[Federal Register Volume 87, Number 88 (Friday, May 6, 2022)]
[Rules and Regulations]
[Pages 27208-27393]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-09438]



[[Page 27207]]

Vol. 87

Friday,

No. 88

May 6, 2022

Part II





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; Final Rule

  Federal Register / Vol. 87 , No. 88 / Friday, May 6, 2022 / Rules and 
Regulations  

[[Page 27208]]


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DEPARTMENT OF HEALTH AND HUMAN SERVICES

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

[CMS-9911-F]
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: Final rule.

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SUMMARY: This final rule includes payment parameters and provisions 
related to the risk adjustment and risk adjustment data validation 
programs, as well as 2023 user fee rates for issuers offering qualified 
health plans (QHPs) through Federally-facilitated Exchanges (FFEs) and 
State-based Exchanges on the Federal platform (SBE-FPs). This final 
rule also includes requirements related to guaranteed availability; the 
offering of QHP standardized plan options through Exchanges on the 
Federal platform; requirements for agents, brokers, and web-brokers; 
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; and re-enrollment. This final rule also 
responds to comments on how the Department of Health and Human Services 
(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: These regulations are effective July 1, 2022.

FOR FURTHER INFORMATION CONTACT: 
    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, 
Jacqueline Wilson, (301) 492-4286, or Leanne Klock, (410) 786-1045, for 
matters related to risk adjustment or risk adjustment data validation.
    Aaron Franz, (410) 786-8027, or John Barfield, (301) 492-4433, for 
matters related to Federally-facilitated Exchange and State-based 
Exchange on the Federal platform user fees.
    Nora Simmons, (410) 786-1981, for matters related to advance 
payment of the premium tax credit 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.
    Becca Bucchieri, (301) 492-4341, Agata Pelka, (301) 492-4400, or 
Leigha Basini, (301) 492-4380, for matters related to nondiscrimination 
based on sexual orientation and gender identity, essential health 
benefit 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 eligibility standards.
    Katherine Bentley, (301) 492-5209, or Ariel Kennedy, (301) 492-
4306, for matters related to special enrollment period verification.
    Christina Whitefield, (301) 492-4172, for matters related to the 
medical loss ratio program.
    Nidhi Singh Shah, (301) 492-5110, for matters related to quality 
improvement strategy standards for Exchanges.
    Dan Brown, (301) 492-5146 for matters related to downstream and 
delegated entities.
    Nikolas Berkobien, (301) 492-4400, or Leigha Basini, (301) 492-4380 
for matters related to standardized plan options.
    Erika Melman, (301) 492-4348, Deborah Hunter, (443) 386-3651, 
Whitney Allen, (667) 290-8748, or Emily Martin, (301) 492-4423, 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.
    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:

Table of Contents

I. Executive Summary
II. Background
    A. Legislative and Regulatory Overview
    B. Stakeholder Consultation and Input
    C. Structure of Final Rule
III. Provisions of the Final 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 (Sec.  156.111)
    I. ICRs Regarding Differential Display of Standardized Plan 
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)
    N. Summary of Annual Burden Estimate for Proposed Requirements
V. Regulatory Impact Analysis
    A. Statement of Need
    B. Overall Impact
    C. Impact Estimates of the Payment Notice Provisions and 
Accounting Table
    D. Regulatory Alternatives Considered
    E. Regulatory Flexibility Act
    F. Unfunded Mandates
    G. Federalism

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    H. Congressional Review Act

Background

    In the proposed rule, ``Patient Protection and Affordable Care Act; 
HHS Notice of Benefit and Payment Parameters for 2023'' (87 FR 584), 
published in the January 5, 2022 edition of the Federal Register (2023 
Payment Notice proposed rule), HHS proposed amendments to certain 
regulations prohibiting discrimination in health insurance coverage, 
including discrimination in the design and implementation of health 
plans, under Sec. Sec.  147.104(e), 155.120(c), 155.220(j), 156.125(b), 
156.200(e), and 156.1230(b) under title 45 of the Code of Federal 
Regulations (CFR). HHS proposed to amend these regulations to 
explicitly identify and recognize discrimination on the basis of sexual 
orientation and gender identity as prohibited forms of discrimination 
based on sex consistent with the Supreme Court's decision in Bostock v. 
Clayton County, 140 S. Ct. 1731 (2020), and HHS nondiscrimination 
policy that existed prior to the 2020 regulatory amendments HHS made in 
conformance with the ``Nondiscrimination in Health and Health Education 
Programs or Activities, Delegation of Authority'' final rule (85 FR 
37160), published in the June 19, 2020 edition of the Federal 
Register.\1\ In connection with discriminatory benefit designs 
prohibited under Sec.  156.125, HHS also included in the proposed rule 
an example related to gender-affirming care that was intended to 
illustrate a health plan design that presumptively discriminates 
against enrollees based on gender identity.
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    \1\ See also 85 FR 37160, 37218 through 21 (the 2020 final rule 
implementing section 1557 of the ACA revised the following CMS 
regulations: 45 CFR 147.104, 155.120, 155.220, 156.200, 156.1230).
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    Currently, HHS is developing a proposed rule \2\ that also will 
address prohibited discrimination based on sex in health coverage under 
section 1557 of the Patient Protection and Affordable Care Act (ACA) 
\3\ (42 U.S.C. 18116). Section 1557 prohibits discrimination on the 
basis of race, color, national origin, sex, age, or disability in 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 
its amendments. Because HHS' proposed rule implementing section 1557 of 
the ACA will also address issues related to prohibited discrimination 
based on sex, HHS is of the view that it would be most prudent to 
address the nondiscrimination proposals related to sexual orientation 
and gender identity in the 2023 Payment Notice proposed rule at a later 
time, to ensure that they are consistent with the policies and 
requirements that will be included in the section 1557 rulemaking. 
Therefore, HHS will not address in this final rule the 
nondiscrimination proposals related to sexual orientation and gender 
identity included in the 2023 Payment Notice proposed rule or the 
comments submitted in response to those proposals.
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    \2\ HHS submitted a draft notice of proposed rulemaking 
addressing section 1557 of the Patient Protection and Affordable 
Care Act and its implementing regulations to the Office of 
Management and Budget on or around March, 22, 2022. See https://www.reginfo.gov/public/do/eoDetails?rrid=234566.
    \3\ 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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    HHS is committed to robust civil rights protections in health care 
for all consumers, including protections to combat discrimination on 
the basis of gender identity or sexual orientation.\4\ Moreover, to the 
extent that entities subject to the relevant regulations prohibiting 
discrimination in health insurance coverage are also covered by section 
1557, they are already under the statutory obligation not to 
discriminate on the basis of sex.\5\ Consistent with the Supreme 
Court's decision in Bostock v. Clayton County, 140 S. Ct. 1731 (2020), 
and the HHS Notice of Interpretation and Enforcement of Section 1557 of 
the Affordable Care Act and Title IX of the Education Amendments of 
1972 (86 FR 27984), published in the May 25, 2021 edition of the 
Federal Register, HHS will continue to interpret and enforce section 
1557 of the ACA and its protections against sex discrimination to 
prohibit discrimination on the basis of sexual orientation and gender 
identity in all aspects of health insurance coverage governed by 
section 1557.\6\ Thus, notwithstanding that the Department will address 
in future rulemaking the proposals related to sexual orientation and 
gender identity and the example related to gender-affirming care, HHS 
will continue to scrutinize the activities of covered health plans to 
root out practices that unlawfully discriminate on the basis of sexual 
orientation or gender identity. HHS' interpretation of section 1557 
will guide HHS in processing complaints and conducting investigations, 
but does not itself determine the outcome in any particular case or set 
of facts. In enforcing Section 1557, HHS will comply with the Religious 
Freedom Restoration Act, 42 U.S.C. 2000bb et seq., and all other legal 
requirements.\7\
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    \4\ HHS' proposals related to sexual orientation and gender 
identity in the 2023 Payment Notice proposed rule resulted, in part, 
from reviews HHS conducted as directed in President Biden's January 
20, 2021, Executive Order 13988 (86 FR 7023), which stated the 
Administration's policy on preventing and combating discrimination 
on the basis of gender identity and sexual orientation and the 
President's conclusion that ``[u]nder Bostock's reasoning, laws that 
prohibit sex discrimination . . . , along with their respective 
implementing regulations--prohibit discrimination on the basis of 
gender identity or sexual orientation, so long as the laws do not 
contain sufficient indications to the contrary.'' 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 construction of the laws, and to consider whether to suspend, 
revise, or rescind any agency actions that are inconsistent with 
that policy and construction.
    \5\ See 85 FR 37219 (explaining that section 1557 governs 
entities established under Title I of the ACA, including Exchanges).
    \6\ See also Hammons v. Univ. of Maryland Med. Sys. Corp., No. 
20-cv-2009, 2021WL 3190492, at *17 (D. Md. July 28, 2021) (stating 
Bostock ``made clear that the position stated in HHS's [Bostock 
Notice] was already binding law'').
    \7\ 86 FR 27985.
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I. Executive Summary

    American Health Benefit Exchanges, or ``Exchanges,'' are entities 
established under the ACA 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.
    In previous rulemakings, we established provisions and parameters 
to implement many ACA requirements and programs. In this final rule, we 
amend some of these provisions and parameters, with a focus on 
maintaining a stable regulatory environment. These changes are intended 
to provide issuers with greater predictability for upcoming plan years 
(PYs), while simultaneously enhancing the role of States in these 
programs. They will also provide States

[[Page 27210]]

with additional flexibilities, reduce unnecessary regulatory burdens on 
stakeholders, empower consumers, ensure program integrity, and improve 
affordability.
    Risk adjustment continues to be a core program in the individual, 
small group, and merged markets both on and off Exchanges. We published 
a technical paper, the 2021 HHS-Operated Risk Adjustment Technical 
Paper on Possible Model Changes \8\ in October 2021 (2021 RA Technical 
Paper), and sought comment on three potential updates to the risk 
adjustment models. We are finalizing two of the three proposed updates 
to the HHS risk adjustment models beginning with the 2023 benefit year. 
Specifically, beginning with the 2023 benefit year, we are finalizing 
the removal of the current severity illness factors from the adult 
models and the addition of an interacted hierarchical condition 
category (HCC) count model specification to the adult and child models. 
We also are finalizing the replacement of the current enrollment 
duration factors in the adult models with HCC-contingent enrollment 
duration factors. We are not finalizing the proposed model 
specification change to add a two-stage weighted approach to the adult 
and child models. We are finalizing the use of the 2017, 2018, and 2019 
enrollee-level External Data Gathering Environment (EDGE) data to 
recalibrate the 2023 benefit year risk adjustment models. For 2023, we 
are also finalizing the continued application of 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.
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    \8\ HHS-Operated Risk Adjustment Technical Paper on Possible 
Model Changes. (2021, October 26). CMS. https://www.cms.gov/files/document/2021-ra-technical-paper.pdf.
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    In addition, we are finalizing 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.\9\ 
We are also finalizing, for the 2024 benefit year and beyond, the 
proposal 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 will 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 will 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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    \9\ 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 are finalizing the proposal to repeal the ability 
of States, other than prior participants, to request a reduction in 
risk adjustment State transfers starting with the 2024 benefit year. We 
are also finalizing the changes that limit a prior participant's 
ability to request a reduction in risk adjustment transfers under Sec.  
153.320(d) to only those that meet the de minimis threshold criteria. 
In future rulemaking, HHS intends to propose to eliminate the prior 
participant exception starting with the 2025 benefit year. For the 2023 
benefit year, we are announcing approval of Alabama's request to reduce 
risk adjustment State transfers for its individual and small group 
markets, but at lower percentages than requested. We approve a 25 
percent reduction in Alabama's individual market transfers (including 
the catastrophic and non-catastrophic risk pools) and a 10 percent 
reduction in Alabama's small group market transfers for the 2023 
benefit year.
    We are finalizing the 2023 benefit year risk adjustment user fee 
for States where HHS operates the risk adjustment program of $0.22 per 
member per month (PMPM). We are also finalizing the proposal to collect 
and extract five new data elements as part of the enrollee-level EDGE 
data beginning with the 2023 benefit year. We are also finalizing the 
proposal to extract three data elements issuers already report to their 
EDGE servers--plan ID, rating area, and subscriber indicator--as part 
of the required risk adjustment data. Plan ID and rating area will be 
extracted beginning with the 2021 benefit year, and subscriber 
indicator will be extracted beginning with the 2022 benefit year.
    Finally, we are finalizing 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 
will 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 are finalizing as proposed the refinements to the HHS risk 
adjustment data validation (HHS-RADV) error estimation methodology 
beginning with the 2021 benefit year to: (1) Extend the application of 
Super HCCs \10\ (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 \11\) 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, except when the child and adult 
coefficient estimation groups have identical definitions; 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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    \10\ As finalized in this rule, beginning with the 2021 benefit 
year of HHS-RADV, a Super HCC will be defined as the aggregate de-
duplicated frequencies of EDGE HCCs that share an HCC coefficient 
estimation group determined based on the enrollees' risk adjustment 
model.
    \11\ Regulations and Guidance. (2022). CMS. https://www.cms.gov/CCIIO/Resources/Regulations-and-Guidance. The January 7, 2022 
version of the DIY software is available at 2021 Benefit Year Risk 
Adjustment Updated HHS-Developed Risk Adjustment Model Algorithm 
``Do It Yourself (DIY)'' Software. (2022). CMS.
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    As we do every year in the HHS Notice of Benefit and Payment 
Parameters, we are finalizing updated parameters for the individual and 
small group markets. For the PY 2023, we are maintaining FFE and SBE-FP 
user fees at the current PY 2022 rates, 2.75 and 2.25 percent of total 
monthly premiums, respectively. On December 28, 2021, we released the 
Premium Adjustment Percentage, Maximum Annual Limitation on Cost 
Sharing, Reduced Maximum Annual Limitation on Cost Sharing, and 
Required Contribution Percentage for the 2023 Benefit Year guidance 
setting forth these parameters for PY 2023.\12\
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    \12\ Premium Adjustment Percentage. (2021, December 28). CMS. 
https://www.cms.gov/files/document/2023-papi-parameters-guidance-v4-final-12-27-21-508.pdf.
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    We are not finalizing the proposal to require all Exchanges to 
prorate premiums and advance payments of the premium tax credit (APTC). 
After considering the comments received, we are finalizing the policy 
to clarify the APTC proration methodology which Exchanges on the 
Federal platform will be subject to under HHS' authority to administer 
APTC, but we are not finalizing the requirement for State Exchanges to 
prorate premium or APTC amounts as described in the proposed rule. 
Rather, beginning in PY 2024, State

[[Page 27211]]

Exchanges must report to HHS through existing State Exchange oversight 
mechanisms the methodology the State Exchange will use that does not 
cause total monthly APTC amounts to exceed an enrollee's monthly PTC 
eligibility. This will ensure compliance with HHS and Internal Revenue 
Service (IRS) regulations particularly when an 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.
    We are finalizing 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 that did not. We also finalize 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 are finalizing 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 also finalize policies to address certain agent, broker, and 
web-broker practices. These policies will be added as part of the FFE 
standards of conduct codified at Sec.  155.220(j)(2), improving CMS' 
ability to enforce existing responsibilities and requirements 
applicable to agents, brokers, and web-brokers participating in the 
FFEs and SBE-FPs, while also providing more detail about specific 
business practices that are prohibited.
    We are finalizing a revision to our interpretation of the 
guaranteed availability requirement to prohibit 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 are finalizing flexibility under which Exchanges may conduct 
risk-based employer sponsored coverage verification in connection with 
eligibility determinations for APTC. This policy will help States more 
effectively balance the need to prevent improper APTC payments with the 
costs of verification.
    We are finalizing amendments to implementing regulations to codify 
existing MLR policy 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 are also updating the MLR regulations 
to 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, we are 
finalizing a technical amendment to the MLR provisions 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 rescinded the 
provision in a final rule published in the Federal Register on May 5, 
2021 (86 FR 24140) (part 2 of the 2022 Payment Notice final rule).
    With regard to the EHBs, we are finalizing a permanent annual 
deadline in early-May for EHB-benchmark plan applications by States, as 
well as the repeal of the ability for States to permit issuers to 
substitute benefits between EHB categories. In addition, we are 
finalizing changes to the de minimis thresholds for the 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 finalize the proposal to remove the State annual reporting 
requirement to report State-required benefits in addition to the EHB to 
HHS.
    We are finalizing 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. 
We will begin implementation of appointment wait time standards in PY 
2024. We are also finalizing the requirement for issuers to submit 
information about whether providers offer telehealth services. For 
plans with tiered networks, we are finalizing that, to count toward the 
issuer's satisfaction of the essential community provider (ECP) 
standards, providers must be contracted within the network tier that 
results in the lowest cost-sharing obligation. This rule finalizes that 
the ECP threshold will increase from 20 percent to 35 percent.
    We are finalizing the proposed amendments to the current HHS 
regulation that establishes standards for QHP issuer downstream and 
delegated entities. These changes will 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 solicited 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 finalize the 
proposal 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 proposed and are finalizing policies related to 
requirements that issuers of QHPs in FFEs and SBE-FPs offer 
standardized QHP options through the Exchange beginning in PY 2023.
    Finally, we solicited 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 and provide responses to the 
public comments received.

