 and 3 of the 2022 Payment Notice
final rules our intent to undertake rulemaking to establish network
adequacy standards, beginning in this proposed rule for PY 2023.
b. FFE Network Adequacy Reviews
For the QHP certification cycle for PYs beginning in 2023, HHS
proposes to evaluate the adequacy of provider networks of QHPs offered
through the FFEs, or of plans seeking certification as FFE QHPs, except
for FFEs in certain states. HHS would not evaluate QHP network adequacy
in FFE states performing plan management functions that elect to
perform their own reviews of plans seeking QHP certification in their
state, so long as the state applies and enforces quantitative network
adequacy standards that are at least as stringent as the federal
network adequacy standards established for QHPs under Sec. 156.230,
and that network adequacy reviews are conducted prior to QHP
certification. States performing plan management functions are states
served by an FFE where the state has agreed to assume primary
responsibility

[[Page 681]]

for reviewing issuer-submitted QHP certification material and making
certification recommendations to HHS.
We seek comment on this proposal.
c. FFE Network Adequacy Standards Beginning With PY 2023
i. Network Adequacy Standards Applicable to Plans That Use a
Provider Network
Section 1311(c)(1)(B) of the ACA directs HHS to establish criteria
for the certification of health plan as QHPs, which includes the
requirement that QHPs must ``ensure a sufficient choice of providers.''
HHS codified QHP network adequacy requirements under Sec.
156.230(a)(2). In the 2012 Exchange final rule, we established the
minimum network adequacy criteria that health and dental plans must
meet to be certified as QHPs at Sec. 156.230. This regulation provided
that an issuer of a QHP that uses a provider network must maintain a
network that is sufficient in number and types of providers, including
providers that specialize in mental health and substance use disorder
services, to ensure that all services will be accessible to enrollees
without unreasonable delay. In the 2016 Payment Notice, we modified
Sec. 156.230(a) in part to specify that network adequacy requirements
only apply to QHPs that use a provider network, and that a provider
network includes only providers that are contracted as in-network.
Later in this section of the preamble, we propose to refine the
FFE's QHP certification standards regarding the adequacy of plans'
provider networks by imposing time and distance standards, appointment
wait time standards, and standards related to tiered networks.
ii. Time and Distance Standards
For the certification cycle for PYs beginning in 2023, HHS proposes
to adopt for QHPs offered through the FFEs time and distance standards
that HHS would use to assess whether FFE QHPs (or QHP candidates)
fulfill network adequacy standards applicable to plans that use
provider networks.
The proposed provider specialty lists for time and distance
standards for PY 2023 are informed by prior HHS network adequacy
requirements, consultation with stakeholders, and other federal and
state health care programs, such as Medicare Advantage and Medicaid.
The provider specialty lists cover more provider types than previously
evaluated under FFE standards so that QHP networks will be more robust,
comprehensive, and responsive to QHP enrollees' needs. The proposed
provider specialty lists are generally consistent with standards used
for plans in the Medicare Advantage program. For brevity purposes, when
discussing provider types for network adequacy, we will use the term
``behavioral health'' to encompass mental health and substance use
disorders.
HHS proposes reviewing additional specialties for time and
distance, beyond those included by Medicare Advantage, that are
necessary to meet the health care needs of QHP enrollees since Medicare
Advantage and the FFEs serve different enrollee populations. The
additional specialties proposed are: Emergency medicine, outpatient
clinical behavioral health, pediatric primary care, and urgent care.
Individual market health insurance has typically provided coverage of
these specialties, as well.
We are aware of issues faced by consumers where in-network
emergency physicians are in limited supply or not available at in-
network hospitals. To provide proactive consumer protections, and,
similar to the No Surprises Act, incentivize contracting between
emergency medicine physicians and issuers to increase enrollee access
to in-network providers, we propose adding emergency medicine
physicians to our provider specialty list for time and distance
standards. Behavioral health services are similarly critical to meeting
QHP enrollees' health needs, so we also propose to add outpatient
clinical behavioral health to our provider specialty list for time and
distance standards. Since QHP enrollees include dependents under the
age of 18, we propose adding pediatric primary care as a specialty. We
further propose to include urgent care facilities in our time and
distance standards because they help meet QHP enrollees time-sensitive
health care needs when primary care is unavailable and the issues do
not require emergency intervention. We seek to ensure the QHP enrollees
have access to a variety of behavioral health facilities at the
residential and inpatient levels of care. Consequently, we are also
proposing to broaden the inpatient psychiatry facility specialty to be
inpatient or residential behavioral health facility.
HHS proposes that time and distance standards would be calculated
at the county level and vary by county designation. CMS would use a
county type designation method that is based upon the population size
and density parameters of individual counties, in alignment with
Medicare Advantage. The time and distance standards would apply to the
provider specialty lists contained in Tables 18 and 19. To count
towards meeting the time and distance standards, individual and
facility providers listed on Tables 18 and 19 would have to be
appropriately licensed, accredited, or certified to provide services in
their state, as applicable, and would need to have in-person services
available.
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The county-specific time and distance parameters that plans would
be required to meet would be detailed in future guidance. These
parameters would be informed by industry standards.
Issuers that are unable to meet the specified standards would be
able to submit a justification to account for variances. HHS would
review such justifications to determine whether the variance(s) is/are
reasonable based on circumstances, such as the local availability of
providers and variables reflected in local patterns of care, and
whether offering the plan through the FFE would be in the interest of
qualified individuals and employers. We propose to codify the network
adequacy justification process in regulation at Sec. 156.230.
HHS seeks comment on this proposal, including on the specific
parameters for time and distance standards, and flexibilities that may
be needed in rural areas when there are provider or plan shortages. In
particular, HHS seeks comment on the parameters that should apply with
respect to behavioral health providers in order to ensure adequate
access to these services. HHS also seeks comment on the specialty list
to which time and distance standards would apply and whether HHS should
establish time and distance standards for additional specialties in
future PYs.
iii. Appointment Wait Times
For the certification cycle for PYs beginning in 2023, HHS proposes
to adopt appointment wait time standards to assess whether QHPs offered
through the FFEs fulfill network adequacy standards applicable to plans
that use a provider network. We are proposing a short list of critical
service categories for which appointment wait time standards would be
assessed. The proposed provider specialty list for appointment wait
time standards for PY 2023 is included below and is informed by prior
federal network adequacy requirements and consultation with
stakeholders, including issuers and other federal and state health care
programs, such as Medicare Advantage and Medicaid.
The appointment wait time standards would apply to medical QHPs.
For stand-alone dental plans (SADPs), only the dental provider
specialty within the Specialty Care (Non-Urgent) category of
appointment wait time standards would apply. To count towards meeting
appointment wait time standards, providers listed in Table 20 must be
appropriately licensed, accredited, or certified to practice in their
state, as applicable, and must have in-person services available.
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BILLING CODE 4120-01-C
The specific appointment wait time parameters that plans would be
required to meet, including specifications for individual provider and
facility types, would be detailed in future guidance. These parameters
would be informed by industry standards. Issuers applying for FFE QHP
certification would need to attest that they meet these standards as
part of the certification process. HHS proposes to conduct post-
certification reviews to monitor compliance with these standards. These
compliance reviews would occur in response to access to care complaints
or through random sampling.
Similar to the proposed justification process for time and distance
standards, issuers that are unable to meet the appointment wait time
standards would be able to submit a justification to account for
variances. HHS would review such justifications to determine whether
the variance(s) is/are reasonable based on circumstances,

[[Page 684]]

such as the local availability of providers and variables reflected in
local patterns of care, and whether offering the plan through the FFE
would be in the interest of qualified individuals and employers. We
propose to codify the network adequacy justification process in
regulation at Sec. 156.230.
HHS seeks comment on this proposal, including on the specialty list
to which appointment wait time standards would apply, specific
parameters for appointment wait time standards, and other ideas to
strengthen network adequacy policy in future years, such as provider-
enrollee ratios, provider demographics, and accessibility of services
and facilities. We also seek comment on possible methods to collect and
analyze claims data to inform future network adequacy standards and
other aspects of QHP certification that impact health equity.
iv. Tiered Networks
HHS proposes that, for plans that use tiered networks, to count
toward the issuer's satisfaction of the network adequacy standards,
providers must be contracted within the network tier that results in
the lowest cost-sharing obligation. For example, a QHP issuer cannot
use providers contracted with their PPO network when certifying a plan
using their HMO network, if use of PPO network providers would result
in higher cost-sharing obligations for HMO plan enrollees. For plans
with two network tiers (for example, participating providers and
preferred providers), such as many PPOs, where cost sharing is lower
for preferred providers, only preferred providers would be counted
towards network adequacy standards. We propose to codify the network
tiering requirement for network adequacy in regulation at Sec.
156.230.
Network adequacy standards are tailored to ensure QHP enrollees
have reasonable access to a sufficient number and type of providers to
meet their health care needs. HHS is aware of instances in which
issuers have attempted to satisfy QHP certification requirements
related to networks, such as ECP standards, using providers that would
require enrollees to pay higher cost sharing. We seek to ensure that
QHP enrollees have access to networks with sufficient numbers and types
of providers without the imposition of a higher cost-sharing
requirement.
HHS seeks comment on this proposal.
v. Telehealth Services
HHS proposes to require all issuers seeking certification of plans
to be offered as QHPs through the FFEs to submit information about
whether network providers offer telehealth services. HHS proposes that
this requirement would be applicable beginning with the QHP
certification cycle for PY 2023. We believe this information could be
relevant to HHS' analysis of whether a QHP meets network adequacy
standards. For PY 2023, this data would be for informational purposes;
it would be intended to help inform future development of telehealth
standards and would not be displayed to consumers. Issuers should not
construe this proposal to mean that telehealth services could be
counted in place of in-person service access for the purpose of network
adequacy standards.
As further explained in the ICRs and Regulatory Impact Analysis
sections for network adequacy, we believe the telehealth data
collection would create some additional burden for issuers who do not
already have this data. The estimated burden for the telehealth data
collection is included as part of the total burden for completing and
submitting the ECP/NA template and is detailed in the ICRs and
Regulatory Impact Analysis sections for network adequacy. We believe
that the potential benefits of obtaining this information and using it
to inform future network adequacy standards are in the best interests
of both QHP enrollees and QHP issuers. As such, we anticipate that the
additional burden would be mitigated by the expected benefits.
HHS seeks comment on this proposal, including comments on how HHS
might incorporate telehealth availability into network adequacy
standards in future PYs. We specifically seek comment on whether HHS
should consider aligning the FFE network adequacy standards with
Medicare Advantage's telehealth approach in which issuers are offered a
credit towards meeting time and distance standards.
vi. Solicitation of Comments--Unintended Impacts of Stronger Network
Adequacy Standards
HHS is of the view that the network adequacy standards we propose
in this rule are reasonable, necessary, and appropriate to ensure that
QHPs enrollees have the access to the in-network providers the ACA
requires. We acknowledge, however, that there is some risk that
stronger network adequacy standards could be leveraged to create an
uneven playing field in network agreement negotiations that could
result in higher health care costs for consumers. We are also
interested in exploring rules and policies that would promote
competition, taking into consideration the interests of issuers,
providers, and consumers by limiting the potential that network
adequacy standards may be used by parties to network agreements as
leverage to obtain more favorable contract terms, leading to higher
health care costs for consumers.
Strengthening network adequacy standards may increase the market
power of some providers and inadvertently increase the cost of health
care--for issuers, and, consequently, for enrollees. Some issuers seek
to counteract these costs by incentivizing enrollees to seek care from
lower-cost providers. However, some providers impose contractual
steering restrictions in contracts with issuers. For example, where
only one hospital is available to an issuer to meet the network
adequacy standard, that hospital could charge higher prices without the
threat of being excluded from the issuer's network. Such a price
increase may be avoided if the issuer can include the hospital in its
network, while giving incentives to its enrollees to use a more cost-
effective alternative. This procompetitive option to ``steer'' patients
away from high-cost providers can be precluded by the provider imposing
contractual steering restrictions on issuers. A rule that circumscribes
such steering restrictions may prevent providers from exploiting
network adequacy standards to charge higher prices. We seek comment on
the feasibility and parameters of such a rule and other solutions that
would balance bargaining power between issuers and providers in a way
that protects the interests of consumers.
The risk that a network adequacy standard may inadvertently empower
a provider to charge higher prices is particularly problematic when the
provider is part of a multi-provider hospital system and that system
contracts on an all-or-nothing basis with issuers. An all-or-nothing
contract is one that requires that an issuer contract with all
facilities in a health system if the issuer wants to include any of the
health system's facilities in its plan networks. When a multi-provider
hospital system requires an all-or-nothing provision in its network
agreements with issuers, issuers may be required to contract with the
entire system in order to meet the network adequacy standard, and this
may compel issuers to pay higher prices across the system, or else fail
to meet the network adequacy standard. For this reason, we are
interested in exploring how limiting ``all-or-nothing'' contracting
provisions in payer contracts might counteract the potential for
stronger network adequacy standards

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to increase health care costs and seek comment on this topic. We
understand that provider organizations typically use all-or-nothing
provisions to leverage the status of their facilities that plan
networks must have to satisfy network adequacy standards. These
circumstances may compel the issuer to pay higher prices across the
system. We are interested in understanding how this practice affects
enrollees' use of and access to in-network care and how it may
contribute to the cost of care. We seek comment on these issues,
including comments on ways that HHS could help stem the use of all-or-
nothing contracts that may drive up health care costs for consumers;
how issuers can use provider networks to drive costs down; and what
impact all-or-nothing contracting has on enrollees, plans, providers,
and the market.
vii. Solicitation of Comments--Network Adequacy in State Exchanges
HHS is interested in learning more about network adequacy in states
with State Exchanges. HHS understands that State Exchanges have a mix
of network adequacy policies in place, and that about 75 percent of
those states have at least one quantitative standard for time and
distance, appointment wait times, or both. While the new proposed
network adequacy standards for QHP issuers in FFEs differ from those in
State Exchanges, HHS has not been inclined to propose additional
regulations that specifically target network adequacy reviews for QHP
issuers in State Exchanges, and we are not inclined to propose
regulating network adequacy for State Exchanges at this time. However,
we are considering whether there is a need for greater alignment in FFE
and State Exchange network adequacy standards.
Starting in PY 2022, there will be 21 State Exchanges. We are
concerned that there is no preferred network adequacy model that is
shared among states, which indicates that there is no general agreement
among states or Exchanges regarding what exactly constitutes an
adequate network. Moreover, the proliferation of narrower networks in
recent years presents a number of potential consumer protection
concerns, including whether a narrow network has sufficient capacity to
serve plan enrollees, or whether providers may be too geographically
dispersed to be reasonably accessible. We are aware of the NAIC Health
Benefit Plan Network Access and Adequacy Model Act,\349\ which includes
recommendations for network adequacy standards to which states could
hold their issuers accountable, and requires submission of access
plans. Since there has been limited uptake of the full Model Act by
states, there remains a lack of consistency in network adequacy
standards among states and Exchanges.
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\349\ https://content.naic.org/sites/default/files/inline-files/MDL-074.pdf.
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HHS seeks comment on whether these conditions necessitate a more
coordinated, national approach to network adequacy rules across all
Exchanges that is suited to address contemporary conditions in the
health care markets. For example, we seek comment on whether in future
PYs, HHS should consider imposing network adequacy rules in FFEs and
State Exchanges that would be intended to increase the standardization
of network adequacy across the Exchanges. Moreover, we seek comment on
specific measures to support such standardization to ensure that all
Exchange enrollees can access the benefits and services under their
plans as required by the ACA. We further seek comments that identify
specific gaps in provider accessibility that exist under disparate
State Exchange network adequacy standards that might be addressed
through greater federal regulation of network adequacy standards across
all Exchanges.
12. Essential Community Providers (Sec. 156.235)
Essential community providers (ECPs) include providers that serve
predominantly low-income and medically underserved individuals, and
specifically include providers described in section 340B(a)(4) of the
PHS Act and section 1927(c)(1)(D)(i)(IV) of the Social Security Act.
The ECP categories include: Family planning providers, Indian health
care providers, Federally Qualified Health Centers, hospitals, Ryan
White providers, and other ECP providers. QHP issuers must include a
sufficient number and geographic distribution of ECPs in their
networks, where available. Section 156.235 establishes the requirements
for inclusion of ECPs in QHP provider networks and provides an
alternate standard for issuers that provide a majority of covered
services through physicians employed directly by the issuer or a single
contracted medical group.
In assessing the appropriate PY 2023 ECP standard for medical QHP
and SADP QHP certification, HHS has considered multiple options for
strengthening our ECP policy. After careful consideration, HHS proposes
the approaches described below. States performing plan management
functions in the FFEs would be permitted to use a similar approach.
Section 156.235(a)(2)(i) provides that a plan has a sufficient
number and geographic distribution of ECPs if it demonstrates, among
other criteria, that the network includes as participating
practitioners at least a minimum percentage, as specified by HHS. HHS
proposes that for PY 2023 and beyond, the required ECP provider
participation standard be raised from 20 percent to 35 percent of
available ECPs based on the applicable PY HHS ECP list, including
approved ECP write-ins that would also count toward a QHP issuer's
satisfaction of the 35 percent threshold. HHS would consider a plan to
have satisfied the regulatory standard if the issuer contracts with at
least 35 percent of available ECPs in each plan's service area to
participate in the plan's provider network. The calculation methodology
outlined in the 2018 Letter to Issuers in the federally-facilitated
Marketplaces and 2018 Payment Notice would remain unchanged for issuers
offering plans with a provider network.
The PY 2023 HHS ECP list will be based on data maintained by HHS as
well as provider data that HHS receives directly from providers through
the ECP petition process for PY 2023. HHS will include on the PY 2023
HHS ECP list those providers that submitted an ECP petition during the
ECP petition window that closed on August 18, 2021, and that meet the
definition of an ECP under Sec. 156.235.
In developing this proposal, HHS considered that when the ECP
threshold was 30 percent in PYs 2015-2017, all QHP issuers satisfied
the 30 percent threshold with minimal reliance on ECP write-ins and
justifications. In PYs 2018-2021, when the ECP threshold was 20
percent, all QHP issuers satisfied the lower threshold with ease and
very little reliance on ECP write-ins and justifications. Beginning in
2019, HHS began publication of the ``Rolling Draft ECP list'', which
significantly eased issuer burden for satisfying a higher threshold by
allowing issuers to preview changes (that is, additions and removals)
to the ECP list year-round in preparation for upcoming plan year
contracting. Finally, in PY 2021, the percentage of medical and dental
FFE issuers that could have satisfied a 35 percent ECP threshold was 80
percent and 74 percent, respectively; while the mean and median ECP
score across all FFE issuers was 55 percent and 54 percent,
respectively.
HHS anticipates that any QHP issuers falling short of the 35
percent threshold for PY 2023 could satisfy the standard by using ECP
write-ins and

[[Page 686]]

justifications. As in previous years, if an issuer's application does
not satisfy the ECP standard, the issuer would be required to include
as part of its application for QHP certification a satisfactory
justification describing how the issuer's provider networks, as
presently constituted, provides an adequate level of service for low-
income and medically underserved individuals and how the issuer plans
to increase ECP participation in the issuer's provider network(s) in
future years. At a minimum, such justification must include the number
of contracts offered to ECPs for PY 2023, the number of additional
contracts an issuer expects to offer and the timeframe of those planned
negotiations, the names of the specific ECPs to which the issuer has
offered contracts that are still pending, and contingency plans for how
the issuer's provider network, as currently designed, will provide
adequate care to enrollees who might otherwise be cared for by relevant
ECP types that are missing from the issuer's provider network.
HHS also proposes that, for plans that use tiered networks, to
count toward the issuer's satisfaction of the ECP standard, ECPs must
be contracted within the network tier that results in the lowest cost
sharing obligation. For example, a QHP issuer cannot use the number of
ECPs contracted with their PPO network when certifying a plan using
their HMO network, if use of PPO network providers would result in
higher cost sharing obligations for HMO plan enrollees. For plans with
two network tiers (for example, participating providers and preferred
providers), such as many PPOs, where cost sharing is lower for
preferred providers, only the preferred network would be counted
towards ECP standards. We propose to codify the network tiering
requirement for ECP in regulation at Sec. 156.235.
Additionally, for PY 2023 and beyond, HHS proposes that issuers
could comply with the requirement at Sec. 156.235(a)(2)(ii)(B) to
offers contracts to at least one ECP in the category of `other ECP
providers'' by offering a contract to a Substance Use Disorder
Treatment Center. These facilities are critical to HHS' efforts to
ensure that low-income, medically underserved individuals have
sufficient access to this EHB. We are also considering making non-
substantive revisions to Sec. 156.235, which requires QHPs to offer
contracts to at least one ECP in each of the ECP categories, to improve
readability and clarity, and to more closely reflect how Exchanges may
operationalize this requirement. For example, the regulation text
presently does not include language that specifically identifies which
providers may fit the category of `Other ECP Providers.' We solicit
comments on whether clarifying revisions are necessary and on how best
to clarify this requirement in the regulation text.
In addition to these proposed changes, HHS seeks comment on whether
and how QHP issuers should increase the use of telehealth services as
part of their contingency planning to ensure access to adequate care
for enrollees who might otherwise be cared for by relevant ECP types
that may be missing from the issuer's provider network. We also seek
comment on if we should consider adding newly Medicare-certified Rural
Emergency Hospitals to our Hospitals ECP category.
These proposed changes are consistent with the directive from E.O.
13985. HHS anticipates positive health equity impact as we believe
these changes will increase access to quality, relevant health care for
low-income and medically underserved individuals. HHS seeks comment on
these proposals, including from ECPs and issuers serving low-income and
medically underserved populations. HHS also seeks comment on ideas for
further strengthening ECP policy.
14. Standards for Downstream and Delegated Entities (Sec. 156.340)
We propose to amend and add language to Sec. 156.340 to extend the
existing downstream and delegated standards to QHP issuers on all
Exchange models, including State Exchanges and State Exchange SHOPs,
and Exchange models that use the Federal platform, including, FFEs,
SBE-FPs, FF-SHOPs; and HHS also proposes to add a requirement that all
agreements between QHP issuers and their downstream and delegated
entities include language stating that the relevant Exchange authority,
including State Exchanges, may demand and receive the downstream or
delegated entity's books, contracts, computers, or other electronic
systems, including medical records and documentation, relating to the
QHP issuer's obligations in accordance with Federal standards under
paragraph (a) of this section until 10 years from the final date of the
agreement period. These changes would hold QHP issuers in all models of
Exchange responsible for their downstream and delegated entities'
adherence to applicable federal standards related to Exchanges, and to
make their oversight obligations, and the obligations of their
downstream and delegated entities, explicit in regulation and in the
QHP issuers' agreements with their downstream and delegated entities.
We also propose to amend the title of subpart D of 45 CFR part 156 from
``Standards for Qualified Health Plan Issuers on Federally Facilitated
Exchanges and State-Based Exchanges on the Federal platform'' to
``Standards for Qualified Health Plan Issuers on Specific Types of
Exchanges'' to align with the proposed changes to extend the
applicability of the Sec. 156.340 to all Exchange models.
Section 156.340 was originally adopted in 2013 as part of the first
Program Integrity Rule and is similar to existing standards for
downstream and delegated entity that contract with Medicare Advantage
Organizations.\350\ It currently provides that, notwithstanding any
relationship(s) that a QHP issuer may have with delegated or downstream
entities, the QHP issuer maintains responsibility for its compliance
and the compliance of any of its delegated or downstream entities, with
all applicable federal standards related to Exchanges, including those
at Sec. 156.340(a)(1) through (4). Specifically, these paragraphs
reference obligations set forth under: Subpart C of part 156, which
governs QHP minimum certifications standards for all types of Exchange,
with several provisions specific to FFEs or to Exchanges that use the
Federal platform; subpart K of part 155, which governs Exchange
functions pertaining to QHP certification for all types of Exchange,
with several provisions specific to FFEs; subpart H of part 155, which
governs the Exchange functions of the SHOP, including State Exchange
SHOPs, SBE-FP-SHOPs and FF-SHOPs; standards in Sec. 155.220 with
respect to agents, brokers, and web-brokers assisting with enrollment
in QHPs offered through FFEs, FF-SHOPs, SBE-FPs, and SBE-FP-SHOPs; and
standards in Sec. Sec. 156.705 and 156.715 for maintenance of records
and compliance reviews for QHP issuers operating in an FFE and an FF-
SHOP. In the 2019 Payment Notice, we amended Sec. 156.340(a)(2) to
include language incorporating cross-references to SHOP provisions, to
ensure consumers on the FF-SHOPs received the protections the provision
intended for them to receive.\351\
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\350\ 78 FR at 54120.
\351\ 83 FR at 17028.
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In this rule, we propose to amend paragraph (a) by adding language
stating that the applicable standards for which the QHP issuers and
their downstream and delegated entities are responsible depend on the
Exchange model in which the issuer provides coverage. We propose to
remove existing paragraphs

[[Page 687]]

(a)(1) through (a)(4) that currently identify the key applicable
standards as examples of the requirements with which QHP issuers must
ensure their downstream and delegated entities comply, and create a new
paragraph (a)(1) that outlines the standards applicable to QHP issuers
participating in State Exchanges. In proposed new paragraph (a)(1), QHP
issuers participating in State Exchanges, including State Exchange
SHOPs, would be responsible for ensuring their downstream and delegated
entities comply with the standards of subpart C of part 156 with
respect to each of its QHPs on an ongoing basis and the Exchange
processes, procedures, and standards in accordance with subparts H and
K of part 155, including Sec. Sec. 155.705 and 155.706 for the small
group market, unless the standard is specifically identified as
applicable to only the FFE or FF-SHOP. This new proposed paragraph
(a)(1) would generally extend applicability of the current downstream
and delegated standards captured in existing paragraphs (a)(1)-(a)(2)
of Sec. 156.340 to QHP issuers participating in State Exchanges,
including State Exchange SHOPs, if the standard is otherwise applicable
to the Exchange type in which the QHP issuer is operating.
We further propose to create a new paragraph (a)(2) to outline the
standards applicable to QHP issuers providing coverage on Exchange
models that use the Federal platform. In proposed new paragraph (a)(2),
QHP issuers participating in FFEs, FF-SHOPs, SBE-FPs, or SBE-FP-SHOPs
would be responsible for ensuring their downstream and delegated
entities comply with the standards of subpart C of part 156 with
respect to each of its QHPs on an ongoing basis; the Exchange
processes, procedures, and standards in accordance with subparts H and
K of part 155, including Sec. Sec. 155.705 and 155.706 for the small
group market; the standards of Sec. 155.220 with respect to agents,
brokers and web-brokers assisting with enrollment in QHPs; and the
standards of Sec. Sec. 156.705 and 156.715 for maintenance of records
and compliance reviews if applicable to the Exchange type in which the
QHP issuer is operating. This new proposed paragraph (a)(2) would apply
the current downstream and delegated standards in existing paragraphs
(a)(1) through (a)(4) of Sec. 156.340 to QHP issuers participating in
FFEs, FF-SHOPs, SBE-FPs, and SBE-FP-SHOPs if the standard is otherwise
applicable to the Exchange type in which the QHP issuer is operating.
We also propose to add a new paragraph (b)(5), pertaining to record
retention, incorporating the requirement that contracts between QHP
issuers and their downstream and delegated entities include language
that the relevant Exchange authority, including State Exchanges, may
demand and receive the delegated or downstream entity's books,
contracts, computers, or other electronic systems, including medical
records and documentation, relating to the QHP issuer's obligations in
accordance with Federal standards under paragraph (a) of this section
until 10 years from the final date of the agreement period. This
amendment would ensure the relevant Exchange authority--whether the
FFE, SBE-FP or State Exchange--has access to the records and
information from delegated and downstream entities that are necessary
to ensure compliance with applicable minimum Federal standards related
to Exchanges.
These proposed amendments to Sec. 156.340 will better align the
regulation with its intent and prevent confusion on the part of
regulated entities and their downstream and delegated entities.
We propose this amendment be applicable as of the effective date of
the final rule. We seek comment on these proposed amendments.
15. Payment for Cost-Sharing Reductions--Clarification of CSR Payment
and Data Collection Processes (Sec. 156.430)
HHS proposes to amend Sec. 156.430 to clarify when CSR data
submission is mandatory or voluntary. Section 156.430 establishes
parameters for the advance payment for CSRs, the associated data
submission standards, and how final CSR payment and charges are
reconciled. On October 11, 2017, the Attorney General issued a legal
opinion that HHS did not have a valid Congressional appropriation with
which to make CSR payments to issuers.\352\ As a result, CSR payments
ceased as of October 12, 2017.\353\ Because issuers were not receiving
CSR payments from HHS, beginning with the 2018 benefit year CSR
Reconciliation Data Submission process, HHS made the CSR data
submission process voluntary. To clarify the data submission
requirements, we propose to amend Sec. 156.430 to clarify that this
data submission is mandatory for those issuers that receive CSR
payments from HHS for any part of the benefit year and voluntary for
other issuers.
---------------------------------------------------------------------------

\352\ Acting Secretary's memorandum enclosing Attorney General's
opinion regarding CSR payments (2017), available at https://www.hhs.gov/sites/default/files/csr-payment-memo.pdf.
\353\ Ibid.
---------------------------------------------------------------------------