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

[[Page 27212]]

issuers in the group and individual markets. The term ``group health 
plan'' includes both insured and self-insured group health plans.\13\
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    \13\ 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''.
    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) of the ACA establishes 
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.\14\
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    \14\ 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 QHPs offered through Exchanges and (2) assist individuals in 
applying for PTC and CSRs for QHPs sold through an Exchange.
    Sections 1313 and 1321 of the ACA provide the Secretary with the 
authority to oversee the financial integrity of State Exchanges, their 
compliance with HHS standards, and the efficient and non-discriminatory 
administration of State Exchange activities. Section 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 \15\ 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

[[Page 27213]]

beyond those received by the general public.
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    \15\ Office of Management and Budget. (2004). Circular A-25 
Revised. https://www.whitehouse.gov/wp-content/uploads/2017/11/Circular-025.pdf.
---------------------------------------------------------------------------

    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.
    Section 1402 of the ACA provides for, among other things, 
reductions in cost sharing for EHB for qualified low- and moderate-
income enrollees in silver level QHPs offered through the individual 
market Exchanges. This section also provides for reductions in cost 
sharing for 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.\16\ 
In addition, HHS has previously finalized rules unrelated to section 
1557 of the ACA to address populations that have historically been 
subject to discrimination.
---------------------------------------------------------------------------

    \16\ 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.\17\ 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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    \17\ Public Law 115-97, 131 Stat. 2054 (2017).
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1. Premium Stabilization Programs
    The premium stabilization programs refer to the risk adjustment, 
risk corridors, and reinsurance programs established by the ACA.\18\ 
For past rulemaking, we refer readers to the following rules:
---------------------------------------------------------------------------

    \18\ See 42 U.S.C. 18061, 18062, and 18063.
---------------------------------------------------------------------------

     In the March 23, 2012 Federal Register (77 FR 17219) 
(Premium Stabilization Rule), we implemented the premium stabilization 
programs.
     In the March 11, 2013 Federal Register (78 FR 15409) (2014 
Payment Notice), we finalized 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.
     In the October 30, 2013 Federal Register (78 FR 65046), we 
finalized the modification to the HHS-operated methodology related to 
community rating States.
     In the November 6, 2013 Federal Register (78 FR 66653), we 
published a correcting amendment to the 2014 Payment Notice final rule 
to address how an enrollee's age for the risk score calculation would 
be determined under the HHS-operated risk adjustment methodology.
     In the March 11, 2014 Federal Register (79 FR 13743) (2015 
Payment Notice), we finalized the benefit and payment parameters for 
the 2015 benefit year to expand the provisions related to the premium 
stabilization programs, set forth certain oversight provisions and 
established payment parameters in those programs.
     In the May 27, 2014 Federal Register (79 FR 30240), we 
announced the 2015 fiscal year sequestration rate for the risk 
adjustment program.
     In the February 27, 2015 Federal Register (80 FR 10749) 
(2016 Payment Notice), we finalized the benefit and payment parameters 
for the 2016 benefit year to expand the provisions related to the 
premium stabilization programs, set forth certain oversight provisions, 
and established the payment parameters in those programs.
     In the March 8, 2016 Federal Register (81 FR 12203) (2017 
Payment Notice), we finalized the benefit and payment parameters for 
the 2017 benefit year to expand the provisions related to the premium 
stabilization programs, set forth certain oversight provisions and 
established the payment parameters in those programs.
     In the December 22, 2016 Federal Register (81 FR 94058) 
(2018 Payment Notice), we finalized the benefit and payment parameters 
for the 2018 benefit year, added the high-cost risk pool parameters to 
the HHS risk adjustment methodology, incorporated prescription drug 
factors in the adult models, established enrollment duration factors 
for the adult models, and finalized policies related to the collection 
and use of enrollee-level EDGE data.
     In the April 17, 2018 Federal Register (83 FR 16930) (2019 
Payment Notice), we finalized the benefit and payment parameters for 
2019 benefit year, created the State flexibility framework permitting 
States to request a reduction in risk adjustment State transfers 
calculated by HHS, and adopted a new methodology for HHS-RADV 
adjustments to transfers.
     In the May 11, 2018 Federal Register (83 FR 21925), we 
published a correction to the 2019 risk adjustment

[[Page 27214]]

coefficients in the 2019 Payment Notice final rule.
     On July 27, 2018, consistent with 45 CFR 153.320(b)(1)(i), 
we updated the 2019 benefit year final risk adjustment model 
coefficients to reflect an additional recalibration related to an 
update to the 2016 enrollee-level EDGE dataset.\19\
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    \19\ Updated 2019 Benefit Year Final HHS Risk Adjustment Model 
Coefficients. (2018, July 27). CMS. 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 
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). The final rule set forth an additional 
explanation of the rationale supporting the 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. The 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 
the publication of the final rule.\20\
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    \20\ Update on the HHS-operated Risk Adjustment Program for the 
2017 Benefit Year. (2018, July 27). https://www.cms.gov/CCIIO/Resources/Regulations-and-Guidance/Downloads/2017-RA-Final-Rule-Resumption-RAOps.pdf.
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     In the December 10, 2018 Federal Register (83 FR 63419), 
we adopted 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. In the rule, we set forth an additional 
explanation of the rationale supporting the 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 April 25, 2019 Federal Register (84 FR 17454) (2020 
Payment Notice), we finalized the benefit and payment parameters for 
2020 benefit year, as well as the policies related to making the 
enrollee-level EDGE data available as a limited data set for research 
purposes and expanding the HHS uses of the enrollee-level EDGE data, 
approval of the request from Alabama to reduce risk adjustment 
transfers by 50 percent in the small group market for the 2020 benefit 
year, and updates to HHS-RADV program requirements.
     On May 12, 2020, consistent with 153.320(b)(1)(i), we 
released 2021 Benefit Year Final HHS Risk Adjustment Model Coefficients 
to the CCIIO website.\21\
---------------------------------------------------------------------------

    \21\ Final 2021 Benefit Year Final HHS Risk Adjustment Model 
Coefficients. (2020, May 12). CMS. 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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     In the May 14, 2020 Federal Register (85 FR 29164) (2021 
Payment Notice), we finalized the benefit and payment parameters for 
2021 benefit year, as well as adopted updates to the risk adjustment 
models' HCCs to transition to ICD-10 codes, approved the request from 
Alabama to reduce risk adjustment transfers by 50 percent in small 
group market for the 2021 benefit year, and modified the outlier 
identification process under the HHS-RADV program.
     In the December 1, 2020 Federal Register (85 FR 76979) 
(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)), we adopted the 
creation and application of Super HCCs in the sorting step that assigns 
HCCs to failure rate groups, finalized a sliding scale adjustment in 
HHS-RADV error rate calculation, and added a constraint for negative 
error rate outliers with a negative error rate. We 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), 
we 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.
     In the May 5, 2021 Federal Register (86 FR 24140), we 
issued part 2 of the 2022 Payment Notice final rule containing policy 
and regulatory revisions related to the risk adjustment program, 
including finalization of the benefit and payment parameters for the 
2022 benefit year and 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. In addition, this 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.
     On July 19, 2021, consistent with Sec.  153.320(b)(1)(i), 
we released Updated 2022 Benefit Year Final HHS Risk Adjustment Model 
Coefficients on the CCIIO website, announcing some minor revisions to 
the 2022 benefit year final risk adjustment adult model 
coefficients.\22\
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    \22\ Updated 2022 Benefit Year Final HHS Risk Adjustment Model 
Coefficients. (2021, July 19). CMS https://www.cms.gov/files/document/updated-2022-benefit-year-final-hhs-risk-adjustment-model-coefficients-clean-version-508.pdf.
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2. Program Integrity
    We have finalized program integrity standards related to the 
Exchanges and premium stabilization programs 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). We 
also refer readers to the 2019 Patient Protection and Affordable Care 
Act; Exchange Program Integrity rule published in the December 27, 2019 
Federal Register (84 FR 71674).
3. Market Rules
    For past rulemaking related to the market rules, we refer readers 
to the following rules:
     In the April 8, 1997 Federal Register (62 FR 16894), HHS, 
with the Department of Labor and Department of the Treasury, published 
an interim final rule relating to the HIPAA health insurance reforms. 
In the February 27, 2013 Federal Register (78 FR 13406) (2014 Market 
Rules), we published the health insurance market rules.
     In the May 27, 2014 Federal Register (79 FR 30240) (2015 
Market Standards Rule), we published the Exchange and Insurance Market 
Standards for 2015 and Beyond.
     In the December 22, 2016 Federal Register (81 FR 94058), 
we provided additional guidance on guaranteed availability and 
guaranteed renewability.
     In the April 18, 2017 Federal Register (82 FR 18346) 
(Market Stabilization final rule), we further interpreted the 
guaranteed availability provision.
     In the in the April 17, 2018 Federal Register (83 FR 
17058) (2019 Payment Notice final rule), we clarified that certain 
exceptions to the special enrollment periods only apply to

[[Page 27215]]

coverage offered outside of the Exchange in the individual market.
     In the June 19, 2020 Federal Register (85 FR 37160) (2020 
section 1557 final rule), in which HHS discussed section 1557 of the 
ACA, HHS removed nondiscrimination protections based on 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 September 27, 2021 Federal Register (86 FR 53412) 
(part 3 of the 2022 Payment Notice final rule), which was published by 
HHS and the Department of the Treasury, we 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. In the March 27, 
2012 Federal Register (77 FR 18309) (Exchange Establishment Rule), we 
implemented components of the Exchanges and set forth standards for 
eligibility for Exchanges, as well as network adequacy and ECP 
certification standards.
    In the 2014 Payment Notice and 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.
    We published the final rule in the May 14, 2020 Federal Register 
(85 FR 29164) (2021 Payment Notice).
    In the January 19, 2021 Federal Register (86 FR 6138), we finalized 
part 1 of the 2022 Payment Notice final rule that finalized only a 
subset of the proposals in the 2022 Payment Notice proposed rule. In 
the May 5, 2021 Federal Register (86 FR 24140), we published (part 2 of 
the 2022 Payment Notice final rule). In the September 27, 2021 Federal 
Register (86 FR 53412) (part 3 of the 2022 Payment Notice final rule), 
in conjunction with the Department of the Treasury, we finalized 
amendments to certain policies in part 1 of the 2022 Payment Notice 
final rule.
    In the January 5, 2022 Federal Register (87 FR 584), we published a 
proposed rule that outlined proposals to maintain the user fee rate for 
issuers offering plans through the FFEs and maintain the user fee rate 
for issuers offering plans through the SBE-FPs. We also proposed 
various policies to address certain agent, broker, and web broker 
practices and conduct. We also proposed updates to the requirement that 
all Exchanges conduct special enrollment period verifications.
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.\23\ 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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    \23\ Essential Health Benefits Bulletin. (2011, December 16). 
CMS. 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), an interim final rule that was published in the 
September 2, 2020 Federal Register (85 FR 54820), and the May 5, 2021 
Federal Register (86 FR 24140).
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 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 regulations at Sec.  156.1130 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 1302 of the ACA provides for the establishment of an EHB 
package that includes coverage of EHB and AV requirements. In the 
February 25, 2013 Federal Register (78 FR 12834), HHS published the 
``Patient Protection and Affordable Care Act; Standards Related to 
Essential Health Benefits, Actuarial

[[Page 27216]]

Value, and Accreditation'' final rule, which included nondiscrimination 
protections.
    In the 2020 section 1557 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 consulted with stakeholders on policies related to the PHS Act 
and ACA Federal market reform requirements, including the operation of 
Exchanges and the risk adjustment program (including HHS-RADV). For 
example, related to risk adjustment, HHS released the 2021 HHS-Operated 
Risk Adjustment Technical Paper on Possible Model Changes \24\ and the 
HHS-Operated Risk Adjustment Technical Paper on Possible Model Changes: 
Summary Results for Transfer Simulations.\25\ We also held a number of 
meetings with consumers, providers, employers, health plans, advocacy 
groups, and the actuarial community to gather public input. We 
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 and written comments we received in response to the 
proposed rulemaking as we developed the policies in this final rule.
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    \24\ HHS-Operated Risk Adjustment Technical Paper on Possible 
Model Changes. (2021, October 26). CMS. https://www.cms.gov/files/document/2021-ra-technical-paper.pdf.
    \25\ HHS-Operated Risk Adjustment Technical Paper on Possible 
Model Changes: Summary Results for Transfer Simulations. (2021, 
December 28). CMS. https://www.cms.gov/files/document/report-summary-results-transfer-simulations.pdf.
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C. Structure of Final Rule

    The regulations outlined in this final rule will be codified in 45 
CFR parts 144, 147, 153, 155, 156, and 158.
    The changes to 45 CFR part 144 will remove superfluous language 
from the definition of a large group market.
    The changes to 45 CFR part 147 will ensure that issuers cannot 
refuse to effectuate new coverage based on the failure of an individual 
or employer to pay premiums owed for prior coverage.
    The policies relating to 45 CFR part 153 involve recalibration of 
the 2023 benefit year risk adjustment models using the 2017, 2018, and 
2019 enrollee-level EDGE data. We also finalize updates to the adult 
and child risk adjustment models for 2023 and beyond to better predict 
plan liability for certain subpopulations. Specifically, beginning with 
the 2023 benefit year, we will 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 
will add an interacted HCC count model specification for 2023 and 
beyond to the adult and child models. We are not finalizing the 
proposal to add a two-stage weighted approach to model recalibrations.
    We are finalizing 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 
are finalizing 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.\26\ For the 2024 benefit year and 
beyond, we will 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 are 
finalizing 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 will use the most recent RXC mapping document 
that was available when we first processed the 2017 enrollee-level EDGE 
data (that is, Q2 2018).
---------------------------------------------------------------------------

    \26\ The same concern was not present for the 2017 enrollee-
level EDGE data because hydroxychloroquine sulfate was not included 
in the RXC crosswalk until 2018.
---------------------------------------------------------------------------

    We are finalizing the proposal to collect and extract five new data 
elements as part of the enrollee-level EDGE data. Beginning with the 
2023 benefit year, issuers will be required to populate the ZIP Code 
and subsidy indicator fields as part of their EDGE data submissions. 
Issuers will also be required to populate the race, ethnicity, and 
Individual Coverage Health Reimbursement Arrangement (ICHRA) indicator 
fields. For the 2023 and 2024 benefit years, we are adopting a 
transitional period for the race, ethnicity, and ICHRA indicator fields 
during which time issuers will be required to populate these fields 
using available data sources. Then, beginning with the 2025 benefit 
year, issuers that do not have an existing source to populate these 
fields for particular enrollees will also be required to make a good 
faith effort to collect and submit race, ethnicity, and ICHRA indicator 
data elements for these enrollees. We are also finalizing the proposal 
to extract three data elements--plan ID, rating area, and subscriber 
indicator--issuers already report to their EDGE servers as part of the 
required risk adjustment data. We are finalizing the extraction of plan 
ID and rating area beginning with the 2021 benefit year, and subscriber 
indicator will be extracted beginning with the 2022 benefit year. 
Additionally, we finalize the proposal to amend 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.
    In part 153, we are finalizing policies related to risk adjustment 
State flexibility requests. We are finalizing the repeal of the ability 
of States to request a reduction in risk adjustment State transfers 
starting with the 2024 benefit year, with an exception for prior 
participants. We further limit a prior participant's ability to request 
a reduction in risk adjustment transfers starting with the 2024 benefit 
year to only those that meet the de minimis threshold criteria. In 
future rulemaking, HHS intends to propose to eliminate the prior 
participant exception starting with the 2025 benefit year. For the 2023 
benefit year, we approve Alabama's requests to reduce risk adjustment 
State transfers, but at lower percentages, than the State requested. We 
approve for the 2023 benefit year a 25 percent reduction in Alabama's 
individual market (including the catastrophic and non-

[[Page 27217]]

catastrophic risk pools) transfers and a 10 percent reduction in 
Alabama's small group market transfers.
    In part 153, we also finalize the risk adjustment user fee for the 
2023 benefit year at $0.22 PMPM. We also finalize the proposed update 
to 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. We further specify that Super HCCs will be defined 
separately according to the model (infant, child, adult) to which an 
enrollee is subject, except for where child and adult coefficient 
estimation groups have identical definitions. We also finalize the 
proposal 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. These refinements to the HHS-RADV error rate 
methodology and processes will apply beginning with the 2021 benefit 
year. Finally, we adopt the policy 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, we are finalizing the part 153 proposals related to 
MLR reporting requirements and how issuers should report certain ACA 
program amounts that could be subject to reconsideration. More 
specifically, we add references to HHS-RADV adjustments to Sec.  
153.710(h) 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.
    We finalize changes to 45 CFR part 155 to 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. We are codifying the 
proposed APTC proration methodology as the methodology Exchanges on the 
Federal platform will continue to use, but we are not finalizing the 
requirement for State Exchanges to prorate premium or APTC amounts 
using the methodology described in the proposed rule. Rather, we are 
finalizing that beginning in PY 2024, State Exchanges will be required 
to report to HHS their methodology that ensures the amount of APTC 
applied to an enrollee's monthly premium does not exceed their total 
monthly APTC.
    We are also finalizing 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 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. After 
consideration and review of the comments, we will not finalize Sec.  
155.220(j)(2)(ii)(A)(1), which would prohibit agents from entering 
consumer email addresses with domains that remove email from an inbox 
after a set period of time. We encourage agents, brokers, and web-
broker entities to remain aware of, and avoid using, such temporary 
email accounts when assisting consumers in obtaining coverage as a best 
practice and will likely issue future guidance on the matter. 
Otherwise, we are generally finalizing the changes to the remainder of 
Sec.  155.220(j)(2)(ii) to clarify the FFE standards of conduct for 
agents, brokers, and web-brokers, and what it means to provide the 
Exchange with correct information under section 1411(b) of the ACA. We 
also finalize the changes to Sec.  155.220(j)(2)(vi) through (viii) to 
expand the FFE standards of conduct and codify more detail about 
specific business practices that are prohibited.
    In 45 CFR part 156, we are finalizing the user fee rates for the 
2023 benefit year for all issuers participating on Exchanges that use 
the Federal platform. We also finalize technical amendments to Sec.  
156.50 to conform with the repeal of the Exchange Direct Enrollment 
(DE) option finalized in part 3 of the 2022 Payment Notice (86 FR 53412 
at 53424 through 53429 and 53445). Also, we finalize 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 an appropriation to 
make CSR payments and voluntary for other issuers.
    In part 156, we are also finalizing a refinement to the EHB 
nondiscrimination policy to provide that a nondiscriminatory health 
plan design that provides EHB is one that is clinically based; a 
permanent annual deadline in early May for EHB-benchmark plan 
applications by States, a repeal of States' ability to permit issuers 
to substitute benefits between EHB categories; changes to the 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 a repeal of the annual 
requirement for States to report to HHS State-required benefits in 
addition to the EHB.
    In part 156, we are also finalizing a requirement that issuers of 
QHPs in FFEs and SBE-FPs offer through the Exchange standardized QHP 
options beginning in PY 2023. We are also finalizing an update to the 
QIS standards to require QHP issuers to address health and health care 
disparities as a specific topic area within their QIS beginning in 
2023.
    The changes to 45 CFR part 158 codify 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 changes to part 
158 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, we finalize 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,\27\ and thus deleted in part 2 of the 2022 Payment Notice 
final rule.
---------------------------------------------------------------------------

    \27\ City of Columbus, et al. v. Cochran, 523 F. Supp. 3d 731 
(D. Md. 2021).
---------------------------------------------------------------------------

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

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

1. Definitions (Sec.  144.103)
    In the HHS Notice of Benefit and Payment Parameters for 2023 
proposed rule (87 FR 584, 594), we proposed to remove the phrase 
``unless otherwise provided under State law'' from the definition of 
large group market at Sec.  144.103. As discussed in the proposed rule, 
the phrase has no meaning or application and does not appear in the

[[Page 27218]]

statutory definition of large group market 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.\28\ However, in the 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 section 
2791(e) of the PHS Act, 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 proposed to do so in the proposed rule, to align 
these definitions and make the regulatory definition for large group 
market consistent with the definition under the ACA.
---------------------------------------------------------------------------

    \28\ 62 FR 16894 and 69 FR 78720.
---------------------------------------------------------------------------

    We sought comment on this proposal.
    After reviewing public comments, we are finalizing this provision 
as proposed. The removal of the phrase ``unless otherwise provided 
under State law,'' will add clarity to the regulatory definition of 
``large group market,'' and align with the current definition under 
section 2791(e) of the PHS Act.
    We summarize and respond to public comments received on the 
definition of large group market below.
    Comment: We received two comments related to the definition of a 
large group market. One commenter did not see any adverse consequences 
to the revision. Another expressed concern that State law definitions 
of ``large group'' would be adversely affected by the change in Federal 
law because each State passes laws tailored to the market in their 
respective State.
    Response: As discussed in the proposed rule, we proposed this 
change to align the regulation with the underlying statutory definition 
of ``large group market,'' which does not include the phrase ``unless 
otherwise provided under State law.'' In addition, removing this 
language will not affect State law definitions of large group market to 
the extent that they do not prevent the application of Federal law.

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
    In the HHS Notice of Benefit and Payment Parameters for 2023 
proposed rule (87 FR 584, 594 through 595), we proposed 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 when the 
individual or employer owes past-due premiums for coverage from the 
same issuer or another issuer in the same controlled group. Under the 
current interpretation of the guaranteed availability requirement, to 
the extent permitted by applicable State law, an issuer does not 
violate the guaranteed availability requirements under Sec.  147.104 
when 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.\29\
---------------------------------------------------------------------------

    \29\ 82 FR 18346, 18349 through 18353.
---------------------------------------------------------------------------

    On January 28, 2021, President Biden issued Executive Order 14009, 
``Strengthening Medicaid and the Affordable Care Act'' (E.O. 
14009).\30\ 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. On April 5, 2022, 
President Biden issued Executive Order 14070, ``Continuing to 
Strengthen Americans' Access to Affordable, Quality Health Coverage'' 
(E.O. 14070).\31\ Section 2 of E.O. 14070 directs agencies with 
responsibilities related to Americans' access to health coverage, in 
addition to taking the actions directed pursuant to E.O. 14009, to 
review agency actions to identify ways to continue to expand the 
availability of affordable health coverage, to improve the quality of 
coverage, to strengthen benefits, and to help more Americans enroll in 
quality health coverage. Consistent with section 3(iv) of E.O. 14009 
and section 2(a) of E.O. 14070, the re-interpretation of the guaranteed 
availability requirement is intended to remove an unnecessary barrier 
and make it easier for consumers to enroll in coverage.
---------------------------------------------------------------------------

    \30\ Executive Order 14009 on Strengthening Medicaid and the 
Affordable Care Act. (2021, February 2). See 86 FR 7793.
    \31\ Executive Order 14070 on Continuing to Strengthen 
Americans' Access to Affordable, Quality Health Coverage, April 5, 
2022; see 87 FR 20689.
---------------------------------------------------------------------------

    In the proposed rule (87 FR 594), we proposed to re-designate 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). Based 
on our experience, we believe that the currently effective 
interpretation of guaranteed availability has the unintended 
consequence of creating barriers to health coverage that 
disproportionately affect low-income individuals.
    After reviewing the public comments, we are finalizing this 
provision as proposed. We summarize and respond to public comments 
received on the proposed re-interpretation of guaranteed availability 
requirements for the group and individual health insurance markets 
below.
    Comment: Many commenters supported the proposal, stating that the 
current interpretation of the guaranteed availability requirement is 
inconsistent with the ACA and creates barriers to accessing health care 
that disproportionately harm persons with low incomes and those 
experiencing economic hardship. Other commenters in favor of the 
proposal stated that the current interpretation of the guaranteed 
availability requirement is a barrier to enrollment that 
disproportionately impacts people of color, especially women of color, 
persons with disabilities, lesbian, gay, bisexual, transgender, queer, 
and intersex (LGBTQI+) people, and immigrants.
    Some commenters stated that non-payment of past-due premiums is 
typically not an intentional decision to avoid financial 
responsibility, and may be the result of a mistake or catastrophic 
events such as financial hardship, environmental disaster, 
hospitalization, or lack of awareness of past-due premium debt. Some 
commenters expressed concern that the current interpretation of the 
guaranteed availability requirement permits issuers to adopt punitive 
measures against consumers who, without malice, are unable to satisfy 
past-due premium debt.
    Some commenters stated that the current interpretation of the 
guaranteed availability requirement compounds barriers to enrollment by 
requiring consumers with past-due premium debt

[[Page 27219]]

to pay multiple months of premiums on top of a binder payment in order 
to effectuate coverage. A commenter noted that there is no evidence 
that individuals are attempting to ``game the system'' by enrolling in 
coverage and paying premiums only when care is needed. Other commenters 
stated that the current interpretation poses a steep barrier to 
enrollment for consumers responding to catastrophic life events, 
particularly given that the amount of past-due premiums owed to payors 
is nominal compared to issuer profits.
    Other commenters opposed the proposed policy and stated that more 
research is necessary to determine why individuals and employers fail 
to pay past-due premiums and questioned whether other coverage options 
could be made more accessible.
    Response: We believe finalizing the proposed re-interpretation of 
the guaranteed availability requirement will alleviate a barrier to 
enrollment for individuals struggling to access health coverage, which 
disproportionately affects historically marginalized populations and 
individuals facing financial hardship. The current interpretation of 
this policy disincentivizes enrollment by conditioning coverage on the 
repayment of the past-due premium debt, which may deter individuals who 
have accrued past-due premium debt from seeking coverage altogether. 
Conversely, permitting individuals to enroll in coverage, regardless of 
past-due premium debt, will help ensure continuous access to health 
care, especially for individuals facing dire economic circumstances. We 
agree with commenters that enrollees fail to pay premiums for numerous, 
valid reasons that have nothing to do with exploiting grace periods or 
special enrollment periods to avoid paying for health coverage. 
Additionally, many consumers and small businesses face financial 
challenges. As such, we believe it is prudent to remove barriers to 
accessing health coverage to ease the enrollment process.
    While the exact cause of premium non-payment and past-due premium 
accrual may not be clear in all cases, we are of the view that this 
should not be a reason to deny individuals coverage. We agree with 
commenters suggesting that more research is needed to determine why 
individuals and employers fail to pay past-due premiums, and believe 
that such research could inform future policies to better support 
consumers in staying enrolled in coverage.\32\
---------------------------------------------------------------------------

    \32\ Cunningham, P.J., Green, T.L., & Braun, R.T. (2018, 
February 26). Income Disparities in the Prevalence, Severity, and 
Costs of Co-Occurring Chronic and Behavioral Health Conditions. 
Medical Care.
---------------------------------------------------------------------------

    Comment: Some commenters recommended limiting the re-interpretation 
of the guaranteed availability requirement to the individual market and 
not making it applicable to the group market. One commenter stated that 
the proposed change could have significant impacts on issuer management 
of enrollment and billing for group market accounts.
    Response: Under section 2702 of the PHS Act and Sec.  147.104, the 
guaranteed availability requirement applies to both the individual and 
group markets. We believe the same principles underlying this policy 
should apply equally to both markets, and therefore, decline to adopt 
this recommendation.
    Comment: Commenters stated that this proposal restricts issuers' 
ability to collect past-due premiums or requires them to forgive such 
debt. Some commenters expressed concern that finalizing the proposal 
will remove a disincentive that guards against enrollees ceasing to pay 
premiums during the last 3 months of the plan year, and will leave 
issuers without adequate redress when faced with non-payment. Some 
commenters stated that permitting individuals with past-due premium 
debt to enroll in coverage before repaying past-due premiums will 
ultimately result in fewer choices and higher premiums, harming 
consumers with low incomes. One commenter requested that HHS specify 
other options for issuers besides collections.
    In contrast, another commenter noted that issuers have largely 
chosen not to use the flexibility provided under the current 
interpretation of the guaranteed availability requirement because the 
implementation of a policy that attributes payments made for new 
coverage to past-due premiums before effectuating new enrollment would 
cost more than the past-due premiums the issuer would recoup through 
such a policy. Other commenters agreed that issuers have other tools 
for recouping unpaid premiums. Some commenters suggested that issuers 
should be prohibited from acting to collect past-due premiums.
    Response: We disagree that this proposal restricts issuers from 
collecting past-due premiums. Issuers are generally not permitted to 
forgive the past-due premium debt and have alternative methods to 
collect past-due premiums (such as pursuing debt collection). We 
believe this mitigates the risk that some enrollees may take advantage 
of the guaranteed availability rules. We also believe that the low 
adoption among issuers of policies that rely on the current 
interpretation of guaranteed availability demonstrates that there are 
sufficient avenues for issuers to collect past-due premium debt without 
having to condition enrollment into new coverage on the payment of 
past-due premium debt. However, we acknowledge that issuers that 
implemented a policy of attributing payment made for new coverage to 
past-due premiums before effectuating enrollment will need to make 
operational changes as a result of this re-interpretation of the 
guaranteed availability requirement. Finally, in response to the 
commenter's suggestion that issuers should be prohibited from acting to 
collect on debt for past-due premiums, we reiterate that an issuer's 
forgiveness of premium debt is generally not permissible under our 
rules.
b. Nondiscrimination Based on Sexual Orientation and Gender Identity
    In the HHS Notice of Benefit and Payment Parameters for 2023 
proposed rule (87 FR 584, 595 through 597), we proposed to amend 45 CFR 
147.104(e) to explicitly prohibit discrimination based on sexual 
orientation and gender identity. As we explain in the Supplemental 
Information section earlier in the preamble, HHS will address this 
policy, as well as the public comments submitted in response to this 
proposal, in a future rulemaking.

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. 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.\33\ 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.
---------------------------------------------------------------------------

    \33\ See also 42 U.S.C. 18041(c)(1).
---------------------------------------------------------------------------

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

[[Page 27220]]

sequestration.\34\ 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).
---------------------------------------------------------------------------

    \34\ OMB Report to the Congress on the BBEDCA 251A Sequestration 
for Fiscal Year 2022. (2021, May 28). White House. https://www.whitehouse.gov/wp-content/uploads/2021/05/BBEDCA_251A_Sequestration_Report_FY2022.pdf.
---------------------------------------------------------------------------

    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 amended, and the 
underlying authority for the risk adjustment program, the funds that 
are sequestered in the fiscal year 2022 from the risk adjustment 
program will become available for payment to issuers in the 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 the fiscal year 
2030 at a rate of 5.7 percent per fiscal year.\35\
---------------------------------------------------------------------------

    \35\ CARES Act, S.3548. (2020).
---------------------------------------------------------------------------

    We received no comments on the FY2022 sequestration rate for risk 
adjustment.
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 diagnosis is 
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.\36\ 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 or PLRS) 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.
---------------------------------------------------------------------------

    \36\ 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.
---------------------------------------------------------------------------

a. Data for Risk Adjustment Model Recalibration for 2023 Benefit Year 
and Beyond
    In the HHS Notice of Benefit and Payment Parameters for 2023 
proposed rule (87 FR 584, 598), we proposed to recalibrate the 2023 
benefit year risk adjustment models with 2017, 2018, and 2019 enrollee-
level EDGE data. We sought comment on this proposal.
    In the proposed rule, we also sought 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 the 
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 years models.\37\ Although HHS has not analyzed the 2020 
enrollee-level EDGE data yet, we solicited comment on the future use of 
the 2020 enrollee-level EDGE data for the annual recalibration of the 
HHS risk adjustment models.
---------------------------------------------------------------------------

    \37\ 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.
---------------------------------------------------------------------------

    After reviewing the public comments, we are finalizing, as 
proposed, the use of the 2017, 2018, and 2019 enrollee-level EDGE data 
to recalibrate the 2023 benefit year risk adjustment models. We were 
unable to finalize coefficients in time to publish them in this final 
rule. Therefore, consistent with Sec.  153.320(b)(1)(i), we will 
publish the final coefficients for the 2023 benefit year in guidance 
soon after the publication of this final rule.
    Additionally, we appreciate comments on the future use of the 2020 
enrollee-level EDGE data due to the COVID-19 PHE. We continue to 
consider how to handle 2020 enrollee-level EDGE data for recalibration 
of the 2024, 2025, and 2026 benefit year models and will work with 
stakeholders as we analyze the data. Changes to the established 
policies for recalibration of the risk adjustment models, including 
proposals related to the use of 2020 enrollee-level EDGE data for such 
purposes, would be pursued through notice-and-comment rulemaking.
    We summarize and respond to public comments received on data for 
risk adjustment model recalibration for the 2023 benefit year and 
beyond below.
    Comment: Many commenters supported the use of the 2017, 2018, and 
2019 enrollee-level EDGE data to recalibrate the 2023 risk adjustment 
models. One commenter noted that the 2017, 2018, and 2019 enrollee-
level EDGE data reflect the most recently available health outcomes and 
recent treatment patterns in the enrollee population. Another commenter 
supported using the most recent 3 years of EDGE data available in time 
for publication of the draft coefficients in the proposed rule in order 
to give the industry the earliest opportunity to model premium rates 
for the next benefit year.
    Response: We are finalizing the use of the 2017, 2018, and 2019 
enrollee-level EDGE data to recalibrate the 2023 risk adjustment models 
as proposed. The 2017, 2018, and 2019 enrollee-level EDGE data were the 
3 most recent consecutive years of enrollee-level EDGE data that were 
available at the time we incorporated the data in the draft 
recalibrated coefficients published in the proposed rule. As discussed 
in the 2022 Payment Notice, the purpose of using the 3 most recent 
consecutive years of enrollee-level EDGE data that were available at 
the time we incorporated the data in the draft recalibrated 
coefficients published in the proposed rule was to respond to 
stakeholders' request to provide the draft coefficients in the proposed 
rule (86 FR 24152). We believe that this approach promotes stability 
and avoids the delays in publication of the coefficients while 
continuing to develop blended, or averaged, coefficients from the 3 
years of separately solved models for model recalibration.
    Comment: We received several comments on the use of 2020 enrollee-
level EDGE data for recalibration of the

[[Page 27221]]

2024, 2025, and 2026 benefit years. Some of these commenters supported 
the inclusion of 2020 enrollee-level EDGE data in these future benefit 
year model recalibrations, stating that 2020 data would accurately 
reflect utilization patterns that can be expected in 2021 and beyond 
and that the inclusion of 3 years of enrollee-level EDGE data in 
recalibration would dampen the impact of 2020 data. Another commenter 
noted that failure to include 2020 data would result in an outdated 
picture of medical spending.
    One commenter opposed the inclusion of 2020 enrollee-level EDGE 
data in model recalibration altogether. Another commenter noted that 
not relying on 2020 experience to develop risk adjustment coefficients 
is consistent with industry practice, asserting that the majority of 
Medicare Advantage and ACA issuers used 2019 data in lieu of 2020 data 
for 2022 pricing.
    Several commenters requested HHS develop a technical paper on using 
2020 enrollee-level EDGE data in future model recalibrations, with 
several commenters suggesting that HHS do a comparison of coefficients 
with and without the 2020 enrollee-level EDGE data to review relative 
changes in coefficients, and evaluate changes for clinical 
reasonability and consistency with 2018 and 2019 enrollee-level EDGE 
data. One commenter requested that HHS release 2020-related statistics 
and solicit further comment on how to best proceed with 2020 data, 
including whether to instead use 2017, 2018, and 2019 EGDE data for the 
2024 benefit year recalibration of the HHS risk adjustment models.
    One commenter recommended either assigning 2020 enrollee-level EDGE 
data lower weight if used to recalibrate the models in the 2024, 2025, 
and 2026 benefit years, or using four years of enrollee-level EDGE data 
in the annual model recalibration until 2020 data is no longer included 
in recalibration. Another commenter recommended that HHS evaluate if it 
would be better to use 1 or 2 years of data for recalibration of the 
models in the 2024, 2025, and 2026 benefit years on a transitional 
basis until only post-2020 data would be used.
    Response: We appreciate comments on the future use of the 2020 
enrollee-level EDGE data for risk adjustment model recalibration and 
will consider this feedback as we analyze the 2020 enrollee-level EDGE 
data and consider options for its use for recalibration of the risk 
adjustment models.
b. Risk Adjustment Model Updates
    In the proposed rule (87 FR 598 through 605), we proposed three 
modeling updates to the risk adjustment models beginning with the 2023 
benefit year. Consistent with the potential model updates discussed in 
the 2021 RA Technical Paper, we proposed the following model updates, 
which are the same as those proposed but not finalized in the 2022 
Payment Notice:\38\ (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 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.
---------------------------------------------------------------------------