To do this, we are proposing several modifications to Sec.
156.430. First, we propose to amend Sec. 156.430(b)(1) to clarify that
when there is an HHS appropriation to make CSR payments to issuers, an
issuer will receive periodic advance payments to the extent permitted
by the appropriation and based on the advance payment amounts
established in guidance. We believe that this proposed change clarifies
that the data submission requirements are mandatory for those issuers
that receive CSR payments from HHS for any part of the benefit year.
Further, and in line with the current practice, HHS will continue to
provide those issuers that do not receive CSR payments from HHS the
option to submit CSR data.
Second, we propose to amend Sec. 156.430(d) to reflect a change of
focus from reconciliation of CSR amounts to the timing and nature of
CSR data submissions, specifically when CSR payments are made. We
propose to amend Sec. 156.430(d) to state that HHS will periodically
provide a submission window for issuers to submit CSR data documenting
CSR amounts issuers paid, as specified in Sec. 156.430(d)(1) and (2),
in a form and manner specified by HHS in guidance, and calculated in
accordance with Sec. 156.430(c). When an appropriation is available
for HHS to make CSR payments to QHP issuers, HHS will notify QHP
issuers that the submission of the CSR data is mandatory for those
issuers that received CSR payments from HHS for any part of the benefit
year, and will use the data to reconcile advance CSR payments to
issuers against the actual amounts of CSRs issuers provided, as
determined by HHS based on amounts specified in Sec. 156.430(d)(1) and
(2), and calculated in accordance with Sec. 156.430(c).
When CSR payments are not made, HHS will notify those QHP issuers
that did not receive CSR payments from HHS for any part of the benefit
year that the submission of the CSR data is voluntary. The CSR data
that must be submitted in either a voluntary or mandatory submission
includes the data elements listed in Sec. 156.430(d)(1) and (2). The
purpose of this change is to clarify when HHS will use CSR data to
reconcile CSR payments. Specifically, we are proposing that to the
extent that CSR payments from HHS are made to issuers, the CSR data
submission process would be mandatory for those issuers having received
CSR payments for any part of the benefit year from HHS, and would be
voluntary for issuers that did not receive CSR

[[Page 688]]

payments from HHS for any part of the benefit year. This approach is
consistent with how HHS has conducted these data submission processes
since the 2018 benefit year CSR data submission process.
Third, we propose to amend the title of Sec. 156.430(e) from
``Payment of discrepancies'' to ``Cost-sharing Reductions Payments and
Charges'' to reflect that this section governs both payments to issuers
for CSR and charges levied against issuers for CSR.
Lastly, we propose to amend Sec. 156.430(e)(1) to clarify that HHS
will collect data regarding the CSRs actually provided by issuers to
their enrollees as opposed to collecting data on the dollar value of
CSRs HHS provided to the issuer, and to further clarify that HHS only
pays reconciled CSR amounts when there is an appropriation to make CSR
payments and to the extent permitted by such appropriation. We believe
these proposed changes would provide issuers with further clarity
regarding the intention of CSR data submission requirements.
We note that, regardless of whether HHS makes CSR payments, issuers
are required to provide CSRs to enrollees as specified at Sec.
155.1030. We solicit comment on these proposals.
16. Quality Standards: Quality Improvement Strategy (Sec. 156.1130)
In accordance with section 1311(c)(1)(E) of the ACA, quality
improvement strategies described in section 1311(g)(1) of the ACA must
be implemented across Exchanges as a QHP certification requirement.
Section 1311(g)(1) of the ACA defines a QIS as a payment structure that
provides increased reimbursement or other incentives for implementing
activities related to the five health care topic areas defined in
statute: Improving health outcomes of plan enrollees, preventing
hospital readmissions, improving patient safety and reducing medical
errors, promoting wellness and health, and reducing health and health
care disparities. Under Sec. 156.1130(a), a QHP issuer participating
in an Exchange for 2 or more consecutive years must implement and
report on a QIS, including a payment structure that provides increased
reimbursement or other market-based incentives in accordance with the
health care topic areas in section 1311(g)(1) of the ACA, for each QHP
offered in an Exchange, consistent with the guidelines developed by HHS
under section 1311(g) of the ACA. In the 2016 Payment Notice, HHS
established a phase-in approach for QIS implementation standards and
reporting requirements to provide QHP issuers the necessary time to
understand the populations enrolling in a QHP offered through the
Exchange and to build quality performance data on their respective QHP
enrollees.\354\ HHS noted that implementation of a QIS should be a
continuous improvement process for which QHP issuers define the health
outcome needs of their enrollees, set goals for improvement, and
provide increased reimbursement to their providers or other market-
based incentives to reward achievement of those goals.\355\ In line
with this approach and pursuant to the authority granted under Sec.
156.1130(a) and section 1311(g) of the ACA, HHS proposes to update the
QIS standards and enter the next phase of implementation by adopting a
new guideline that would apply to QHP issuers beginning in 2023.
Specifically, we propose a new guideline under which QHP issuers would
be required to address health and health care disparities as a specific
topic area within their QIS, in addition to at least one other topic
area described in section 1311(g)(1) of the ACA beginning in 2023. We
propose this expansion of the QIS standards, which aligns with health
equity efforts across federal government policies and programs;
however, we are not proposing amendments to the regulatory text
outlined in Sec. 156.1130.
---------------------------------------------------------------------------

\354\ 80 FR 10750 at 10844 (Feb. 27, 2015).
\355\ Ibid.
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Persistent inequities in health care outcomes exist in the United
States, including among populations enrolling in QHPs across Exchanges.
Belonging to a racial or ethnic minority group, living with a
disability, being a member of the lesbian, gay, bisexual, transgender,
and queer (LGBTQI+) community, having limited English proficiency,
living in a rural area, or being near or below the poverty level, is
often associated with worse health outcomes.\356\ Such disparities in
health outcomes are the result of a number of factors and exist
irrespective of health insurance coverage type. Although not the sole
determinant, poor health care access and provision of lower quality
health care contribute to health disparities. In fact, research has
shown that the expansion of health insurance coverage, for example
through Medicaid expansion under the ACA, and the resulting increased
access to health care, is linked to reductions in disparities in health
insurance coverage as well as reductions in disparities in health
outcomes.\357\
---------------------------------------------------------------------------

\356\ See Lindenauer PK, Lagu T, Rothberg MB, et al. Income
Inequality and 30-Day Outcomes After Acute Myocardial Infarction,
Heart Failure, and Pneumonia: Retrospective Cohort Study. British
Medical Journal. 2013;346; Trivedi AN, Nsa W, Hausmann LRM, et al.
Quality and Equity of Care in U.S. Hospitals. New England Journal of
Medicine. 2014;371(24):2298-2308; Polyakova, M., et al. Racial
Disparities In Excess All-Cause Mortality During The Early COVID-19
Pandemic Varied Substantially Across States. Health Affairs. 2021;
40(2): 307-316; Rural Health Research Gateway. Rural Communities:
Age, Income, and Health Status. Rural Health Research Recap.
November 2018; https://www.minorityhealth.hhs.gov/assets/PDF/Update_HHS_Disparities_Dept-FY2020.pdf; www.cdc.gov/mmwr/volumes/70/wr/mm7005a1.htm; Poteat TC, Reisner SL, Miller M, Wirtz AL. COVID-19
Vulnerability of Transgender Women With and Without HIV Infection in
the Eastern and Southern U.S. Preprint. medRxiv.
2020;2020.07.21.20159327. Published 2020 Jul 24. doi:10.1101/
2020.07.21.20159327.
\357\ Guth M, Garfield R, Rudowitz R. The Effects of Medicaid
Expansion Under the ACA: Studies from Jan 2014 to Jan 2020.
---------------------------------------------------------------------------

We are specifically committed to achieving equity in health care
outcomes for QHP enrollees by supporting QHP issuers in quality
improvement activities to reduce health and health care disparities,
and promoting issuer accountability for improving equity in the health
and health care of their enrollee populations. For the purposes of this
proposed rule, we are using the definition of ``equity'' established in
Executive Order 13985, issued on January 20, 2021, as ``the consistent
and systematic fair, just, and impartial treatment of all individuals,
including individuals who belong to underserved communities who have
been denied such treatment, such as Black, Latino, and Indigenous and
Native American persons, Asian Americans and Pacific Islanders and
other persons of color; members of religious minorities; LGBTQI+
persons; persons with disabilities; persons who live in rural areas;
and persons otherwise adversely affected by persistent poverty or
inequality.'' \358\ In light of the COVID-19 PHE, which is having a
disproportionate and severe impact on underserved populations, and in
line with the goals of Executive Order 13985, CMS is strengthening
efforts across all programs to address disparities and advance health
equity. This is a topic area that QHP issuers across the Exchanges have
increasingly been focusing on in their QIS submissions.
---------------------------------------------------------------------------

\358\ 86 FR 7009 (Jan. 25, 2021), available at https://www.federalregister.gov/documents/2021/01/25/2021-01753/advancing-racial-equity-and-support-for-underserved-communities-through-the-federal-government.
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Upon CMS evaluation of QHP issuer QIS submissions in the FFEs, an
estimated 60 percent of QIS submissions in PY 2020 did address health
care disparities. Building on the phase-in

[[Page 689]]

approach established in the 2016 Payment Notice and our experiences
evaluating QIS submissions over the years and during the COVID-19 PHE,
we now propose to update the QIS standards. We propose to require QHP
issuers to address health and health care disparities as one topic area
of their QIS in addition to at least one other topic area described in
section 1311(g)(1) of the ACA beginning in 2023. As previously noted,
we are proposing this expansion of the QIS standards, which aligns with
health equity efforts across federal government policies and programs;
however, we are not proposing amendments to the regulatory text
outlined in Sec. 156.1130. We seek comment on this proposal.
17. Disbursement of Recouped High-Cost Risk Pool Funds--Administrative
Appeals of Issuers of Risk Adjustment Covered Plans (Sec. 156.1220)
HHS proposes that any funds recouped as a result of a successful
high-cost risk pool administrative appeal under Sec.
156.1220(a)(1)(ii) would be used to reduce high cost-risk pool charges
for that national high-cost risk pool for the current benefit year, if
high-cost risk pool payments have not already been calculated for that
benefit year. If high-cost risk pool payments have already been
calculated for that benefit year, we propose to use any funds recouped
as a result of a successful high-cost risk pool administrative appeal
to reduce high-cost risk pool charges for that national high-cost risk
pool for the next benefit year. As discussed earlier in this rule, we
also proposed similar treatment of high-cost risk pool funds HHS
recoups as a result of audits of risk adjustment covered plans under
Sec. 153.620(c)(5)(ii) and as a result of actionable discrepancies
under Sec. 153.710(d). We propose to treat high-cost risk pool funds
recouped as a result of a successful appeal the same way, that is, the
recouped funds would be used to reduce high-cost risk pool charges for
that national high-cost risk pool for the next benefit year for which
high-cost risk pool payments have not already been calculated.
We also clarify that when HHS recoups high-cost risk pool funds as
a result of a successful administrative appeal, the issuer that filed
the appeal would then be responsible for reporting that adjustment to
its high-cost risk pool payments or charges in the next MLR reporting
cycle consistent with the applicable instructions in 45 CFR 153.710(h).
Additionally, for any benefit year in which high-cost risk pool charges
are reduced as a result of high-cost risk pool funds recouped as a
result of an actionable discrepancy, issuers whose charge amounts are
reduced would report the high-cost risk pool charges paid for that
benefit year net of recouped audit funds in the next MLR reporting
cycle consistent with 45 CFR 153.710(h).
We seek comment on this proposal.
18. Direct Enrollment With the QHP Issuer in a Manner Considered To Be
Through the Exchange (Sec. 156.1230)
We propose to amend Sec. 156.1230 such that its nondiscrimination
protections would explicitly prohibit discrimination based on sexual
orientation and gender identity. HHS previously codified such
nondiscrimination protections at Sec. 156.1230, but amendments made in
2020 to Sec. 156.1230 removed any reference to sexual orientation and
gender identity. If finalized, this proposal would revert Sec.
156.1230 to the pre-2020 nondiscrimination protections.
Section 156.1230(b)(2) states that the QHP issuer must provide
consumers with correct information, without omission of material fact,
regarding the FFE, QHPs offered through the FFE, and insurance
affordability programs, and refrain from marketing or conduct that is
misleading a consumer into believing they are visiting HealthCare.gov,
coercive, or discriminates based on race, color, national origin,
disability, age, or sex. Previously, in the 2017 Payment Notice final
rule, HHS finalized at Sec. 155.220(j)(2)(i) standards that prohibited
agents, brokers and web-brokers from discriminating on the basis of
sexual orientation and gender identity, among other factors.\359\ In
the 2018 Payment Notice final rule, we added this nondiscrimination
standard from Sec. 155.220(j) to Sec. 156.1230(b) so that the
nondiscrimination protections on the basis of sexual orientation and
gender identity also applied to issuers using direct enrollment on an
FFE.\360\ However, in the 2020 final rule related to section 1557, HHS
revised certain CMS regulations, including Sec. 156.1230(b)(2), by
removing sexual orientation and gender identity as bases of
discrimination subject to the CMS regulations' nondiscrimination
protections.\361\
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\359\ 81 FR 12204 (March 8, 2016).
\360\ 81 FR 94058 (December 22, 2016).
\361\ 85 FR 37160 (June 19, 2020); See id. at 37218-21 (the 2020
section 1557 final rule revised the following CMS regulations: 45
CFR 147.104, 155.120, 155.220, 156.200, 156.1230).
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CMS possesses statutory authority independent of section 1557 of
the ACA to prohibit discrimination in enrollment through the Exchanges
by issuers of QHPs on the Exchanges under the authority to establish
requirements with respect to the operation of Exchanges, the offering
of QHPs through such Exchanges, and other requirements as the Secretary
determines appropriate in sections 1321(a)(1)(A), (B), and (D) of the
ACA. Pursuant to this authority, in the 2018 Payment Notice final rule,
HHS finalized at Sec. 156.1230(b)(2) standards applicable to issuers
using direct enrollment on an FFE to require that issuers refrain from
marketing or conduct that is misleading, coercive, or discriminatory,
including on the basis of sexual orientation or gender identity. HHS
explained it was adding this nondiscrimination standard from Sec.
155.220(j) to Sec. 156.1230(b) so that the nondiscrimination
protections on the basis of sexual orientation and gender identity also
applied to issuers using direct enrollment on an FFE. HHS proposes to
exercise that same authority here to amend Sec. 156.1230(b) to again
prohibit issuers using direct enrollment on an FFE from discriminating
based on sexual orientation and gender identity. Sections
1321(a)(1)(A), (B), and (D) of the ACA are the same authority CMS
relies upon for implementation of existing nondiscrimination
protections at Sec. 156.200(e). Utilizing this same authority to again
prohibit discrimination based on sexual orientation and gender identity
at Sec. 156.1230(b) would be consistent with the authority CMS relies
upon for the existing protections at Sec. 156.1230(b) that currently
prohibit discrimination on the basis of race, color, national origin,
disability, age, or sex. We believe such amendments are warranted in
light of the existing trends in health care discrimination and are
necessary to better address barriers to health equity for LGBTQI+
individuals.
A more in-depth discussion of these developments and other factors
considered in proposing these amendments to CMS nondiscrimination
protections is included earlier in the preamble to Sec. 147.104 under
section III.B.1.b. of this preamble. For brevity, we refer back to that
section of the preamble rather than restating the issues here.
19. Solicitation of Comments--Choice Architecture and Preventing Plan
Choice Overload
One of the primary goals of the ACA is to provide consumers access
to quality, comprehensive health coverage options, as well as the
information and assistance they need to make coverage choices that are
right for them. For this reason, both Federal and State Exchanges
invest significant time and resources to building Exchanges that

[[Page 690]]

support consumer access to competitive health plan options that offer
sufficiently diverse benefit options that give consumers a meaningful
choice between Exchange coverage options. Exchanges also work to ensure
that QHP information is presented to consumers in a manner that is
clear and easy to understand, and allows consumers to accurately
recognize the material differences between plan options.
Although HHS continues to prioritize competition and choice on the
Exchanges, we are concerned about plan choice overload which can result
when consumers have too many choices in plan options on an Exchange. A
2016 report by the RAND Corporation reviewing over 100 studies
concluded that having too many health plan choices can lead to poor
enrollment decisions due to the difficulty consumers face in processing
complex health insurance information.\362\
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\362\ Taylor EA, Carman KG, Lopez A, Muchow AN, Roshan P, and
Eibner C. Consumer Decisionmaking in the Health Care Marketplace.
RAND Corporation. 2016.
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Earlier under this section E. of the preamble, we introduced a
proposal to require that FFE and SBE-FP issuers offer certain
standardized options to be designed by HHS. Standardized options offer
a solution to the problems of choice overload through simplifying cost
sharing structures and increasing plan comparability by allowing
consumers to focus on premium price, provider network, and plan
quality.\363\ In light of the proliferation of seemingly similar plans
offered through the Exchanges over the last several years, HHS wishes
to explore whether it should limit the total number of plans issuers
may offer through the FFEs and SBE-FPs in future PYs in order to
further streamline and optimize the plan selection process for
consumers on the Exchanges.
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\363\ ``Facilitating Consumer Choice: Standardized Plans in
Health Insurance Marketplaces.'' Office of the Assistant Secretary
for Planning and Evaluation, U.S. Department of Health and Human
Services. December 2021. Available at https://aspe.hhs.gov/.
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HHS's desire to limit the number of plans that issuers can offer
through the Exchanges arises following the sharp increase in plan
offerings in recent years. For example, in the FFEs and SBE-FPs in PY
2019, there was an enrollee-weighted average of 1.2 catastrophic plans,
7.9 bronze plans, 12.3 silver plans, 4.6 gold plans, and 1.1 platinum
plans available per enrollee, amounting to a total of 27.1 plans
available per enrollee. In the FFEs and SBE-FPs in PY 2022, based on
current filing data, it is expected that there will be an enrollee-
weighted average of 2.7 catastrophic plans, 40.4 bronze plans, 45.3
silver plans, 19.2 gold plans, and 1.6 platinum plans available per
enrollee, amounting to a total of 109.2 plans available per enrollee.
In PY 2022, it is expected that several rating areas will have more
than 50 silver plans, excluding CSR variations, available to
consumers--a number we expect will make it difficult for consumers to
make reasonably informed decisions. This proliferation of plans is only
partially attributable to new market entrants, since in PY 2019,
consumers could select QHPs from an enrollee-weighted average of 2.8
issuers per enrollee, while in PY 2022, it is expected consumers will
be able to select QHPs from an enrollee-weighted average of 6.3 issuers
per enrollee. The fact that the enrollee-weighted average number of
plan offerings increased by a factor of four while the enrollee-
weighted average number of issuers only increased by a factor of just
over two between PYs 2019 and 2022 suggests consideration of the need
to limit the proliferation of seemingly similar plans in order to
further streamline and optimize the plan selection process for
consumers on the Exchanges.
HHS is concerned that having an excessive number of health plan
options may make consumers less likely to complete any plan selection
and more likely to select a plan that does not match their health
needs. In studies of consumer behavior in Medicare Part D, Medicare
Advantage, and Medigap, a choice of 15 or fewer plans was associated
with higher enrollment rates, while a choice of 30 or more plans led to
a decline in enrollment rates.\364\ These conclusions are supported by
the comments received during prior rulemaking in which a significant
number of commenters raised concerns that removing tools that
facilitate the plan selection process causes consumers to face choice
paralysis and leads to a reduction in overall enrollment in QHPs,
undermining the purpose of Exchanges--to allow people to compare and
purchase QHPs.
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\364\ Chao Zhou and Yuting Zhang, ``The Vast Majority of
Medicare Part D Beneficiaries Still Don't Choose the Cheapest Plans
That Meet Their Medication Needs.'' Health Affairs, 31, no.10
(2012): 2259-2265.
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HHS's experience during its annual open enrollment period also
suggests that ``many consumers, particularly those with a high number
of health plan options, find the large variety of cost-sharing
structures available on the Exchanges difficult to navigate.'' \365\
Thus, in order to streamline and optimize the plan selection process
for consumers on the Exchanges, HHS is interested in exploring possible
methods of improving choice architecture. Several proposals within this
rulemaking complement this goal, including the standardized options
proposal at Sec. 156.201 and the proposals to change the applicable AV
de minimis range at Sec. Sec. 156.140, 156.200, and 156.400.
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\365\ 80 FR 75,488, 75,542 (Dec. 2, 2015).
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Specifically, the standardized options proposal at Sec. 156.201
proposes to require FFE and SBE-FP issuers to offer plans with
standardized cost-sharing parameters at every product network type,
metal level, and throughout every service area that they offer non-
standardized options. Though this proposal does not limit the number of
non-standardized options, HHS intends to consider and propose future
rulemaking, as appropriate, to determine whether to limit the number of
non-standard plans that FFE and SBE-FP issuers may offer through the
Exchanges in PYs beginning on or after January 1, 2024.
Additionally, the proposals at Sec. Sec. 156.140, 156.200, and
156.400 propose to modify the AV de minimis ranges. HHS proposes to
modify the de minimis ranges at Sec. 156.140(c) beginning in PY 2023
to +2/-2 percentage points for all individual and small group market
plans subject to the AV requirements under the EHB package, other than
for expanded bronze plans, for which HHS proposes a de minimis range of
+5/-2. Under Sec. 156.200, HHS proposes, as a condition of
certification as a QHP, to limit the de minimis range to +2/0
percentage points for individual market silver QHPs. HHS also proposes
under Sec. 156.400 to specify de minimis ranges of +1/0 percentage
points for income-based silver CSR plan variations. HHS anticipates
that these proposals will have the effect of decreasing the number of
plan offerings due to more restricted AV de minimis ranges.
HHS is also considering resuming the meaningful difference standard
that was previously codified at 45 CFR 156.298. The meaningful
difference standard was first finalized in the 2015 Payment Notice,
revised in the 2017 Payment Notice, and discontinued and removed from
regulation in the 2019 Payment Notice. The meaningful difference
standard was originally intended to enhance consumer understanding of
the differences between plans and enable optimal consumer choice. It
was then considered to be no longer necessary given the decreased
number of issuers and plans offered through the FFEs and SBE-FPs in PY
2019. Given that the

[[Page 691]]

number of plans offered through the Exchanges has increased sharply
over the last several years, HHS believes that resuming the meaningful
difference standard could play a constructive role in limiting the
proliferation of seemingly similar plans on the Exchanges, thus further
streamlining and optimizing the plan selection process for consumers on
the Exchanges.
HHS also acknowledges that a number of State Exchanges have
successfully employed an active purchaser model in which these
Exchanges selectively negotiate contracts with issuers, limit the total
number of issuers that can offer QHPs through the Exchange, require
issuers to offer standardized options exclusively, and exclude plans
that have not demonstrated the administrative capability, prices,
networks or product designs that improve consumer value. HHS intends to
consider whether such a model would be appropriate in future PYs to
achieve the aforementioned goals of streamlining the plan selection
process for consumers on the Exchanges.
We seek comment on the utility of limiting the number of plans that
FFE and SBE-FP issuers can offer through the Exchanges in future PYs in
order to avoid plan choice overload and to further streamline and
optimize the plan selection process for consumers on the Exchanges. We
also seek comment on the impact of limiting the number of plans that
issuers can offer through the Exchanges and on effective methods to
achieve this goal, the advantages and disadvantages of these methods,
and if there are alternative methods we have not considered.
We also seek comment on other evidence-based approaches to improve
choice architecture within the Exchanges.

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

1. Reimbursement for Clinical Services Provided to Enrollees (Sec.
158.140)
We propose to amend Sec. 158.140(b)(2)(iii) to clarify that only
those provider incentives and bonuses that are tied to clearly defined,
objectively measurable, and well-documented clinical or quality
improvement standards that apply to providers may be included in
incurred claims for MLR reporting and rebate calculation purposes.
Section 2718(a) of the PHS Act requires health insurance issuers
offering group or individual health insurance coverage (including a
grandfathered health plan) to, for MLR purposes, separately report the
percentage of total premium revenue (after certain adjustments)
expended on reimbursement for clinical services provided to enrollees
under such coverage, for activities that improve health care quality,
and on all other non-claims (administrative) costs. Section 2718(b) of
the PHS Act requires a health insurance issuer to provide an annual
rebate to each enrollee if the issuer's MLR falls below the applicable
MLR standard established in section 2718(b)(1)(A)(i) and (ii). Section
158.140 sets forth the MLR reporting requirements related to the
reimbursement for clinical services provided to enrollees, including a
requirement in Sec. 158.140(b)(2)(iii) that issuers must include in
incurred claims the amount of incentive and bonus payments made to
providers. Incentive and bonus payments made to providers were
originally required to be included in incurred claims to reflect
certain claim liability accounting practices of HMOs,\366\ but due to
the lack of clarity and specificity in the regulations, have resulted
in inclusion of a variety of incentive and bonus payments to providers.
However, inclusion of many types of provider incentives and bonuses in
incurred claims is appropriate and consistent with the purpose of the
statute to the extent such bonuses reward or incentivize providers to
deliver higher-quality care to consumers and thus lead to higher value
for consumers' premium payments.
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\366\ See 75 FR 74874 and https://www.govinfo.gov/content/pkg/FR-2010-12-01/pdf/2010-29596.pdf.
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In the course of conducting MLR examinations pursuant to Sec. Sec.
158.401 and 158.402, we have observed some issuers reporting incentive
or bonus payments to providers that are not based on quality or
performance metrics, but rather, involve transferring excess premium
revenue to providers to circumvent MLR rebate requirements and avoid
paying MLR rebates when issuers do not meet the applicable MLR
standard.
Most provider incentive and bonus agreements we encounter during
MLR examinations tend to have clinical metrics that must be met by the
provider, rather than the issuer, in order for payment to occur.
However, we have observed arrangements where the issuer's failure to
meet the MLR standard is itself the metric that triggers the payment of
a bonus to the provider. Under such arrangements, any time an issuer's
MLR falls below a specified threshold, including below the applicable
MLR standard (or, similarly, a metric tied to the issuer's
profitability or surplus exceeds a specified threshold), the issuer
must pay the excess profits to a provider group or hospital system. If
such payments are labeled as a provider ``incentive'' or ``bonus'' and
are included in the issuer's incurred claims, the issuer's MLR is
artificially raised so that it is close to or meets the applicable MLR
standard. This artificial inflation of MLR often eliminates most, or in
some cases even all, of the rebate owed to enrollees, regardless of how
low enrollees' claims costs are relative to premiums those enrollees
pay. Such artificial inflation of MLR denies consumers the protection
of receiving premium rebates guaranteed by the statute for the years
when claims costs are low due to low utilization of health care
services, such as the years when numerous medical procedures are
deferred due to a pandemic. In some cases, when such payments to
providers are inappropriately labeled as ``incentives'' or ``bonuses,''
they inflate paid claims by as much as 30 percent to 40 percent. The
incentive for such arrangements is particularly high for integrated
medical systems where the issuer is the subsidiary, owner, or affiliate
of a provider group or a hospital system. Further, in some cases these
``incentives'' or ``bonuses'' are not even paid to the clinical
providers, but rather to the non-clinical parent holding company of the
hospital or provider group and the issuer.
Although we consider inclusion of the provider ``incentives'' and
``bonuses'' described above in incurred claims inappropriate under
existing regulations because the described approach directly
contravenes the statute, in order to increase compliance and improve
program integrity, we propose to amend Sec. 158.140(b)(2)(iii) to
clarify that only those provider incentives and bonuses made to
providers that are tied to clearly defined, objectively measurable, and
well-documented clinical or quality improvement standards that apply to
providers may be included in incurred claims for MLR reporting and
rebate calculation purposes. We seek comment on this proposal.
2. Activities That Improve Health Care Quality (Sec. 158.150)
We propose to amend Sec. 158.150(a) to specify that only
expenditures directly related to activities that improve health care
quality may be included in QIA expenses for MLR reporting and rebate
calculation purposes.
Section 2718(a) of the PHS Act requires health insurance issuers
offering group or individual health insurance coverage (including a

[[Page 692]]

grandfathered health plan) to, for MLR purposes, report the percentage
of total premium revenue (after certain adjustments) expended on
reimbursement for clinical services provided to enrollees under such
coverage, for activities that improve health care quality, and on all
other non-claims costs. Section 158.221 defines the numerator of an
issuer's MLR to include the issuer's incurred claims plus the issuer's
expenditures for activities that improve health care quality, as
defined in Sec. Sec. 158.150 and 158.151. Section 158.150 describes
the types of activities that qualify as QIA, but does not specify the
types of expenses that may be included as QIA expenses, or the extent
to which such expenses must relate to the activity. The lack of clarity
in existing regulations has caused wide discrepancies in the types of
expenses that issuers include in QIA expenses and creates an unequal
playing field among issuers. Some issuers appropriately include only
direct expenses, such as the salaries of the staff performing actual
QIA functions in QIA expenses. However, other issuers additionally
allocate indirect expenses such as overhead, marketing, lobbying,
corporate or holding group overhead, and vendor profits in QIA
expenses. To the extent they can be quantified, such indirect expenses
often inflate QIA amounts by 33 percent to 50 percent, potentially
reducing rebates provided to enrollees while providing no value for
consumers' premium dollars. In many other cases, the amounts of
indirect expenses included in QIA expenses appear to be arbitrary
because there is no reasonable method to allocate them to QIA as the
expenses have no direct or quantifiable relationship to health care
quality.
A significant portion of QIA expenses is attributable to salaries
of employees actually performing the QIA. However, issuers' employees
often perform QIA only part of the time, while performing cost
containment and other strictly administrative and profit-generating
functions (such as negotiating provider rates, or claims adjustment and
appeals) the rest of the time. As a result, numerous fixed costs that
some issuers allocate to QIA simply because some of their staff spend
some of their time performing QIA would, for the most part, exist even
if the issuer did not engage in any QIA. Examples of such indirect
expenses include: Office space (including rent or depreciation,
facility maintenance, janitorial, utilities, property taxes, insurance,
wall art), human resources, salaries of general counsel and executives,
computer and telephone usage, and company parties and retreats,
including catering and travel.
Some issuers additionally allocate a fixed percentage of their
entire IT cost centers to QIA, even though the IT infrastructure
disproportionately supports regular business functions such as billing,
claims processing, financial analysis, and cost containment, and for
the most part would exist even if the issuer did not engage in any QIA.
Examples of such expenses include: Salaries of IT staff and call center
or help desk staff, data centers and warehouses, mainframe equipment,
network system applications and equipment, enterprise data management,
as well as depreciation, maintenance, and utilities associated with IT
equipment.
Some issuers include in QIA expenses amounts exceeding the cost of
providing the actual QIA service. For example, some issuers make a
profit when providing wellness incentives to enrollees, but structure
cost reporting in a manner that includes such profits in QIA expenses.
In addition, some issuers include the promotion or marketing of their
QIA services to group policyholders or enrollees as QIA expenses. Some
issuers also include the cost of developing the prices of QIA services
sold to group policyholders, or costs associated with calculating and
reporting QIA expenses.
Section 2718 of the PHS Act created the first national MLR
reporting and rebating program with the goal of putting downward
pressure on issuers' administrative expenses and encouraging issuers to
devote more of the premium dollars to medical spending and enrollee
health. Section 2718 of the PHS Act recognizes that investing in QIA
may improve enrollee health, thereby increasing the value of their
premium dollars. However, facility maintenance, utilities, human
resources, salaries of counsel and executives, computers, travel and
entertainment, IT systems, and marketing of issuers' products provide
no benefit to an enrollee's health. By including such costs in the MLR
numerator, the value of the enrollee's premium dollars is actually
reduced. Thus, indirect expenses such as those are described here are
classified as non-claims, administrative costs for purposes of
reporting incurred claims under Sec. 158.140. Allowing issuers to
report these same excluded expenses as expenditures on QIA is
inappropriate and would undermine the very purpose and intent of
section 2718 of the PHS Act. It would allow issuers to inflate QIA
costs by including expenses that do not actually improve health care
quality, particularly since these expenses are often fixed costs that
would occur regardless of whether the issuer engages in QIA. Further,
some issuers are not able to precisely determine what portion of
indirect costs is tied to QIA, as many issuers do not have an accurate
method to quantify the actual cost of each expense category as it
relates to each QIA, and thus issuers are often arbitrarily determining
or apportioning indirect expenses without adequate documentation to
support their determinations. The lack of clarity in Sec. 158.150 as
to what expenses may be included in QIA expenses has created an uneven
playing field that is unfairly boosting the MLRs of issuers that
include indirect or overhead expenses in QIA expenses as compared to
those that are not reporting these expenses in QIA expenses, thus
driving up health care spending and depriving consumers of value for
their premium dollars.
In order to ensure reporting consistency among issuers and ensure
that QIA expenses included in the MLR numerator represent actual value
provided for consumers' premium dollars, we propose to amend Sec.
158.150(a) to specify that only expenditures directly related to
activities that improve health care quality may be included in QIA
expenses.
We seek comment on this proposal.
3. Allocation of Expenses (Sec. 158.170)
As noted in part 2 of the 2022 Payment Notice final rule, on March
4, 2021, the United States District Court for the District of Maryland
decided City of Columbus, et al. v. Cochran, 523 F. Supp. 3d 731 (D.
Md. 2021). Among other things, the court vacated Sec. 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.\367\
Accordingly, in part 2 of the 2022 Payment Notice final rule, we
finalized the deletion of Sec. 158.221(b)(8) and removed the option
allowing issuers to report the fixed, standardized amount of QIA and
reverted to requiring issuers to itemize QIA expenditures, beginning
with the 2020 MLR reporting year (MLR reports that were due by July 31,
2021). However, we inadvertently failed to make a conforming amendment
to

[[Page 693]]

Sec. 158.170(b). Section 158.170 addresses allocation of expenses in
relation to MLR reporting in general. Section 158.170(b) requires
issuers to describe the methods used to allocate expenses.
Specifically, Sec. 158.170(b) requires the report required in Sec.
158.110 to include a detailed description of the methods used to
allocate, among other things, ``quality improvement expenses (unless
the report utilizes the percentage of premium option described in Sec.
158.221(b)(8), in which case the allocation method description should
state so),'' to each health insurance market in each State. Given the
deletion of Sec. 158.221(b)(8) in part 2 of the 2022 Payment Notice
final rule, the reference in Sec. 158.170(b) to the percentage of
premium QIA reporting option described in Sec. 158.221(b)(8) is no
longer applicable. Accordingly, we propose make a technical amendment
to Sec. 158.170(b) to correct this oversight and remove the reference
to the percentage of premium QIA reporting option described in Sec.
158.221(b)(8).
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\367\ 86 FR 24140.
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G. Solicitation of Comments on Health Equity, Climate Health, and
Qualified Health Plans

On January 20, 2021, President Biden issued Executive Order 13985,
titled ``Advancing Racial Equity and Support for Underserved
Communities through the Federal Government,'' which established a
government-wide approach to advancing equity and addressing disparities
for historically marginalized communities in the United States. The
order defines equity as ``the consistent and systematic fair, just and
impartial treatment of all individuals, including individuals who
belong to underserved communities that have been denied such
treatment.'' \368\
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\368\ Advancing Racial Equity and Support for Underserved
Communities Through the Federal Government. Executive Office of the
President. 2021, https://www.federalregister.gov/documents/2021/01/25/2021-01753/advancing-racial-equity-and-support-for-underserved-communities-through-the-federal-government.
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CMS' Office of Minority Health (CMS OMH) aligns with Healthy People
2030 that defines health disparities as ``a particular type of health
difference that is closely linked with social, economic, and/or
environmental disadvantage. Health disparities adversely affect groups
of people who have systematically experienced greater obstacles to
health based on their racial or ethnic group; religion; socioeconomic
status; gender; age; mental health; cognitive, sensory, or physical
disability; sexual orientation or gender identity; geographic location;
or other characteristics historically linked to discrimination or
exclusion.'' \369\
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\369\ https://health.gov/our-work/national-health-initiatives/healthy-people/healthy-people-2030/questions-answers.
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In alignment with the objectives set forth by the President's
Executive Order and CMS OMH, CMS aims to proactively advance health
equity and improve the health of all Americans, including racial and
ethnic minorities, sexual and gender minorities, people with
disabilities, individuals with limited English proficiency, rural
populations, and historically underserved communities.
Section 1311(e)(1)(B) of the ACA states an Exchange may certify a
health plan as a QHP if the Exchange determines that making available
such health plan through such Exchange is in the interests of qualified
individuals and qualified employers. Section 1321(a)(1) of the ACA
provides the Secretary with general rulemaking authority, including
with respect to setting standards for meeting the requirements for
offering QHPs through Exchanges and such other requirements as the
Secretary determines appropriate. In addition to the proposals in this
rule,\370\ CMS is considering other ways to incorporate health equity
standards by using the Secretary's authority to enhance criteria for
the certification of QHPs and/or leverage existing QHP requirements,
such as the Network Adequacy Standards at 45 CFR 156.230 and
Accreditation of QHP Issuers at 45 CFR 156.275. Furthermore, CMS seeks
input on additional ways to incentivize QHP issuers to improve health
equity and improve conditions in enrollees' environments, as well as to
address other SDOH outside of the QHP certification process.
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\370\ See, for example, the proposed updated quality standards
under 45 CFR 156.1130 for QHP issuer quality improvement strategies
and interoperability requirements under 45 CFR 156.221 for QHP
issuers in the FFE to implement and maintain a patient access
application programming interface.
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CMS seeks comment from stakeholders on advancing health equity
through QHP certification standards; advancing CMS's understanding of
the existing landscape of issuer collection of health equity data; and
assessing data sources that focus on population-level factors made
available by governments, quasi-governmental entities, data vendors and
other organizations, both generally and with respect to the following
specifics:
CMS seeks input on:
++ Requiring QHP issuers to obtain the National Committee for
Quality Assurance (NCQA) Health Equity Accreditation in addition to
their existing accreditation requirements,
++ Other health equity assessment tools that achieve this goal, and
(3) the challenges QHP issuers could face implementing a new
accreditation product on health equity.\371\
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\371\ https://store.ncqa.org/accreditation/health-equity-he.html.
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What demographic and/or SDOH data do QHP issuers currently
collect from enrollees? Should QHP issuers be required to collect
demographic and other SDOH data to help issuers gain a better
understanding of the populations they serve, and thereby develop more
equity-focused QHPs? Which data elements should be considered to
advance health equity within QHPs? What are some of the challenges and
barriers to collect this data?
What datasets related to population factors could CMS
leverage to analyze whether QHP networks are providing adequate access
to health care services for members within specific geographic areas?
What ability do QHP issuers have to tailor provider
networks based on the health needs of enrollees in specific geographic
areas?
What health conditions or outcome variables should CMS
analyze to identify gaps in the health care services? What are some of
the ways that CMS could measure QHP issuers' progress toward advancing
health equity?
Should CMS encourage QHP issuers to be accountable for
improving health outcomes across all populations equitably, while
acknowledging variations in SDOH?
Are there ways that CMS could incentivize QHP issuers to
advance health equity outside of the QHP certification requirement,
such as through other federal reporting requirements, including MLR
reporting?
What are the challenges QHP issuers face in promoting and
advancing health equity? What are some strategies that could overcome
those challenges?
What other health equity tools made available by
organizations should CMS consider to address health disparities within
QHPs?
HHS further seeks to explore how Exchanges and their constituent
organizations can more fully prepare for the harmful impacts of climate
change on their enrollees. Since we know that climate change causes
great and growing harm to Americans (through both catastrophic events
and chronic disease) and since we know that it will disproportionately
harm vulnerable populations, including those groups subject to health
disparities described

[[Page 694]]

above, HHS and CMS believe that it is critical to study and prepare for
these dire impacts. Generally, HHS seeks input on how Qualified Health
Plans can more effectively: (1) Determine likely climate impacts on
their enrollees and particularly the most vulnerable enrollees; (2)
determine potential costs of these impacts; (3) develop plans to
mitigate catastrophic and chronic impacts for these populations (that
is, plans for resilience); and (4) take responsibility for greenhouse
gas emission reduction across the networks of organizations that make
up their exchanges. Specific questions include:
Do Exchanges and issuers have a plan to assess, reduce or
mitigate its emissions in its operations or organizations?
What data do Exchanges and issuers currently collect with
respect to the climate threats faced by their enrollees and
particularly their most vulnerable enrollees? Do they complete risk
assessments or surveys that have a geographic or population focus?
What types of utilization reviews could issuers perform of
medical or prescription data to better understand the impact of climate
change events on their enrollees?
Do National Committee for Quality Assurance (NCQA) health
equity requirements include reviews of climate resilience?
What would incentivize Exchanges and issuers participating
in those Exchanges to more fully prepare for climate change's impacts
on vulnerable populations? What would incentivize them to take action
on decarbonization? How can issuers strengthen the overall health of
their enrollees to be more resilient to harmful climate change events?
Do issuers currently use, or could they use, apps and/or
AI to alert enrollees of severe climate events and steps to mitigate
related harmful effects (for example, extreme heat or wildfire events)?
What measures would be appropriate for assessing QHP
performance on climate change and health equity?

IV. Collection of Information Requirements

Under the Paperwork Reduction Act of 1995 (PRA), we are required to
provide 60-day notice in the Federal Register and solicit public
comment before a collection of information requirement is submitted to
OMB for review and approval. This proposed rule contains information
collection requirements that are subject to review by OMB. A
description of these provisions is given in the following paragraphs
with an estimate of the annual burden, summarized in Table 22. 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 are soliciting public comment on each of the required issues
under section 3506(c)(2)(A) of the PRA for the following information
collection requirements.

A. Wage Estimates

To derive wage estimates, we generally used data from the Bureau of
Labor Statistics to derive average labor costs (including a 100 percent
increase for fringe benefits and overhead) for estimating the burden
associated with the ICRs.\372\ Table 21 in this proposed rule presents
the mean hourly wage, the cost of fringe benefits and overhead, and the
adjusted hourly wage. 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.
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\372\ See May 2020 Bureau of Labor Statistics, Occupational
Employment Statistics, National Occupational Employment and Wage
Estimates. Available at https://www.bls.gov/oes/current/oes_stru.htm.
[GRAPHIC] [TIFF OMITTED] TP05JA22.037

[[Page 695]]

B. ICRs Regarding State Flexibility for Risk Adjustment (Sec. 153.320)

We are proposing to generally repeal the ability of states to
request a reduction in risk adjustment state transfers in any state
market risk pool starting with the 2024 benefit year, with an exception
for states that previously participated in risk adjustment state
flexibility. We propose to provide an exception for states that
previously submitted state flexibility requests under Sec. 153.320(d)
so that only those states would be able to continue to request this
flexibility in 2024 and future benefit years. We further propose to
remove as an option for a prior participant justification and HHS
approval of a state flexibility request the demonstration of state-
specific circumstances that warrant an adjustment to more precisely
account for relative risk differences in the state individual
catastrophic, individual non-catastrophic, small group, or merged
market risk pool, and to retain as the only option for state
justification and HHS approval the demonstration that the requested
reduction would have de minimis impact on the necessary premium
increase to cover the transfers for issuers that would receive reduced
transfer payments. This change would also apply beginning with 2024
prior participant benefit year requests from prior participant states.
As such, we propose various amendments to the risk adjustment state
flexibility regulations at Sec. 153.320(d) to reflect the general
repeal of this flexibility, with the exception for states that
previously participated, and to remove one of the criteria for state
justification and HHS approval beginning with benefit year 2024
requests. The burden associated with this requirement is the time and
effort for the state regulator to submit its request and supporting
evidence and analysis to HHS. We estimate that submitting the request
and supporting evidence and analysis will take a business operations
specialist 40 hours (at a rate of $75.32 per hour) to prepare the
request and 20 hours for a senior operations manager (at a rate of
$120.90 per hour) to review the request and transmit it electronically
to HHS. We estimate that each state seeking a reduction will incur a
burden of 60 hours at a cost of approximately $5,430.80 per state to
comply with this reporting requirement (40 hours for the insurance
operations analyst and 20 hours for the senior manager). The estimated
burden related to submission of these requests would be reduced as a
result of these proposed changes, since only one state, Alabama,
previously participated and would still be able to request this
flexibility. In the 2019 Payment Notice,\373\ we estimated that 25
states would submit requests and provided a total burden of
approximately 1,500 hours across all states, which would total $135,770
based on current wage estimates. Since there is only one prior
participating state, we estimate that this burden will be reduced by
$130,339.20 to a total annual cost of $5,430.80, reflecting the burden
associated with one state's submission. This information collection is
approved under OMB control number 0938-115, and if this proposal is
finalized, HHS would revise the information collection under OMB
control number 0938-1155 accordingly and provide the applicable comment
periods.
---------------------------------------------------------------------------

\373\ 82 FR at 51118.
---------------------------------------------------------------------------

C. ICRs Regarding Distributed Data and Risk Adjustment Data Submission
Requirements (Sec. Sec. 153.610 and 153.710)

Pursuant to section 1343(b) of the ACA, the Secretary, in
consultation with states, shall establish criteria and methods to be
used in carrying out the risk adjustment activities under this section.
Consistent with section 1321(c) of the ACA, the Secretary is
responsible for operating the risk adjustment program in any state that
fails to do so. As described in Sec. 153.610, health insurance issuers
are required to maintain risk adjustment data in order for HHS to
operate risk adjustment on behalf of a state. HHS employs a distributed
data approach when running risk adjustment on behalf of a state and
uses the same data for the purpose of determining the risk adjustment
user fee for each issuer. In this proposed rule, we propose to collect
five new data elements from issuers' EDGE servers through issuers' Edge
Server Enrollment Submission (ESES) files and risk adjustment
recalibration enrollment files: ZIP code, race, ethnicity, ICHRA
indicator and subsidy indicator. We also propose to extract these new
data elements as part of the enrollee-level EDGE data beginning with
the 2023 benefit year. In addition, we propose to begin extracting
three data elements issuers already report to their EDGE servers--plan
ID, rating area and subscriber indicator--as part of the enrollee-level
EDGE data beginning with the 2022 benefit year.
Section 153.700(a), requires an issuer of a risk adjustment covered
plan in a state where HHS is operating the risk adjustment program to
provide HHS, through its dedicated distributed data environment, access
to enrollee-level plan enrollment data, enrollee claims data, and
enrollee encounter data as specified by plan ID, rating area, and
subscriber indicator. Thus, the proposals to extract these data
elements will not pose additional operational burden to issuers, since
the creation and storage of the extract--which issuers do not receive--
is mainly handled by HHS. Therefore, we are not proposing to change the
existing burden for the proposal to extract plan ID, rating area, and
subscriber indicator.
For the five new data elements we propose to collect beginning with
the 2023 benefit year, we estimate that approximately 600 issuers would
be subject to this new data collection. We propose to collect these new
data elements via issuers' ESES files and risk adjustment recalibration
enrollment files. We estimate a cost of approximately $375.28 in total
labor costs for each issuer, which reflects 4 hours of work by a
management analyst per issuer at an average hourly rate of $93.82 per
hour. The cumulative additional cost estimate as a result of this
proposal is $225,168 for 600 issuers (2,400 total hours per year for
all issuers). The proposals to extract these data elements will not
pose additional operational burden to issuers, since the creation and
storage of the extract is mainly handled by HHS. If the proposed
collection of ZIP code, race, ethnicity, the ICHRA indicator, and the
subsidy indicator are finalized, we would revise the information
collection under OMB control number 0938-1155 accordingly and provide
the applicable comment periods.

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

We propose to revise Sec. 155.220(c)(3)(i)(A) to include at
proposed new Sec. Sec. 155.220(c)(3)(i)(A)(1) through (5) a list of
the QHP comparative information web-broker non-Exchange websites are
required to display consistent with Sec. 155.205(b)(1). We also
propose to revise the disclaimer requirement in Sec.
155.220(c)(3)(i)(A) so that web-broker non-Exchange websites would be
required to prominently display a standardized disclaimer provided by
HHS stating that enrollment support is available on the Exchange
website and provide a web link to the Exchange website where enrollment
support for a QHP is not available using the web-broker's non-Exchange
website.

[[Page 696]]

This proposal should result in very limited new burden for web-
brokers. The proposed new standardized disclaimer would require web-
brokers to make minor updates to their non-Exchange websites in cases
where they do not support enrollment in all available QHPs. However, in
those cases, web-brokers would be displaying a disclaimer much like the
plan detail disclaimer that they have historically been required to
display.
We estimate this proposal will affect approximately 20 web-brokers
based on the number of web-brokers currently approved by CMS and our
internal knowledge of entities that have expressed interest in becoming
web-brokers. Given the minor modifications necessary to implement the
revised disclaimer in this proposal, we estimate a cost of $411 in
total labor costs for each web-broker, which reflects 5 hours of work
by Web Developers and Digital Interface Designers (15-1257) per web-
broker (100 hours across all web-brokers annually) at an average hourly
rate of $82.20. The cumulative additional cost estimate as a result of
this proposal is $8,220 for 20 web-brokers in the 2022 benefit year. If
this proposal is finalized, we would revise the information collection
under OMB control number 0938-1349 accordingly and provide the
applicable comment periods.
We propose to amend Sec. 155.220 to add a proposed new paragraph
(c)(3)(i)(M) that would require web-broker websites to prominently
display a clear explanation of the rationale for explicit QHP
recommendations and the methodology for the default display of QHPs on
their websites (for example, alphabetically based on plan name, from
lowest to highest premium, etc.). We believe this proposed new
requirement would provide consumers with a better understanding of the
information being presented to them on web-broker websites, thereby
enabling them to make better informed decisions and shop for and select
QHPs that best fit their needs.
We support web-broker websites' use of innovative decision-support
tools for consumers to help them shop for and select QHPs that best fit
their needs. However, web-broker websites that explicitly recommend or
rank QHPs do not always provide an explanation for their
recommendations or rankings. Similarly, web-broker websites may not
include an explanation of the methodology used for their default
displays of QHPs, and it may not otherwise be apparent what
methodologies are used. The absence of such explanations may cause some
consumers to misunderstand the bases for the recommendations displayed
to them on web-broker websites (whether explicit or implicit), or may
prevent them from assessing the value of the recommendations (for
example, whether a recommendation is based on the factors most
important to them). In addition, the lack of explanations for QHP
recommendations on web-broker websites may obscure that the web-broker
is recommending QHPs based on compensation the web-broker receives from
QHP issuers in violation of Sec. 155.220(c)(3)(i)(L). For these
reasons, we propose to amend Sec. 155.220 to add proposed new
paragraph (c)(3)(i)(M) that would require web-broker websites to
prominently display a clear explanation of the rationale for QHP
recommendations and the methodology for their default display of QHPs.
This proposal should result in very limited new costs for web-
brokers, since the information it would require they display on their
websites would only require text-based changes that are relatively easy
to implement. Furthermore, the extent of those textual updates should
be relatively minor in most cases. For example, if a web-broker is
recommending a QHP based on the fact that it has the lowest monthly
premiums for a consumer, that can likely be communicated in one or two
sentences of informational text, or possibly even in a single phrase or
set of short bullet points. Some web-brokers are already providing the
information that would be required by this proposal, and therefore
would not have to make any website updates. Other web-broker websites
do not explicitly recommend QHPs, and therefore the impact of this
proposal would be limited to providing similar information about the
methodology for their default display of QHPs (for example, explaining
QHPs are sorted from lowest to highest premium, etc.), assuming they do
not already provide that information.
We estimate this proposal will affect approximately 20 web-brokers.
Given the minor text-based changes necessary to implement the
informational text detailing the rationale for QHP recommendations and
the methodology for a default display of QHPs, we estimate a cost of
$411 in total labor costs for each web-broker, which reflects 5 hours
of work by Web Developers and Digital Interface Designers (15-1257) per
web-broker (100 hours across all web-brokers annually) at an average
hourly rate of $82.20. The cumulative additional cost estimate as a
result of this proposal is $8,220 for 20 web-brokers in the 2022
benefit year. If this proposal is finalized, we would revise the
information collection under OMB control number 0938-1349 accordingly
and provide the applicable comment periods.

E. ICRs Regarding Verification of Eligibility for Special Enrollment
Periods (Sec. 155.420)

Since 2017, the 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. We propose to amend Sec. 155.420 to add new paragraph (g) to
state that Exchanges may conduct pre-enrollment eligibility
verification for special enrollment periods at the option of the
Exchange. The Exchanges on the Federal platform would verify special
enrollment period eligibility for the most common special enrollment
period type, loss of minimum essential coverage. This special
enrollment period type comprises the majority of all special enrollment
period enrollments on the Exchanges on the Federal platform.
Since consumers on Exchanges on the Federal platform currently must
provide eligibility verification documentation for more special
enrollment period types, the provision would decrease burden on
consumers applying for special enrollment period types that no longer
require pre-enrollment verification. We expect that it takes an
individual, on average, about 1 hour to gather and submit the relevant
documentation needed for pre-enrollment special enrollment period
eligibility verification. This estimate is based on the assumption that
each individual required to submit documentation will submit, on
average, two documents for review. It could take significantly less
time if an individual already has the documents on hand, or more time
if the individual needs to procure documentation from a government
agency or other source.
Based on enrollment data for Exchanges on the Federal platform, we
estimate that HHS eligibility support staff members would conduct pre-
enrollment verification for 194,000 fewer individuals. We estimate that
Once individuals have submitted the required verification documents, it
would take an Eligibility Interviewer approximately 12 minutes (at an
hourly cost of $46.14) to review and verify submitted verification
documents. In 2017, the Exchanges on the Federal platform expanded pre-
enrollment special enrollment period verification to include five
special enrollment period types and estimated an annual additional
administrative burden of

[[Page 697]]

130,000 hours at a cost of $5,306,600.\374\ Limiting pre-enrollment
verification to one special enrollment period type would decrease the
annual administrative burden of special enrollment period verification.
The proposed change would result in a decrease in annual burden for the
federal government of 38,800 hours at a cost of $1,790,232. It would
also result in a decrease in annual burden for consumers attesting to
special enrollment period types that no longer require document
verification of 194,000 hours.
---------------------------------------------------------------------------

\374\ 82 FR 18346.
---------------------------------------------------------------------------

The proposed information collection requirements and the related
burden decrease discussed in this section will be submitted for OMB
review and approval as part of a revision of the information collection
currently approved under OMB control number 0938-1207 (Expiration date:
February 29, 2024).\375\
---------------------------------------------------------------------------

\375\ Essential Health Benefits in Alternative Benefit Plans,
Eligibility Notices, Fair Hearing and Appeal Processes, and Premiums
and Cost Sharing; Exchanges: Eligibility and Enrollment (CMS-10468).
---------------------------------------------------------------------------

F. ICRs Regarding General Program Integrity and Oversight Requirements
(Sec. 155.1200)

We propose to add Sec. 155.1200(e) to permit a State Exchange to
meet the requirement to conduct an annual independent external
programmatic audit, as described at Sec. 155.1200(c), by completing an
audit that year under the SEIPM audit process we propose under Part
155, subpart P. We estimate that there would be a burden reduction for
State Exchanges related to the programmatic audit requirement under
Sec. 155.1200(c). In particular, the 18 State Exchanges that manage
their own eligibility and enrollment platforms would no longer be
required to dedicate resources to procure and reimburse auditing
entities for services rendered to complete the annual independent
external programmatic audits, assuming the State Exchanges were instead
completing the required SEIPM program process that year. Based on
industry estimates of the average cost of contracting an auditor to
conduct an independent external programmatic audit, HHS estimates that
the cessation of contracting such audit entities would result in an
annual cost reduction of approximately $90,000 for each State Exchange,
which is described in detail in the RIA section of this rule.
Additionally, staff resources would no longer be needed to submit
the results of the programmatic audit as a component of the State-based
Marketplace Annual Reporting Tool (SMART). This would result in a
reduction in cost and staff resources for each State Exchange. We
anticipate a reduction in cost associated with compiling data,
summarizing the programmatic audit results, and submitting to CMS.
State Exchanges are required to provide the results of the programmatic
audit in a public summary. This proposal would remove the burden
associated with reporting requirements, which includes the burden for a
management analyst taking 3 hours (at $93.82 an hour) to pull data into
a report, the time and effort necessary for a policy analyst taking 2
hours (at $93.82) to prepare the report of the audit results, and the
time for a senior manager taking 1 hour (at $155.52 an hour) to review
and submit to CMS. We estimate the burden of 6 hours at a cost of
$624.62 for each State Exchange. Therefore, the aggregate burden for
the 18 State Exchanges that manage their own eligibility and enrollment
platforms is 108 hours at a cost of $11,243.16.
Based on these estimates we expect the cost reduction associated
with compiling and reporting audit data to total $11,243.16 across all
18 State Exchanges beginning in the 2024 benefit year. The information
collection associated with the burden being reduced is covered under
OMB Control Number 0938-1244. If this rule is finalized as proposed, we
would revise the burden estimates covered under 0938-1244 before the
implementation of the SEIPM program.
We estimate this impact to take effect in June 2024 at the
earliest, which is when the State Exchanges would otherwise be
providing completed independent external audits as a component of their
PY 2023 SMART submissions. There would, however, be a corresponding new
burden created to complete the SEIPM process. For an estimate of the
burden created under SEIPM, please refer to section 14.
We request comment on the reduction in burden proposed, and
specifically seek feedback from State Exchanges regarding the annual
cost of the programmatic audit process.