    \38\ In the 2022 Payment Notice Proposed Rule, we proposed three 
model specification changes, see 85 FR 78572 at 78583 through 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 through 24162. See also HHS-Operated Risk Adjustment 
Technical Paper on Possible Model Changes. (2021, October 26). CMS. 
https://www.cms.gov/files/document/2021-ra-technical-paper.pdf and 
HHS-Operated Risk Adjustment Technical Paper on Possible Model 
Changes: Summary Results for Transfer Simulations. (2021, December 
28). CMS. https://www.cms.gov/files/document/2021-ra-technical-paper.pdf.
---------------------------------------------------------------------------

    After a review of public comments, we are finalizing two of the 
three proposed model specification updates. We are not finalizing the 
proposed addition of a two-stage weighted model specification to the 
adult and child models. We are finalizing, as proposed, removing the 
current severity illness factors in the adult models and replacing them 
with new severity and transplant indicators that interacted with HCC 
count factors in the adult and child models. We are also finalizing, as 
proposed, replacing the current enrollment duration factors in the 
adult models with HCC-contingent enrollment duration factors in the 
adult models. In the following sections, we describe the proposed model 
specification changes, as well as summarize and respond to the comments 
received on each of these proposals.
i. Two-Stage Weighted Model Specification
    We proposed 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 \39\). For a full description of the 
proposed two-stage weighted model specification see the proposed rule 
(87 FR 599 through 601). We sought comment on the two-stage weighted 
model specification proposal.
---------------------------------------------------------------------------

    \39\ When we refer to the enrollees without HCCs, we are 
referring to enrollees without payment HCCs.
---------------------------------------------------------------------------

    After reviewing the public comments, we are not finalizing the 
adoption of the two-stage weighted model specification.
    We summarize and respond to public comments received on the 
proposed two-stage model specification below.
    Comment: Several commenters supported the implementation of the 
proposed two-stage weighted model specification. Some of these 
commenters generally supported all of the proposed model specification 
changes, while others specifically noted that the proposed two-stage 
model improved prediction for the lowest-risk enrollees.
    Conversely, several other commenters opposed the implementation of 
the proposed two-stage weighted model specification. Several commenters 
were concerned that the proposed two-stage weighted model specification 
would have anti-competitive effects, leading to fewer choices for 
consumers. These commenters stated that the two-stage weighted model 
specification would increase premiums on more generous health insurance 
coverage, incentivize issuers to adopt narrow networks and lower-
quality plans, encourage issuers to avoid enrolling consumers with 
chronic illnesses, and contribute to the creation and use of 
discriminatory benefit designs.
    Other commenters did not support a model change that improved risk 
predictions for certain subpopulations at the expense of the risk 
adjustment program's ability to mitigate adverse selection for high-
cost enrollees. Some commenters stated that the proposed two-stage 
weighted model specification ignores current market dynamics in which 
plans are already incentivized to attract the healthiest enrollees. 
Additionally, some commenters recommended additional analysis of the 
two-stage weighted model specification, specifically geographic and 
market-specific considerations, before its adoption. One commenter 
suggested that if HHS finalizes the two-stage weighted model 
specification, HHS should pilot or phase-in the implementation based on 
an analysis of localized market conditions.
    Response: After consideration of the comments on this proposal, we 
are not finalizing the proposed two-stage

[[Page 27222]]

weighted model specification. We pursued the proposed model 
specification updates to improve the prediction of certain 
subpopulations in response to feedback from stakeholders and internal 
analysis where we had observed underprediction in the current models. 
As we previously reported in the 2018 Payment Notice, our initial 
analysis found that, based on the commercial MarketScan[supreg] data, 
the HHS risk adjustment models slightly underpredicted risk for the 
lowest-risk enrollees (81 FR 61472 through 61473 and 81 FR 94082 
through 94083). Our subsequent analysis of enrollee-level EDGE data 
confirmed this preliminary finding.\40\ In addition, stakeholders have 
consistently encouraged HHS to adjust the models to address this 
underprediction of risk, which affects the PLRSs of plans that enroll 
more healthy individuals. HHS has therefore been examining these 
issues, considering different options, and soliciting comments on ways 
to modify the risk adjustment models to improve prediction for certain 
subpopulations, including the lowest-risk enrollees, over several years 
(81 FR 61473 and 85 FR 7101 through 7104). Throughout this process, we 
consistently emphasized the need to carefully evaluate the impact on 
and consider the trade-offs that would need to be made in model 
predictive power among subgroups of enrollees.
---------------------------------------------------------------------------

    \40\ Section 2. HHS-Operated Risk Adjustment Technical Paper on 
Possible Model Changes. (2021, October 26). CMS. https://www.cms.gov/files/document/2021-ra-technical-paper.pdf.
---------------------------------------------------------------------------

    The proposed two-stage weighted model specification was targeted at 
improving model prediction for lowest-risk enrollees. As previously 
explained, we believed that by addressing the underprediction of costs 
associated with lowest-risk enrollees in the adult and child models, we 
could encourage the offering and retention of plans that enroll a 
higher proportion of this subpopulation of enrollees.\41\ We also 
recognized that issuers offering these types of plans were at greater 
risk of exiting the market if transfers calculated under the State 
payment transfer formula under-compensated for the true plan liability 
of the lowest-risk enrollees. These concerns, along with stakeholder 
comments on these issues, prompted the design of the two-stage weighted 
model specification two years ago. However, we acknowledged that there 
are trade-offs associated with the adoption of the proposed two-stage 
weighted model, including that while it would improve prediction for 
the lowest-risk enrollees it would worsen model prediction along other 
dimensions, such as reduced R-squared values, less accurate prediction 
of plan liability by age-sex factor (especially for younger and older 
women), as well as a less accurate prediction of costs for certain 
HCCs.\42\ Additionally, since developing the proposed two-stage 
weighted model specification, there have been key shifts in the 
individual market, including increased enrollment and increased 
availability of subsidies,\43\ that have made the market more 
attractive to issuers. However, these market shifts have also shown the 
pressing need to update the adult model enrollment duration factors, 
which we are also finalizing as part of this rule.
---------------------------------------------------------------------------

    \41\ Section 2.1. HHS-Operated Risk Adjustment Technical Paper 
on Possible Model Changes. (2021, October 26). CMS. https://www.cms.gov/files/document/2021-ra-technical-paper.pdf.
    \42\ Section 2.3. HHS-Operated Risk Adjustment Technical Paper 
on Possible Model Changes. (2021, October 26). CMS. https://www.cms.gov/files/document/2021-ra-technical-paper.pdf. See also 87 
FR 600 through 601.
    \43\ Biden-Harris Administration Announces 14.5 Million 
Americans Signed Up for Affordable Health Care During Historic Open 
Enrollment Period. (2022, January 27). CMS. https://www.hhs.gov/
about/news/2022/01/27/biden-harris-administration-announces-14-5-
million-americans-signed-affordable-health-care-during-historic-
open-enrollment-
period.html#:~:text=Today%2C%20the%20Biden%2DHarris%20Administration,
people%20who%20have%20newly%20gained.
---------------------------------------------------------------------------

    While the interacted HCC count model specification and the 
enrollment duration factor updates finalized in this rule do not 
improve predictive accuracy for the lowest-risk enrollees as much as 
they would have if they were combined with the proposed two-stage 
weighted model specification, we believe the finalized model 
specifications will still make significant gains in improved predictive 
accuracy for our target subpopulations, including the lowest-risk 
enrollees, highest-risk enrollees, and partial-year enrollees.\44\ As 
demonstrated in Chapter 4 of the 2021 RA Technical Paper, our analysis 
found the proposed interacted HCC counts model specification and the 
proposed HCC-contingent enrollment duration factors improved prediction 
for the lowest-risk enrollees, compared with the current adult models, 
even without accounting for the proposed two-stage weighted model 
specification.\45\ Using 2018 enrollee-level EDGE data, the proposed 
interacted HCC counts model specification combined with the proposed 
HCC-contingent enrollment duration factors improves the PR for adult 
silver-plan enrollees in risk decile 1 from 0.52 to 0.81.\46\ This 
approach of incremental improvements in predictive accuracy aligns with 
our commitment to continuously analyze and refine the risk adjustment 
models. After consideration of comments and further evaluation of the 
trade-offs, we are finalizing the interacted HCC count model 
specification and enrollment duration factor updates but are not 
finalizing the proposed two-stage weighted model specification.
---------------------------------------------------------------------------

    \44\ Figures 4.2, 4.3, and 4.4. HHS-Operated Risk Adjustment 
Technical Paper on Possible Model Changes. (2021, October 26). CMS. 
https://www.cms.gov/files/document/2021-ra-technical-paper.pdf.
    \45\ Ibid.
    \46\ Section 4. HHS-Operated Risk Adjustment Technical Paper on 
Possible Model Changes. (2021, October 26). CMS. https://www.cms.gov/files/document/2021-ra-technical-paper.pdf.
---------------------------------------------------------------------------

    Since we are not finalizing the proposed two-stage weighted model 
specification, we do not intend to pursue or otherwise consider pilot 
or phase-in implementation strategies. Similarly, we do not intend to 
engage in additional analysis of alternative implementations of the 
two-stage weighted model specification, including but not limited to an 
analysis of implementation by geographic or market-specific conditions, 
at this time.
    Comment: One commenter that supported the proposed two-stage 
weighted model specification also encouraged HHS to recalibrate the 
State payment transfer formula to further ensure that plans do not face 
excessive risk adjustment charges when enrolling a high proportion of 
young and healthy enrollees. Another commenter supported the 
finalization of the two-stage weighted model specification, but noted 
that it is unclear to what extent these model changes address 
situations in which risk adjustment charges for some issuers exceed the 
premium collected for some lower-risk enrollees.
    Response: We did not propose and are not finalizing changes to the 
State payment transfer formula. However, we intend to continue analysis 
of the risk adjustment State payment transfer formula to consider 
whether changes are needed to it. For example, in Appendix A of the 
2021 RA Technical Paper, we discussed options to potentially update the 
risk adjustment State payment transfer formula to improve prediction 
for CSR enrollees' plan liability. More specifically, we identified 
several potential options to update the risk term and one option to 
update the rating term to more precisely account for CSR plan liability 
in the State payment transfer formula.\47\ We familiarized stakeholders 
with these options and accepted public comments on the considerations 
in the 2021 RA Technical Paper. We continue

[[Page 27223]]

to conduct analyses of these options and will propose any changes in 
future notice-and-comment rulemaking.
---------------------------------------------------------------------------

    \47\ Appendix A. HHS-Operated Risk Adjustment Technical Paper on 
Possible Model Changes. (2021, October 26). CMS. https://www.cms.gov/files/document/2021-ra-technical-paper.pdf.
---------------------------------------------------------------------------

    As part of future analyses, we also intend to assess the impact of 
the State payment transfer formula on risk adjustment covered plans 
with lowest-risk enrollees to the extent that our data allows. However, 
in response to commenters' concerns that risk adjustment charges exceed 
premiums collected for some of the lowest-risk enrollees, we do not 
believe that this concern falls within the scope of the proposed two-
stage weighted model specification, and we reiterate that we do not 
believe that adjusting the State payment transfer formula to limit 
charges to the level of premiums for enrollees is appropriate (86 FR 
24140 at 24186). Also, as previously described, we proposed the two-
stage weighted model specification to address the underprediction of 
the lowest risk enrollees, not to address the situation described by 
the commenter in which risk adjustment charges may exceed premiums 
collected for some enrollees. As described in the most recent ``Summary 
Report on Permanent Risk Adjustment Transfers for the 2020 Benefit 
Year,'' risk adjustment is working as intended to transfer payments 
from plans with lower than average actuarial risk to plans with higher 
than average actuarial risk.\48\ Furthermore, we do not believe that 
limiting risk adjustment charges to the level of enrollee premiums is 
consistent with the framework set forth in section 1343 of the ACA, 
which requires the establishment of a risk adjustment program focused 
on risk differentials at the plan level, not the enrollee level.\49\ 
Risk adjustment transfers under the State payment transfer formula are 
therefore calculated based on the PLRS and the Statewide average 
premium, not based on individual enrollees' premiums.
---------------------------------------------------------------------------

    \48\ Summary Report on Permanent Risk Adjustment Transfers for 
the 2020 Benefit Year. (2021, June 30). CMS. https://www.cms.gov/CCIIO/Programs-and-Initiatives/Premium-Stabilization-Programs/Downloads/RA-Report-BY2020.pdf.
    \49\ Compare 42 U.S.C. 18063 (establishing the permanent risk 
adjustment program, which involves an assessment and comparison of 
the actuarial risk in each issuer's plans in a State market risk 
pool with the average actuarial risk of all plans in the applicable 
State market risk pool) and 42 U.S.C. 18061 (establishing the 
transitional reinsurance program, which involves an assessment of 
actuarial risk of individual enrollees to identify those that 
qualify as ``high risk.'')
---------------------------------------------------------------------------

    Comment: Some commenters requested that if HHS finalizes the 
proposed two-stage weighted model specification, then HHS should 
reassess the 14 percent administrative adjustment, which they argue may 
already address some of the underprediction seen in predictive ratios.
    Response: We did not propose and are not finalizing changes to the 
14 percent administrative cost reduction to the Statewide average 
premium used in the State payment transfer formula. While HHS is not 
finalizing the proposed two-stage weighted model specification, we 
reiterate that the proposed two-stage weighted model specification and 
administrative cost adjustment to Statewide average premium address 
separate considerations. Specifically, the 14 percent administrative 
cost reduction is used in the State payment transfer formula to adjust 
the Statewide average premium and does not address the predictive 
accuracy of the risk adjustment models, as described in the 2021 RA 
Technical Paper. As detailed in the 2018 Payment Notice, the purpose of 
the administrative cost adjustment to the Statewide average premium is 
to exclude fixed administrative costs that are not dependent on 
enrollee risk, such as taxes (81 FR 61488 through 61489 and 81 FR 94099 
through 94100). In contrast, and as previously described elsewhere,\50\ 
the proposed two-stage weighted model specification was a targeted 
refinement aimed at improving the current adult and child models' 
prediction for the lowest-risk enrollees. Therefore, we do not agree 
with commenters' assertions that the administrative cost adjustment 
addresses the same issue as the two-stage weighted model specification, 
specifically the underprediction of costs in the lowest-risk enrollee 
subpopulation.
---------------------------------------------------------------------------

    \50\ Section 2.2. HHS-Operated Risk Adjustment Technical Paper 
on Possible Model Changes. (2021, October 26). CMS. https://www.cms.gov/files/document/2021-ra-technical-paper.pdf. See also 85 
FR 78667 and 86 FR 24283.
---------------------------------------------------------------------------

    Comment: Some commenters that opposed the proposed two-stage 
weighted model specification were concerned it may be resulting in 
overfitting of the models and may not predict future costs accurately. 
They also noted that the two-stage weighted model specification is not 
a standard procedure for risk adjustment and worsens fit in some areas, 
such as the reduced R-squared values,\51\ although the effect is small.
---------------------------------------------------------------------------

    \51\ We acknowledge three areas where the two-stage weighed 
model specification worsens fit of the risk adjustment models along 
other dimensions in Section 2.3 in the HHS-Operated Risk Adjustment 
Technical Paper on Possible Model Changes. (2021, October 26). CMS. 
https://www.cms.gov/files/document/2021-ra-technical-paper.pdf.
    \52\ Kautter, J., Pope, G., Ingber, M. J., Freeman, S. E., 
Patterson, L. J., Cohen, M. A., & Keenan, D. P. (2014). The HHS-HCC 
risk adjustment model for individual and small group markets under 
the Affordable Care Act. Medicare & Medicaid Research Review, 4(3), 
E1-E46. doi:10.5600/mmrr.004.03.a03. Kautter, J., Pope, G., & 
Keenan, D. P. (2014). Affordable Care Act risk adjustment: Overview, 
context, and challenges. Medicare & Medicaid Research Review, 4(3), 
E1-E11. doi:10.5600/mmrr.004.03.a02.
    \53\ For information on the use of hierarchies and constraints, 
see Sections 2.1, 3.7 and 3.8 of the March 2016 Risk Adjustment 
Methodology White Paper. (2016, March 24). https://www.cms.gov/CCIIO/Resources/Forms-Reports-and-Other-Resources/Downloads/RA-March-31-White-Paper-032416.pdf. See also the June 2019 Potential 
Updates to HHS-HCCs for the HHS-operated Risk Adjustment Program 
Technical Paper (2019, June 17). CMS. https://www.cms.gov/CCIIO/Resources/Regulations-and-Guidance/Downloads/Potential-Updates-to-HHS-HCCs-HHS-operated-Risk-Adjustment-Program.pdf.
---------------------------------------------------------------------------