G. ICRs Regarding State Exchange Improper Payment Measurement Program
(Sec. Sec. 155.1500-155.1540)

1. Data Collection (Sec. 155.1510)
In the preamble to Sec. 155.1510, we explain the sampling process
for each SEIPM review cycle. In Sec. 155.1510(a)(1), we propose that
HHS will provide State Exchanges with the pre-sampling data request,
which State Exchanges will complete and return to HHS. Both the pre-
sampling data request and the requested source data are in an
electronic format. The burden associated with completion and return of
the pre-sampling data request would be the time it would take each
State Exchange to interpret the requirements, analyze and design the
database queries based on the data elements identified in the SEIPM
data request form, develop the database queries, test the data, perform
verification and validation of the data, and return the form to HHS.
Once the pre-sampling data request is returned to HHS, HHS will
draw the sample for each State Exchange. In Sec. 155.1510(a)(2), we
propose that HHS will provide the sampled unit data request to the
State Exchange for completion and return to HHS. The sampled unit data
request will include the sampled units specific to each State Exchange.
Both the sampled unit data request and the requested source data are in
an electronic format. The burden associated with completion and return
of the sampled unit data request would be the time it would take each
State Exchange to interpret the requirements, analyze and design the
database queries based on the data elements identified in the SEIPM
data request form, develop the database queries, test the data, perform
verification and validation of the data, and return the form to HHS.
We expect respondent costs will not substantially vary since the
data being collected is largely in a digitized format and that each
State Exchange will be providing information for approximately 100
sampled units. We do not expect reporting costs to vary considerably
based on sample size. We seek comment on these assumptions.
We estimate completion of the pre-sampling data request would take
12 hours per respondent at an estimated $1,364 per respondent. We
estimate completion of the sampled unit data request would take 707
hours per respondent at an estimated cost of $73,054 per respondent. To
compile our estimates, we referenced our experience in collecting data
in our FFE pilot initiative. We identified specific personnel and the
number of hours that would be involved in collecting the sampled unit
data broken down by specific area (for example, eligibility
verification, auto re-enrollment, periodic data matching, enrollment
reconciliation, plan management, and manual reviews including document
retrieval). Additionally, to account for the time needed for any State
Exchanges to convert hard copies to a digitized format, we added 20
hours for each

[[Page 698]]

State Exchange into the burden estimates.
Hourly wage rates are based on May 2020 Bureau of Labor Statistics
Occupational Codes and vary from $45.98 (adjusted to $91.96 to account
for overhead) to $77.76 (adjusted to $155.52 to account for overhead)
depending on occupation code and function. With a mean hourly rate of
$103.50 for the respective occupation codes, the burden across the 18
State Exchanges equals 12,942 hours for a total cost of up to
$1,339,523. The burden related to this information collection is being
submitted to OMB for approval with this proposed regulation.
2. Determination of Error Findings Decision and Appeal Redetermination
(Sec. Sec. 155.1525 and 155.1530)
As described in the preamble to Sec. 155.1525, Redetermination of
Error Findings Decision, a State Exchange may file a request with HHS
to resolve issues with HHS' findings within the deadline prescribed in
the annual program schedule.
The burden associated with the information collection requirements
contained in Sec. Sec. 155.1525 and 155.1530 is the time and effort
necessary to draft and submit a request for a redetermination of an
error findings decision and, if requested, an appeal of a
redetermination decision. In accordance with 5 CFR 1320.4, information
collected during the conduct of an administrative action is not subject
to the PRA. As a result, we believe the burden associated with these
requirements is exempt from the PRA under 44 U.S.C. 3502(3)(A)(i).
3. Corrective Action Plan (Sec. 155.1535)
As described in the preamble to Sec. 155.1535, we are proposing
that State Exchanges may be required to develop and implement
corrective action plans following a completed SEIPM measurement
designed to reduce improper payments as a result of eligibility
determination errors. The burden associated with this requirement is
the time and effort put forth by State Exchanges to develop and submit
a corrective action plan to HHS. We estimate that it would take each
selected State Exchange up to 1,000 hours to develop a CAP. We estimate
that the total annual burden associated with this requirement for up to
18 State Exchange respondents would be up to 18,000 hours. Assuming the
management analyst average hourly rate of $93.82 per hour, we estimate
that the cost of a corrective action plan per State Exchange could be
up to $93,820, and for all 18 State Exchanges, up to $1,688,760. The
burden related to this information collection will be submitted to OMB
for approval after future rulemaking has been completed regarding the
CAP process and requirements.

H. ICRs Regarding State Selection of EHB-Benchmark Plan for Plan Years
Beginning on or After January 1, 2020 (Sec. 156.111)

We are proposing to eliminate the requirement at Sec. 156.111(d)
and (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 proposal, states would no longer be required to submit
an annual report that complies with each requirement listed at Sec.
156.111(f)(1) through (6), nor would HHS identify which benefits are in
addition to EHB for the applicable PY in the state if a state does not
submit an annual reporting package.
As states are already required under Sec. 155.170 to identify
which state-required benefits are in addition to EHB and to defray the
cost of QHP coverage of those benefits, the 2021 Payment Notice
estimated that a majority of states, approximately 41, would submit
annual reports and that 10 states would not submit annual reports.\376\
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\376\ 85 FR 29164, 29244.
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The 2021 Payment Notice estimated that the burden for each state to
meet this reporting requirement in the first year would be 30 hours,
with an equivalent cost of approximately $2,459, with a total first
year burden for all 41 states of 1,230 hours and an associated total
first year cost of approximately $100,829. Because the first year of
annual reporting was intended to set the baseline list of state-
required benefits which states would update as necessary in future
annual reporting cycles, the 2021 Payment Notice explained that the
burden associated with each annual reporting thereafter would be lower
than the first year. The 2021 Payment Notice therefore estimated that
for each annual reporting cycle after the first year the burden for
each state to meet the annual reporting requirement would be 13 hours
with an equivalent cost of approximately $1,117, with a total annual
burden for all 41 states of 533 hours and an associated total annual
cost of approximately $45,817. The average annual burden over 3 years
was estimated at approximately 765 hours with an equivalent average
annual cost of approximately $64,154.
Given that we did not require states to submit annual reports in
2021 pursuant to our enforcement posture in part 2 of the 2022 Payment
Notice final rule, if finalized as proposed, repealing the annual
reporting requirement would also remove the associated ICRs and the
anticipated burden on states submitting such reports. Thus, if
finalized as proposed, we will request discontinuation of the ICRs
associated with the repealed annual reporting requirement (OMB control
number: 0938-1174 Essential Health Benefits Benchmark Plans (CMS-
10448)/Expiration date: February 29, 2024).

I . ICR Regarding Differential Display of Standardized Options on the
Websites of Web-Brokers (Sec. 155.220) and QHP Issuers (Sec. 156.265)

In the current rulemaking, we consider resuming the differential
display of standardized options per the existing authority at Sec.
155.205(b)(1). We also consider resuming enforcement of the
standardized options differential display requirements for approved
web-brokers and QHP issuers using a direct enrollment pathway to
facilitate enrollment through an FFE or SBE-FP--including both the
Classic DE and EDE Pathways--at Sec. Sec. 155.220(c)(3)(i)(H) and
156.265(b)(3)(iv), respectively.
We estimate that a total of 110 web-brokers and QHP issuers
participating in the FFEs and SBE-FPs would be required to comply with
these requirements. We estimate that it would take a web developer/
digital interface designer (OES occupational code 15-1257) 2 hours
annually, at an average hourly cost of $82.20 per hour, to implement
these changes, at a total annual cost of $164.40 per entity. We
therefore estimate a total annual burden of 220 hours at a cost of
$18,804 for all applicable web-brokers and QHP issuers.
Consistent with the approach finalized in the 2018 Payment
Notice,\377\ we continue to recognize that system constraints may
prevent web-broker and QHP issuers from mirroring the HealthCare.gov
display. We would therefore continue to permit web-brokers and QHP
issuers that use a direct enrollment pathway to facilitate enrollment
through an FFE or SBE-FP to submit a request to deviate from the
display on HealthCare.gov, with approval from HHS. Any requests from

[[Page 699]]

web-brokers and QHP issuers seeking approval for an alternate
differentiation format would be reviewed based on whether the same
level of differentiation and clarity is being provided under the
requested deviation as is provided on HealthCare.gov.
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\377\ See 81 FR at 94118.
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We estimate that 55 of the above web-brokers and QHP issuers would
submit a request to deviate from the manner in which standardized
options are differentially displayed on HealthCare.gov. We estimate it
would take a compliance officer (OES occupational code 13-1041)
approximately 1 hour annually, at a rate of $72.70 per hour, to
complete the request to deviate from the display on HealthCare.gov as
well as the justification for the request. We therefore estimate a
total annual burden for all web-brokers and issuers subject to the
differential display requirements submitting a request to deviate of
approximately $3,998.50 beginning in 2023.
To account for the burden associated with this ICR, HHS will submit
a revised version of the existing PRA package for Non-Exchange Entities
(under OMB control number: 0938-1329 (CMS-10633)) which was previously
discontinued on March 4, 2020. This proposed rule serves as the initial
notice for the revised PRA package.

J. ICRs Regarding Network Adequacy and Essential Community Providers
(Sec. Sec. 156.230 and 156.235)

In this rule, HHS is proposing amendments to Sec. 156.230,
including adoption of standards related to time and distance and
appointment wait time to assess QHP issuers' fulfillment of the
reasonable access network adequacy standard. HHS is proposing to raise
the ECP threshold from 20 percent to 35 percent. Issuers will continue
to submit provider facility information and geographic location of
participating ECPs participating in an issuer's provider network or
other documentation necessary to demonstrate that an issuer has a
sufficient number and geographic distribution of ECPs for the intended
service areas. This is done to ensure QHP enrollees have reasonable and
timely access to providers that serve predominantly low-income,
medically underserved individuals in accordance with ECP inclusion
requirements found at Sec. 156.235.
Additionally, issuers must collect and submit provider information
necessary to demonstrate satisfaction of time and distance standards
and appointment wait time standards to ensure that an issuer's network
has fulfilled the network adequacy reasonable access standard found at
Sec. 156.230. Lastly, an issuer must report the offering of telehealth
services for each provider to help inform future development of
telehealth standards. We would provide the definition of telehealth and
ask issuers to respond yes or no as to whether each network provider
offers telehealth. As described in the preamble, issuers who do not
have the information available by the time of the QHP certification
process would be able to respond that they have requested the
information from the provider and are awaiting the response.
HHS anticipates burden for completing the ECP/NA template will
increase based on the changes in this proposed rule to an estimated 20
hours in total for each medical QHP submitted by issuers and 4 hours in
total for each SADP submitted by issuers. This estimate is inclusive of
the requirement to report provider facility information and geographic
location of ECPs in an issuer's provider network. Since we propose to
raise the ECP threshold from 20 percent to 35 percent, QHP issuers will
need to submit information on a sufficient number of their contracted
ECPs to meet the higher threshold.\378\ Some issuers have previously
only included enough contracted ECPs on the template in order to meet
the current threshold for that year's certification process. For those
issuers, the proposed increase in the ECP threshold would somewhat
increase burden in completing the ECP/NA template as they would need to
include more contracted ECPs on the template to meet the standard.
Notwithstanding, HHS estimates that the burden associated with showing
compliance with the increased ECP threshold will account for 3 hours of
the total 20 hours we estimate for completing the ECP/NA template for
medical QHPs and 1 hour of the total 4 hours we estimate for SADPs.
---------------------------------------------------------------------------

\378\ The ECP/NA template requires QHP issuers to report only
that number of providers sufficient to demonstrate compliance with
relevant requirements.
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The 20-hour burden estimate for the ECP/NA template also includes
burden resulting from the requirement that QHP issuers report
information relevant to compliance with time and distance standards and
appointment wait time standards. For PYs 2018-2022, HHS deferred
reviews of network adequacy for QHPs to states that HHS determined to
have a sufficient network adequacy review process, which was all FFE
states for that time period. As HHS resumes network adequacy reviews,
we are proposing to include a broader provider specialty list for time
and distance standards than was evaluated for PYs 2015-2017, and to add
appointment wait time standards. HHS estimates that the burden
associated with the requirement that QHPs report information sufficient
to show compliance with the proposed network adequacy standards would
account for 12 of the total 20 hours we estimate for completing the
ECP/NA template for medical QHPs, and 1 hour of the total 4 hours we
estimate for SADPs.
The 20-hour estimate also includes the burden associated with the
requirement that issuers report whether network providers provide
telehealth services. HHS believes that many QHP issuers already collect
and maintain information on whether network providers furnish
telehealth services. Approximately half of the parent companies of
issuers on the FFEs also offer Medicare Advantage plans. Since Medicare
Advantage offers a telehealth credit for network adequacy, we expect
those issuers would already have telehealth information available for
their providers. HHS further is of the view that those QHP issuers that
do not currently collect this information may do so using the same
means and methods by which they already collect information from their
network providers relevant to time and distance standards and provider
directory information. For these reasons, HHS estimates that any
additional burden relative to the requirement that QHP issuers report
whether each network provider is furnishing telehealth services would
lead to a minimal increase in burden for many issuers. The requirement
to report whether providers offer telehealth services would account for
four of the total 20 hours we estimate for completing the ECP/NA
template for medical QHPs and 1 of the total 4 hours we estimate for
SADPs. Finally, we estimate it will take 1 hour for issuers, including
both medical QHPs and SADPs, to submit the ECP/NA template and complete
the portions of the Issuer Module that are relevant to these reviews.
We estimate that the total annual burden associated with completing
the additional requirements proposed in this rule within the ECP/NA
template for medical QHPs for up to 215 issuers would be up to 4,300
hours. Assuming the compliance officer average hourly rate of $36.35
per hour, we estimate that the cost of completing the ECP/NA template
for an individual medical QHP could be up to $1,454, and for all 215
issuers, up to $312,610. We estimate that the total annual burden
associated

[[Page 700]]

with this requirement for SADPs for up to 270 issuers would be up to
1,080 hours. Assuming the compliance officer average hourly rate of
$36.35 per hour, we estimate that the cost of completing the ECP/NA
template for an individual SADP could be up to $290.80, and for all 270
issuers, up to $78,516. The total estimated cost for the annual burden
associated with completing the ECP/NA template across both medical QHP
and SADP issuers is $391,126.
HHS is submitting a new information collection package to OMB to
cover data collection related to essential community provider and
network adequacy requirements, which will include the changes proposed
in this proposed rule. This proposed rule serves as the initial notice
for the PRA package. The existing information collection package for
QHP certification (under OMB control number: 0938-1187 (CMS-10433)/
Expiration date: June 30, 2022) includes the data collection and burden
information for the ECP/NA template, outside of what is proposed in
this rule.

K. ICRs Regarding Payment for Cost-Sharing Reductions (Sec. 156.430)

In this rule, HHS is proposing several amendments to Sec. 156.430
to clarify that CSR data submission is mandatory for those issuers that
received CSR payments from HHS for any part of the benefit year, and
voluntary for other issuers. The currently approved burden estimate is
a total cost of $235,683 (2,362.50 hours) across 150 issuers ($1,571.22
per issuer), which accounts for 0.75 hours per issuer to complete and
submit the Issuer Summary Report to HHS each year and 15 hours per
issuer to complete and submit the Standard Methodology Plan and Policy
Report to HHS each year.\379\ We expect that these proposals will
reduce the burden associated with the CSR data submission process when
HHS is not making CSR payments to QHP issuers, as we expect that the
number of issuers submitting CSR data each year will decrease due to
these proposals. We have revised the information collection currently
approved under OMB control number: 0938-1266 (Cost-Sharing Reduction
Reconciliation (CMS-10526)/Expiration date: July 31, 2024) to account
for this decreased burden when HHS is not making CSR payments to QHP
issuers.
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\379\ OMB control number 0938-1266 (Cost-Sharing Reduction
Reconciliation (CMS-10526)/Expiration date: July 31, 2024).
---------------------------------------------------------------------------

L. ICRs Regarding Quality Improvement Strategy (Sec. 156.1130)

We are not proposing to amend regulatory text in 45 CFR 156.1130
which outlines QIS standards established in the 2016 Payment Notice.
The information collections associated with QIS data collection and
submission requirements are approved under OMB control number 0938-1286
(Quality Improvement Strategy Implementation Plan and Progress Report
(CMS-10540)/Expiration date: February 25, 2024) and encompasses the
estimated burden and costs associated with a QIS submission that may
include several QIS topic areas. In this proposed rule, we propose that
beginning in 2023, a QHP issuer would be required to address reducing
health and health care disparities as one of their QIS topic areas in
addition to at least one other topic area outlined in section
1311(g)(1) of the ACA, including: Improving health outcomes of plan
enrollees, preventing hospital readmissions, improving patient safety
and reducing medical errors, and promoting wellness and health. We do
not estimate additional burden to be accounted for since the QIS
submission form currently approved under OMB control number: 0938-1286
(Quality Improvement Strategy Implementation Plan and Progress Report
(CMS-10540)/Expiration date: February 25, 2024) already encompasses the
estimated burden and costs associated with a QIS submission that may
include several QIS topic areas.

M. ICRs Regarding Medical Loss Ratio (Sec. Sec. 158.140, 158.150,
158.170)

We propose to amend Sec. 158.140 to clarify that only those
provider incentives and bonuses that are tied to clearly defined,
objectively measurable, and well-documented clinical or quality
improvement standards that apply to providers may be included in
incurred claims for MLR reporting and rebate calculation purposes. We
also propose to amend Sec. 158.150 to specify that only expenditures
directly related to activities that improve health care quality may be
included in QIA expenses for MLR reporting and rebate calculation
purposes. We further propose to make a technical amendment to Sec.
158.170(b) to correct an oversight and remove the reference to the
percentage of premium QIA reporting option described in Sec.
158.221(b)(8), which was deleted in part 2 of the 2022 Payment Notice
final rule. We anticipate that implementing these provisions would
require minor changes to the MLR Annual Reporting Form Instructions,
but would not significantly increase the associated reporting burden.
The burden related to this information collection is currently approved
under OMB control number: 0938-1164 (Medical Loss Ratio Annual Reports,
MLR Notices, and Recordkeeping Requirements (CMS-10418)). The control
number is currently set to expire on July 31, 2024.

O. Summary of Annual Burden Estimates for Proposed Requirements

[[Page 701]]

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[GRAPHIC] [TIFF OMITTED] TP05JA22.039

This proposed rule includes several proposals, including
information collection requests for which we seek to use this
rulemaking as the Federal Register notice through which to receive
comment on their proposed revisions to or submissions of PRA packages.
These proposals include Verification of Eligibility for Special
Enrollment Periods (Sec. 155.420), Data Collection and Corrective
Action Plans related to the SEIPM Program(Sec. 155.1510, 155.1535),
and the proposals on Network Adequacy and Essential Community Providers
(Sec. Sec. 156.230 and 156.235) and the proposal regarding
Differential Display of Standardized Options (Sec. Sec. 155.220) and
156.265).
The following proposals with associated information collection
requests, including the proposal regarding State Flexibility for Risk
Adjustment (Sec. 153.320), the proposal regarding risk adjustment
Distributed Data and Risk Adjustment Data Submission Requirements
(Sec. Sec. 153.610 and 153.710), the proposal on General Program
Integrity and Oversight Requirements (Sec. 155.1200), will be
submitted for PRA approval outside of this rulemaking, through a
separate Federal Register notice.
The proposals for Quality Improvement Strategy (Sec. 156.1130),
Medical Loss Ratio (Sec. Sec. 158.140, 158.150, 158.170), and Payment
for Cost-Sharing Reductions (Sec. 156.430) contain information
collections which are covered by existing PRA packages. One proposal,
the State Selection of EHB-Benchmark Plan for Plan Years Beginning on
or After January 1, 2020 (Sec. 156.111), proposes to discontinue the
associated information collections and remove them from the PRA
package, and the information collection in the Determination of Error
Findings Decision and Appeal Redetermination (Sec. Sec. 155.1525 and
155.1530) proposal is exempt from the PRA.

P. Submission of PRA-Related Comments

We have submitted a copy of this proposed rule to OMB for its
review of the rule's information collection and recordkeeping
requirements. These requirements are not effective until they have been
approved by the OMB.
To obtain copies of the supporting statement and any related forms
for the proposed collections discussed above, please visit CMS's
website at https://www.cms.gov/regulations-and-guidance/legislation/PaperworkReductionActof1995, or call the Reports Clearance Office at
410-786-1326.
We invite public comments on these potential information collection
requirements. If you wish to comment, please submit your comments
electronically as specified in the

[[Page 702]]

ADDRESSES section of this proposed rule and identify the rule (CMS-
9911-P), the ICR's CFR citation, CMS ID number, and OMB control number.
ICR-related comments are due March 7, 2022.

V. Response to Comments

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

VI. Regulatory Impact Analysis

A. Statement of Need

This rule proposes standards related to the risk adjustment program
for the 2023 benefit year and beyond, as well as standards for the HHS-
RADV program beginning with the 2021 benefit year. This rule proposes
additional standards related to eligibility redetermination, special
enrollment periods, requirements for agents, brokers, web-brokers, and
issuers assisting consumers with enrollment through Exchanges that use
the Federal platform; state selection of EHB-benchmark plan and annual
reporting of state-required benefits, termination of coverage, the MLR
program, and 2023 FFE and SBE-FP user fees. This rule also proposes to
remove the annual reporting requirement on states to report state-
required benefits to HHS. In addition, it proposes to reinstate
nondiscrimination provisions related to sexual orientation and gender
identity. The rule also proposes to refine the EHB nondiscrimination
framework by including examples of presumptively discriminatory cases.
The rule also proposes to require issuers in FFEs and SBE-FPs to offer
standardized options. This rule proposes to expand QIS standards and
require QHP issuers to address health and health care disparities in
their QIS submissions in addition to at least one other topic area
outlined in section 1311(g)(1) of the ACA. Finally, this proposed rule
would implement the PIIA requirements for State Exchanges.

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) and Executive Order 13132 on
Federalism (August 4, 1999).
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 1 year. Based on HHS estimates, OMB's Office of Information
and Regulatory Affairs has determined this rulemaking is ``economically
significant'' as measured by the $100 million threshold. In accordance
with the provisions of Executive Order 12866, this regulation was
reviewed by the Office of Management and Budget.
The provisions in this proposed rule aim to ensure that consumers
continue to have access to affordable coverage and quality health care.
Although there is still some uncertainty regarding the net effect on
premiums, we anticipate that the provisions of this proposed rule would
help further HHS' goal of ensuring that all consumers have access to
quality and affordable health care and are able to make informed
choices. In accordance with Executive Order 12866, HHS believes that
the benefits of this regulatory action justify the costs.

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

In accordance with OMB Circular A-4, Table 24 depicts an accounting
statement summarizing HHS' assessment of the benefits, costs, and
transfers associated with this regulatory action.
This proposed rule implements standards for programs that will have
numerous effects, including providing consumers with access to
affordable health insurance coverage, reducing the impact of adverse
selection, and stabilizing premiums in the individual and small group
health insurance markets and in an Exchange. We are unable to quantify
all benefits and costs of this proposed rule. The effects in Table 24
reflect qualitative assessment of impacts and estimated direct monetary
costs and transfers resulting from the provisions of this proposed rule
for health insurance issuers and consumers. The annual monetized
transfers described in Table 24 include changes to costs associated
with the risk adjustment user fee paid to HHS by issuers and the
potential increase in rebates from issuers to consumers due to proposed
amendments to MLR requirements.

[[Page 703]]

We are proposing the risk adjustment user fee of $0.22 PMPM for the
2023 benefit year to operate the risk adjustment program on behalf of
states, which we estimate to cost approximately $60 million in benefit
year 2023.\380\ We expect risk adjustment user fee transfers from
issuers to the federal government to remain steady at $60 million, the
same as estimated for the 2022 benefit year; this is included in Table
24.
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\380\ As noted previously in this proposed rule, no state has
elected to operate the risk adjustment program for the 2023 benefit
year; therefore, HHS will operate the program for all 50 states and
the District of Columbia.
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Additionally, for 2023, we are proposing maintaining the FFE and
the SBE-FP user fee rates at current levels, 2.75 and 2.25 percent of
premiums, respectively.
For our proposed implementation of the State Exchange Improper
Payment Measurement program, we estimate record keeping costs for data
collection and corrective action plan development and implementation to
be approximately $3.0 million annually beginning in PY 2023.
BILLING CODE 4120-01-P

[[Page 704]]

[GRAPHIC] [TIFF OMITTED] TP05JA22.040

[[Page 705]]

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\381\ Healthy People 2030 defines health equity as ``the
attainment of the highest level of health for all people.'' https://health.gov/our-work/national-health-initiatives/healthy-people/healthy-people-2030/questions-answers.
[GRAPHIC] [TIFF OMITTED] TP05JA22.041

BILLING CODE 4120-01-C
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. Table 25 summarizes the effects of the risk adjustment
program on the federal budget from fiscal years 2023 through 2027, with
the additional, societal effects of this proposed rule discussed in
this RIA. We do not expect the

[[Page 706]]

provisions of this proposed rule to significantly alter CBO's estimates
of the budget impact of the premium stabilization programs that are
described in Table 25.
In addition to utilizing CBO projections, HHS conducted an internal
analysis of the effects of its regulations on enrollment and premiums.
Based on these internal analyses, we anticipate that, quantitatively,
the effects of the provisions proposed in this rule are consistent with
our previous estimates in the 2022 Payment Notice for the impacts
associated with the APTCs, the premium stabilization programs, and FFE
(including SBE-FP) user fee requirements.
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\382\ Reinsurance collections ended in FY 2018 and outlays in
subsequent years reflect remaining payments, refunds, and allowable
activities.
[GRAPHIC] [TIFF OMITTED] TP05JA22.042

1. Guaranteed Availability of Coverage (Sec. 147.104(i))
This proposed rule proposes amendments to Sec. 147.104(i), which
would reverse the policy allowing an issuer to attribute a premium
payment made for new coverage to any past-due premiums owed for
coverage from the same issuer or another issuer in the same controlled
group within the prior 12-month period preceding the effective date of
coverage before effectuating enrollment in new coverage. Under current
rules, individuals may have to pay up to 3 months of past-due premiums
plus a binder payment before enrolling in coverage.\383\ CMS lacks
information on the frequency with which consumers miss payments or the
frequency with which binder payments are currently being made, and
seeks data or information related to past-due premiums. CMS is also
interested in learning more about the population and characteristics of
individuals with past-due premiums.
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\383\ Section 156.270(d) requires issuers to observe a 3-
consecutive month grace period before terminating coverage for those
enrollees who upon failing to timely pay their premiums are
receiving APTC. Section 155.430(d)(4) requires that when coverage is
terminated following this grace period, the last day of enrollment
in a QHP through the Exchange is the last day of the first month of
the grace period. Therefore, individuals whose coverage is
terminated at the conclusion of a grace period would owe at most 1
month of premiums, net of any APTC paid on their behalf to the
issuer. Individuals who attempt to enroll in new coverage while in a
grace period (and whose coverage has not yet been terminated) could
owe up to 3 months of premiums, net of any APTC paid on their behalf
to the issuer.
---------------------------------------------------------------------------

Individuals often stop making premium payments or forgo health
insurance because they are unable to afford the premium payments. In a
2019 survey, 42 percent of insured adults reported being worried about
paying for their monthly health insurance premium, with 18 percent
being ``very worried'' and 24 percent being ``somewhat worried''.\384\
In addition, 28 percent of insured adults reported having a difficult
time covering the cost of health insurance each month. In 2019, 73.7
percent of uninsured adults pointed to high cost of coverage as the
reason for being uninsured.\385\
---------------------------------------------------------------------------

\384\ Kirzinger, Ashley et al., Data Note: Americans' Challenges
with Health Care Costs, KFF, June 11, 2019. https://www.kff.org/health-costs/issue-brief/data-note-americans-challenges-health-care-costs/.
\385\ Tolbert, J. and Orgera, K., Key Facts about the Uninsured
Population, KFF, November 6, 2020. https://www.kff.org/uninsured/issue-brief/key-facts-about-the-uninsured-population/.
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Based on internal analysis, we estimate that approximately 7.8
percent of enrollees in Exchanges using the Federal platform had their
coverage terminated in 2020 for non-payment of premiums. That figure
was 10.7 percent in 2019, 12.4 percent in 2018, and 17.3 percent in
2017.\386\ Among those enrollees who had their coverage terminated in
2019 and lived in an area where their issuer (or a different issuer in
the same controlled group) had plans available the next year, we
estimate that 16.9 percent enrolled with the same issuer (or a
different issuer in the same controlled group) the following year. That
figure was 16.5 percent in 2018 and 16.8 percent in 2017.\387\ For
those enrollees with household incomes below the federal poverty level,
15.3 percent of enrollees who had their coverage terminated in 2019 and
lived in an area where their issuer (or a different issuer in the same
controlled group) was available the next year enrolled with the same
issuer (or a different issuer in the same controlled group) the
following year.\388\ That figure was 13.5 percent in 2018 and 13.2
percent in 2017. Our analysis also suggests that those enrollees with
lower household incomes (specifically, household incomes below the
federal poverty level) were less likely to enroll in coverage from the
same issuer or another issuer in the same controlled group the
following year. In 2017, 2018, and 2019, those enrollees who were less
than 35 years old were also less likely to enroll in coverage from the
same issuer or another issuer in the same controlled group the
following year than those aged 35 to 54.
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\386\ The annual figures presented in this section should not
necessarily be interpreted as trends, as some states moved from
Exchanges using the Federal platform to State Exchanges and the
overall composition of the dataset may have changed.
\387\ As we reported in the April 18, 2017 Federal Register (82
FR 18346), that figure was approximately 16 percent in 2016.
\388\ Of the 936,637 enrollees who had their coverage terminated
in 2019 and lived in an area where their issuer (or a different
issuer in the same controlled group) was available the next year,
24,784 (or 2.6 percent) had incomes below the federal poverty level.
Many, but not all, of these enrollees lived in states that did not
expand Medicaid eligibility following the implementation of the ACA.
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Due to data limitations, we are unable to directly attribute any
changes in enrollment behavior in the Exchanges using the Federal
platform to the interpretation of the guaranteed availability
requirement stated in the Market Stabilization final rule. However,
this proposed rule would

[[Page 707]]

increase access to health insurance coverage for individuals who stop
paying premiums due to reasons such as financial hardship or
affordability and who are currently unable to enroll in coverage
because they cannot afford to pay past-due premiums. This increased
access could lead to better health outcomes, if these individuals are
able to maintain coverage.\389\ This proposed rule would also increase
the ability for enrollees to access coverage with the same issuer in
the next year. This would be of particular benefit to those Exchange
enrollees living in counties with only one or two participating
issuers.\390\ It could also reduce the costs and burden to enrollees
related to searching for a new plan from another issuer when seeking to
enroll in health care coverage. Being able to enroll with the same
issuer would also allow individuals to have access to the same network
of services and providers, which could improve continuity of care.
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\389\ We request comment on whether there would be any impact on
premiums, affordability, and access for the individuals who reliably
pay. We are interested in comments regarding whether issuers who
implemented policies requiring payment of past due premiums prior to
reenrollment experienced declines in administrative costs related to
the collection of past-due premiums.
\390\ According to recent figures from KFF, in 2021, there were
only two issuers participating in the ACA Exchanges in 44 percent of
counties, and there was only one issuer participating in the ACA
Exchanges in 10 percent of counties. Source: McDermott, Daniel and
Cynthia Cox (2020). ``Insurer Participation on the ACA Marketplaces,
2014-2021.'' KFF, November 23. https://www.kff.org/private-insurance/issue-brief/insurer-participation-on-the-aca-marketplaces-2014-2021/; This was noted by Sandy Ahn and JoAnn Volk in their
analysis of the previous interpretation of the guaranteed
availability requirement. Reference: Ahn, Sandy and JoAnn Volk
(2017). ``Relaxing the Affordable Care Act's Guaranteed Issue
Protection: Issues for Consumers and State Options.'' CHIRblog, June
2. http://chirblog.org/relaxing-the-affordable-care-acts-guaranteed-issue-protection-issues-for-consumers-and-state-options/.
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This policy could result in transfers from issuers who would have
been able to recoup unpaid premiums from enrollees to those enrollees
who would now be able to enroll in coverage from the same issuer or
another issuer in the same controlled group without having to pay past-
due premiums. However, we anticipate that these transfers would be
minimal, as issuers are not permitted to waive past-due premiums and
would be expected to pursue other means of collecting them.
We seek comment on the potential costs, benefits, and transfers
associated with this provision.
2. Nondiscrimination Based on Sexual Orientation and Gender Identity
(Sec. Sec. 147.104(e), 155.120(c), 155.220(j), 156.125(b), 156.200(e),
and 156.1230(b)), and EHB Nondiscrimination Policy for Health Plan
Designs (Sec. 156.125)
Many of the entities regulated by Sec. Sec. 147.104(e),
155.120(c), 155.220(j), 156.125(b), 156.200(e), and 156.1230(b) may
have previously incorporated the proposed nondiscrimination protections
related to sexual orientation and gender identity into their operations
in response to the inclusion of these protections in these regulations
prior to the effective date of the June 19, 2020 rulemaking on section
1557 that eliminated the references to these protections from these
regulations. These regulated entities may have incurred any
administrative costs at that time. We do not anticipate coming into
compliance with these proposed changes would substantially impose
administrative costs on any regulated entities that did not
subsequently revise nondiscrimination policies based on the 2020
section 1557 final rule. Although costs may be incurred by any
regulated entities that did subsequently revise nondiscrimination
policies in response to the removal of such protections from the
affected regulations based on the 2020 section 1557 final rule, we
believe such costs are justified in light of the potential significant
benefits the proposed changes could provide to individuals in the
LGBTQI+ community, by ensuring they are not subject to discrimination
on the basis of their sexual orientation or gender identity.
The EHB nondiscrimination policy proposals in this rulemaking will
most likely impact the vast majority of state EHB-benchmark plans. If
the nondiscrimination policy proposals become final, issuers subject to
Sec. 156.125 and states subject to the standards under Sec. 156.125
through the cross-reference at Sec. 156.111(b)(2)(v) will most likely
need to take action to come into compliance with the updated
nondiscrimination policies, and states may choose to provide guidance
to assist issuers in doing so. The actions necessary to come into
compliance with the updated nondiscrimination policies will likely
impact and minimally increase premiums (for example, Colorado 2023 EHB-
benchmark plan \391\ noted a minimal increase to premiums with the
updated benefits). States have the flexibility to design their EHB-
benchmark plans consistent with Sec. 156.111, which provides more
options in plan designs. We note that several states have already used
this flexibility to update their EHB-benchmark plans. CMS provides
states with greater flexibility to select their EHB-benchmark plans by
providing three new options for selection in PY 2020 and beyond,
including: (1) Selecting the EHB-benchmark plan that another state used
for PY 2017, (2) replacing one or more categories of EHBs under its
EHB-benchmark plan used for PY 2017 with the same category or
categories of EHB from the EHB-benchmark plan that another state used
for PY 2017, or (3) otherwise selecting a set of benefits that would
become the state's EHB-benchmark plan. Under each of these three
options, the new EHB-benchmark also must comply with additional
requirements, including scope of benefits requirements, under Sec.
156.111(b).\392\
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\391\ See for example, Colorado 2023 EHB Benchmark Plan
Actuarial Report: Suite of Gender-affirming care benefits to treat
gender dysphoria resulted cost estimate was 0.04% of the total
allowed claims assuming utilization would be for adults. https://www.cms.gov/CCIIO/Resources/Data-Resources/ehb.
\392\ Section 156.111(b). https://www.ecfr.gov/current/title-45/subtitle-A/subchapter-B/part-156.
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We seek comment on the potential costs, benefits, and transfers
associated with this provision.
3. Risk Adjustment (Sec. Sec. 153.320, 153.610, 153.620, 153.700,
153.710, and 153.730)
Beginning with the 2023 benefit year, we propose the following
model specification changes to the HHS risk adjustment models: (1) To
add a two-stage weighted model specification to the adult and child
risk adjustment models, (2) to remove the existing severity illness
factors in the adult models and add interacted HCC counts factors to
the adult and child risk adjustment models, and (3) to revise the
enrollment duration factors for the adult models. By prioritizing
simplicity and limiting the number of changes to the current model
structure, we minimize administrative burden for HHS, and as HHS runs
risk adjustment in all 50 states and the District of Columbia, we do
not expect these policies to place additional burden on state
governments. These proposed model specifications would result in
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.\393\
To

[[Page 708]]

further assist issuers in understanding the potential impact of these
changes on risk adjustment transfers, we released the 2021 RA Technical
Paper and conducted an EDGE transfer simulation that estimated the
impact on risk scores and transfers with and without these proposed
changes using 2020 benefit year risk adjustment data.\394\ Based on
results from this simulation, we estimate the impact of these policies
on risk adjustment transfers to be relatively minor.\395\
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\393\ See current burden estimates in the Supporting Statement
of OMB control number 0938-1155 (Standards Related to Reinsurance,
Risk Corridors, and Risk Adjustment (CMS-10401)), which is currently
being updated. The previous version of the Supporting Statement is
available at https://www.reginfo.gov/public/do/PRAViewDocument?ref_nbr=201712-0938-015.
\394\ See the 2021 HHS-Operated Risk Adjustment Technical Paper
on Possible Model Changes, available at https://www.cms.gov/files/document/2021-ra-technical-paper.pdf and the HHS-Operated Risk
Adjustment Technical Paper on Possible Model Changes: Summary
Results for Transfer Simulations, available at https://www.cms.gov/CCIIO/Programs-and-Initiatives/Premium-Stabilization-Programs.
Issuers that participated in the simulation also received detailed
issuer-specific data, including risk score and transfer estimates
for the simulated results.
\395\ We estimate that the impact of the model specification
changes between the proposed and final 2022 benefit year risk
adjustment models in total absolute value change in transfer over
premium is -0.3 in the individual marker and -0.2 in the small group
market.
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Additionally, we propose to recalibrate the HHS risk adjustment
models for the 2023 benefit year using the 2017, 2018, and 2019
enrollee-level EDGE data. 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 2022 benefit year to the 2023 benefit
year. We also propose to continue applying a market pricing adjustment
to the plan liability associated with Hepatitis C drugs in the risk
adjustment models, consistent with the approach adopted beginning with
the 2020 models. For the 2023 benefit year, we propose to recalibrate
the models using the final, fourth quarter (Q4) RXC mapping document
that was applicable for the 2018 and 2019 benefit year, with the
exception of the 2017 enrollee-level EDGE data year, for which we
propose to use the most recent RXC mapping document that was available
when we first processed the 2017 enrollee-level EDGE data (that is, Q2
2018) for consistency with prior model year recalibrations, as we did
not include RXCs in the adult risk adjustment models until 2018.\396\
For the 2024 benefit year and beyond, we propose to recalibrate the
models using the final, fourth quarter (Q4) RXC mapping document that
was applicable for each benefit year of data that is included in the
current year's model recalibration. We also propose to continue to
apply a pricing adjustment for Hepatitis C drugs for all three model
types (adult, child, and infant), as well as outline our consideration
for targeted removal of the mapping of hydroxychloroquine sulfate to
RXC 09 (Immune Suppressants and Immunomodulators) and the related RXC
09 interactions for the 2018 and 2019 benefit years' enrollee-level
EDGE data used for model recalibration,\397\ as well as our
consideration for the targeted removal of the mapping of
Descovy[supreg] to RXC 01 ((Anti-HIV Agents) from all three benefit
year datasets used for model recalibration. For the 2023 benefit year,
we are proposing to maintain the CSR adjustment factors finalized in
the 2019-2022 Payment Notices. Overall, we do not estimate that these
changes will impact issuer burden beyond the current burden for the
HHS-operated risk adjustment program.
---------------------------------------------------------------------------

\396\ See 81 FR at 94075.
\397\ The same concerns were not present for the 2017 enrollee-
level EDGE data because hydroxychloroquine sulfate was not included
in the RXC crosswalk until 2018.
---------------------------------------------------------------------------

For the 2023 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' operation of risk adjustment on behalf of
states is funded through a risk adjustment user fee. For the 2023
benefit year, we propose to use the same methodology that we finalized
in the 2022 Payment Notice to estimate our administrative expenses to
operate the program. Risk adjustment user fee costs for the 2023
benefit year are expected to remain steady from the prior 2022 benefit
year estimates. However, we project a small increase in billable member
months in the individual and small group markets overall in the 2023
benefit year based on the enrollment increases observed in the 2020
benefit year. We estimate that the total cost for HHS to operate the
risk adjustment program on behalf of states for 2023 will be
approximately $60 million, and therefore, the proposed risk adjustment
user fee would be $0.22 PMPM. Because overall risk adjustment costs
estimated for the 2023 benefit year are similar to 2022 costs, we do
not expect the proposed risk adjustment user fee for the 2023 benefit
year to materially impact the transfer amounts collected or paid by
issuers of risk adjustment covered plans.
We also propose to generally repeal the ability for states to
request a reduction in risk adjustment state transfers of up to 50
percent in all state market risk pools beginning with the 2024 benefit
year, with an exception for prior participants. We propose to provide
an exception for states that have previously submitted risk adjustment
state flexibility requests, so only such states may continue to request
this flexibility beginning with the 2024 benefit year. We also propose
to remove as a criterion for state justification and HHS approval of
these requests the demonstration of state-specific factors that warrant
an adjustment to more precisely account for relative risk differences
in the State individual catastrophic, individual non-catastrophic,
small group, or merged market risk pool. As proposed, we would retain
as the sole requirement for state justification and criterion for HHS
approval the demonstration that the requested reduction would have a de
minimis impact on the necessary premium increase to cover the transfers
for issuers that would receive reduced transfer payments beginning with
the 2024 benefit year.
We anticipate that the proposed changes to risk adjustment state
flexibility requests would have a minimal impact on states and other
interested parties. Only one state, Alabama, has requested a reduction
in risk adjustment state transfers since this flexibility was first
made available beginning in the 2020 benefit year, and under this
proposal, Alabama would be considered a prior participant and could
continue to request such reductions. We do not anticipate any new
burden or costs as a result of this policy.
We also propose to collect and extract five new data elements from
issuers' EDGE servers through issuers' Edge Server Enrollment
Submission (ESES) files and risk adjustment recalibration enrollment
files: ZIP code, race, ethnicity, subsidy indicator, and ICHRA
indicator beginning with the 2023 benefit year. In addition, we propose
to begin extracting three data elements issuers already report to their
EDGE servers--plan ID, rating area and subscriber indicator--as part of
the enrollee-level EDGE data beginning with the 2022 benefit year. The
proposal to extract plan ID, rating area, and subscriber indicator will
pose minimal burden on issuers (only the burden associated with running
of a command) since the creation and storage of the extract--which
issuers do not receive--is mainly handled by HHS. For the collection of
the five new data elements we propose to collect and extract beginning
with the 2023 benefit year, the cumulative additional cost estimate is
$225,168 for 600 issuers. We estimate that the addition of these five
new data elements to the risk adjustment data

[[Page 709]]

submission requirements would be $375.28 per issuer. The proposal to
extract these data elements will pose minimal burden on issuers (only
the burden associated with running of a command) since the creation and
storage of the extract--which issuers do not receive--is mainly handled
by HHS. We expect minimal costs to HHS as a result of these proposals.
We also propose to amend Sec. 153.730 to clarify that in
situations where the April 30 deadline for issuers to submit risk
adjustment data to HHS in states where HHS is operating the risk
adjustment program falls on a non-business day, the deadline for
issuers to submit the required data would be the next applicable
business day. We believe this proposal would not pose additional burden
since it does not change any of the data submission requirements and
only clarifies the deadline when April 30 falls on a non-business day.
We seek comment on estimated costs and transfers and potential
benefits associated with these provisions.
4. Risk Adjustment Data Validation (Sec. Sec. 153.350 and 153.630)
In this proposed rule, we propose updates to the HHS-RADV error
rate calculation methodology beginning with the 2021 benefit year to
(1) extend the application of Super HCCs from their current application
only in the sorting step that assigns HCCs to failure rate groups to
broader application throughout the HHS-RADV error rate calculation
processes, (2) specify that Super HCCs will be defined separately
according to the age group model to which an enrollee is subject, and
(3) constrain to zero any negative failure rate outlier in a failure
rate group, regardless of whether the outlier issuer has a negative or
positive error rate. Although we anticipate the proposed changes will
have a small impact on issuers' HHS-RADV risk adjustment transfer
adjustments, risk adjustment is a budget neutral program and we expect
these proposals to refine the HHS-RADV error rate calculation
methodology will not have an impact on the administrative burden to
issuers subject to the current HHS-RADV process because HHS is
responsible for calculating error rates and applying error rates to
adjust risk scores and state market risk pool transfers. Furthermore,
we expect these changes will have minimal impacts on administrative
costs to the federal government as the described changes do not impact
the underlying HHS-RADV data, the amount of data HHS collects, or the
SVA, which is conducted by an entity HHS retains.
We seek comment on these burden estimates.
5. Agents, Brokers, and Web-Brokers (Sec. 155.220)
a. Required QHP Comparative Information on Web-Broker Websites and
Related Disclaimer
We propose to amend Sec. 155.220(c)(3)(i)(A) to include at
proposed new Sec. Sec. 155.220(c)(3)(i)(A)(1) through (c)(3)(i)(A)(5)
a list of the QHP comparative information web-broker non-Exchange
websites are required to display consistent with Sec. 155.205(b)(1).
We also propose to revise the disclaimer requirement in Sec.
155.220(c)(3)(i)(A) so that web-broker non-Exchange websites would be
required to prominently display a standardized disclaimer provided by
HHS stating that enrollment support is available on the Exchange
website and provide a web link to the Exchange website where enrollment
support for a QHP is not available using the web-broker's non-Exchange
website.
In the preamble of part 2 of the 2022 Payment Notice final rule, we
announced our intention to enforce the requirement that web-brokers
display the QHP comparative information described under Sec.
155.205(b)(1) beginning with the PY 2022 open enrollment period.\398\
Specifically, we propose to create proposed new Sec. Sec.
155.220(c)(3)(i)(A)(1) through (5) to list premium and cost-sharing
information, the summary of benefits and coverage established under
section 2715 of the PHS Act, identification of the metal level of the
QHP as defined by section 1302(d) of the ACA or whether it is a
catastrophic plan as defined by section 1302(e) of the ACA, the results
of the enrollee satisfaction survey as described in section 1311(c)(4)
of the ACA, quality ratings assigned in accordance with section
1311(c)(3) of the ACA, and the provider directory made available to the
Exchange in accordance with Sec. 156.230 as the minimum QHP
comparative information web-broker non-Exchange websites must display
for all available QHPs. Including this information within Sec.
155.220, instead of through a cross-reference to Sec. 155.205(b)(1),
would provide better clarity and ease of reference and establish a list
of required QHP comparative information consistent with our current
enforcement approach, which, as discussed above, does not require the
display of MLR information and transparency of coverage measures.
---------------------------------------------------------------------------

\398\ See Patient Protection and Affordable Care Act; HHS Notice
of Benefit and Payment Parameters for 2022 and Pharmacy Benefit
Manager Standards; Final Rule, 86 FR 24140 at 24206 (May 5, 2021).
---------------------------------------------------------------------------

We propose to revise Sec. 155.220(c)(3)(i)(A) to state that web-
broker websites must disclose and display the following QHP information
provided by the Exchange or directly by QHP issuers consistent with the
requirements of Sec. 155.205(c), and to the extent that enrollment
support for a QHP is not available using the web-broker's website,
prominently display a standardized disclaimer provided by HHS stating
that enrollment support for the QHP is available on the Exchange
website, and provide a web link to the Exchange website.
These proposals should result in very limited new burden for web-
brokers. As we explained in Section III of the preamble, given CMS's
current enforcement policies relative to these requirements, the QHP
comparative information we propose to require web-broker websites to
display is consistent with current requirements. As a result, this
proposed requirement would not present new burden to web-brokers.
The proposed new disclaimer would require web-brokers to make minor
updates to their websites in cases when they do not support enrollment
in all available QHPs. However, in those cases, they would be
displaying a standardized disclaimer much like the plan detail
disclaimer that they have historically been required to display.
We estimate this proposal will affect approximately 20 web-brokers.
Given the minor modifications necessary to implement the revised
disclaimer in this proposal, we estimate a cost of $411 in total labor
costs for each web-broker, which reflects 5 hours of work by Web
Developers and Digital Interface Designers (15-1257) per web-broker
(100 hours across all web-brokers annually) at an average hourly rate
of $82.20. The cumulative additional cost estimate as a result of this
proposal is $8,220 for 20 web-brokers in the 2022 benefit year.
We seek comment on the estimated burden associated with these
proposals.
b. Prohibition of QHP Advertising on Web-Broker Websites
Section 155.220(c)(3)(i)(L) prohibits web-broker non-Exchange
websites from displaying QHP recommendations based on compensation an
agent, broker, or web-broker receives from QHP issuers. We propose to
amend Sec. 155.220(c)(3)(i)(L) to make clear that web-broker non-
Exchange websites are also prohibited from displaying QHP
advertisements, or otherwise providing

[[Page 710]]

favored or preferred placement in the display of QHPs, based on
compensation agents, brokers, or web-brokers receive from QHP issuers.
This proposal should impose no new costs on web-brokers so long as
they are not displaying QHP advertisements on their websites. We
believe that very few web-brokers are currently doing so. However, for
those few web-brokers that are displaying QHP advertisements on their
websites, they would be required to update their websites to remove
those advertisements and would lose any advertising revenue associated
with such placements. Since advertisements on websites are inherently
subject to change, even for those web-brokers that would be required to
make updates to their websites if this proposal is finalized, the costs
may be very limited, although we request comment on this assumption and
acknowledge that there may be loss of advertising revenue. We also
realize, to the extent advertising revenue is lost, web-brokers may
seek to recoup the lost revenue from other sources resulting in a
transfer of costs. For example, web-brokers may seek to increase fees
received from agents and brokers using their websites or may pursue
increased commissions from QHP issuers.
We seek comment on the potential costs, benefits, and transfers
associated with this proposal.
c. Explanation of Rationale for QHP Recommendations on Web-Broker
Websites
We propose to amend Sec. 155.220 to add a proposed new paragraph
(c)(3)(i)(M) that would require web-broker websites to prominently
display a clear explanation of the rationale for explicit QHP
recommendations and the methodology for the default display of QHPs on
their websites (for example, alphabetically based on plan name, from
lowest to highest premium, etc.). We believe this proposed new
requirement would provide consumers with a better understanding of the
information being presented to them on web-broker websites, thereby
enabling them to make better informed decisions and shop for and select
QHPs that best fit their needs.
We support web-broker websites' use of innovative decision-support
tools for consumers to help them shop for and select QHPs that best fit
their needs. However, web-broker websites that explicitly recommend or
rank QHPs do not always provide an explanation for their
recommendations or rankings. Similarly, web-broker websites may not
include an explanation of the methodology used for their default
displays of QHPs, and it may not otherwise be apparent what
methodologies are used. The absence of such explanations may cause some
consumers to misunderstand the bases for the recommendations displayed
to them on web-broker websites (whether explicit or implicit), or may
prevent them from assessing the value of the recommendations (for
example, whether a recommendation is based on the factors most
important to them). In addition, the lack of explanations for QHP
recommendations on web-broker websites may obscure that the web-broker
is recommending QHPs based on compensation the web-broker receives from
QHP issuers in violation of Sec. 155.220(c)(3)(i)(L). For these
reasons, we propose to amend Sec. 155.220 to add proposed new
paragraph (c)(3)(i)(M) that would require web-broker websites to
prominently display a clear explanation of the rationale for QHP
recommendations and the methodology for its default display of QHPs.
This proposal should result in very limited new costs for web-
brokers, since the information it would require they display on their
websites would only require text-based changes that are relatively easy
to implement. Furthermore, the extent of those textual updates should
be relatively minor in most cases. For example, if a web-broker is
recommending a QHP based on the fact that it has the lowest monthly
premiums for a consumer, that can likely be communicated in one or two
sentences of informational text, or possibly even in a single phrase or
set of short bullet points. Some web-brokers are already providing the
information that would be required by this proposal, and therefore
would not have to make any website updates. Other web-broker websites
do not explicitly recommend QHPs, and therefore the impact of this
proposal would be limited to providing similar information about the
methodology for their default display of QHPs (for example, explaining
QHPs are sorted from lowest to highest premium, etc.), assuming they do
not already provide that information.
We estimate this proposal will affect approximately 20 web-brokers.
Given the minor text-based changes necessary to implement the
informational text detailing the rationale for QHP recommendations and
the methodology for a default display of QHPs, we estimate a cost of
$411 in total labor costs for each web-broker, which reflects 5 hours
of work by Web Developers and Digital Interface Designers (15-1257) per
web-broker (100 hours across all web-brokers annually) at an average
hourly rate of $82.20. The cumulative additional cost estimate as a
result of this proposal is $8,220 for 20 web-brokers in the 2022
benefit year.
We seek comment on the potential costs and benefits associated with
this proposal.
d. Providing Correct Information to the FFEs and Prohibited Business
Practices
These proposed revisions to Sec. 155.220(j)(2) are focused on
addressing various areas where HHS has thus far identified a need for
more direct and clear guidance, including ensuring that correct
consumer information is entered onto Exchange applications. This
includes contact information, such as the consumer's email address,
telephone number, and mailing address, as well as information related
to projected consumer household income. They also set forth prohibited
business practices, such as using automation when interacting with CMS
Systems or the DE Pathways without CMS' advance written approval and
failing to properly identity proof Exchange applicants. These proposed
changes will clarify HHS' expectations in these areas, and create
clear, enforceable standards and bases for taking enforcement action
for violations of these requirements.
HHS believes these proposals would not impose any burden on any of
the parties the proposals would impact, including agents, brokers, and
web-brokers. None of these proposals propose to impose new
requirements. Rather, these proposals are intended to address common
problems that HHS has observed, and provide clear, enforceable
standards intended to protect consumers and support the efficient
operation of Exchanges by substantially reducing the occurrence of
those problems.
We seek comment on any potential costs or benefits associated with
these proposals.
6. Verification Process Related to Eligibility for Insurance
Affordability Programs (Sec. 155.320)
We propose to amend Sec. 155.320(d)(4) to remove the requirement
that Exchanges that do not reasonably expect to obtain sufficient
verification data related to enrollment in or eligibility for employer
sponsored coverage conduct random sampling to verify whether an
applicant is eligible for or enrolled in an eligible employer sponsored
plan in favor of a verification process that is based on risk for
inappropriate APTC/CSRs. We believe this proposal would benefit
employers, employees, Exchanges using the Federal platform, and State
Exchanges that operate their own eligibility and enrollment platform,

[[Page 711]]

as this proposal would relieve them from the burden of investing
resources to conduct and respond to random sampling, as applicable.
In the 2019 Payment Notice final rule, we discussed a study that
HHS conducted in 2016 and the burden associated with sampling based in
part on the alternative process used for the Exchanges.\399\ HHS
incurred approximately $750,000 in costs to design and operationalize
this study, and the study indicated that $353,581 of APTC was
potentially incorrectly granted to individuals in the sampled
population who inaccurately attested to their enrollment in or
eligibility for a qualifying eligible employer sponsored plan. We
placed calls to employers to verify 15,125 cases but were only able to
verify 1,948 cases. A large number of employers either could not be
reached or were unable to verify a consumer's information, resulting in
a verification rate of approximately 13 percent. The sample size
involved in the 2016 study did not represent a random sample of the
target population and did not fulfill all regulatory requirements for
sampling under Sec. 155.320(d)(4)(i).
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\399\ See https://www.govinfo.gov/content/pkg/FR-2017-11-02/pdf/2017-23599.pdf, p. 51128.
---------------------------------------------------------------------------

Taking additional costs into account--namely, the cost of sending
notices to employees as required under Sec. 155.320(d)(4)(i)(A), the
cost of building the infrastructure and implementing the first year of
operationalizing this process, and the cost of expanding the number of
cases to a random sample size of approximately 1 million cases--we
estimate that the overall one-time cost of implementing sampling would
have been approximately $8 million for the Exchanges using the Federal
platform, and between $2 million and $7 million for other Exchanges,
depending on their enrollment volume and existing infrastructure.
Therefore, we estimate that the average per-Exchange cost of
implementing sampling that resembles the approach taken by the
Exchanges using the Federal platform would have been approximately $4.5
million for State Exchanges that operate their own eligibility and
enrollment platform, for a total cost of $67.5 million for the 15 State
Exchanges that operate their own eligibility and enrollment platform
(operating in 14 states and the District of Columbia). However, we are
aware that 4 State Exchanges that operate their own eligibility and
enrollment platform have already incurred costs to implement sampling
and estimate that they have incurred one-time costs of approximately
$4.5 million per Exchange with a total of $18 million and will only
experience savings related to recurring costs. Therefore, the one-time
savings for Exchanges using the Federal platform and the remaining
State Exchanges that operate their own eligibility and enrollment
platform will be approximately $49.5 million.
We estimate the annual costs to conduct sampling on a random sample
size of approximately 1 million cases to be approximately $8 million
for the Exchanges using the Federal platform and $7 million on average
for each State Exchange that operates its own eligibility and
enrollment platform. This estimate includes operational activities such
as noticing, inbound and outbound calls to the Marketplace call center,
and adjudicating consumer appeals. The total annual cost to conduct
sampling would have been $105 million for 15 State Exchanges.
Therefore, the total annual cost for the Exchanges using the Federal
platform and the 15 State Exchanges that operate their own eligibility
and enrollment platform would have been $113 million in 2022 and
onward.
Eliminating these estimated costs would be offset by the costs of
designing and implementing an appropriate verification process. We
estimate that the cost to conduct research for Exchanges using the
Federal platform to be approximately $295,000 and for the 15 State
Exchanges that operate their own eligibility and enrollment platform to
be approximately $4.4 million. In addition to significant cost savings,
this proposal would provide more flexibility for states to design and
implement a verification process for employer sponsored coverage that
is tailored to their unique populations, and would protect the
integrity of states' respective individual markets. Furthermore, we
believe that this proposal would reduce burden on employers and
employees, as compliance with the current random sampling,
notification, and information gathering processes require significant
time and resources, which likely would be reduced if this proposal is
finalized.
HHS requests comment on the estimated and potential costs and
impacts of this proposal.
7. Proration of Advance Premium Tax Credit and Premium (Sec. Sec.
155.240(e), 155.305(f)(5), and 155.340)
HHS is proposing amendments to part 155, specifically at Sec. Sec.
155.240(e), 155.305(f)(5), and 155.340 to establish the requirement
that all Exchanges prorate both premiums and APTCs for enrollees
enrolled in a particular policy for less than the full coverage month,
including when the enrollee is enrolled in multiple policies within a
month, each lasting less than the full coverage month using a specified
methodology. In line with calculating PTC according to the provisions
at 26 CFR 1.36B-3, this method of administering APTC would reduce
instances of payments of APTC in excess of an applicable taxpayer's
monthly PTC for a month in which an enrollee is enrolled for less than
a full calendar month and thus would protect the applicable taxpayer
from incurring income tax liability due to excess APTC.
This would benefit both issuers and enrollees by preventing APTC
overpayment and eliminating wasted resources dedicated to resolving
overpayment issues. While the FFEs and SBE-FPs already prorate APTC and
premium amounts, State Exchanges do not currently prorate consistently
the amount of applied APTC administered to issuers in their applicable
states.
HHS acknowledges that those State Exchanges that do not currently
prorate APTC or premium amounts will be financially impacted by the
proposed requirement to implement this methodology, and this proposal
will likely require operational systems builds to support this new
proration requirement.
Based on historical cost data for SBEs to implement changes to
their IT systems and operations related to premium processing
functionality and similar functionality, such as functionality for
processing consumer failures to reconcile APTC received for a previous
plan year, HHS estimates that State Exchanges that currently do not
implement proration of APTC or premium amounts according to the
proposed methodology could expect to incur one-time implementation
costs. HHS anticipates that each affected State Based Exchange that
does not already prorate APTC or premium amounts according to the
proposed methodology would expect an estimated $1 million one-time
burden to account for the IT build to support the new calculation and
reporting systems associated with this requirement.
HHS estimates that 8 State Exchanges currently prorate premium
amounts but do not prorate APTC amounts. HHS anticipates that those
State Exchanges which already prorate premium amounts will have the
operational and systems capacity to calculate the prorated premium and
APTC amounts as required in this proposed policy.
Currently, State Exchanges vary in their approaches to implementing
the proposed APTC and premium proration. In order to provide the most
conservative estimate of this proposal's