    Response: As previously described, we acknowledged that there are 
trade-offs associated with adoption of the proposed two-stage weighted 
model, including that it would worsen model prediction along some 
dimensions, such as reduced R-squared values. We also recognize that 
the two-stage weighted model specification is not a standard procedure 
for risk adjustment. After consideration of comments and further 
evaluation of the trade-offs, we are not finalizing the proposed two-
stage weighted model specification update to the adult and child 
models. In response to commenters' concerns about overfitting, we note 
that we do not have concerns with respect to overfitting the models for 
a variety of reasons. First, we estimate the models using 3 years of 
data and the final model parameters are an average of coefficients 
across the 3 years. By using 3 years of data, the potential for one 
unusual year to skew the coefficients is limited. Second, for each 
model year, the overall sample size is quite large in each adult model, 
particularly relative to the number of model predictors used in the 
risk adjustment models.\52\ For example, the 2019 recalibration sample 
alone has 18.7 million adult enrollees whose data are used to fit adult 
models consisting of 181 predictors for the 2023 benefit year. 
Additionally, we ensure sample sizes for each coefficient are 
reasonable through the application of hierarchies, constraints, and 
similar model design choices.\53\ We also note that although the models 
perfectly predict past experience, this does not guarantee the models 
will perfectly predict when applied to future payment years, as that 
will depend, in part, on what happens between the calibration and 
payment years. However, this does not reflect overfitting. To the 
extent the calibration years are representative of future payment 
years, the models are positioned to perform well when used

[[Page 27224]]

for payment.\54\ For all of these reasons, we are not concerned about 
the proposed two-stage weighted model specification change resulting in 
overfitting of the models; however, as previously described, we are not 
finalizing the proposed two-stage weighted model specification.
---------------------------------------------------------------------------

    \54\ Section 1.4. HHS-Operated Risk Adjustment Technical Paper 
on Possible Model Changes. (2021, October 26). CMS. https://www.cms.gov/files/document/2021-ra-technical-paper.pdf.
---------------------------------------------------------------------------

ii. Interacted HCC Counts Model Specification
    In addition to the two-stage weighted model specification, we 
proposed 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 0.1 
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.\55\
---------------------------------------------------------------------------

    \55\ Section 4.1. HHS-Operated Risk Adjustment Technical Paper 
on Possible Model Changes. (2021, October 26). CMS. https://www.cms.gov/files/document/2021-ra-technical-paper.pdf.
---------------------------------------------------------------------------

    Therefore, to address the underprediction of the highest-risk 
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. 
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 by accounting for the 
fact that costs of certain HCCs rise significantly when they occur with 
multiple other HCCs.
    In developing this interacted HCC counts model specification, we 
tested different types of severity and transplant indicators interacted 
with HCC counts with the goal of improving prediction for enrollees 
with the highest costs and multiple HCCs to counterbalance the 
reciprocal prediction weights that relatively underpredicted costs for 
these enrollees. For this approach, we assessed the HCCs for enrollees 
with extremely high costs, and HCCs that were being underpredicted in 
the current risk adjustment models. We found that many of the HCCs that 
were flagged as being underpredicted were those HCCs that indicated 
severe illness, such as the transplant HCCs, and other HCCs related to 
severity of disease; therefore, we proposed dropping the current 
severity illness indicators in the adult models and replacing them with 
severity and transplant indicators interacted with HCC counts factors 
in the adult and child models.
    We proposed the inclusion of the factors in Tables 1 and 2 of the 
proposed rule as the severity and transplant interaction factors in the 
adult and child models starting with the 2023 benefit year. We 
separated out severity and transplant HCCs into two sets of interaction 
factors, as expressed in Tables 1 and 2 of the proposed rule, because 
we found that this approach improved prediction for the highest-risk 
enrollees better than an approach that included a single set of 
factors.
    If an enrollee has at least one severity HCC in Table 3 of the 
proposed rule (shown in Table 1 of this rule as the Final HCCs Selected 
for the HCC Interacted Counts), the enrollee will receive an interacted 
HCC count factor toward their risk score, and the severity HCC count 
factor selected would be based on the enrollee's total payment HCC 
count.\56\ If an adult or child enrollee has at least one transplant 
HCC in Table 1 of this rule, the enrollee will receive an interacted 
HCC count factor for both a severity HCC interacted factor and, if the 
enrollee has four or more HCCs, a transplant HCC interacted factor 
towards their risk score, and both of those count factors would be 
based on the enrollee's total payment HCC count.
---------------------------------------------------------------------------

    \56\ For additional information on how the interacted HCC counts 
model specification works, see Section 4.3 of the HHS-Operated Risk 
Adjustment Technical Paper on Possible Model Changes. (2021, October 
26). CMS. https://www.cms.gov/files/document/2021-ra-technical-paper.pdf. See also 87 FR at 601 through 603.
---------------------------------------------------------------------------

    To further explain, as seen in Table 2 of this rule, the 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 1 of this rule 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 1 of this rule and 
(2) 10 or more payment HCCs in the enrollee's data. For the child 
models, the first five factors represent the presence of (1) an HCC in 
the severity list in Table 1 of this rule 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 1 and (2) six to seven payment HCCs, and the seventh 
factor represents the presence of (1) an HCC in the severity list in 
Table 1 and (2) eight or more payment HCCs in the enrollee's data.

[[Page 27225]]

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[GRAPHIC] [TIFF OMITTED] TR06MY22.001


[[Page 27226]]


    As seen in Table 3 of this rule, the transplant-HCC-count-
interaction factors are calculated similarly. However, the transplant 
factors are 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 1 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 1 of this rule and (2) a total of four or more 
payment HCCs in the enrollee's data. Using only one transplant-HCC-
count-interaction factor stabilized the child model estimates by 
increasing the sample size used to estimate the factor 
coefficients.\57\
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    \57\ For an illustration of how the proposed severity- (or 
transplant-) HCC-count-interaction factors would be assigned to an 
enrollee, see 87 FR 601 through 602.
[GRAPHIC] [TIFF OMITTED] TR06MY22.002

    To implement the severity- and transplant-HCC-count-interaction 
factors in the regression model and estimate the value of their factor 
coefficients, we proposed 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.
    We sought comment on this proposal.
    We are finalizing the removal of the current adult model severity 
illness factors and adding an interacted HCC count model specification 
to the adult and child risk adjustment models starting with the 2023 
benefit year, as proposed.
    We summarize and respond to public comments received on the 
interacted HCC counts model specification updates below.
    Comment: Several commenters supported the proposal to add an 
interacted HCC counts model specification to the adult and child risk 
adjustment models noting that the interacted HCC counts model 
specification will improve model prediction and more accurately 
quantify risk. Some commenters expressed general agreement with HHS 
that the current models may be underpredicting plan liability of the 
highest-risk enrollees, but did not otherwise comment on the interacted 
HCC count model specification proposals. One commenter suggested that 
the proposed refinement will mitigate issuers' concerns about adverse 
selection and lead to a more competitive market, while another agreed 
that it would address the current models' underestimate of plan 
liability for the very highest-risk enrollees.
    However, several other commenters opposed the proposed interacted 
HCC counts model policy, stating that this change would add undue 
complexity to the models and would increase coding and issuer gaming. 
Some commenters requested clarification on how the interacted HCC 
counts variable would be accommodated in the HHS-RADV process. These 
commenters requested that HHS increase program integrity measures and 
adopt additional safeguards against upcoding, such as targeted sampling 
to test for upcoding in the HHS-RADV process, as an additional measure 
to protect against gaming if this model specification change is 
finalized. One commenter generally noted they only supported the 
interacted HCC counts model specification if the two-stage weighted 
model specification was also finalized.
    Response: We agree with the commenters that the interacted HCC 
counts model specification will improve model prediction, more 
accurately quantify risk, and address the underprediction of plan 
liability of the highest-risk enrollees that we have observed in the 
current adult and child models. The current adult models incorporate a 
severe illness adjustment that accounts for combinations of selected 
HCCs. However, the total count of an enrollee's HCCs does not currently 
independently affect the risk score and, while the current severity 
illness indicator helps predict costs accurately among most adult 
enrollees with qualifying severe illnesses, it does not fully address 
the underprediction for the very highest-risk enrollees. The current 
severity of illness indicators also do not extend to the child models. 
The proposed interacted HCC counts model specification was targeted at 
addressing these concerns and more accurately predicting risks and 
capturing costs for the highest-risk enrollees.
    We understand that there are concerns about the increased 
complexity that the interacted HCC counts model specification may 
introduce. However, we see the interacted HCC counts model 
specification as an advancement of our current severe illness 
indicators, which have been in place since the beginning of the risk 
adjustment models, so we believe the interacted HCC counts model 
specification change only slightly increases complexity. As described 
in our analysis of 2018 enrollee-level EDGE data in the 2021 RA 
Technical Paper, the interacted HCC counts model specification, along 
with the HCC-contingent enrollment duration factors, significantly 
improved prediction for the very highest-risk enrollees, which we 
believe outweighs the disadvantages of slightly increasing model 
complexity.\58\
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    \58\ Section 4.4. HHS-Operated Risk Adjustment Technical Paper 
on Possible Model Changes. (2021, October 26). CMS. https://www.cms.gov/files/document/2021-ra-technical-paper.pdf.
---------------------------------------------------------------------------

    Additionally, we acknowledge concerns over the potential for 
upcoding and issuer gaming and further note that incorporating 
safeguards to protect against the potential for gaming was a major 
consideration in our investigation of various interacted HCC counts 
model specifications. When developing the proposed interacted HCC 
counts model specification we were specifically concerned that the 
presence of counts across all HCCs, without requiring a

[[Page 27227]]

severe illness or transplant HCC, would further incentivize issuers to 
code for more HCCs, thus increasing their payment or reducing their 
charge under the State payment transfer formula. This would be 
inconsistent with the risk adjustment principle not to encourage coding 
proliferation.\59\ However, we believe that implementing the interacted 
HCC counts model specification updates, as proposed, which restricts 
the incremental risk score adjustment to enrollees with at least one 
severe illness or transplant HCC, reduces concerns of issuers inflating 
HCC counts to increase their transfers under the State payment transfer 
formula. More specifically, our analysis of 2016, 2017, and 2018 
enrollee-level EDGE data revealed that severe illness HCCs are 
relatively uncommon; less than 2 percent of the adult enrollee-level 
EDGE data population across these 3 benefit years had at least one 
severe illness HCC, as opposed to about 20 percent of adult enrollees 
with any payment HCC. Therefore, opportunities to inflate HCC counts 
would be limited to a small fraction of total enrollees.
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    \59\ For information on the principles that guide the HHS risk 
adjustment models' diagnostic classification system, see Section 
1.1.2 of the HHS-Operated Risk Adjustment Technical Paper on 
Possible Model Changes. (2021, October 26). CMS. https://www.cms.gov/files/document/2021-ra-technical-paper.pdf (see, in 
particular, Principle 6: The diagnostic classification should not 
reward coding proliferation.)
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    Although we believe this approach appropriately balances the 
different trade-offs by improving prediction for highest-risk enrollees 
while mitigating the potential for gaming or upcoding, we generally 
intend to monitor implementation of the model specification updates 
finalized in this rule. Specifically, we will look for any notable 
changes in HCC failure rates for the interacted severity and transplant 
HCCs in HHS-RADV beginning with the 2023 benefit year that could be the 
result of implementation of the interacted HCC counts model 
specification updates.
    Lastly, we note the interacted HCC counts model specification 
update finalized in this rule is effective beginning with 2023 risk 
adjustment. The HHS-RADV process for the 2023 benefit year would not 
begin until spring 2024. Therefore, we intend to consider whether 
changes are needed beginning with the 2023 benefit year HHS-RADV error 
estimation methodology or processes in recognition of the interacted 
HCC counts model specification and would propose any such changes in 
future notice-and-comment rulemaking. HHS will also consider whether 
targeted sampling, or other approaches, in HHS-RADV are necessary to 
detect and address upcoding or coding proliferation as a result of the 
implementation of the interacted HCC counts model specification.
    Comment: Some commenters questioned whether the exclusion of 
capitated claims biases the analysis of the proposed interacted HCC 
counts model specification change.
    Response: As previously explained,\60\ 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 reliable data for 
recalibration or analysis.\61\ However, in response to comments 
submitted to the 2021 RA Technical Paper and the proposed rule, we 
conducted additional analyses to investigate how enrollees with 
capitated claims could have impacted our assessment of the 
underpredicted subpopulations described in the 2021 RA Technical Paper. 
This additional analysis did not show that the exclusion of enrollees 
with capitated claims biased the analysis or results in the 2021 RA 
Technical Paper.
---------------------------------------------------------------------------

    \60\ March 2016 Risk Adjustment Methodology White Paper. (2016, 
March 24). https://www.cms.gov/CCIIO/Resources/Forms-Reports-and-Other-Resources/Downloads/RA-March-31-White-Paper-032416.pdf. See 
also 87 FR 602 through 603.
    \61\ Enrollees with at least one capitated claim in EDGE are 
excluded from recalibration, as the risk adjustment models are used 
to evaluate enrollees' expenditures, and capitated claims do not 
provide meaningful and comparable cost (allowed charges) data in 
comparison to non-capitated claims. We are also concerned that 
methods for computing and reporting derived amounts from capitated 
claims could be inconsistent across issuers and would not provide 
reliable or comparable data.
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    To conduct this additional analysis, we compared the recalibration 
sample, which excluded enrollees with any capitated claims,\62\ with 
the capitation sample, which included only enrollees with capitated 
claims. Overall, for the 2023 risk adjustment models, the capitation 
exclusion resulted in 15-17 percent of enrollees being dropped from the 
recalibration sample. As described in the 2021 RA Technical Paper, 
where we utilized the recalibration sample to analyze the proposed 
model changes, we observed underpredicted plan liability for the 
lowest-risk enrollees (enrollees in low-risk deciles and without HCCs) 
and underpredicted plan liability for the highest-risk enrollees 
(enrollees in the top 0.1 percent decile and with many HCCs).\63\ In 
our additional analysis of the capitation sample, we also observed the 
same general trends of underprediction of the lowest-risk and highest-
risk enrollees. Further, we evaluated whether the proposed 2023 model 
specification changes produced similar improvements in addressing the 
underprediction of these subpopulations in the capitation sample as the 
recalibration sample and found that the proposed 2023 model 
specification changes resulted in similar prediction improvements for 
both samples. Therefore, we do not believe that the exclusion of 
enrollees with capitated claims biased the analysis or results, and we 
do not believe that their inclusion would have meaningfully impacted 
our findings.
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    \62\ The calibration sample is the same sample used for the 
analysis in the 2021 RA Technical Paper, which excludes capitated 
enrollees.
    \63\ Figures 1.2 and 1.3. HHS-Operated Risk Adjustment Technical 
Paper on Possible Model Changes. (2021, October 26). CMS. https://www.cms.gov/files/document/2021-ra-technical-paper.pdf.
---------------------------------------------------------------------------

    Comment: Some commenters recommended additional information and 
analysis on the proposed interacted HCC counts model change 
specification, such as its effect on calculations under the State 
payment transfer formula for issuers that tend to attract healthier 
enrollees, whether small sample sizes were an issue, and an evaluation 
of whether removing the interacted severity HCCs would improve PLRS PRs 
more than attaching counts to those HCCs. One of the commenters 
suggested that it is difficult to assess the net effect of the 
interacted HCC count proposals on risk adjustment State transfers 
selection incentives. This commenter further noted they would oppose 
the proposal if this proposed change reduced State transfers paid by 
issuers with lower than average risk scores.
    Response: We provided extensive information on the interacted HCC 
counts model specification changes and the estimated impact on State 
transfers in rulemakings,\64\ the 2021 RA Technical Paper,\65\ and the 
HHS-Operated Risk Adjustment Technical Paper on Possible Model Changes: 
Summary Results for Transfer Simulations.\66\ In the transfer 
simulation report, we provided summary-level information on the 
estimated combined

[[Page 27228]]

impact of the proposed model specification changes on the calculation 
of plan-level risk scores and State transfers. Issuers that 
participated in the simulation also received detailed issuer-specific 
data, including risk score and transfer estimates for the simulated 
results.
---------------------------------------------------------------------------

    \64\ 85 FR 78583 through 78586 and 87 FR 598 through 605.
    \65\ HHS-Operated Risk Adjustment Technical Paper on Possible 
Model Changes. (2021, October 26). CMS. https://www.cms.gov/files/document/2021-ra-technical-paper.pdf.
    \66\ HHS-Operated Risk Adjustment Technical Paper on Possible 
Model Changes: Summary Results for Transfer Simulations. (December 
28, 2021). CMS. https://www.cms.gov/files/document/2021-ra-technical-paper.pdf.
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    While we acknowledge stakeholders' requests for additional 
analysis, such as the effect of the interacted HCC counts model 
specification updates on transfer calculations for issuers who tend to 
attract healthier enrollees, operational and technological limitations 
within both HHS and the issuer community limited capacity to conduct 
additional simulations. Despite these limitations in being able to 
conduct additional simulations, we were able to produce and share 
evidence and detailed analyses in support of the proposed interacted 
HCC counts model specification.\67\ For example, as described in the 
2021 RA Technical Paper, the interacted HCC counts model specification 
improved prediction for the highest-risk enrollees.\68\
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    \67\ Figures 4.2, 4.3, and 4.4 in the HHS-Operated Risk 
Adjustment Technical Paper on Possible Model Changes demonstrate the 
improvements in PRs of the interacted HCC counts and HCC-contingent 
EDFs. HHS-Operated Risk Adjustment Technical Paper on Possible Model 
Changes. (2021, October 26). CMS. https://www.cms.gov/files/document/2021-ra-technical-paper.pdf.
    \68\ Section 4.4. HHS-Operated Risk Adjustment Technical Paper 
on Possible Model Changes. (2021, October 26). CMS. https://www.cms.gov/files/document/2021-ra-technical-paper.pdf.
---------------------------------------------------------------------------