[[Page 712]]

burden, HHS assumes that 10 State Exchanges, including State Exchanges
that newly transitioned to being State Exchanges by the time of this
rulemaking, will incur the highest level of implementation cost
detailed earlier in this proposed rule ($1 million in one-time
implementation burden per State Exchange) for a total estimated impact
of $10,000,000 in the 2024 benefit year across all State Exchanges. HHS
seeks comment on the estimated costs and benefits described in this
section.
10. Special Enrollment Periods--Special Enrollment Period Verification
(Sec. 155.420)
We are proposing to amend Sec. 155.420 to add new paragraph (g) to
state that Exchanges may conduct pre-enrollment verification of
eligibility for special enrollment periods, at the option of the
Exchange, and that Exchanges may provide an exception to pre-enrollment
special enrollment period verification for special circumstances.
Exchanges on the Federal platform would conduct pre-enrollment special
enrollment period eligibility verification for new consumers who attest
to losing minimum essential coverage.
We do not anticipate that revisions to Sec. 155.420 would impose
regulatory burden or costs on the Exchanges on the Federal platform
because these Exchanges will decrease the number of special enrollment
period types that require pre-enrollment verification to only include
special enrollment periods for new consumers who attest to losing
minimum essential coverage. The provisions proposed in this rule would
decrease the scope of pre-enrollment special enrollment period
verification in all states with Exchanges served by the Federal
platform. We anticipate that this would result in 194,000 fewer
individuals having their enrollment delayed or ``pended'' annually
until eligibility verification is completed, which would result in a
$5,150,700 decrease in annual ongoing costs to the federal government.
There may be State Exchanges that also decide to reduce the scope
of their current pre-enrollment special enrollment period verification,
which would also decrease annual ongoing costs for State Exchanges.
State Exchanges that are currently conducting pre-enrollment
verification of eligibility for more special enrollment period types
than those that the Exchanges on the Federal platform would be
verifying under this proposal could experience a decrease in burden and
costs if they choose to align their approaches with the Exchanges on
the Federal platform. State Exchanges that are currently conducting
pre-enrollment verification of eligibility for fewer types of special
enrollment periods than the proposed special enrollment period that the
Exchanges on the Federal platform would be verifying under this
proposal could experience an increase in burden and costs if they
choose to align with the Exchanges on the Federal platform, but State
Exchanges will not be required to align with the Exchanges on the
Federal platform.
We do not anticipate that this would increase administrative costs
on QHP issuers. Additionally, our data suggests that SEP documentation
deters younger, likely healthier individuals from enrolling, but there
could be an increase in claims costs to QHP issuers since the Exchanges
on the Federal platform will be requiring document submission prior to
enrollment for fewer special enrollment period types.
We seek comment on the potential costs, benefits, and transfers
associated with this proposal.
11. General Program Integrity and Oversight Requirements (Sec.
155.1200)
We propose to add new Sec. 155.1200(e) to permit a State Exchange
to meet the requirement to conduct an annual independent external
programmatic audit, as described at Sec. 155.1200(c), by completing
the annual, required SEIPM program process. As a result, we estimate
that there would be a general reduction in reporting and contracting
costs to State Exchanges related to meeting auditing requirements under
Sec. 155.1200. We anticipate the combined cost in contracting and
reporting would result in an average annual reduction of approximately
$90,624.62 for each State Exchange beginning in benefit year 2024. The
total cost annual reduction across 18 State Exchanges would be
approximately $1,631,243.16. Any new costs, burdens, and benefits to
State Exchanges of meeting requirements for the SEIPM program are
described later in this proposed rule.
We seek comment on the potential costs, benefits, and transfers
associated with this provision.
12. State Exchange Improper Payment Measurement Program (Sec. Sec.
155.1500 Through 155.1540)
The implementation of the SEIPM program could have the direct
effect of reducing improper payments. Measuring the error rate of State
Exchange Premium Tax Credit payments will reveal vulnerable processes
to be corrected. Recordkeeping costs of $3.0 million annually will
begin in 2023.
We seek comment on the estimated costs and benefits and potential
transfers associated with this provision.
13. FFE and SBE-FP User Fees (Sec. 156.50)
We are proposing an FFE user fee rate of 2.75 percent of monthly
premiums for the 2023 benefit year, which is the same as the 2.75
percent FFE user fee rate finalized in part 3 of the 2022 Payment
Notice.\400\ We also propose an SBE-FP user fee rate of 2.25 percent
for the 2023 benefit year, which is the same as the 2.25 percent SBE-FP
user fee rate finalized in part 3 of the 2022 Payment Notice.
Therefore, we do not believe that these proposed user fee rates will
have any additional impact on premiums compared to the 2022 benefit
year. We also propose to amend Sec. 156.50 to conform the user fee
regulations with the repeal of the Exchange DE option finalized in part
3 of the 2022 Payment Notice.\401\ As this proposal does not alter
existing policy, we do not expect that it will have any additional
regulatory impact.
---------------------------------------------------------------------------

\400\ 86 FR 53412 at 53445.
\401\ 86 FR 53412.
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We seek comment on the potential costs, benefits, and transfers
associated with this provision.
14. State Selection of EHB-Benchmark Plan for Plan Years Beginning on
or After January 1, 2020 (Sec. 156.111)
We are proposing to eliminate the requirement at Sec. 156.111(d)
and (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 proposal, states would no longer be required to submit
an annual report that complies with each requirement listed at Sec.
156.111(f)(1) through (6), nor would HHS identify which benefits are in
addition to EHB for the applicable PY in the state if a state does not
submit an annual reporting package.
The 2021 Payment Notice acknowledged that requiring states to
annually report to HHS would require that states submit additional
paperwork to HHS on an annual basis but noted that, as states are
already required under Sec. 155.170 to identify which state-required
benefits are in addition to EHB and to defray the cost of those
benefits,

[[Page 713]]

any such burden experienced by states would be minimal.\402\ The 2021
Payment Notice also stated that this reporting requirement would be
complementary to the process the state should already have in place for
tracking and analyzing state-required benefits. The 2021 Payment Notice
further explained that states may opt not to report this information
and instead let HHS make this determination for them. In the 2021
Payment Notice, we also discussed that any state burden associated with
this policy would be limited to the completion of the HHS templates,
validation of that information, and submission of the templates to HHS.
Repealing the annual reporting requirement would remove the burden
associated with that policy, detailed in 2021 Payment Notice and
summarized previously in the Collection of Information Requirements
section in this proposed rule.
---------------------------------------------------------------------------

\402\ 85 FR 29164, 29252.
---------------------------------------------------------------------------

Although this proposal would relieve states of the annual reporting
requirements and any associated burden with submission and validation
of the information on the annual reporting templates, it would 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
proposal, 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. We also 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).
We seek comment on the potential costs, benefits, and transfers
associated with this provision.
15. Levels of Coverage (Actuarial Value) (Sec. 156.140, 156.200,
156.400)
We are proposing to change the de minimis range for levels of
coverage at Sec. 156.140(c) to a variation of +2/-2 percentage points
for all standard bronze plans, gold plans, platinum plans, individual
market off-Exchange silver plans, and all small group market silver
plans (on- and off-Exchange), as well as proposing to change the de
minimis for expanded bronze plans to +5/-2, that are required to comply
with AV standards for PYs beginning in 2023. In addition, we are
proposing to change the de minimis under Sec. 156.200 to +2/0
percentage points for individual market silver QHPs and for the income-
based silver CSR plan variations under Sec. 156.400 to +1/0.
In the 2017 Market Stabilization rule,\403\ we acknowledged that in
the short run, expanding the standard de minimis range to +2/-4 would
generate a transfer of costs from consumers to issuers in the form of
decreased APTC and increased premiums, but stated our belief that the
additional flexibility for issuers would have positive effects for
consumers over the longer term as premiums stabilized, issuer
participation increased, and coverage options at the silver level and
above increased, which would attract more young and healthy enrollees
into such plans. As discussed above, since we finalized the expanded de
minimis ranges, we have observed decreased enrollment in silver plans
(from 963,241 enrollees in PY 2018 to 424,345 enrollees in PY 2021),
despite the number of standard silver plans available on HealthCare.gov
steadily increasing from 811 silver plans in PY 2018 to 1,386 silver
plans in PY 2021. Thus, we cannot justify the decreased APTC with
evidence of increased enrollment of younger and healthier enrollees in
silver plans.
---------------------------------------------------------------------------

\403\ Patient Protection and Affordable Care Act; Market
Stabilization, 82 FR 18346 (April 18, 2017). Available at https://www.govinfo.gov/content/pkg/FR-2017-04-18/pdf/2017-07712.pdf.
---------------------------------------------------------------------------

Changing the de minimis ranges for standard metal level plans would
generate a transfer of costs from the government and issuers to
consumers in the form of increased APTC and decreased premiums, because
narrowing the de minimis range for silver plans can affect the
generosity of the SLCSP. The SLCSP is the benchmark plan used to
determine an individual's PTC. A subsidized enrollee in any county that
has a SLCSP that is currently below 70 percent AV would see the
generosity of their current SLCSP increase, resulting in an increase in
PTC. Not all counties would see the SLCSP change as a result of this
proposal. In states using HealthCare.gov, approximately 87 percent of
counties across 23 states have a SLCSP that is below 70 percent AV.
For this proposal, the CMS Office of the Actuary estimates a
nationwide increase in PTCs through PY 2032, as shown in Table 26:
[GRAPHIC] [TIFF OMITTED] TP05JA22.043

This proposal would impact those consumers currently enrolled in
standard silver plans that are currently in the -4 to -0.01 percent de
minimis range that would be out of compliance under this proposal, as
well as consumers currently enrolled in individual market silver QHPs
that are currently in the -4 to -0.01 percent de minimis range and
associated income-based CSR silver plan variations currently enrolled
in the -1 to -0.01 percent de minimis range. Of the plans on
HealthCare.gov, we estimate that there are approximately 150,000
enrollees in gold plans below 78 percent AV, and 3,500 enrollees in
platinum plans below 88 percent AV.\404\ Additionally, we estimate
there are approximately 248,000 enrollees in HealthCare.gov silver QHPs
below 70 percent AV, with approximately 4.2 million enrollees in
corresponding income-based CSR plan variations. Under these proposals,
those enrollees would need to select a different plan for PY 2023 if
the issuer chooses to discontinue the plan rather than revise the
plan's cost sharing. Additionally, these proposals would similarly
affect enrollees in such plans that are not available on
HealthCare.gov, such as plans sold on state Exchanges, for which

[[Page 714]]

we do not have data to make an informed estimate.
---------------------------------------------------------------------------

\404\ There are no enrollees in bronze plans below 58% AV.
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We estimate the premiums for these plans would increase
approximately 2 percent on average because of benefit changes required
for plans to meet a +2/0 de minimis threshold. However, for Exchange
enrollees, we expect this premium increase to be substantially offset
by the corresponding increase in PTC because of the proposal's impact
on the SLCSP. Similarly, the proposal to change the de minimis range
for CSR variants to +1/0 would lead to improved cost-sharing due to the
higher relative AV compared to the current +1/-1 range, along with
increased gross premiums that would be substantially offset by
increased PTC payments. After implementation of the ARP enhanced
financial subsidies, subsidized enrollees make up the majority of
HealthCare.gov silver QHP enrollees--only 91,000 of approximately
248,000 individual market silver QHP enrollees in plans with AV between
66.00 and 69.99 percent plan AV remain unsubsidized. By comparison,
enrollment within the corresponding income-based silver CSR variations
of the above silver QHPs has increased to approximately 4.2 million. We
expect the increased PTC payments due to the premium increase to
incentivize healthier subsidy-eligible enrollees to participate in the
Marketplace, and that the improved risk pool as a result of increased
healthier enrollees would mitigate the net cost burden of covering a
decreasing population of unsubsidized enrollees.
In addition, changing the de minimis range for standard silver
plans would impact ICHRAs, which use the Lowest Cost Silver Plan (LCSP)
as the benchmark to determine whether an ICHRA is considered affordable
to an employee. Under this proposal, as silver plans become more
generous and premiums increase, an employer would have to contribute
more to an ICHRA to have it be considered affordable. This change could
discourage large employer use of ICHRAs because large employers need to
offer affordable coverage to satisfy the employer shared responsibility
provisions.\405\ Additionally, if coverage is considered unaffordable
to the employee, the employee can opt out of the ICHRA and instead
purchase coverage on the Exchange with APTC, if otherwise eligible; and
increasing the LCSP premiums could make employer-sponsored coverage
unaffordable to more employees. We estimate silver plans with an AV
below 70 percent will see premiums increase approximately 2 percent on
average due to more generous benefits. We do not believe this will have
a significant impact on the number of employers willing to offer ICHRAs
or whether an ICHRA is considered affordable to most employees, but
invite comment to refute or refine this understanding on these issues
in particular.
---------------------------------------------------------------------------

\405\ See section 4980H of the Code; 26 CFR 54.4980H-1--26 CFR
54.4980H-6.
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We seek comment on the estimated costs, benefits, and transfers
associated with this provision.
16. Standardized Options (Sec. 156.201)
Section 156.201 would require QHP issuers to offer standardized QHP
options. Though these proposed requirements would necessitate the
creation of new plans, HHS believes the burden imposed on issuers would
be minimal because these new plans' benefits, networks, and formularies
would not differ substantially from the benefits, networks, and
formularies of plans that issuers currently offer and because HHS is
specifying the cost sharing parameters, MOOPs, and deductibles for
these new plans. Additionally, HHS would design these standardized
options to resemble the most popular QHPs in the individual market FFEs
and SBE-FPs in PY 2021, making these standardized options comparable to
plans that the majority of issuers already offer. Furthermore, since
HHS proposes to require QHP issuers to offer standardized options at
every product network type, metal level, and throughout every service
area that they also offer non-standardized QHPs (but not at different
product network types, metal levels, and service areas that they do not
also offer non-standardized QHPs), issuers would not be required to
extend plan offerings beyond their existing service areas.
Additionally, since HHS does not propose to limit the number of
non-standardized QHP options that issuers can offer in PY 2023, HHS
believes the majority of enrollees will remain enrolled in their
current non-standardized options. Moreover, since HHS does not propose
to require issuers to offer a higher number of QHPs than what they
currently offer, issuers would still be able to determine how many QHPs
they wish to offer. As a result, HHS does not expect the total number
of plans that issuers will offer to change substantially subsequent to
the imposition of requirement. Thus, though these new plans would have
to be submitted for approval, certification, and display, we expect
that the overall burden for issuers and states alike would not
substantially increase because we do not expect the number of overall
plan offerings to substantially increase--due in part to issuers
discontinuing some old plans.
As noted earlier in the preamble, HHS is considering resuming the
differential display of standardized options per the existing authority
at Sec. 155.205(b)(1). HHS would assume burden for the differential
display of standardized options on HealthCare.gov, meaning FFE and SBE-
FP issuers would not be subject to this burden. In addition, as noted
above in the preamble, HHS is considering resuming enforcement of the
standardized options display requirements for approved web-brokers and
QHP issuers using a direct enrollment pathway to facilitate enrollment
through an FFE or SBE-FP--including both the Classic DE and EDE
Pathways--at Sec. Sec. 155.220(c)(3)(i)(H) and 156.265(b)(3)(iv),
respectively.
HHS believes that resuming enforcement of these differential
display requirements will not require significant modification of these
entities' platforms and non-Exchange websites. Further, since HHS would
continue to allow these entities to submit requests to deviate from the
manner in which standardized options are differentially displayed on
HealthCare.gov, potential burden for these for these entities would be
further reduced. HHS also intends to provide access to information on
standardized options to web-brokers through the Health Insurance
Marketplace PUFs and QHP Landscape file to further minimize burden. The
specific burden estimates for these requirements can be found in the
corresponding ICR sections for Sec. Sec. 155.220 and 156.265.
We seek comment on the potential costs, benefits, and transfers
associated with this provision.
17. Network Adequacy (Sec. 156.230)
Section 156.230(a)(2) currently requires a QHP issuer to maintain a
network that is sufficient in number and types of providers, including
providers that specialize in mental health and substance use disorders,
to ensure that all services will be accessible without unreasonable
delay. In this proposed rule, HHS proposes for PY 2023 and future PYs
that all QHPs or QHP candidates that use a provider network must comply
with network adequacy standards.
HHS proposes to conduct prospective quantitative network adequacy
reviews for all FFEs in all FFE states except in states performing plan
management functions that adhere to a standard as stringent as the
federal standard, conduct reviews prospectively, and choose to conduct
their own reviews.

[[Page 715]]

HHS proposes for PY 2023 and future PYs to adopt time and distance
standards to assess whether FFE QHPs or QHP candidates fulfill network
standards based on numbers and types of providers and providers'
geographic locations. Time and distance standards would be calculated
at the county level using information from the ECP/NA template. HHS
also proposes to adopt appointment wait time standards to assess
whether FFE QHPs or QHP candidates fulfill network adequacy standards.
For PY 2023, issuers would attest to meeting the appointment wait time
standards. Issuers that are unable to meet the specified standards for
time and distance or appointment wait times must submit a justification
to account for such variances.
HHS proposes that, for plans that use tiered networks to count
toward the issuer's satisfaction of the network adequacy standards,
providers must be contracted within the network tier that results in
the lowest cost-sharing obligation. For plans with two network tiers
(for example, participating providers and preferred providers), such as
many PPOs, where cost sharing is lower for preferred providers, only
preferred providers would be counted towards network adequacy
standards.
Finally, HHS proposes to collect information about providers who
offer telehealth services via the ECP/NA template to inform network
adequacy and provider access standards for future PYs. As discussed
previously in the Collection of Information Requirements section, this
may increase related administrative costs for issuers who do not
already possess this data, though many issuers already collect and
submit this information for network adequacy submissions in other
markets. While we anticipate that increased burden related to
telehealth data collection would be minimal for many issuers, the
increased burden could ultimately lead to an increase in premiums for
consumers. As noted previously, we believe that the potential benefits
of obtaining telehealth information and using it to inform future
network adequacy standards are in the best interests of both QHP
enrollees and QHP issuers. As such, we anticipate that the additional
burden would be mitigated by the expected benefits.
We seek comment on the potential costs, benefits, and transfers
associated with this provision.
18. Essential Community Providers (Sec. 156.235)
Section 156.235(a)(2)(i) provides that a plan has a sufficient
number and geographic distribution of ECPs if the issuer demonstrates,
among other things, that a QHP or QHP candidate provides access to a
network of providers that includes at least a minimum percentage of
ECPs, as specified by HHS.
For PY 2023 and future PYs, HHS proposes to raise the ECP threshold
applicable to QHPs and QHP candidates from 20 percent to 35 percent.
For this increased threshold, HHS would consider issuers to have
satisfied the regulatory threshold requirement if the issuer contracts
with at least 35 percent of available ECPs in each plan's service area
to participate in the plan's provider network.
We note that in PYs 2015-2017, all FFE QHP issuers satisfied the 30
percent threshold with minimal reliance on ECP write-ins and
justifications. In PYs 2018 through 2021, when the ECP threshold was 20
percent, all QHP issuers satisfied the lower threshold with ease and
very little reliance on ECP write-ins and justifications.
Consequently, HHS anticipates that issuers can meet the proposed 35
percent threshold using ECP write-ins and justifications as needed. We
believe that increasing the ECP threshold would lead to greater ECP
access for low-income and medically underserved individuals. HHS
anticipates that costs may not increase since HHS' data analysis shows
most issuers could easily meet this standard or use the justification
process. HHS expects that administrative cost changes would likely be
minimal for most issuers.
HHS proposes that, for plans that use tiered networks to count
toward the issuer's satisfaction of ECP standards, providers must be
contracted within the network tier that results in the lowest cost-
sharing obligation. For plans with two network tiers (for example,
participating providers and preferred providers), such as many PPOs,
where cost sharing is lower for preferred providers, only preferred
providers would be counted towards ECP standards.
We seek comment on the potential costs, benefits, and transfers
associated with this provision.
19. Standards for Delegated and Downstream Entities (Sec. 156.340)
We propose to amend and add language to Sec. 156.340, to extend
its applicability to QHP issuers on all Exchange models. The proposed
changes capture the delegated and downstream entity standards that
would apply to QHP issuers on State Exchanges and State Exchange SHOPs,
as well as QHP issuers providing coverage on Exchange models that use
the Federal platform, including, but not limited to, FFEs, FF-SHOPs,
SBE-FPs, and SBE-FP-SHOPs. HHS also proposes to add a requirement that
all agreements between QHP issuers and their downstream and delegated
entities include language stating that the relevant Exchange authority,
including State Exchanges, may demand and receive a delegated and
downstream entity's records related to the QHP issuer's obligations in
accordance with the minimum Federal standards related to Exchanges.
These proposed amendments are intended to hold QHP issuers in all
Exchange models responsible for their downstream and delegated
entities' compliance with applicable Exchange standards, and to make
their oversight obligations, and the obligations of their downstream
and delegated entities, explicit. We also propose conforming amendments
to the title of subpart D of 45 CFR part 156 from ``Standards for
Qualified Health Plan Issuers on Federally Facilitated Exchanges and
State-Based Exchanges on the Federal platform'' to ``Standards for
Qualified Health Plan Issuers on Specific Types of Exchanges''.
We anticipate these proposals will impose a minimal burden on QHP
issuers and Exchange authorities impacted by them. HHS expects some QHP
issuers may need to make changes to existing record retention policies
and their agreements with delegated and downstream entities. If
finalized as proposed, the conforming amendments will become applicable
to all books, contracts, computers, or other electronic systems,
including medical records and documentation relating to the QHP
issuer's obligations in accordance with Federal standards under
paragraph (a) of this section until 10 years from the final date of the
agreement period, as of the effective date of the final rule. State
Exchange authorities will retain primary enforcement authority and
would be responsible for ensuring QHP issuers in State Exchanges and
State Exchange SHOPs maintain oversight over downstream and delegated
entities.
We seek comment on the potential costs, benefits, and transfers
associated with this provision.
20. Payment for Cost-Sharing Reductions (Sec. 156.430)
We propose to amend Sec. 156.430 to clarify that the CSR data
submission process is mandatory only for those issuers that received
CSR payments from HHS for any part of the benefit year as a result of a
valid appropriation to make CSR payments, and voluntary for other
issuers. In the event HHS has not made CSR payments to issuers

[[Page 716]]

because there is no appropriation to do so, HHS will continue to
provide those issuers that have not received CSR payments from HHS for
any part of the benefit year the option to submit CSR data, but issuers
will not be required to do so. We do not expect any of these provisions
to increase burden on issuers, as this amendment would codify existing
practices.
We seek comment on any potential costs, benefits, and transfers
associated with this provision.
21. Quality Improvement Strategy (Sec. 156.1130)
We propose that beginning in 2023, a QHP issuer would be required
to address reducing health and health care disparities as one of their
QIS topic areas in addition to at least one other topic area outlined
in section 1311(g)(1) of the ACA, including improving health outcomes
of plan enrollees, preventing hospital readmissions, improving patient
safety and reducing medical errors, and promoting wellness and health.
We are not proposing any changes to regulatory text. We do not estimate
additional costs or burdens as a result of this proposal.
We seek comment on any potential costs, benefits, and transfers
associated with this proposal.
22. Medical Loss Ratio (Sec. Sec. 158.140, 158.150, 158.170)
We propose to amend Sec. 158.140(b)(2)(iii) to clarify that only
those provider incentives and bonuses that are tied to clearly defined,
objectively measurable, and well-documented clinical or quality
improvement standards that apply to providers may be included in
incurred claims for MLR reporting and rebate calculation purposes. To
the extent some issuers currently include in incurred claims payments
to providers that significantly reduce or eliminate rebates while
providing no value to consumers, the proposed clarification would
result in transfers from such issuers to enrollees in the form of
higher rebates or lower premiums. Although we do not know how many
issuers currently engage in such reporting practices or the amounts
improperly included in MLR calculations, we estimate the impact of the
proposed clarification by assuming that provider incentive and bonus
payments of 1.06 percent or more of paid claims (the top 5 percent of
such observations) may represent incentives based on MLR or similar
metrics. Based on this assumption and the MLR data for 2019, the
proposed clarification would increase rebates paid by issuers to
consumers or reduce premiums collected by issuers from consumers by
approximately $ 12 million per year.
We also propose to amend Sec. 158.150(a) to specify that only
expenditures directly related to activities that improve health care
quality may be included in QIA expenses for MLR reporting and rebate
calculation purposes. This proposed change would result in transfers
from issuers that currently include indirect expenses in QIA to
enrollees in the form of higher rebates or lower premiums. Although we
do not know how many issuers include indirect expenses in QIA, we
estimate the impact of the proposed change by assuming that indirect
expenses inflate QIA by 41.5 percent (the midpoint of the 33 percent-
to 50 percent range we have observed during MLR examinations) for half
of the issuers that report QIA expenses (based on the frequency of QIA-
related findings in MLR examinations). Based on these assumptions and
the MLR data for 2020, the proposed clarification would increase
rebates paid by issuers to consumers or reduce premiums collected by
issuers from consumers by approximately $ 49.8 million per year.
We also propose to make a technical amendment to Sec. 158.170(b)
to correct an oversight and remove the reference to the percentage of
premium QIA reporting option described in Sec. 158.221(b)(8), a
provision that was vacated by the United States District Court for the
District of Maryland in City of Columbus, et al. v. Cochran,\406\ and
thus deleted in part 2 of the 2022 Payment Notice final rule. We do not
anticipate any impact on rebates or premiums as a result of this
change. We seek comment on any potential costs, benefits, and transfers
associated with these provisions.
---------------------------------------------------------------------------

\406\ 523 F. Supp. 3d 731 (D. Md. 2021).
---------------------------------------------------------------------------

D. Regulatory Alternatives Considered

In developing the policies contained in this proposed rule, we
considered numerous alternatives to the presented proposals. Below we
discuss the key regulatory alternatives that we considered.
As described in prior rulemakings and the 2021 RA Technical Paper,
we considered a variety of alternatives to the proposed model
specifications and updated enrollment duration factors for the HHS risk
adjustment models.\407\ For example, we considered adding a non-linear
term or HCC counts terms for all enrollees in the adult and child risk
adjustment models. As detailed in the proposed 2022 Payment Notice and
the 2021 RA Technical Paper, we found that non-linear model
specifications often failed to converge, preventing us from testing the
impact of the non-linear model specifications on the magnitude of
transfers.\408\ In addition, the non-linear model specifications would
significantly overhaul the current linear models, increasing the
administrative burden on issuers and HHS. We also found that the HCC
counts terms approach posed gaming concerns, which would violate
principle six of the HHS-operated risk adjustment program by rewarding
coding proliferation.
---------------------------------------------------------------------------

\407\ 85 FR 78572 at 78583-78586; See the 2021 HHS-Operated Risk
Adjustment Technical Paper on Possible Model Changes, available at
https://www.cms.gov/files/document/2021-ra-technical-paper.pdf.
\408\ Ibid.
---------------------------------------------------------------------------

In addition to the non-linear and HCC counts model specifications,
we also considered variations to the interacted HCC counts factors and
the two-stage weighted model specifications. Specifically, we tested
various alternative caps for the weights based on the distribution of
costs, but found the proposed caps resulted in better prediction on
average. For the prediction weights, we tested various alternative
forms of weights, including reciprocals of the square root of
prediction, log of prediction, and residuals from the first-step
estimation, but the reciprocal of the capped predictions resulted in
better PRs 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 proposed list in
Table 3. We chose the list of HCCs in Table 3 because including these
HCCs most improved prediction for enrollees with the highest costs,
multiple HCCs, and with these specific HCCs. We also considered various
alternatives to structure the interacted HCC counts, such as applying
individual interacted HCC count 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
severe and transplant indicator groups. We chose the proposed model
specification because it would add fewer additional factors to the
models, which minimizes the increased burden on issuers and HHS without
sacrificing any significant predictive accuracy.
For the enrollment duration factors in the adult models, we propose
to replace the enrollment duration factors with monthly duration
factors of up to 6 months for enrollees with HCCs. The purpose of this
proposed change is to

[[Page 717]]

address the underprediction of plan liability for partial-year adult
enrollees with HCCs. As part of this assessment, we considered whether
enrollment duration factors by type of partial-year enrollment
(enrolling through a special enrollment period versus enrolling during
the annual open enrollment period and dropping enrollment partway
through the year), by market type (individual versus small group
market), or by specific HCC (as well as by type of HCC--acute versus
chronic) may be warranted. As previously noted, varying enrollment
duration factors by partial-year enrollment type or by market produced
factors that were generally very similar between partial- and full-year
enrollees, which indicates they would add little value to the models
while increasing complexity.\409\ We chose the proposed enrollment
duration factors, contingent on the presence of at least one HCC,
because these factors improve predictive accuracy for partial-year
enrollees and simplify the adult risk adjustment models compared to the
current models.\410\
---------------------------------------------------------------------------

\409\ See, for example, 85 FR 78572 at 78585-78586 and Sections
3.3.1 and 3.3.2 of the 2021 HHS-Operated Risk Adjustment Technical
Paper on Possible Model Changes, available at https://www.cms.gov/files/document/2021-ra-technical-paper.pdf.
\410\ As detailed above, these new proposed factors would only
apply to partial-year adult enrollees with up to 6 months of
enrollment and at least one payment HCC.
---------------------------------------------------------------------------

Relative to the other considered alternatives, our proposed model
specification changes would improve the current models' predictive
accuracy and minimize burden on issuers and HHS by avoiding unnecessary
complexity.
With respect to the proposed changes to Sec. 153.320(d), we
considered repealing risk adjustment state flexibility for the
individual catastrophic and non-catastrophic market risk pools, while
retaining risk adjustment state flexibility for the small group market
risk pool. Consistent with the directive in E.O. 14009 \411\ to
prioritize protecting and strengthening the ACA and making high-quality
health care accessible and affordable for all individuals, we
considered whether this approach is inconsistent with policies
described in Sections 1 and 3 of E.O. 14009. In prior rulemakings, we
received comments stating that risk adjustment state flexibility in any
market may result in risk selection, market destabilization, increased
premiums, smaller networks, and worse plan options. we believe that
generally retaining state flexibility could introduce unnecessary risk
of undermining the stated goals of the risk adjustment program.
---------------------------------------------------------------------------

\411\ Executive Order 14009; 86 FR 7793 (Feb. 2, 2021).
---------------------------------------------------------------------------

We also considered whether to adopt an exception for states that
previously requested reductions under Sec. 153.320(d) to the risk
adjustment transfers calculated by HHS under the state payment transfer
formula. In the one state that has requested to reduce transfers under
this policy, it has stabilized market participation and impacts issuers
who receive risk adjustment payments by less than 1 percent of
premiums.\412\ Although allowing state flexibility may undermine the
efficacy of risk adjustment by not fully compensating higher-risk plans
for their enrollees, we believe the benefit of maintaining
participation in markets that might otherwise only have a single issuer
offering coverage outweighs the potential harm of not fully
compensating the higher-risk plan for its enrollees when there is a de
minimis (less than 1 percent) impact on premiums. Additionally, under
the proposal in this rulemaking, if a prior participant seeks a future
reduction to risk adjustment transfers in the 2024 benefit year or
beyond, the state would need to demonstrate that it meets the de
minimis regulatory criteria, meaning no issuer would need to increase
its premiums by more than 1 percent as a result of the reduced risk
adjustment payments.
---------------------------------------------------------------------------

\412\ See, for example, the 2019, 2020, and 2021 Unified Rate
Review Public Use Files, available at https://www.cms.gov/CCIIO/Resources/Data-Resources/ratereview.
---------------------------------------------------------------------------

With regard to the proposed 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, the
Exchange must select a random sample of applicants and attempt to
verify their attestation with the employer listed on their Exchange
application. However, based on HHS' 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 believe the proposed change discussed earlier in
the preamble to design a process to verify enrollment in or eligibility
for an employer sponsored plan, informed by a risk assessment, is
reasonably designed to ensure the accuracy of data, and is based on the
activities or methods used by an Exchange such as studies, research,
and analysis of an Exchange's own enrollment data. We also believe the
proposed change would protect the integrity of the individual market by
allowing all Exchanges to proactively identify applicants with the
greatest incentive to forego enrolling in an employer sponsored plan in
favor of Exchange coverage with APTC/CSRs that they may not be eligible
to receive, thereby potentially adding high health risk to the
individual market risk pool that should be covered by the group health
market, for example.
We considered several alternatives to specifying in Sec. 155.420
that Exchanges may conduct pre-enrollment verification of eligibility
for special enrollment periods, at the option of the Exchange,
including requiring Exchanges to verify a certain percentage of special
enrollment period enrollments and designating specific special
enrollment period types for which eligibility must be verified by the
Exchange. However, we believed that imposing any requirements for pre-
enrollment special enrollment period verification would increase burden
on consumers and Exchanges and decrease implementation flexibility to
decide the best way to conduct special enrollment period verification
based on Exchange type, population characteristics, and trends.
HHS considered multiple options for measuring the improper payment
amounts and rates for State Exchanges to comply with its statutory
mandate in the PIIA. HHS developed and pilot tested the proposed
methodology with extensive collaboration from participating Exchanges
during a multi-year research and demonstration period. HHS considered
the following alternatives while developing this proposed rule:
1. Conducting No Reviews
HHS might take no preventive efforts to detect improper payments.
We would wait passively until third-party investigators, private
whistleblowers, qui tam relators, disgruntled relatives, or others
report speculation through Inspector General channels. Advanced
statistical analysis could estimate the odds of third-party prosecution
and project the improper payment amount and rate for each State
Exchange (with wide confidence intervals). This low intervention
strategy may not fully comply with statutory intent.
2. Placing More Responsibility on State Exchanges To Conduct Reviews
HHS could require that each State Exchange determine its own
improper payment rate with broad discretion on

[[Page 718]]

the methodology. This option would maximize regulatory flexibility
while still complying with PIIA 2019 requirements. However, diverse
methodology would make the State Exchanges' results difficult to
compare and of variable validity. In addition, the costs resulting from
higher error rates are borne by the federal government in the form of
increased APTC and CSRs, giving State Exchanges' minimal incentive to
aggressively reduce improper payments.
3. Placing More Responsibility on State Exchanges To Engage Third-Party
Reviewers
HHS could require that State Exchanges engage third-party reviewers
to determine the improper payment rate. As with financial reporting,
the State Exchange could select among competing vendors to obtain its
preferred combination of methodology, service, quality, and price.
However, this approach would require more work and resources from both
State Exchanges and HHS than the proposed methodology would require.
The third party would need to obtain personally identifiable
information from both state and federal data systems. These processes
suffer from potential record matching and data security issues. In
addition, competing vendors might offer incompatible methodologies,
producing non-comparable improper payment rates.
4. Conducting a Random Sample Across All State Exchanges
HHS could annually sample from the population of all State Exchange
enrollees, rather than within each State Exchange. Thus, more cases
would come from larger State Exchanges. This design would increase the
efficiency and decrease the variance for the national estimate, but it
would not provide an estimate for each State Exchange. It also would
not reduce the burden on each State Exchange and may not comply with
statutory intent.
With respect to standardized options, we considered a range of
options for our proposed policy approach at Sec. 156.201. On one end
of this range, we considered resuming standardized options as reflected
in the 2017 and 2018 Payment Notices. This approach would have allowed
issuers to voluntarily offer standardized options and have the
Exchanges on the Federal platform, web-brokers, and Classic DE and EDE
Pathways differentially display these plans. We also considered
gradually limiting the number of non-standardized options per issuer,
product network type, metal level, and service area over the course of
several PYs. We also considered preferentially displaying standardized
options over non-standardized options. We also considered requiring
issuers to offer exclusively standardized options in FFEs and SBE-FPs.
We believe the approach we have chosen for standardized options in
which we propose to require issuers to offer standardized options and
do not propose to limit the number of non-standardized offerings in PY
2023 strikes the greatest balance between simplifying the plan
selection process, combatting discriminatory benefit designs, and
advancing health equity, all while promoting a smooth transition to the
introduction of standardized options.
For our proposal in Sec. Sec. 155.240(e), 155.305(f)(5), and
155.340 on prorating the calculation and administration of premium and
APTC, HHS considered an alternative form of implementation in which HHS
would perform the proration on behalf of each State Exchange which does
not already implement proration according to the proposed methodology.
This approach would lessen concern regarding the burden of implementing
a new proration methodology among State Exchanges. HHS already has the
structures in place to prorate APTC and premium amounts in accordance
with the proposed methodology and has already implemented proration in
the FFEs and SBE-FPs.\413\ Under this alternative, HHS would assume
responsibility for prorating the amount of APTC due to each State
Exchange based on the methodology HHS proposes in Sec. 155.340 which
states that when an enrollee is enrolled in a particular policy for
less than the full coverage month (including when the enrollee is
enrolled in multiple policies within a month, each lasting less than
the full coverage month) the amount of APTC paid to the issuer of the
policy will be calculated as the product of (1) the APTC applied on the
policy for one month of coverage divided by the number of days in the
month, and (2) the number of days for which coverage is provided during
the applicable month. However, this alternative would require State
Exchanges to agree to allow HHS to use the data on the monthly SBMI to
calculate the prorated amount. This would require State Exchanges to
review payment reports to ensure the correct calculation of APTC and
premium is reflected on each applicable State Exchanges' 1095-A. HHS
expects that this alternative would produce additional burden of $4,500
in contract labor to update each State Exchange's SBMI and would
necessitate increased data sharing and coordination back and forth
between HHS and the applicable State Exchanges. In order to streamline
the process of proration and allow State Exchanges greater control in
the administration of APTC, HHS determined that it would propose that
each State Exchange would prorate their own APTC and premium amounts
for the applicable enrollees in their state. HHS seeks comment on the
alternative proposals considered.
---------------------------------------------------------------------------

\413\ Under the SBE-FP agreement, the same method also applies
in the SBE-FPs, as they rely on the Federal platform, which
calculates applicable premiums in those Exchanges.
---------------------------------------------------------------------------

Additionally, for the proposal to prorate APTC amounts with
amendments to Sec. Sec. 155.240, 155.305(f)(5) and 155.340, we
considered proposing to implement this requirement for the 2023 benefit
year. However, after analyzing the potential burden on State Exchanges
to achieve operational readiness, we concluded that 2023 may not
provide sufficient time. Therefore, we propose 2024 benefit year
implementation and request comment on the feasibility of 2023 benefit
year implementation.

E. Regulatory Flexibility Act

The Regulatory Flexibility Act, (5 U.S.C. 601, et seq.), requires
agencies to prepare an initial regulatory flexibility analysis to
describe the impact of the proposed rule on small entities, unless the
head of the agency can certify that the rule will not have a
significant economic impact on a substantial number of small entities.
The RFA generally defines a ``small entity'' as (1) a proprietary firm
meeting the size standards of the Small Business Administration (SBA),
(2) a not-for-profit organization that is not dominant in its field, or
(3) a small government jurisdiction with a population of less than
50,000. States and individuals are not included in the definition of
``small entity.'' HHS uses a change in revenues of more than 3 to 5
percent as its measure of significant economic impact on a substantial
number of small entities.
In this proposed rule, we propose standards for the risk adjustment
and HHS-RADV programs, which are intended to stabilize premiums and
reduce incentives for issuers to avoid higher-risk enrollees. Because
we believe that insurance firms offering comprehensive health insurance
policies generally exceed the size thresholds for ``small entities''
established by the SBA, we do not believe that an initial regulatory

[[Page 719]]

flexibility analysis is required for such firms.
We believe that health insurance issuers and group health plans
would be classified under the North American Industry Classification
System (NAICS) code 524114 (Direct Health and Medical Insurance
Carriers). According to SBA size standards, entities with average
annual receipts of $41.5 million or less would be considered small
entities for these NAICS codes. Issuers could possibly be classified in
621491 (HMO Medical Centers) and, if this is the case, the SBA size
standard would be $35 million or less.\414\ 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 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.\415\
This estimate may overstate the actual number of small health insurance
issuers that may be affected, since over 72 percent of these small
issuers 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. Only 10 of these
90 potentially small entities, three of them part of larger holding
groups, are estimated to experience a change in rebates under the
proposed amendments to the MLR provisions of this proposed rule in part
158. Therefore, we do not expect the proposed MLR provisions of this
rule to affect a substantial number of small entities.
---------------------------------------------------------------------------

\414\ https://www.sba.gov/document/support--table-size-standards.
\415\ Available at https://www.cms.gov/CCIIO/Resources/Data-Resources/mlr.html.
---------------------------------------------------------------------------

The proposals related to SEIPM at Sec. Sec. 155.1500-155.1540 will
affect only State Exchanges. As state governments do not constitute
small entities under the statutory definition, and as all State
Exchanges have revenues exceeding $5 million, an impact analysis for
these provisions is not required 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 Social Security 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 603
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 proposed rule would not affect small rural hospitals. Therefore,
the Secretary has determined that this proposed rule would 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 proposed rule that includes any
Federal mandate that may result in expenditures in any 1 year by a
state, local, or Tribal governments, in the aggregate, or by the
private sector, of $100 million in 1995 dollars, updated annually for
inflation. In 2021, that threshold is approximately $158 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 does not meet the UMRA definition of unfunded mandate.

G. Federalism

Executive Order 13132 establishes certain requirements that an
agency must meet when it issues a proposed rule that imposes
substantial direct costs on state and local governments, preempts state
law, or otherwise has federalism implications.
In compliance with the requirement of E.O. 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 E.O. 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. Current State Exchanges charge user fees to issuers.
In our view, while this proposed rule would 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. For example, the repeal of the risk adjustment state
flexibility policy may have federalism implications, but they are
mitigated because states have the option to operate their own Exchange
and risk adjustment program if they believe the HHS risk adjustment
methodology does not account for state-specific factors unique to the
state's markets.
In addition, we believe this proposed regulation has federalism
implications due to our proposal for Exchanges to design a new risk-
based verification process for enrollment in or eligibility for
employer sponsored plan coverage that meets minimum value standards,
that is based on the Exchange's assessment of risk for inappropriate
APTC/CSR payments. However, the federalism implications are mitigated
because the proposed requirement provides Exchanges with the
flexibility to determine the best process to verify employer sponsored
coverage and may choose not to implement such a risk-based verification
process.
As previously noted, the proposals in this rule related to SEIPM
would impose a minimal unfunded mandate on State Exchanges to supply
data for the improper payment calculation. Accordingly, E.O. 13132 does
not apply to this section of the proposed rule. In addition, statute
requires HHS to determine the amount and rate of improper payments.
Finally, states have the option to choose an FFE or SBE-FP, each of
which place different federal burdens on the state. As the SEIPM
section of the proposed rule should not conflict with state law, HHS
does not anticipate any preemption of state law. We invite State
Exchanges to submit comments on this section of the proposed rule if
they believe it would conflict with state law.

[[Page 720]]

Chiquita Brooks-LaSure, Administrator of the Centers for Medicare &
Medicaid Services, approved this document on December 15, 2021.

List of Subjects

45 CFR Part 144

Health care, Health insurance, Reporting and recordkeeping
requirements.

45 CFR Part 147

Health care, Health insurance, Reporting and recordkeeping
requirements.

45 CFR Part 153

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

45 CFR Part 155

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

45 CFR Part 156

Administrative practice and procedure, Advertising, Advisory
committees, Brokers, Conflict of interests, Consumer protection, Grant
programs-health, Grants administration, Health care, Health insurance,
Health maintenance organization (HMO), Health records, Hospitals,
Indians, Individuals with disabilities, Loan programs-health, Medicaid,
Organization and functions (Government agencies), Public assistance
programs, Reporting and recordkeeping requirements, State and local
governments, Sunshine Act, Technical assistance, Women, Youth.

45 CFR Part 158

Administrative practice and procedure, Claims, Health care, Health
insurance, Penalties, 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 144--REQUIREMENTS RELATING TO HEALTH INSURANCE COVERAGE

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

Authority: 42 U.S.C. 300gg through 300gg-63, 300gg-91, 300gg-
92, and 300gg-111 through 300gg-139, as amended.

Sec. 144.103 [Amended]

0
2. Amend Sec. 144.103 in the definition of ``large group market'' by
removing the phrase ``, unless otherwise provided under State law.''

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

0
3. 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
4. Amend Sec. 147.104 by--
0
a. Revising paragraph (e);
0
b. Redesignating paragraph (i) as paragraph (j); and
0
c. Adding a new paragraph (i).
The revision and addition read as follows:

Sec. 147.104 Guaranteed availability of coverage.

* * * * *
(e) Marketing. A health insurance issuer and its officials,
employees, agents, and representatives must comply with any applicable
State laws and regulations regarding marketing by health insurance
issuers and cannot employ marketing practices or benefit designs that
will have the effect of discouraging the enrollment of individuals with
significant health needs in health insurance coverage or discriminate
based on an individual's race, color, national origin, present or
predicted disability, age, sex, sexual orientation, gender identity,
expected length of life, degree of medical dependency, quality of life,
or other health conditions.
* * * * *
(i) Coverage denials for failure to pay premiums for prior
coverage. A health insurance issuer that denies coverage to an
individual or employer due to the individual's or employer's failure to
pay premium owed under a prior policy, certificate, or contract of
insurance, including by attributing payment of premium for a new
policy, certificate, or contract of insurance to the prior policy,
certificate, or contract of insurance, violates paragraph (a) of this
section.
* * * * *

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

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

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

0
6. Amend Sec. 153.320 by--
0
a. Revising paragraphs (d) introductory text and (d)(1)(iii);
0
b. Adding paragraph (d)((1)(iv);
0
c. Revising paragraphs (d)(4)(i)(A) and (B); and
0
d. Adding paragraph (d)(5).
The revisions and additions read as follows:

Sec. 153.320 Federally certified risk adjustment methodology.

* * * * *
(d) State flexibility to request reductions to transfers. For the
2020 through 2023 benefit years, States can request to reduce risk
adjustment transfers in the State's individual catastrophic, individual
non-catastrophic, small group, or merged markets risk pools by up to 50
percent in States where HHS operates the risk adjustment program.
Beginning with the 2024 benefit year, only prior participants, as
defined in paragraph (d)(5) of this section, may request to reduce risk
adjustment transfers in the State's individual catastrophic, individual
non-catastrophic, small group, or merged markets risk pools by up to 50
percent in States where HHS operates the risk adjustment program.
(1) * * *
(iii) For the 2020 through 2023 benefit years, a justification for
the reduction requested demonstrating the State-specific factors that
warrant an adjustment to more precisely account for relative risk
differences in the State individual catastrophic, individual non-
catastrophic, small group, or merged market risk pool, or demonstrating
the requested reduction would have de minimis impact on the necessary
premium increase to cover the transfers for issuers that would receive
reduced transfer payments; or
(iv) Beginning with the 2024 benefit year, a justification for the
reduction requested demonstrating the requested reduction would have de
minimis impact on the necessary premium increase to cover the transfers
for issuers

[[Page 721]]

that would receive reduced transfer payments.
* * * * *
(4) * * *
(i) * * *
(A) For the 2020 through 2023 benefit years, that State-specific
rules or other relevant factors warrant an adjustment to more precisely
account for relative risk differences in the State's individual
catastrophic, individual non-catastrophic, small group, or merged
market risk pool and support the percentage reduction to risk
adjustment transfers requested; or State-specific rules or other
relevant factors warrant an adjustment to more precisely account for
relative risk differences in the State's individual catastrophic,
individual non-catastrophic, small group, or merged market risk pool
and the requested reduction would have de minimis impact on the
necessary premium increase to cover the transfers for issuers that
would receive reduced transfer payments.
(B) Beginning with the 2024 benefit year that the requested
reduction would have de minimis impact on the necessary premium
increase to cover the transfers for issuers that would receive reduced
transfer payments.
* * * * *
(5) Exception for prior participants. As used in paragraph (d) of
this section, prior participants mean States that submitted a State
reduction request in the State's individual catastrophic, individual
non-catastrophic, small group, or merged market risk pool in the 2020,
2021, 2022, or 2023 benefit year.
0
7. Amend Sec. 153.710 by--
0
a. Revising paragraphs (h)(1) introductory text and (h)(1)(iii) and
(iv);
0
b. Adding paragraph (h)(1)(v); and
0
c. Revising paragraphs (h)(2) and (3).
The revisions and addition read as follows:

Sec. 153.710 Data requirements.

* * * * *
(h) * * *
(1) Notwithstanding any discrepancy report made under paragraph
(d)(2) of this section, any discrepancy filed under Sec.
153.630(d)(2), or any request for reconsideration under Sec.
156.1220(a) of this subchapter with respect to any risk adjustment
payment or charge, including an assessment of risk adjustment user fees
and risk adjustment data validation adjustments; reinsurance payment;
cost-sharing reduction payment or charge; or risk corridors payment or
charge, unless the dispute has been resolved, an issuer must report,
for purposes of the risk corridors and MLR programs:
* * * * *
(iii) A cost-sharing reduction amount equal to the actual amount of
cost-sharing reductions for the benefit year as calculated under Sec.
156.430(c) of this subchapter, to the extent not reimbursed to the
provider furnishing the item or service;
(iv) For medical loss ratio reporting only, the risk corridors
payment to be made or charge assessed by HHS under Sec. 153.510; and
(v) The risk adjustment data validation adjustment calculated by
HHS in the applicable benefit year's Summary Report of Benefit Year
Risk Adjustment Data Validation Adjustments to Risk Adjustment
Transfers.
(2) An issuer must report during the current MLR and risk corridors
reporting year any adjustment made or approved by HHS for any risk
adjustment payment or charge, including an assessment of risk
adjustment user fees and risk adjustment data validation adjustments;
any reinsurance payment; any cost-sharing reduction payment or charge;
or any risk corridors payment or charge before August 15, or the next
applicable business day, of the current MLR and risk corridors
reporting year unless instructed otherwise by HHS. An issuer must
report any adjustment made or approved by HHS for any risk adjustment
payment or charge, including an assessment of risk adjustment user
fees; any reinsurance payment; any cost-sharing reduction payment or
charge; or any risk corridors payment or charge where such adjustment
has not been accounted for in a prior MLR and Risk Corridor Annual
Reporting Form, in the MLR and Risk Corridors Annual Reporting Form for
the following reporting year.
(3) In cases where HHS reasonably determines that the reporting
instructions in paragraph (h)(1) or (2) of this section would lead to
unfair or misleading financial reporting, issuers must correct their
data submissions in a form and manner to be specified by HHS.
0
8. Revise Sec. 153.730 to read as follows:

Sec. 153.730 Deadline for submission of data.

A risk adjustment covered plan or a reinsurance-eligible plan in a
State in which HHS is operating the risk adjustment or reinsurance
program, as applicable, must submit data to be considered for risk
adjustment payments and charges and reinsurance payments for the
applicable benefit year by April 30 of the year following the
applicable benefit year or, if such date is not a business day, the
next applicable business day.

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

0
9. 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.

Sec. 155.120 [Amended]

0
10. Amend Sec. 155.120 in paragraph (c)(1)(ii) by removing the phrase
``age, or sex'' and adding in its place the phrase ``age, sex, sexual
orientation, or gender identity''.

Sec. 155.206 [Amended]

0
11. Amend Sec. 155.206 in paragraph (i) by removing the phrase ``$100
for each day for each'' and adding in its place the phrase ``$100 for
each day, as adjusted annually under 45 CFR part 102, for each''.
0
12. Amend Sec. 155.220 by--
0
a. Revising paragraphs (c)(3)(i)(A) and (L);
0
b. Adding paragraph (c)(3)(i)(M);
0
c. In paragraph (j)(2)(i) by removing the phrase ``age, or sex'' and
adding in its place the phrase ``age, sex, sexual orientation, or
gender identity'';
0
d. Revising paragraphs (j)(2)(ii);
0
e. In paragraph (j)(2)(iv), by removing the phrase ``described in Sec.
155.260(b)(2); and'' and adding in its place the phrase ``described in
Sec. 155.260(b)(2);''; and
0
f. Adding paragraphs (j)(2)(vi) through (viii).
The revisions and additions 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) * * *
(3) * * *
(i) * * *
(A) Disclose and display the following QHP information provided by
the Exchange or directly by QHP issuers consistent with the
requirements of Sec. 155.205(c), and to the extent that enrollment
support for a QHP is not available using the web-broker's website,
prominently display a standardized disclaimer provided by HHS stating
that enrollment support for the QHP is available on the Exchange
website, and provide a Web link to the Exchange website:
(1) Premium and cost-sharing information;
(2) The summary of benefits and coverage established under section
2715 of the PHS Act;
(3) Identification of whether the QHP is a bronze, silver, gold, or
platinum

[[Page 722]]

level plan as defined by section 1302(d) of the Affordable Care Act, or
a catastrophic plan as defined by section 1302(e) of the Affordable
Care Act;
(4) The results of the enrollee satisfaction survey, as described
in section 1311(c)(4) of the Affordable Care Act;
(5) Quality ratings assigned in accordance with section 1311(c)(3)
of the Affordable Care Act; and
(6) The provider directory made available to the Exchange in
accordance with Sec. 156.230 of this subchapter.
* * * * *
(L) Not display QHP advertisements or recommendations, or otherwise
provide favored or preferred placement in the display of QHPs, based on
compensation the agent, broker, or web-broker receives from QHP
issuers; and
(M) Prominently display a clear explanation of the rationale for
QHP recommendations and the methodology for its default display of
QHPs.
* * * * *
(j) * * *
(2) * * *
(ii) Provide the federally-facilitated Exchanges with correct
information under section 1411(b) of the Affordable Care Act,
including, but not limited to:
(A) Only entering an email address on an application for Exchange
coverage or an application for advance payments of the premium tax
credit and cost sharing reductions for QHPs that is secure, not
disposable, and belongs to the consumer or the consumer's authorized
representative designated in compliance with Sec. 155.227. A
consumer's email address may only be entered on an Exchange application
with the consent of the consumer or the consumer's authorized
representative. Properly entered email addresses must adhere to the
following guidelines:
(1) The email address may not have domains that remove email from
an inbox after a set period of time;
(2) The email address must be accessible by the consumer, or the
consumer's authorized representative designated in compliance with
Sec. 155.227, and may not be accessible by the agent, broker, or web-
broker assisting the consumer; and
(3) The email address may not have domains that belong to the
agent, broker, or web-broker or their business or agency.
(B) Only entering a telephone number on an application for Exchange
coverage or an application for advance payments of the premium tax
credit and cost sharing reductions for QHPs that belongs to the
consumer or their authorized representative designated in compliance
with Sec. 155.227. Telephone numbers entered on Exchange applications
may not be the personal number or business number of the agent, broker,
or web-broker assisting the consumer, or their business or agency,
unless the telephone number is actually that of the consumer or their
authorized representative.
(C) Only entering a mailing address on an application for Exchange
coverage or an application for advance payments of the premium tax
credit and cost sharing reductions for QHPs that belongs to, or is
primarily accessible by, the consumer or their authorized
representative designated in compliance with Sec. 155.227, is not for
the exclusive or convenient use of the agent, broker, or web-broker,
and is an actual residence or a secure location where the consumer or
their authorized representative may receive correspondence, such as a
P.O. Box or homeless shelter. Mailing addresses entered on Exchange
applications may not be that of the agent, broker, or web-broker
assisting the consumer, or their business or agency, unless the address
is the actual residence of the consumer or their authorized
representative.
(D) When submitting household income projections used by the
Exchange to determine a tax filer's eligibility for advance payments of
the premium tax credit in accordance with Sec. 155.305(f) or cost-
sharing reductions in accordance with Sec. 155.305(g), only entering a
consumer's household income projection that the consumer or the
consumer's authorized representative designated in compliance with
Sec. 155.227 has knowingly authorized and confirmed as accurate.
Household income projections on Exchange applications must be
calculated and attested to by the consumer. The agent, broker, or web-
broker assisting the consumer may answer questions posed by the
consumer related to household income projection, such as helping the
consumer determine what qualifies as income.
* * * * *
(vi) Not engage in scripting and other automation of interactions
with CMS Systems or the Direct Enrollment Pathways, unless approved in
advance in writing by CMS.
(vii) Only use an identity that belongs to the consumer when
identity proofing the consumer's account on HealthCare.gov.
(viii) When providing information to federally-facilitated
Exchanges that may result in a determination of eligibility for a
special enrollment period in accordance with Sec. 155.420, obtain
authorization from the consumer to submit the request for a
determination of eligibility for a special enrollment period and make
the consumer aware of the specific triggering event and special
enrollment period for which the agent, broker, or web-broker will be
submitting an eligibility determination request on the consumer's
behalf.
* * * * *
0
13. Amend Sec. 155.240 by adding paragraph (e)(2) to read as follows:

Sec. 155.240 Payment of premiums.

* * * * *
(e) * * *
(2) For plan years 2024 and beyond, in each Exchange, the premium
for a policy in which an enrollee is enrolled for less than the full
coverage month, including when the enrollee is enrolled in multiple
policies within a month, each lasting less than the full coverage
month, must equal the product of:
(i) The premium for 1 month of coverage divided by the number of
days in the month; and
(ii) The number of days for which coverage is being provided in the
month described in paragraph (e)(1)(i) of this section.
0
14. Amend Sec. 155.305 by revising paragraph (f)(1)(i) to read as
follows:

Sec. 155.305 Eligibility standards.