    We also acknowledge the request to evaluate the impact of removing 
the current severity and transplant indicators against the proposed 
interacted HCC counts model specification. However, we do not believe 
this approach warrants further evaluation because we did not propose to 
entirely remove the indicators without replacing them. Additionally, 
the current severity illness indicators improve the current adult 
models' prediction of high-risk enrollees, so we do not believe we 
should consider completely removing the severity illness terms from the 
models. We reiterate that the proposed interacted HCC counts model 
specification further improves the adult and child models' predictive 
power beyond the adult models' current severity illness indicators. 
Therefore, we do not believe that we should further consider removing 
the severity illness indicators and not replacing them.
    We recognized that one potential concern with this model 
specification change was that the severity- and transplant-HCC-count-
interaction factor coefficients might be based on small sample sizes. 
Therefore, 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 individually 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+ 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 are comparable to the sample sizes 
used for individual HCCs in the adult and child risk adjustment models.
iii. Changes to the Adult Model Enrollment Duration Factors \69\
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    \69\ 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 through 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. Therefore, we proposed to continue to apply 
enrollment duration factors to the adult models only.
---------------------------------------------------------------------------

    In the proposed rule, we proposed to change the enrollment duration 
factors in the adult risk adjustment models to improve prediction for 
partial-year adult enrollees with and without HCCs (87 FR 603 through 
604). Although the values 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 in the 2018 Payment Notice 
(81 FR 94071 through 94074).
    As described in prior rules and the 2021 RA Technical Paper, we 
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.\70\ \71\
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    \70\ 85 FR 29164 at 29188 through 29190.; 86 FR 24140 at 24151 
through 24162; and the HHS-Operated Risk Adjustment Technical Paper 
on Possible Model Changes. (2021, October 26). CMS. https://www.cms.gov/files/document/2021-ra-technical-paper.pdf.
    \71\ When we refer to the enrollees with and without HCCs, we 
are referring to enrollees without payment HCCs.
---------------------------------------------------------------------------

    Therefore, beginning with the 2023 benefit year, we proposed 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. We explained that under this 
proposal 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.
    We solicited comments on the proposed changes to the enrollment 
duration factors for the adult models.
    After reviewing the public comments, we are finalizing the proposal 
to replace the current enrollment duration factors in the adult models 
with HCC-contingent enrollment duration factors as proposed. As such, 
beginning with the 2023 benefit year, there will no longer be 
enrollment duration factors for adult enrollees without HCCs starting 
with the 2023 benefit year, nor will there be enrollment duration 
factors for adult enrollees with HCCs and more than 6 months of 
enrollment.
    We summarize and respond to public comments received on proposed 
changes to the adult model enrollment duration factors below.
    Comment: Most commenters supported the proposed changes to the 
enrollment duration factors for the adult models. Many of these 
commenters asserted that the proposed changes would improve model 
prediction. One commenter noted that the HCC-contingent enrollment 
duration factors would solve the majority of model prediction issues 
even in the absence of

[[Page 27229]]

the adoption of the proposed two-stage weighted model and interacted 
HCC counts model specification updates. Several commenters also stated 
that the proposed HCC-contingent enrollment duration factors would 
reduce issuers' incentives for risk selection.
    Response: We are finalizing the replacement of the current monthly 
enrollment duration factors of up to 11 months for all enrollees in the 
adult models with new monthly enrollment duration factors of up to 6 
months that would apply only to enrollees in the adult models with 
HCCs. As previously explained, our analysis of the current adult model 
enrollment duration factors found that plan liability was 
underpredicted for partial-year adult enrollees with HCCs and 
overpredicted for partial-year adult enrollees without HCCs.\72\ This 
targeted refinement was developed in response to this finding and will 
improve prediction for partial-year adult enrollees with and without 
HCCs. Additionally, HHS agrees that the enrollment duration factor 
changes will reduce issuers' incentives for risk selection by improving 
model prediction.
---------------------------------------------------------------------------

    \72\ HHS-Operated Risk Adjustment Technical Paper on Possible 
Model Changes. (2021, October 26). CMS. https://www.cms.gov/files/document/2021-ra-technical-paper.pdf.
---------------------------------------------------------------------------

    Comment: Several commenters focused on the intersection of special 
enrollment periods (SEP) and these proposed changes. Some commenters 
suggested that the proposed enrollment duration factor updates would 
mitigate the impact of the recent access to SEPs enhanced during the 
2020 and 2021 benefit years due to the COVID-19 PHE and ARP,\73\ which 
changed the SEP enrollee pool and increased opportunities for adverse 
selection. One of these commenters noted the importance of predictive 
accuracy for 1 to 6-month enrollees as Exchanges on the Federal 
platform and State Exchanges expand plan selection options during SEP 
enrollments. Another commenter noted HHS' analysis of the proposed HCC-
contingent duration factors is not representative of the current SEP 
landscape and recommended additional analysis before the proposed 
enrollment duration factor updates are implemented.
---------------------------------------------------------------------------

    \73\ See, for example, HHS Announces Marketplace Special 
Enrollment Period for COVID-19 Public Health Emergency. (2021, 
January 28). CMS. https://www.hhs.gov/about/news/2021/01/28/hhs-announces-marketplace-special-enrollment-period-for-covid-19-public-health-emergency.html.
---------------------------------------------------------------------------

    Response: We appreciate the comments on the intersection of SEP 
opportunities and the proposed updates to the adult model enrollment 
duration factors. We agree with commenters that the proposed updates 
would mitigate the impact of the recent SEPs enhanced during the 2020 
and 2021 benefit years due to the COVID-19 PHE and ARP on potential 
opportunities for adverse selection, but note that these updates to the 
enrollment duration factors will not be implemented until the 2023 
benefit year. We also agree with the commenter on the importance of 
predictive accuracy for partial-year enrollees and believe that these 
changes will improve the current models' predictive accuracy for 
partial-year adult enrollees with and without HCCs.
    As noted above, we are finalizing the changes to the adult model 
enrollment duration factors as proposed and will implement the new 
factors beginning with the 2023 benefit year adult models. To develop 
the 2023 benefit year risk adjustment models, we used the 2017, 2018, 
and 2019 enrollee-level EDGE data, as these datasets were the 3 most 
recent consecutive years of enrollee-level EDGE data that were 
available at the time we incorporated the data in the draft 
recalibrated coefficients published in the proposed rule. Therefore, we 
believe that the data years that we used to develop the HCC-contingent 
enrollment duration factors are the most appropriate data years 
available at this time for purposes of analyzing the proposal to adopt 
these changes beginning with the 2023 benefit year and that further 
analysis is not required at this time. As discussed elsewhere in this 
rule, we are still assessing whether to use the 2020 enrollee-level 
EDGE for model recalibration in the future, and we do not have 2021 
benefit year enrollee-level EDGE yet.\74\ As such, we have not yet been 
able to analyze the impact of the most recent SEP changes. However, HHS 
remains committed to ongoing analysis of these issues and intends to 
study the impact of the new factors once implemented.
---------------------------------------------------------------------------

    \74\ See 45 CFR 153.730. Since April 30, 2022, falls on a 
weekend, CMS will exercise enforcement discretion to shift the 
deadline for submission of final 2021 benefit year risk adjustment 
data to May 2, 2022.
---------------------------------------------------------------------------

    Comment: A few commenters expressed concerns that the proposed HCC-
contingent enrollment duration factors would negatively impact the 
small group market or that the changes would not align with small group 
market enrollment renewal patterns (for example, non-calendar year 
coverage). One commenter that opposed the adoption of the proposed 
changes stated that eliminating enrollment duration factors for non-HCC 
enrollees would disincentivize issuers from taking on new small group 
employers in the fourth quarter. Other commenters that supported the 
proposed enrollment duration factors changes noted general concerns 
that the proposed updates to the enrollment duration factors may 
negatively impact the small group market.
    Response: We explored partial-year enrollment patterns between the 
individual \75\ and small group markets as part of the consideration of 
updates to the enrollment duration factors for the risk adjustment 
adult models. In the 2021 Payment Notice (85 FR 29189), we shared our 
preliminary analysis of the 2017 enrollee-level EDGE dataset found 
separate enrollment duration factors by market in the adult models 
could be warranted; therefore, we continued to study these issues as 
additional enrollee-level EDGE data became available. Our analysis of 
partial-year enrollment using the 2018 enrollee-level EDGE dataset, 
which occurred alongside our development of the proposed HCC-contingent 
enrollment duration factors in the proposed 2022 Payment Notice, did 
not find a meaningful distinction in relative costs between markets on 
average once the proposed enrollment duration factors of up to 6 months 
for adult enrollees with HCCs were implemented.\76\ Even though reasons 
for and patterns of partial-year enrollment differ by market, we 
concluded that the patterns most relevant for predicting cost (for 
example, how enrollment duration relates to cost conditional on the 
presence of HCCs) were the same for both markets.\77\ Therefore, we 
determined it would not be necessary to introduce market-specific 
factors if the proposed HCC-contingent enrollment duration factors were 
adopted in place of the existing enrollment duration factors. We also 
explained that if the HCC-contingent factors were to vary by market, 
the factors for both markets would generally be very similar, which 
would add little value to the models while adding additional 
complexity.\78\ Therefore, we proposed the adoption of

[[Page 27230]]

the same HCC-contingent factors for both markets.
---------------------------------------------------------------------------

    \75\ Section 3. HHS-Operated Risk Adjustment Technical Paper on 
Possible Model Changes. (2021, October 26). CMS. https://www.cms.gov/files/document/2021-ra-technical-paper.pdf. In the 
enrollee-level EDGE dataset, merged market enrollees are assigned to 
the individual or small group market indicator based on their plan.
    \76\ Section 3.3.2. HHS-Operated Risk Adjustment Technical Paper 
on Possible Model Changes (2021, October 26). CMS. https://www.cms.gov/files/document/2021-ra-technical-paper.pdf. See also 86 
FR 24161.
    \77\ Ibid.
    \78\ Section 3.3.2. HHS-Operated Risk Adjustment Technical Paper 
on Possible Model Changes. (2021, October 26). CMS. https://www.cms.gov/files/document/2021-ra-technical-paper.pdf.
---------------------------------------------------------------------------

    In response to comments, we again considered whether the HCC-
contingent enrollment duration factors could have negative impacts on 
small group market issuers, such as on those that offer non-calendar 
year coverage and take on new business later in the year. Our continued 
consideration of these issues did not find evidence of such negative 
impacts.\79\ More specifically, while we recognize there are likely 
some cases where a partial-year enrollee only receives risk adjustment 
ineligible services, our analysis found no evidence that it is 
associated with meaningful underpayment in either the individual or 
small group market. In other words, on average, costs are sufficiently 
low for partial-year enrollees with no HCCs that even a risk score 
based only on demographic factors would generally overpredict plan 
liability.\80\ Commenters did not provide data or other information in 
support of the general assertions or concerns about potential impacts 
on the small group market and have not otherwise refuted the 
conclusions drawn from our analysis of available enrollee-level EDGE 
data. Therefore, we continue to believe it is appropriate to finalize 
and apply the proposed changes to the adult model enrollment duration 
factors to both the individual and small group (including merged) 
markets and to not pursue factors that vary by market. For the reasons 
outlined above, we also believe that the presumed negative impact on 
new business in the small group market would be limited, and the 
guaranteed availability provisions, which require health insurance 
issuers offering non-grandfathered coverage in the individual or small 
group market to accept every individual and employer in the State that 
applies for such coverage unless an exception applies, further protects 
against issuers declining to take on new small group employers.
---------------------------------------------------------------------------

    \79\ Section 3.4. HHS-Operated Risk Adjustment Technical Paper 
on Possible Model Changes. (2021, October 26). CMS. https://www.cms.gov/files/document/2021-ra-technical-paper.pdf.
    \80\ Ibid.
---------------------------------------------------------------------------

    Comment: One commenter stated that they were against limiting 
enrollment duration factors to up to 6-month enrollees and would 
support the proposed changes if the upper limit for the factors was 
extended to 9 months. The commenter noted this change to the upper 
limit would better account for renewal patterns in the small group 
market.
    Response: While we considered other enrollment duration factor 
structures, we proposed and are finalizing a 6-month limit to the 
enrollment duration factors because we found that the monthly average 
cost variation by the 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 prediction for the 
adult models.\81\ Specifically, we found that these coefficients would 
have been close to 0 (and in some cases negative), which means they 
would not have contributed much to the overall risk score for enrollees 
or would have had to be constrained to 0 in the risk adjustment adult 
models. Given this analysis and in an effort to limit the number of 
factors in the models, we are finalizing the HCC-contingent enrollment 
duration factors for up to 6 months as proposed.
---------------------------------------------------------------------------

    \81\ Section 3.2. HHS-Operated Risk Adjustment Technical Paper 
on Possible Model Changes. (2021, October 26). CMS. https://www.cms.gov/files/document/2021-ra-technical-paper.pdf.
---------------------------------------------------------------------------

    Additionally, as explained above, we continue to believe it is 
appropriate to finalize and apply the proposed changes to the adult 
model enrollment duration factors to the small group market and to not 
pursue factors that vary by market.
iv. Combined Impact of the Model Changes
    As discussed in detail above, after reviewing the public comments 
on the proposed risk adjustment model changes, we are finalizing the 
addition of the interacted HCC counts factors in the adult and child 
models, the removal of the current adult model severity illness 
factors, and the replacement of the existing enrollment duration 
factors with the HCC-contingent enrollment duration factors in the 
adult models, as proposed. Our analysis of the proposed interacted HCC 
counts factors combined with the proposed HCC-contingent enrollment 
duration factors in the adult models significantly improves predictions 
across most deciles and HCC counts for the very highest-risk enrollees, 
as well as the lowest-risk enrollees without HCCs.\82\ However, we are 
not finalizing the proposal to add a two-stage weighted model 
specification to model recalibrations.
---------------------------------------------------------------------------

    \82\ Figure 4.2. HHS-Operated Risk Adjustment Technical Paper on 
Possible Model Changes. (2021, October 26). CMS. https://www.cms.gov/files/document/2021-ra-technical-paper.pdf.
---------------------------------------------------------------------------

    We summarized and responded to public comments received on proposed 
model specifications updates in the above sections.
c. Pricing Adjustment for the Hepatitis C Drugs
    In the HHS Notice of Benefit and Payment Parameters for 2023 
proposed rule (87 FR 584, 605), for the 2023 benefit year, we proposed 
to continue applying a market pricing adjustment to the plan liability 
associated with Hepatitis C drugs in the risk adjustment models.\83\
---------------------------------------------------------------------------

    \83\ 84 FR 17463 through 17466.
---------------------------------------------------------------------------

    We sought comment on this proposal.
    After reviewing the public comments, we are finalizing this 
proposal 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 summarize and respond to public comments received on the pricing 
adjustment for Hepatitis C drugs below.
    Comment: Most commenters supported the Hepatitis C pricing 
adjustment. One commenter noted that the pricing adjustment ensures HHS 
is applying the most accurate data, while protecting against issuers 
that might seek to influence provider prescribing patterns to the 
issuers' benefit. Another commenter noted that without the Hepatitis C 
pricing adjustment, issuers would be incentivized to focus on only a 
subset of enrollees needing treatment if they can trigger an increase 
in an enrollee's risk score that is higher than the actual plan 
liability of the drug claim.
    Conversely, a few commenters expressed concerns about the Hepatitis 
C drugs pricing adjustment. These commenters asserted that the 
professional independence and ethical standards of providers would 
prevent them from prescribing drugs that they did not believe were 
medically necessary and appropriate, reducing the potential for issuers 
to game the model. These commenters were concerned about 
undercompensating issuers for enrollees with serious chronic 
conditions, which would incentivize issuers to avoid these enrollees. 
They encouraged HHS to evaluate the models continually to ensure they 
fully capture the cost of the current standard of care for conditions 
in the models. Additionally, one commenter cautioned against reducing 
the coefficient more than the expected decrease, which the commenter 
explained would incentivize issuers to reduce the availability of the 
treatment. This commenter also recommended that HHS clarify the data 
source and approach it is using to constrain the Hepatitis C RXC