* * * * *
(f) * * *
(1) * * *
(i) He or she is expected to have a household income that will
qualify the tax filer as an applicable taxpayer according to 26 CFR
1.36B-2(b) for the benefit year for which coverage is requested; and
* * * * *
0
15. Amend Sec. 155.320 by--
0
a. Revising paragraphs (d)(4) introductory text, (d)(4)(i) introductory
text, and (d)(4)(i)(A);
0
b. Removing paragraph (d)(4)(i)(D).
0
c. Redesignating paragraph (d)(4)(i)(E) as paragraph (d)(4)(i)(D).
0
d. Removing paragraph (d)(4)(i)(F);
0
e. Redesignating paragraph (d)(4)(i)(G) as paragraph (d)(4)(i)(E) and
revising it; and
0
f. Removing and reserving paragraph (d)(4)(ii).
The revisions read as follows:

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

* * * * *
(d) * * *
(4) Alternate procedures. For any benefit year for which it does
not reasonably expect to obtain sufficient

[[Page 723]]

verification data as described in paragraphs (d)(2)(i) through (iii) of
this section, the Exchange may follow the procedures specified in
paragraph (d)(4)(i) of this section, or the Exchange may follow the
procedures specified in paragraph (d)(4)(ii) of this section. For
purposes of this paragraph (d)(4), the Exchange reasonably expects to
obtain sufficient verification data for any benefit year when, for the
benefit year, the Exchange is able to obtain data about enrollment in
or eligibility for qualifying coverage in an eligible employer
sponsored plan from at least one electronic data source that is
available to the Exchange and that has been approved by HHS, based on
evidence showing that the data source is sufficiently current,
accurate, and minimizes administrative burden, as described under
paragraphs (d)(2)(i) of this section.
(i) Based on the Exchange's assessment of risk for inappropriate
payment of advance payments of the premium tax credit or cost-sharing
reductions, implement a verification process that is reasonably
designed to ensure the accuracy of the data and is based on the
activities or methods used by an Exchange such as studies, research,
and analysis of an Exchange's own enrollment data, for enrollment in or
eligibility for qualifying coverage in an eligible employer sponsored
plan, as appropriate.
(A) If, as part of the verification process described under
paragraph (d)(4)(i) of this section, the Exchange will be contacting
any employer identified on the application for the applicant and the
members of his or her family, as defined in 26 CFR 1.36B-1(d), to
verify whether the applicant is enrolled in an eligible employer
sponsored plan or is eligible for qualifying coverage in an eligible
employer sponsored plan for the benefit year for which coverage is
requested, the Exchange must provide notice to the applicant;
* * * * *
(E) To carry out the process described in paragraph (d)(4)(iii) of
this section, the Exchange must only disclose an individual's
information to an employer to the extent necessary for the employer to
identify the employee.
* * * * *
0
16. Amend Sec. 155.340 by adding paragraph (i) to read as follows:

Sec. 155.340 Administration of advance payments of the premium tax
credit and cost-sharing reductions.

* * * * *
(i) Calculation of advance payments of the premium tax credit when
policy coverage lasts less than the full coverage month. (1) For plan
years beginning in 2024 and beyond, when the Exchange determines that
an individual is eligible for advance payments of the premium tax
credit and the enrollee is enrolled in a policy for less than the full
coverage month, including when the enrollee is enrolled in multiple
policies within a month, each lasting less than the full coverage
month, the amount of the advance payment of the premium tax credit paid
to the issuer of the policy must equal the product of--
(i) The advance payments of the premium tax credit applied to the
policy for one month of coverage divided by the number of days in the
month; and
(ii) The number of days for which coverage is being provided in the
month under the policy described in paragraph (i)(1)(i) of this
section.
(2) [Reserved]
0
17. Amend Sec. 155.420 by adding paragraph (g) to read as follows:

Sec. 155.420 Special enrollment periods.

* * * * *
(g) Pre-enrollment special enrollment period verification. At the
option of the Exchange, an Exchange may verify prior to processing a
qualified individual's plan selection that the qualified individual is
eligible for a special enrollment period under this section. In special
circumstances where the Exchange determines that such pre-enrollment
special enrollment period verification may cause undue burden on
qualified individuals, the Exchange may provide an exception to the
pre-enrollment special enrollment period verification process, provided
it does so in a manner that is not based on a prohibited discriminatory
basis. Exchanges on the Federal platform will conduct pre-enrollment
special enrollment verification of eligibility only for special
enrollment periods under paragraph (d)(1) of this section.
0
18. Amend Sec. 155.1200--
0
a. In paragraph (c) introductory text by removing the phrase ``HHS for
review'' and adding in its place the phrase, ``HHS for review, unless a
State Exchange is meeting its programmatic audit requirement for a
given benefit year under paragraph (e) of this section''; and
0
b. By adding paragraph (e).
The addition reads as follows.

Sec. 155.1200 General program integrity and oversight requirements.

* * * * *
(e) State Exchange Improper Payment Measurement (SEIPM) program.
For a given benefit year, a State Exchange may meet the independent
external programmatic audit requirement outlined in paragraph (c) of
this section by completing the required SEIPM program process,
established through 45 CFR part 155, subpart P.
0
19. Add subpart P to read as follows:
Subpart P--State Exchange Improper Payment Measurement Program
Sec.
155.1500 Purpose and definitions.
155.1505 Program notification and planning process.
155.1510 Data collection.
155.1515 Review process and improper payment rate determination.
155.1520 Error findings decisions.
155.1525 Redetermination of error findings decisions.
155.1530 Appeal of redetermination decision.
155.1535 Corrective action plan.
155.1540 Failure to comply.

Subpart P--State Exchange Improper Payment Measurement Program

Sec. 155.1500 Purpose and definitions.

(a) Purpose. This subpart sets forth the requirements of the State
Exchange Improper Payment Measurement program.
(b) Definitions. As used in this subpart--
Appeal of redetermination decision (or appeal decision) means the
HHS appeal decision resulting from a State Exchange's appeal of the
HHS' redetermination decision.
Corrective action plan (CAP) means the plan a State Exchange
develops in order to correct errors resulting in improper payments.
Error means a finding by HHS that a State Exchange did not
correctly apply a requirement in subparts D and E of this part
regarding eligibility for and enrollment in a qualified health plan;
advance payments of the premium tax credit, including the calculation
of advance payments of the premium tax credit; redeterminations of
eligibility determinations during a benefit year; or annual eligibility
redeterminations, which have a payment impact.
Error findings decision means the enumeration of errors made by a
State Exchange, including a determination of how the enumerated errors
inform improper payment estimation and reporting requirements.
Redetermination of an error findings decision (or redetermination
decision) means HHS' decision resulting from a State Exchange's request
for a redetermination of an error findings decision.
Review means the process of analyzing and assessing data submitted
by a State Exchange to HHS in order to determine a State Exchange's

[[Page 724]]

compliance with subparts D and E of this part as it relates to improper
payments.
State Exchange Improper Payment Measurement (SEIPM) program means
the process for determining estimated improper payments and other
information required under the Payment Integrity Information Act of
2019, and implementing guidance, for advance payments of the premium
tax credit, which includes a review of a State Exchange's
determinations regarding eligibility for and enrollment in a qualified
health plan; the calculation of advance payments of the premium tax
credit; redeterminations of eligibility determinations during a benefit
year; and annual eligibility redeterminations.

Sec. 155.1505 Program notification and planning process.

(a) Annual program notification. Beginning no earlier than in 2023,
prior to the start of the measurement year, HHS will annually issue a
notification to State Exchanges concerning information related to the
SEIPM program and the program's upcoming measurement cycle, which may
include but would not be limited to review criteria; key changes from
prior measurement cycles, where applicable; or other modifications
regarding specific SEIPM activities.
(b) Issuance of annual program schedule. Beginning no earlier than
2023, prior to the start of the measurement year, HHS will annually
issue a schedule that prescribes the timeline for the data requests in
accordance with Sec. 155.1510.
(c) Notification of changes. In response to the annual program
notification, the State Exchange must provide HHS with operational and
policy information required to perform the SEIPM review process, as
well as any operational, policy, or other changes that may impact the
SEIPM review process within the deadline prescribed in the annual
program schedule.

Sec. 155.1510 Data collection.

(a) Requirements. For purposes of the SEIPM program, a State
Exchange must annually submit the following eligibility and enrollment
information, in a manner specified by HHS.
(1) Pre-sampling data.
(2) Sampled unit data.
(b) Timing. The State Exchange must submit the data specified in
paragraph (a) of this section within the timelines specified in the
annual program schedule described in Sec. 155.1505(c). HHS will
consider requests for extension when extreme circumstances hinder the
ability of a State Exchange to submit data in accordance with the
requirements of this section.
(c) Compliance. Failure to timely provide the information in
accordance with paragraph (a) or (b) of this section may result in one
or more error findings during the review based upon insufficient data
to support that the State was in compliance with subparts D and E of
this part as it relates to advance payments of premium tax credits.

Sec. 155.1515 Review process and improper payment rate
determination.

(a) Receipt of data. HHS will maintain a record of status of
receipt for the information that is requested from each State Exchange
for a minimum of 10 years.
(b) Review of records. For each sampled record, HHS will review the
information provided by the State Exchange. The review will determine
whether any errors were made in a State Exchange's determinations
regarding eligibility for and enrollment in a qualified health plan;
advance payments of the premium tax credit, including the calculation
of advance payments of the premium tax credit; redeterminations of
eligibility determinations during a benefit year; and annual
eligibility redeterminations.
(c) Improper payment rate. HHS will notify each State Exchange of
HHS' error findings decisions for that State Exchange and HHS' estimate
of that State Exchange's improper payment rate.

Sec. 155.1520 Error findings decisions.

(a) Issuance of error findings decisions. Upon completion of the
review, HHS will issue the error findings decision to the State
Exchange.
(b) Content of error findings decision. The error findings
decisions at a minimum will include:
(1) The review findings regarding any errors made by the State
Exchange.
(2) Information regarding the State Exchange's right to request a
redetermination of the error findings decision in accordance with Sec.
155.1525.

Sec. 155.1525 Redetermination of error findings decisions.

(a) Request for redetermination. A State Exchange may request a
redetermination of error findings decision within the deadline
prescribed by the annual program schedule. During the period for a
State Exchange to request a redetermination of the error findings
decision, HHS will consider a request for an extension in extreme
circumstances, which includes but is not limited to situations such as
natural disasters, interruptions in business operations such as major
system failures, or other extreme circumstances. At a minimum, the
request for redetermination must include:
(1) The error(s) for which the State Exchange is requesting a
redetermination;
(2) All data and information that supports the State Exchange's
request for a redetermination; and
(3) An explanation of how the data and information pertains to the
error(s) specified in (a)(1).
(b) Issuance of redetermination decision. The redetermination of an
error findings decision will be issued within the deadline prescribed
by the annual program schedule. A State Exchange will be notified of
any delays in the issuance in the redetermination of an error findings
decision.
(c) Content of redetermination decision. HHS' redetermination of an
error findings decision, at a minimum, will include:
(1) HHS' findings regarding the impact of the additional data and
information provided by the State Exchange on the error(s) for which
the State Exchange requested a redetermination,
(2) Information regarding the State Exchange's right to request an
appeal of the redetermination of the error findings decision in
accordance with Sec. 155.1530.

Sec. 155.1530 Appeal of redetermination decision.

(a) Request for appeal. A State Exchange may request an appeal of a
redetermination decision within the deadline prescribed by the annual
program schedule. The request for appeal must indicate the specific
error(s) identified in the redetermination decision for which the State
Exchange is requesting an appeal.
(b) On-the-record review. Additional data or information, beyond
that submitted during the redetermination request, will not be
considered in rendering the appeal decision.
(c) Issuance of appeal decision. The appeal decision will be issued
within the deadline prescribed in the annual program schedule unless
there is a delay. A State Exchange will be notified of any delays in
the issuance of the appeal decision.
(d) Content of appeal decision. HHS' appeal decision will include:
(1) The findings regarding the error(s) for which an appeal was
requested. The findings will be limited to those error(s) identified in
the request for an appeal.
(2) The final disposition of the appeal request.

[[Page 725]]

(e) Final report. Upon completion of the review and the closure of
all appeals, HHS may issue a report containing the error findings and
the estimated improper payment rate.

Sec. 155.1535 Corrective action plan.

(a) Corrective action plan. Based on a State Exchange's error rate
for a given benefit year, HHS, in its reasonable discretion, may
require the State Exchange to develop and submit a corrective action
plan to correct errors resulting in improper payments.
(b) Content of proposed corrective action plan. A State Exchange's
corrective action plan must be developed in accordance with Appendix C
to Office of Management and Budget Circular No. A-123.
(c) Implementation and evaluation of corrective action plan. A
State Exchange must develop an implementation schedule for its
corrective action plan, implement the plan in accordance with that
schedule, and regularly evaluate whether the initiatives are effective
at reducing or eliminating error causes.
(d) Failure to submit. If a State Exchange does not submit a
corrective action plan when required, HHS may take actions consistent
with Sec. 155.1540(a)(1) and (2).

Sec. 155.1540 Failure to comply.

(a) Failure to comply. If a State Exchange fails to substantially
comply with the data collection requirements or the CAP provisions
contained in this subpart, and HHS finds that such failures undermine
or prohibit HHS's efficient administration of Exchange improper payment
measurement activities, HHS may implement measures or procedures in
relation to the State Exchange that:
(1) HHS determines are appropriate to secure the State Exchange's
compliance with the data collection requirements or the CAP provisions
contained in subpart P, and to detect, prevent or reduce abuses in the
administration of advance payments of the premium tax credit under
title I of the ACA; and
(2) the Secretary has authority to implement under title I of the
Affordable Care Act or any other Federal law.
(b) [Reserved]

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

0
20. 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
21. Amend Sec. 156.50 by--
0
a. Removing paragraph (c)(3); and
0
b. Revising paragraphs (d)(1) introductory text, (d)(2)(i)(A) and (B),
(d)(2)(ii), (d)(2)(iii)(B), (d)(3) introductory text, (d)(4) and (6),
and (d)(7) introductory text.
The revisions read as follows:

Sec. 156.50 Financial support.

* * * * *
(d) * * *
(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 or the State Exchange
on the Federal platform user fee specified in paragraph (c)(2) of this
section, to the extent that the participating issuer--
* * * * *
(2) * * *
(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 with respect
to which the participating issuer seeks an adjustment of the user fee
specified in paragraph (c)(1) or (2) 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) or (2) 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 or the State-based Exchange on the
Federal platform user fee 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) or (2) 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) or
(2) 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) or (2) 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.
* * * * *
(6) A participating issuer that receives an adjustment in the user
fee specified in paragraph (c)(1) or (2) 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) or (2) 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
22. Amend Sec. 156.111 by--
0
a. Revising the section heading;
0
b. Revising paragraph (d) and paragraph (e) introductory text; and
0
c. Removing paragraph (f).
The revisions read as follows:

[[Page 726]]

Sec. 156.111 State selection of EHB-benchmark plan for plan years
beginning on or after January 1, 2020.

* * * * *
(d) A State must notify HHS of the selection of a new EHB-benchmark
plan by the first Wednesday in May that is 2 years before the effective
date of the new EHB-benchmark plan.
(1) If the State does not make a selection by the first Wednesday
in May that is 2 years before the effective date of the new EHB-
benchmark plan, or its benchmark plan selection does not meet the
requirements of this section and section 1302 of the ACA, the State's
EHB-benchmark plan for the applicable plan year will be that State's
EHB-benchmark plan applicable for the prior year.
(2) [Reserved]
* * * * *
(e) A State changing its EHB-benchmark plan under this section must
submit documents in a format and manner specified by HHS by the first
Wednesday in May that is 2 years before the effective date of the new
EHB-benchmark plan. These must include:
* * * * *
0
23. Amend Sec. 156.115 by revising paragraph (b)(2) to read as
follows:

Sec. 156.115 Provision of EHB.

* * * * *
(b) * * *
(2) An issuer may substitute a benefit within the same EHB
category, unless prohibited by applicable State requirements.
Substitution of benefits between EHB categories is not permitted.
* * * * *
0
24. Amend Sec. 156.125 by revising paragraph (a) to read as follows:

Sec. 156.125 Prohibition on discrimination.

(a) An issuer does not provide EHB if its benefit design, or the
implementation of its benefits design, discriminates based on an
individual's age, expected length of life, present or predicted
disability, degree of medical dependency, quality of life, or other
health conditions. A non-discriminatory benefit design that provides
EHB is one that is clinically-based, incorporates evidence-based
guidelines into coverage and programmatic decisions, and relies on
current and relevant peer-reviewed medical journal article(s), practice
guidelines, recommendations from reputable governing bodies, or similar
sources.
* * * * *
0
25. Amend Sec. 156.140 by revising paragraph (c) to read as follows:

Sec. 156.140 Levels of coverage.

* * * * *
(c) De minimis variation. (1) For plan years beginning on or after
January 1, 2018 through December 31, 2022, the allowable variation in
the AV of a health plan that does not result in a material difference
in the true dollar value of the health plan is -4 percentage points and
+2 percentage points, except if a health plan under paragraph (b)(1) of
this section (a bronze health plan) either covers and pays for at least
one major service, other than preventive services, before the
deductible or meets the requirements to be a high deductible health
plan within the meaning of section 223(c)(2) of the Internal Revenue
Code, in which case the allowable variation in AV for such plan is -4
percentage points and +5 percentage points.
(2) For plan years beginning on or after January 1, 2023, the
allowable variation in the AV of a health plan that does not result in
a material difference in the true dollar value of the health plan is -2
percentage points and +2 percentage points, except if a health plan
under paragraph (b)(1) of this section (a bronze health plan) either
covers and pays for at least one major service, other than preventive
services, before the deductible or meets the requirements to be a high
deductible health plan within the meaning of section 223(c)(2) of the
Internal Revenue Code, in which case the allowable variation in AV for
such plan is -2 percentage points and +5 percentage points.
0
26. Amend Sec. 156.200--
0
a. By revising paragraph (b)(3); and
0
b. In paragraph (e) by removing the phrase ``age, or sex'' and adding
in its place the phrase ``age, sex, sexual orientation, or gender
identity''.
The revision read as follows:

Sec. 156.200 QHP issuer participation standards.

* * * * *
(b) * * *
(3) Ensure that each QHP complies with benefit design standards, as
defined in Sec. 156.20, except that individual market silver QHPs must
have an AV of 70 percent, with a de minimis allowable AV variation of -
0 percentage points and +2 percentage points;
* * * * *
0
27. Add Sec. 156.201 to read as follows:

Sec. 156.201 Standardized options.

For plan year 2023 and subsequent plan years, a QHP issuer in a
federally-facilitated Exchange or a State-based Exchange on the Federal
platform, other than an issuer that is already required to offer
standardized options under state action taking place on or before
January 1, 2020, must offer at least one standardized QHP option,
defined at Sec. 155.20 of this subchapter, at every product network
type, as the term is described in the definition of ``product'' at
Sec. 144.103 of this subchapter, metal level, and throughout every
service area that it also offers non-standardized QHP options,
including, for silver plans, for the income-based cost-sharing
reduction plan variations, as provided for at Sec. 156.420(a), but not
for the zero and limited cost sharing plan variations, as provided for
at Sec. 156.420(b).
0
28. Amend Sec. 156.230 by--
0
a. Revising paragraphs (a)(1) through (3); and,
0
b. Removing paragraph (f).
The revisions read as follows:

Sec. 156.230 Network adequacy standards.

(a) * * *
(1) Each QHP issuer that uses a provider network must ensure that
the provider network consisting of in-network providers, and, for plans
with more than one tier of network, specifically the provider network
consisting of in-network providers in the tier for which the plan
imposes the lowest cost-sharing obligation, as available to all
enrollees, meets the following standards:
(i) Includes essential community providers in accordance with Sec.
156.235;
(ii) Maintains a network that is sufficient in number and types of
providers, including providers that specialize in mental health and
substance abuse services, to ensure that all services will be
accessible without unreasonable delay; and
(iii) Is consistent with the rules for network plans of section
2702(c) of the PHS Act.
(2)(i) Standards. For plan years beginning on or after January 1,
2023, a QHP issuer on a federally-facilitated Exchange must comply with
the requirement in paragraph (a)(1)(ii) of this section by:
(A) Meeting time and distance standards established by the
federally-facilitated Exchange. Such time and distance standards will
be developed for consistency with industry standards and published in
guidance.
(B) Meeting appointment wait time standards established by the
federally-facilitated Exchange. Such appointment wait time standards
will be developed for consistency with industry standards and published
in guidance.
(ii) Written justification. If a plan applying for QHP
certification to be offered through a federally-facilitated

[[Page 727]]

Exchanges does not satisfy the network adequacy standards described in
paragraphs (a)(2)(i)(A) and (B) of this section, the issuer must
include as part of its QHP application a justification describing how
the plan's provider network provides an adequate level of service for
enrollees and how the plan's provider network will be strengthened and
brought closer to compliance with the network adequacy standards prior
to the start of the plan year. The issuer must provide information as
requested by the FFE to support this justification.
(3) The federally-facilitated Exchange may grant an exception to
the requirements in paragraph (a)(2)(i)(A) of this section if the
Exchange determines that making such health plan available through such
Exchange is in the interests of qualified individuals in the State or
States in which such Exchange operates.
* * * * *
0
29. Amend Sec. 156.235 by revising paragraphs (a)(2)(i) and (b)(2)(i)
to read as follows:

Sec. 156.235 Essential community providers.

(a) * * *
(2) * * *
(i) The network includes as participating providers at least a
minimum percentage, as specified by HHS, of available essential
community providers in each plan's service area. Multiple providers at
a single location will count as a single essential community provider
toward both the available essential community providers in the plan's
service area and the issuer's satisfaction of the essential community
provider participation standard. For plans that use tiered networks, to
count toward the issuer's satisfaction of the essential community
provider standards, providers must be contracted within the network
tier that results in the lowest cost-sharing obligation. For plans with
two network tiers (for example, participating providers and preferred
providers), such as many PPOs, where cost sharing is lower for
preferred providers, only preferred providers will be counted towards
essential community provider standards; and
* * * * *
(b) * * *
(2 * * *
(i) The number of its providers that are located in Health
Professional Shortage Areas or five-digit zip codes in which 30 percent
or more of the population falls below 200 percent of the Federal
poverty level satisfies a minimum percentage, specified by HHS, of
available essential community providers in the plan's service area.
Multiple providers at a single location will count as a single
essential community provider toward both the available essential
community providers in the plan's service area and the issuer's
satisfaction of the essential community provider participation
standard. For plans that use tiered networks, to count toward the
issuer's satisfaction of the essential community provider standards,
providers must be contracted within the network tier that results in
the lowest cost-sharing obligation. For plans with two network tiers
(for example, participating providers and preferred providers), such as
many PPOs, where cost sharing is lower for preferred providers, only
preferred providers would be counted towards essential community
provider standards; and
* * * * *

Subpart D--Standards for Qualified Health Plan Issuers for Specific
Types of Exchanges

0
30. Revise the subpart D heading to read as set forth above.
0
31. Amend Sec. 156.340 by revising paragraphs (a) and (b)(4) and (5)
to read as follows:

Sec. 156.340 Standards for downstream and delegated entities.

(a) General requirement. Effective October 1, 2013, notwithstanding
any relationship(s) that a QHP issuer may have with delegated and
downstream entities, a QHP issuer maintains responsibility for its
compliance and the compliance of any of its delegated or downstream
entities with all applicable Federal standards related to Exchanges.
The applicable standards depend on the Exchange model type in which the
QHP is offered, as described in paragraph (a)(1) and (2) of this
section.
(1) QHP issuers participating in Exchange models that do not use
the Federal platform, including State Exchanges and State Exchange
SHOPs. QHP issuers maintain responsibility for ensuring their
downstream and delegated entities comply with the Federal standards
related to Exchanges, including the standards in of subpart C of this
part with respect to each of its QHPs on an ongoing basis, as well as
the Exchange processes, procedures, and standards in accordance with
subparts H and K of part 155 and, in the small group market, Sec. Sec.
155.705 and 155.706 of this subchapter, unless the standard is
specifically applicable to a federally-facilitated Exchange or FF-SHOP;
(2) QHP issuers participating in Exchanges that use the Federal
platform, including federally-facilitated Exchanges, FF-SHOPs, SBE-FPs,
and SBE-FP-SHOPs. QHP issuers maintain responsibility for ensuring
their downstream and delegated entities comply with Federal standards
related to Exchanges, including the standards in subpart C of part 156
with respect to each of its QHPs on an ongoing basis, as well as the
Exchange processes, procedures, and standards in accordance with
subparts H and K of part 155 of this subchapter and, in the small group
market, Sec. Sec. 155.705 and 155.706 of this subchapter if applicable
to the Exchange type in which the QHP issuer is operating. QHP issuers
are also responsible for their downstream and delegated entities'
compliance with the standards of Sec. 155.220 of this subchapter with
respect to assisting with enrollment in QHPs, and to the standards of
Sec. Sec. 156.705 and 156.715 of this subchapter for maintenance of
records and compliance reviews if applicable to the Exchange type in
which the QHP issuer is operating.
(b) * * *
(4) Specify that the delegated or downstream entity must permit
access by the Secretary and the OIG or their designees in connection
with their right to evaluate through audit, inspection, or other means,
to the delegated or downstream entity's books, contracts, computers, or
other electronic systems, including medical records and documentation,
relating to the QHP issuer's obligations in accordance with Federal
standards under paragraph (a) of this section until 10 years from the
final date of the agreement period;
(5) All agreements between issuers offering QHPs through an
Exchange and delegated or downstream entities the issuers engage to
support the issuer's activities on an Exchange must include text under
which the language stating that the relevant Exchange authority may
demand and receive the delegated or downstream entity's books,
contracts, computers, or other electronic systems, including medical
records and documentation, relating to the QHP issuer's obligations in
accordance with Federal standards under paragraph (a) of this section
until 10 years from the final date of the agreement period.
0
32. Amend Sec. 156.400 by revising the definition of ``De minimis
variation for a silver plan variation'' to read as follows:

Sec. 156.400 Definitions.

* * * * *
De minimis variation for a silver plan variation means a -0
percentage point

[[Page 728]]

and +1 percentage point allowable AV variation.
* * * * *
0
33. Amend Sec. 156.430 by revising paragraphs (b)(1), (d) introductory
text, (e) introductory text, and (e)(1) to read as follows:

Sec. 156.430 Payment for cost-sharing reductions.

* * * * *
(b) * * *
(1) When there is an appropriation to make cost-sharing reduction
payments to QHP issuers, a QHP issuer will receive periodic advance
payments from HHS to the extent permitted by the appropriation and
calculated in accordance with Sec. 155.1030(b)(3) of this subchapter.
* * * * *
(d) Cost-sharing reductions data submissions. HHS will periodically
provide a submission window for issuers to submit cost-sharing
reduction data documenting cost-sharing reduction amounts issuers paid,
as specified in paragraphs (d)(1) and (2) of this section, in a form
and manner specified by HHS in guidance, calculated in accordance with
paragraph (c) of this section. When HHS makes cost-sharing reduction
payments to QHP issuers, HHS will notify QHP issuers that the
submission of the cost-sharing data is mandatory for those issuers
having received cost-sharing reduction payments for any part of the
benefit year and voluntary for other issuers, and HHS will use the data
to reconcile advance cost-sharing reduction payments to issuers against
the actual amounts of cost-sharing reductions QHP issuers provided, as
determined by HHS based on amounts specified in paragraphs (d)(1) and
(2) of this section, as calculated in accordance with paragraph (c) of
this section. In the absence of an appropriation to make cost-sharing
reduction payments to issuers, HHS will notify QHP issuers that the
submission of the cost-sharing data is voluntary. The cost-sharing data
that must be submitted in either a voluntary or mandatory submission
includes:
* * * * *
(e) Cost-sharing reductions payments and charges. If the actual
amounts of cost-sharing reductions determined by HHS based on amounts
described in paragraphs (d)(1) and (2) of this section are--
(1) More than the amount of advance payments HHS provided, and the
QHP issuer has timely provided the data of actual amounts of cost-
sharing reductions as required under paragraph (c) of this section, if
an appropriation is available to make cost-sharing payments to QHP
issuers, HHS will make a payment to the QHP issuer for the difference;
or
* * * * *

Sec. 156.1230 [Amended]

0
34. Amend Sec. 156.1230 in paragraph (b)(2) by removing the phrase
``age, or sex'' and adding in its place the phrase ``age, sex, sexual
orientation, or gender identity''.

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

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

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

0
36. Amend Sec. 158.140 by revising paragraph (b)(2)(iii) to read as
follows:

Sec. 158.140 Reimbursement for clinical services provided to
enrollees.

* * * * *
(b) * * *
(2) * * *
(iii) The amount of incentive and bonus payments made to providers
that are tied to clearly defined, objectively measurable, and well-
documented clinical or quality improvement standards that apply to
providers.
* * * * *
0
37. Amend Sec. 158.150 by revising paragraph (a) to read as follows:

Sec. 158.150 Activities that improve health care quality.

(a) General requirements. The report required in Sec. 158.110 must
include expenditures directly related to activities that improve health
care quality, as such activities are described in this section.
* * * * *
0
38. Amend Sec. 158.170 by revising paragraph (b) introductory text to
read as follows:

Sec. 158.170 Allocation of expenses.

* * * * *
(b) Description of the methods used to allocate expenses. The
report required in Sec. 158.110 must include a detailed description of
the methods used to allocate expenses, including incurred claims,
quality improvement expenses, Federal and State taxes and licensing or
regulatory fees, and other non-claims costs, to each health insurance
market in each State. A detailed description of each expense element
must be provided, including how each specific expense meets the
criteria for the type of expense in which it is categorized, as well as
the method by which it was aggregated.
* * * * *

Dated: December 23, 2021.
Xavier Becerra,
Secretary, Department of Health and Human Services.
[FR Doc. 2021-28317 Filed 12-28-21; 4:15 pm]
BILLING CODE 4120-01-P