[[Page 27231]]

coefficient. Finally, one commenter expressed concern that constraining 
the Hepatitis C RXC coefficient would undermine recent progress to 
treat Hepatitis C infections.
    Response: We continue to believe that the Hepatitis C pricing 
adjustment is appropriate at this time, will help avoid perverse 
incentives, and will lead to Hepatitis C RXC coefficients that better 
reflect anticipated actual 2023 benefit year plan liability associated 
with Hepatitis C drugs. Specifically, the purpose of the Hepatitis C 
pricing adjustment is to address 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 that present a risk of creating 
perverse incentives by overcompensating issuers. We reassessed the 
pricing adjustment for the Hepatitis C RXC for the 2023 benefit year 
model recalibration and found that the data used for the 2023 benefit 
year risk adjustment model recalibration (that is, 2017, 2018, and 2019 
enrollee-level EDGE data) still does not account for the significant 
pricing changes that we have observed for the Hepatitis C drugs due to 
the introduction of newer and cheaper Hepatitis C drugs. Therefore, the 
data that will be used to recalibrate the models needs to be adjusted 
because it does not precisely reflect the average cost of Hepatitis C 
treatments expected in the 2023 benefit year.
    In making this determination, we consulted our clinical and 
actuarial experts, and analyzed the most recent enrollee-level EDGE 
data available to further assess the changing costs associated with 
Hepatitis C enrollees. Due to the high cost of these drugs reflected in 
the 2017, 2018, and 2019 enrollee-level EDGE data, without a pricing 
adjustment to plan liability, issuers would be overcompensated for the 
Hepatitis C RXC in the 2023 benefit year, and they could be 
incentivized to encourage overprescribing practices and game risk 
adjustment such that the issuer's risk adjustment payment is increased 
or risk adjustment charge is decreased. We also recognize concerns that 
applying a pricing adjustment that would reduce the coefficient for the 
Hepatitis C RXC by more than the expected decrease in costs could 
incentivize issuers to reduce the availability of the treatment. 
However, we believe that the Hepatitis C pricing adjustment accurately 
captures the costs of Hepatitis C drugs for the applicable risk 
adjustment benefit year using the most recently available data, 
balances the need to deter gaming practices with the need to ensure 
that issuers are adequately compensated, and does not undermine recent 
progress in the treatment of Hepatitis C.
    Additionally, we recognize the important role that the ethical 
standards of providers play in preventing overprescribing of drugs that 
they do not believe are medically necessary and appropriate, but we 
believe that the Hepatitis C pricing adjustment is the most effective 
way to protect against perverse incentives that could affect 
prescribing patterns. Furthermore, while we appreciate commenters' 
concerns about undercompensating issuers for enrollees with serious 
chronic conditions, HHS is adopting several proposals in this 
rulemaking to address the adult and child models' underprediction for 
enrollees with many HCCs.\84\ Specifically, we finalized the interacted 
HCC counts and HCC-contingent enrollment duration factors model 
specifications to improve model prediction for the higher risk 
enrollees and ensure that issuers are being accurately compensated for 
these enrollees.\85\ We intend to continue to reassess this pricing 
adjustment as part of future benefit years' model recalibrations using 
additional years of available enrollee-level EDGE data.
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    \84\ Figure 1.3. HHS-Operated Risk Adjustment Technical Paper on 
Possible Model Changes. (2021, October 26). CMS. https://www.cms.gov/files/document/2021-ra-technical-paper.pdf.
    \85\ The Interacted HCC Counts and HCC-contingent enrollment 
duration factors also improve the models' predictive accuracy for 
the lower risk deciles. See, for example, Figure 4.2. HHS-Operated 
Risk Adjustment Technical Paper on Possible Model Changes. (2021, 
October 26). CMS. https://www.cms.gov/files/document/2021-ra-technical-paper.pdf.
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d. Risk Adjustment RXC Mapping for Recalibration
i. Inclusion and Exclusion Criteria for Drugs in RXC Mapping and 
Recalibration
    In the HHS Notice of Benefit and Payment Parameters for 2023 
proposed rule (87 FR 584, 605), we provided an overview of the 
inclusion and exclusion criteria HHS uses to identify drugs for mapping 
to RXCs in the adult risk adjustment models, reviewed 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 outlined the criteria that warrant consideration 
for changes to the incorporation (or exclusion) of particular drugs 
from the RXC mappings in future benefit year recalibrations. We also 
proposed 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 information on 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).\86\ 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.\87\ As explained in the proposed rule, we had 
been using the most recent RXC mappings (RXCUIs that map to RXCs) that 
were available when we first processed the enrollee-level EDGE data for 
a benefit year for recalibration of the adult risk adjustment 
models.\88\ 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 \89\ and the Q2 2019 mapping document 
for 2018 for recalibration of the adult risk adjustment models' RXC 
factors.
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    \86\ See, for example, 81 FR 94074 through 94080.
    \87\ 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. (2017, September 18). 
CMS. https://www.cms.gov/CCIIO/Resources/Regulations-and-Guidance/Downloads/Draft-RxC-Crosswalk-Memo-9-18-17.pdf.
    \88\ RXCUIs differ by chemical (drug ingredient), strength, and 
dose form, but not by manufacturer or package size. This means that 
RXCUIs describe the same drugs year-over-year, even as the 
underlying NDCs and HCPCs change due to changes in labelers, which 
is why it is possible to apply different mappings to different 
years. For further information, see RxNorm Overview. (2022, January 
3). NIH. https://www.nlm.nih.gov/research/umls/rxnorm/overview.html.
    \89\ 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.
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    As noted in the 2022 Payment Notice (86 FR 26164), we also 
continuously

[[Page 27232]]

assess the availability of drugs in the market and the associated 
mapping of those drugs to RXCs in the adult risk adjustment models. 
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 the pharmacological 
properties and prescribing patterns are consistent with treatment of a 
particular condition (also evaluated through clinical expert review), 
and (4) stakeholder feedback.\90\ As a result of this ongoing 
assessment, we 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 ``Do It Yourself'' (DIY) software and EDGE 
reference data, to ensure drugs are appropriately mapped to RXCs. 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,\91\ 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).\92\
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    \90\ 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. (2017, September 18). 
CMS. https://www.cms.gov/CCIIO/Resources/Regulations-and-Guidance/Downloads/Draft-RxC-Crosswalk-Memo-9-18-17.pdf.
    \91\ The January 7, 2022 version of the DIY software is 
available at 2021 Benefit Year Risk Adjustment Updated HHS-Developed 
Risk Adjustment Model Algorithm ``Do It Yourself (DIY)'' Software. 
(2022). CMS.
    \92\ Available at Distributed Data Collection. REGTAP.
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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 the proposed rule, we proposed 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 proposed to recalibrate the adult risk adjustment models using each 
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 year 
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 appropriately mapped to RXCs.
    We proposed 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 proposed 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 proposed 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 generally hold those mappings 
constant when using the 2018 and 2019 enrollee-level EDGE data years in 
future benefit year model recalibrations (except under the extenuating 
circumstances that are described in the next section that can result in 
targeted changes to RXC mappings)--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.\93\ The purpose of maintaining a 
specific version of the same RXC mapping document for future 
recalibrations 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 are likely to be 
applied to that data year in the final DIY software release before it 
is used for recalibration.
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    \93\ 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.
---------------------------------------------------------------------------

    For purposes of the 2023 benefit year recalibration, we proposed 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 proposed this approach 
for the 2017 benefit year enrollee-level EDGE data because the RXCs 
were still under development in 2017, and were not included in the 
adult risk adjustment models until 2018; \94\ therefore, no RXC 
mappings existed for the 2017 benefit year. Thus, we proposed to use 
the Q2 2018 RXC mapping document for the 2017 benefit year enrollee-
level EDGE data for 2023 model recalibration, consistent with the 
mapping used for processing the 2017 data for recalibration of the 2021 
and 2022 adult models. We sought comment on this proposal.
---------------------------------------------------------------------------

    \94\ See 81 FR 94075.
---------------------------------------------------------------------------

    We summarize and respond to public comments received on the 
proposals related to the RXC mapping document used for the annual 
recalibration of the adult models, along with the comments and 
responses on the other risk adjustment RXC mapping proposals.
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 
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

[[Page 27233]]

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.\95\ 
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 \96\); (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 proposed rule (87 FR 608 
through 609), we illustrated cases where we believe extenuating 
circumstances existed and how we evaluated whether to make targeted 
changes to RXC mappings due to those extenuating circumstances as part 
of the annual recalibration process for the 2023 benefit year adult 
models. In particular, we considered the cases of RXCUI to RXC mapping 
of Descovy[supreg] and hydroxychloroquine sulfate. For Descovy[supreg], 
we did not propose to make an exception to remove Descovy[supreg] from 
mapping to RXC 01 in 2017, 2018 or 2019 benefit year enrollee-level 
EDGE datasets used for the 2023 benefit year recalibration of the adult 
models. For hydroxychloroquine sulfate, we proposed 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 the one used for the 2022 benefit year risk 
adjustment model recalibration and would instead 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 explained that 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.\97\ 
For a full discussion of these examples, see the HHS Notice of Benefit 
and Payment Parameters for 2023 proposed rule (87 FR 608 through 609).
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    \95\ For example, in reviewing drugs removed in Q1 2020, the 
average effect of the removal of a single therapeutic drug 
ingredient was an approximate decrease of 0.14 percent in total 
pharmacy claims spending among RXC drugs. In reviewing drugs removed 
in Q1 2021, the average effect of the removal of a single non-
hydroxychloroquine therapeutic drug ingredient was an approximate 
decrease of 0.68 percent in total pharmacy claims spending among RXC 
drugs.
    \96\ See, for example, 86 FR 24180.
    \97\ 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. See 
85 FR 78582 through 78583.
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    After reviewing the public comments on the various risk adjustment 
RXC proposals, we are finalizing using the Q4 RXC mapping document for 
each benefit year of recalibration data, as proposed. Additionally, as 
proposed, we will remove hydroxychloroquine sulfate in the 2023 benefit 
year model recalibration and will not 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 summarize and respond to public comments received on all of the 
risk adjustment recalibration RXC mapping proposals below.
    Comment: Several commenters supported our RXC mapping proposal to 
recalibrate the 2023 benefit year models and future model years using 
the final, Q4 RXC Crosswalk associated with the applicable EDGE data 
year, with the exception of the 2017 enrollee-level EDGE data year, for 
which we would use the most recent RXC mapping document that was 
available when we first processed the 2017 enrollee-level EDGE data (Q2 
2018). Those supporting comments noted that the changes improve the 
risk adjustment models and will align condition identification 
experienced in the data year with concurrent relevance of particular 
drugs for each RXC. These commenters appreciated the increased 
transparency into the approach HHS takes to RXC mapping noting it would 
allow stakeholders to plan for downstream implications of changes to 
RXC mapping.
    A few commenters requested that HHS provide a technical paper on 
the impact of the different approaches outlined in the RXC mapping 
proposal. One commenter requested that HHS provide a technical paper 
with analysis on the impact of the different approaches for identifying 
the RXC mapping document to use for the annual recalibration of the 
adult models, but stated that in lieu of that analysis, the commenter 
would support the adoption of the alternative approach to use the 
latest RXC mapping available at the time of recalibration as it would 
most closely aligns costs between recalibration data and current 
benefit year data.
    Response: We appreciate the support for the proposal to recalibrate 
the adult risk adjustment model using the final, Q4 RXC Crosswalk 
associated with the applicable EDGE data year. Recalibrating the adult 
risk adjustment models using the final, Q4 RXC mapping document that 
was applicable for each benefit year of data that is included in the 
applicable benefit year's model recalibration will ensure that we are 
capturing the utilization and costs observed for the underlying drugs 
in use in that year for the condition. We are finalizing, as proposed, 
implementation of this approach beginning with the 2023 benefit year 
recalibration of the adult models, with an exception for the 2017 
enrollee-level EDGE data year, for which we will 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 will generally 
hold these mappings constant when using the 2018 and 2019 enrollee-
level EDGE data years in future benefit year model recalibrations 
(except under the extenuating circumstances that are described 
previously in this section that can result in targeted changes to RXC 
mappings)--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.
    We also agree that this approach will improve issuers' ability to 
plan for downstream implications of changes to RXC mapping as it will 
provide 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. We believe that the benefits of limiting 
the volatility of some coefficients from year-to-year, ensuring that we 
are capturing the utilization and costs observed for the underlying 
drugs in use during the data year, and improving issuers' ability to 
plan for downstream implications of changes to RXC mapping outweigh the 
benefits of the alternative approach of using the latest RXC mapping 
available at the time of recalibration. Based on the detailed

[[Page 27234]]

comments received in response to the proposals for identifying the 
version of the RXC mapping document used for the annual recalibration 
of the adult models, we do not believe that additional analysis or a 
technical paper of the approaches to identifying the RXC mapping 
document for recalibration purposes is needed at this time.
    Comment: Several commenters inquired about the timing of RXC 
Crosswalk changes that occur outside of the model recalibration 
process. Some requested notification of RXC Crosswalk changes for drugs 
that could have large impacts on risk adjustment transfers in the 
spring prior to the applicable benefit year. Others requested HHS 
finalize and announce the RXC Crosswalk changes that occur outside of 
the model recalibration process for an applicable benefit year no later 
than the December preceding the applicable benefit year, examine 
opportunities to identify and release such changes ahead of applicable 
State Exchange pricing deadlines, and communicate the final mappings 
prior to the end of the applicable benefit year. For changes to the RXC 
mappings that occur during the risk adjustment benefit year, one 
commenter suggested that HHS consider the relative benefit of removing 
an RXC at a late stage (that is, the fourth quarter of data submission) 
relative to potential impact on market stability and financial outcomes 
for issuers. Another commenter asserted that the timely inclusion of 
new drugs in the model will help ensure the incentives created by risk 
adjustment do not contribute to delays in the coverage of new 
treatments and recommended HHS monitor trends in drug coverage on risk 
adjustment plans to ensure that specific RXC mapping updates are not 
negatively impacting patient access to needed medications.
    Response: We acknowledge commenters' desire to receive RXC 
Crosswalk updates as early as possible in order to fit rating 
timetables and reduce uncertainty. We clarify that, as part of our 
regular Crosswalk review process, we make regular changes that do not 
typically meaningfully impact coefficients and we release this 
information at its earliest availability through DIY software updates 
posted on the CCIIO website and EDGE global reference updates published 
through REGTAP.\98\ However, we have found that there may be a 
relatively small number of drugs that require additional consideration 
given changes that can occur between the data year and the applicable 
benefit year of risk adjustment. As such, we continue to believe that 
it is appropriate to update the risk adjustment mapping of RXCUIs to 
RXCs, along with the list of NDCs and HCPCS that Crosswalk to each 
RXCUI, throughout a benefit year of risk adjustment, while also 
retaining the flexibility to make targeted removals of drugs from the 
RXC Crosswalk and mapping document during the annual recalibration 
process.
---------------------------------------------------------------------------

    \98\ CMS Registration for Technical Assistance Portal (REGTAP), 
available at https://regtap.cms.gov/index.php.
---------------------------------------------------------------------------

    Based on our experience since the incorporation of RXCs into adult 
risk adjustment models in the 2018 benefit year, the removal of an 
RXCUI from the RXC mappings (and the associated removal of the NDCs and 
HCPCS associated with that RXCUI) has not typically been material to 
recalibration because most drug removals are not associated with 
utilization and cost levels that would have a meaningful impact on 
model coefficients. However, in extenuating circumstances where HHS 
believes there will be a significant impact, we will consider whether 
targeted RXC mapping changes for recalibration are necessary or 
appropriate, using the criteria outlined above.
    As far as our regular crosswalk review process, we acknowledge 
commenter concerns over the relative benefit of late stage changes to 
RXC mappings relative to potential impact on market stability and 
financial outcomes for issuers, but we continue to believe that it is 
appropriate to update the risk adjustment mapping of RXCUIs to RXCs 
throughout a benefit year of risk adjustment. We also note that we 
rarely remove entire RXC categories from the risk adjustment models. 
Since the RXCs were introduced in 2018, only two RXC categories have 
been removed altogether and that type of structural change to the RXC 
factors was pursued through notice-and-comment rulemaking (83 FR 
16941).
    Comment: Some commenters requested clarification on how drugs with 
multiple indications are treated in considering changes to RXC mapping 
changes that occur outside the annual recalibration process and more 
clear criteria for these types of drug changes.
    Response: We provided an explanation of the criteria used to 
develop the RXCUI to RXC Crosswalk in the 2017 Creation of the 2018 
Benefit Year HHS-Operated Risk Adjustment Adult Models Draft 
Prescription Drug (RXCUIs) to HHS Drug Classes (RXCs) Crosswalk 
Memorandum.\99\ In short, drugs with multiple indications are evaluated 
by clinical experts to determine if they have reliable specificity to 
the RXC-associated diagnoses. New drugs with multiple indications that 
are all associated with diagnoses in the drug-diagnosis pairs that a 
particular RXC represents are included in that RXC. Drugs associated 
with the drug-diagnosis pairs of multiple RXCs, or with diagnoses both 
paired and unpaired with an RXC, can be evaluated against existing 
drugs with the same active ingredients. Alternatively, these drugs need 
clinical evidence that the RXC-associated diagnosis is the primary 
intended clinical application. In the absence of evidence, such drugs 
with multiple indications would not be mapped to an RXC.
---------------------------------------------------------------------------

    \99\ Creation of the 2018 Benefit Year HHS-Operated Risk 
Adjustment Adult Models Draft Prescription Drug (RXCUIs) to HHS Drug 
Classes (RXCs) Crosswalk. (2017, September 18). CMS. https://www.cms.gov/CCIIO/Resources/Regulations-and-Guidance/Downloads/Draft-RxC-Crosswalk-Memo-9-18-17.pdf.
---------------------------------------------------------------------------

    Comment: Some commenters requested a separate RXC for pre-exposure 
prophylaxis (PrEP).

[[Page 27235]]

    Response: We did not propose and are not finalizing the addition of 
PrEP as an RXC to the adult risk adjustment models. As explained in the 
2021 Payment Notice (85 FR 29187), we chose not to propose 
incorporating PrEP as an RXC because, as a general principle, RXCs are 
incorporated into the HHS risk adjustment adult models to impute a 
missing diagnosis or indicate severity of a diagnosis.\100\ Since the 
use of PrEP is currently recommended as a preventive service for 
persons who are not infected with HIV and are at high risk of HIV 
infection, the use of PrEP does not adequately represent risk due to an 
active condition, and would be inconsistent with this principle to add 
it as an RXC at this time. However, we incorporate 100 percent of the 
PrEP costs for enrollees without HIV diagnosis or treatment in the 
simulation of plan liability for purposes of recalibrating the adult 
and child models. We further note that enrollees in risk adjustment 
covered plans that use PrEP drugs in combination with another HIV 
treatment drug that maps to RXC 01 will still receive credit for RXC 01 
in the 2023 benefit year of risk adjustment. We will continue to 
explore these issues and the potential inclusion of PrEP as an RXC in 
future benefit years, as may be appropriate.
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    \100\ See 81 FR 94058 at 94075. See also March 31, 2016, HHS-
Operated Risk Adjustment Methodology Meeting Questions & Answers. 
(2016, June 8). CMS. https://www.cms.gov/CCIIO/Resources/Fact-Sheets-and-FAQs/Downloads/RA-OnsiteQA-060816.pdf.
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    Comment: One commenter supported the targeted removal of 
hydroxychloroquine sulfate from the data used for recalibration and 
supported our decision not to effectuate a targeted removal of 
Descovy[supreg], one commenter supported the removal of the mapping of 
hydroxychloroquine sulfate to an RXC, and one commenter generally 
asserted that Descovy[supreg] should not be mapped to RXC 01.
    Response: We appreciate comments on our discussion of the treatment 
of hydroxychloroquine sulfate and Descovy[supreg]. For the 2023 benefit 
year, we are finalizing, as proposed, the removal of 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 recalibration of the adult risk adjustment models for the 
2023 benefit year.\101\ In addition, we included Descovy[supreg] in the 
mapping to RXC 01 (Anti-HIV Agents) for 2023 benefit year risk 
adjustment model recalibration, as the benefits of maintaining this 
mapping outweigh the benefits of removing it.
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    \101\ The same concern was not present for the 2017 enrollee-
level EDGE dataset--the other data year that will be used for the 
2023 benefit year adult model recalibration--because 
hydroxychloroquine sulfate was not included in the RXC Crosswalk 
until 2018.
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e. List of Factors to be Employed in the Risk Adjustment Models
    Consistent with our approach in previous benefit years, we will 
release the final 2023 benefit year coefficients in guidance after 
publication of the final rule, as we were unable to finalize them in 
time to publish in this final rule.\102\
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    \102\ See 45 CFR 153.320(b)(1)(i).
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f. Cost-Sharing Reduction Adjustments
    In the HHS Notice of Benefit and Payment Parameters for 2023 
proposed rule (87 FR 584, 623), we proposed to continue including an 
adjustment for the receipt of CSRs in the risk adjustment models in all 
50 States and the District of Columbia. We explained that while we 
continue to study and explore ways to update the CSR adjustments to 
improve prediction for CSR enrollees,\103\ for the 2023 benefit year, 
to maintain stability and certainty for issuers, we proposed to 
maintain the CSR adjustment factors finalized in the 2019, 2020, 2021, 
and 2022 Payment Notices.\104\ See Table 4. We also proposed to 
continue to use a CSR adjustment factor of 1.12 for all Massachusetts 
wrap-around plans in the risk adjustment PLRS calculation, as all of 
Massachusetts' cost-sharing plan variations have AVs above 94 
percent.\105\
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    \103\ See Appendix A. HHS-Operated Risk Adjustment Technical 
Paper on Possible Model Changes. (2021, October 26). CMS. https://www.cms.gov/files/document/2021-ra-technical-paper.pdf.
    \104\ See 83 FR 16930 at 16953; 84 FR 17454 at 17478 through 
17479; 85 FR 29164 at 29190; and 86 FR 24140 at 24181.
    \105\ See 81 FR 12203 at 12228.
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    We sought comment on these proposals.
    [GRAPHIC] [TIFF OMITTED] TR06MY22.003
    

[[Page 27236]]


    After reviewing the public comments, we are finalizing the CSR 
adjustment factors as proposed. We summarize and respond to public 
comments received on cost-sharing reduction adjustments below.
    Comment: One commenter supported the use of CSR adjustment factor 
of 1.12 for all Massachusetts wrap-around plans. Another commenter 
noted that HHS should continue to evaluate the purpose and 
appropriateness of the current CSR adjustment factors in light of 
continued non-funding of CSR subsidies and the potential socioeconomic 
health equity issues associated with the lower-than-anticipated induced 
utilization level identified in the 2021 RA Technical Paper. Another 
commenter recommended that HHS use a CSR-specific adult model that uses 
CSR enrollees' paid claims.
    Response: We are finalizing the CSR adjustment factors as proposed. 
For the 2023 benefit year, we are maintaining the CSR adjustment 
factors finalized in the 2019, 2020, 2021, and 2022 Payment Notices to 
maintain stability and certainty for issuers. We did not propose and 
are not finalizing the addition of a CSR-specific adult model that uses 
CSR enrollees' paid claims. We agree continued study of the current CSR 
adjustment factors is warranted. We intend to consider different 
options for potential changes to the CSR factors for future benefit 
years, including those outlined in the 2021 RA Technical Paper.\106\ We 
would pursue any changes to the CSR adjustment factors in future 
notice-and-comment rulemaking.
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    \106\ See Section A.3. HHS-Operated Risk Adjustment Technical 
Paper on Possible Model Changes. (2021, October 26). CMS. https://www.cms.gov/files/document/2021-ra-technical-paper.pdf.
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g. Model Performance Statistics
    Each benefit year, to evaluate risk adjustment model performance, 
we examined 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 HHS risk adjustment models, the R-squared statistic and 
the PRs are in the range of published estimates for concurrent risk 
adjustment models.\107\ Because we blend the coefficients from 
separately solved models based on the 2017, 2018, and 2019 benefit 
years' enrollee-level EDGE data, we publish the R-squared statistic for 
each model separately to verify their statistical validity. We will 
publish the final 2023 benefit year R-squared statistics with the final 
2023 benefit year risk adjustment coefficients in guidance.
---------------------------------------------------------------------------

    \107\ See Hileman, G. & Spenser S. (2016). Accuracy of Claims-
Based Risk Scoring Models. Society of Actuaries.
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    We did not receive any comments in response to the model 
performance statistics discussion.
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.\108\ We 
explained that under this approach, we will no longer republish these 
formulas in future annual HHS notices of benefit and payment parameters 
unless changes are being proposed. We did not propose any changes to 
the formula in this rule and therefore are not republishing the 
formulas in this rule. We will 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.\109\
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    \108\ See 86 FR 24183 through 24186.
    \109\ For an illustration and further details on the State 
payment transfer formula, see 86 FR 24183 through 24186.
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    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.\110\ 
We did not propose any changes to the high-cost risk pool parameters 
for the 2023 benefit year; therefore, we will maintain the $1 million 
threshold and 60 percent coinsurance rate.
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    \110\ See 84 FR 17466 through 17468.
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    We did not receive any comments in response to the overview of the 
HHS risk adjustment methodology applicable to the 2023 benefit year.
4. Risk Adjustment State Flexibility Requests (Sec.  153.320(d))
    We proposed to repeal the ability of States to request a reduction 
in risk adjustment State transfers under Sec.  153.320(d) starting with 
the 2024 benefit year, with an exception for States that have requested 
such reductions in prior benefit years.\111\ We also published and 
sought 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.
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    \111\ 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. See 84 FR 
17484 through 17485 and 85 FR 29193 through 29194. 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. See 86 FR 24187 through 
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.\112\ 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. The State 
asserted that its 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).
---------------------------------------------------------------------------

    \112\ 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 other than 2020 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

[[Page 27237]]

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 sought 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 were posted under the ``State 
Flexibility Requests'' heading at https://www.cms.gov/CCIIO/Programs-and-Initiatives/Premium-Stabilization-Programs/index.html.
    After reviewing the public comments and Alabama's supporting 
documentation, we are approving a 25 percent reduction in Alabama's 
individual market transfers and a 10 percent reduction in Alabama's 
small group market transfers for the 2023 benefit year.
    We summarize and respond to the public comments on Alabama's 
requests for reduced risk adjustment transfers for the 2023 benefit 
year below.
    Comment: A few commenters supported Alabama's requests to reduce 
risk adjustment transfers in its individual and small group markets for 
the 2023 benefit year, stating the State is best suited to decide 
whether an adjustment is needed within the market to maintain 
competition and program integrity. Some of these commenters reiterated 
the State's arguments that 2020 data for the small group market may be 
unreliable due to the COVID-19 PHE. One commenter recommended that HHS 
not use 2020 data as the sole basis for the determination and analysis 
of the State's individual and small group market reduction requests. 
Another commenter suggested that HHS should use other metrics besides 
the de minimis threshold, such as the market share of issuers, to 
assess the State flexibility requests.
    However, other commenters opposed Alabama's 2023 reduction 
requests, stating that the requested reductions would diminish the 
effectiveness of the HHS-operated risk adjustment program. One 
commenter who opposed the State's requests stated that there was no 
mathematical reason why the presence of one large issuer would preclude 
HHS-operated risk adjustment from functioning appropriately in Alabama. 
Many commenters opposed to Alabama's requests expressed more general 
concern with the transfer reduction request for the individual market 
than the small group market, stating that the approval of the request 
in the individual market would result in increased adverse selection.
    Some commenters also asserted that the State did not meet its 
burden to substantiate the requests under the criteria established in 
Sec.  153.320(d). One of these commenters provided detailed data 
suggesting the requested individual market transfer reduction would 
increase premiums for one impacted Alabama issuer by an amount greater 
than the de minimis threshold for the 2023 benefit year. This commenter 
noted based on their experience from the 2022 benefit year (the first 
year for which the State requested and HHS approved a 50 percent 
reduction in risk adjustment transfers in the individual market), their 
analysis showed a 50 percent reduction in the Alabama individual market 
for the 2023 benefit year is likely to lead to an approximately 2 
percent increase in their premiums.\113\
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    \113\ BCBSAL Comment Letter. (2022, January 27). CMS. https://www.regulations.gov/comment/CMS-2021-0196-0195.
---------------------------------------------------------------------------

    Response: We continue to believe and recognize that risk adjustment 
is critical to the proper functioning of the individual and small group 
(including merged) markets, and we acknowledge commenters' concerns 
that approving requested reductions in risk adjustment transfers could 
impact the effectiveness of the risk adjustment program. Therefore, our 
assessment of the relative benefits of allowing States to request a 
reduction in risk adjustment transfers has been and continues to be on-
going, especially when a State always retains the option to operate its 
own risk adjustment program if the State believes that the HHS-operated 
risk adjustment program does not capture its State specific dynamics. 
As discussed in detail below, we are finalizing amendments to Sec.  
153.320(d) and the framework for State reduction requests \114\ 
applicable beginning with the 2024 benefit year; that is, beginning 
with the 2024 benefit year, only prior participants can make such 
requests and the requests will only be reviewed and approved under the 
de minimis threshold framework and criteria. In addition, in future 
rulemaking, we intend to propose to eliminate the prior participant 
exception and fully repeal the State flexibility framework beginning 
with the 2025 benefit year.
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    \114\ As detailed further later, we are finalizing, as proposed, 
the removal of 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's individual, 
small group or merged market. We are also finalizing the amendments 
that limit this flexibility to prior participants beginning with the 
2024 benefit year.
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    However, current regulation allows States to request to reduce risk 
adjustment State transfers, and if the State's reduction request meets 
the applicable standards under Sec.  153.320(d)(1)(i), HHS will approve 
the requests, subject to Sec.  153.320(d)(4)(ii). Therefore, HHS' 
review of and the approval process for the State flexibility requests 
submitted by Alabama for the 2023 benefit year are guided by the 
applicable framework and criteria established in regulation under Sec.  
153.320(d)(4), which provides that HHS will approve State reduction 
requests if HHS determines, based on a review of the State's 
submission, along with relevant public comments and other relevant 
factors, including the premium impact of the reduction, that (A) the 
State-specific factors warrant an adjustment to risk adjustment 
transfers and support the percentage reduction requested, or (B) the 
State-specific factors warrant an adjustment to risk adjustment 
transfers and the requested reduction would have a de minimis impact on 
transfers for issuers that would receive reduced transfer payments. 
Because Alabama's individual and small group market reduction requests 
included analysis of the premium impacts of the proposed reduction 
under the de minimis framework, HHS' review falls under the criteria 
established under Sec.  153.320(d)(4)(i)(B); that is, HHS will approve 
the State's reduction request if HHS determines that State-specific 
rules 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. Therefore, so long as this policy remains in place, 
it would not be appropriate to use other metrics besides the de minimis 
threshold, such as the market share of issuers, to review Alabama's 
2023 benefit year reduction requests. Additionally, we do not believe 
that approving Alabama's 2023 benefit year requests will undermine the 
efficiency of risk adjustment in the State. We believe the minimal 
impact on transfers, which is further mitigated by the approval of 
lower amounts than requested, is outweighed by the benefit of 
continuing to support the State's efforts to regulate its market risk 
pools

[[Page 27238]]

and leverage the flexibility currently available under Sec.  
153.320(d).\115\
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    \115\ As detailed elsewhere in this rule, we are finalizing the 
amendments to the State flexibility to request transfer reduction 
framework, including the creation of the prior participant 
exception, as proposed, and intend to propose to fully repeal the 
framework in a future rulemaking.
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    For the individual market, the State provided information in 
support of its 50 percent reduction request, including information on 
the unique State-specific market dynamics that it identified as 
warranting an adjustment to HHS calculated transfers and its analysis 
that the reduction requested would have a de minimis impact on 
necessary premium increases. HHS also received public comments in 
opposition to Alabama's individual market request for the 2023 benefit 
year. Specifically, an issuer in Alabama shared its data analysis 
showing a 50 percent reduction would require it to increase its 
premiums by more than 1 percent.\116\ In the comment, the issuer stated 
that a 50 percent reduction would lead to an approximately 2 percent 
increase in individual market premiums, which would fail to meet the de 
minimis threshold established for State requests and HHS approval of 
such requests under Sec.  153.320(d)(1)(iii) and (d)(4)(i)(B), 
respectively.\117\ However, consistent with Sec.  153.320(d)(4)(ii), 
HHS may approve a reduction amount that is lower than the amount 
requested in circumstances where the supporting evidence and analysis 
do not fully support the requested reduction amount.\118\ When 
exercising this flexibility, HHS may assess other relevant factors, 
including the premium impact of the transfer reduction for the 
applicable State market risk pool.
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    \116\ BCBSAL Comment Letter. (2022, January 28). CMS. https://www.regulations.gov/comment/CMS-2021-0196-0195.
    \117\ As explained in the 2019 Payment Notice, to satisfy the de 
minimis threshold applicable to these requests, the State request 
must demonstrate the requested reduction in risk adjustment payments 
would be so small for issuers who would receive risk adjustment 
payments, that the reduction would have a de minimis effect on the 
necessary premium increase to cover the affected issuer's or 
issuers' reduced payments. See 83 FR 16955 through 16960.
    \118\ See 45 CFR 153.320(d)(4)(ii).
---------------------------------------------------------------------------

    Following our consideration of the State's submission and public 
comments, HHS determined that Alabama provided sufficient information 
on the unique State-specific market dynamics that it identified as 
warranting an adjustment to the HHS calculated transfers for the 
State's individual market, but the supporting evidence and analysis did 
not fully support the requested reduction amount. Therefore, HHS 
assessed other relevant factors, including the premium impact of the 
reduction, as well as relevant factors (for example, detailed 
stakeholder analysis of the estimated impact of the reduction on price 
positions \119\). This included consideration and comparison of the 
data and supporting information submitted by the State and commenters, 
as well as plan selection and premium data for Alabama. Based on that 
assessment, HHS has determined that it would be appropriate to approve 
a reduction amount that is lower than the amount requested, consistent 
with Sec.  153.320(d)(4)(ii). More specifically, we began our review of 
the State's individual market reduction request with consideration of 
available 2020 data \120\ and the State's submitted analysis. We also 
considered detailed stakeholder comments that provided tangible 
evidence of changing price and market share positions, using 2021 and 
2022 data, that raised significant questions about the impact a 50 
percent reduction in individual market transfers would have on 
premiums. These comments estimated a 50 percent reduction in individual 
market transfers would lead to an approximately 2 percent premium 
increase based on the stakeholder's experience and the impact of the 
approval of the State's request to reduce 2022 benefit year individual 
market transfers by 50 percent. Using open enrollment plan selection 
and premium data for the individual market in Alabama from the same 
benefit years as the commenter (2021 and 2022),\121\ HHS found the 
commenter's assumptions regarding the approximately 2 percent increase 
in premiums to be reasonable. Specifically, HHS' analysis supports the 
commenters' assertions that a 50 percent reduction in 2023 benefit year 
individual market transfers would lead to a greater than de minimis 
increase in necessary premiums to cover the reduced payments. HHS is 
therefore exercising the flexibility under Sec.  153.320(d)(4)(ii) to 
approve Alabama's requested reduction to individual market transfers, 
but at an amount lower than requested. To ensure the transfer reduction 
meets the de minimis threshold and does not increase premiums by more 
than 1 percent, we are approving a 25 percent reduction to 2023 benefit 
year risk adjustment transfers in Alabama's individual market 
(including the catastrophic and non-catastrophic risk pools).
---------------------------------------------------------------------------

    \119\ Commenter's analysis available at BCBSAL Comment Letter. 
(2022, January 28). CMS. https://www.regulations.gov/comment/CMS-2021-0196-0195. Issuer specific BY 2021 and 2022 EDGE enrollment and 
premium data are not publicly available. However, plan-level QHP 
rates are available in the Health Insurance Exchange Public Use 
Files. (2021, 2022). CMS. https://www.cms.gov/CCIIO/Resources/Data-Resources/marketplace-puf.
    \120\ Similar to our approach in considering Alabama's reduction 
requests in previous years, we considered the most recent data 
available (for example, for the 2022 benefit year, we considered 
2019 data as part of the analysis). This included consideration of 
available EDGE premium and enrollment plan-level data and risk 
adjustment transfer data.
    \121\ Commenter's analysis available at BCBSAL Comment Letter. 
(2022, January 28). CMS. https://www.regulations.gov/comment/CMS-2021-0196-0195. BY 2021 and 2022 open enrollment plan selection and 
premium data are not publicly available. However, plan-level QHP 
rates are available in the Health Insurance Exchange Public Use 
Files. (2021, 2022). CMS. https://www.cms.gov/CCIIO/Resources/Data-Resources/marketplace-puf.
---------------------------------------------------------------------------

    For the small group market, the State's reduction request 
acknowledges 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 using other prior 
years of data 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. HHS also received comments expressing general 
opposition to the State's small group market request for the 2023 
benefit year.
    Following our consideration of the State's submission and public 
comments, HHS determined that Alabama provided sufficient information 
on the unique State-specific market dynamics that it identified as 
warranting an adjustment to the HHS calculated transfers for the 
State's small group market, but the supporting evidence and analysis 
did not fully support the requested reduction amount. Therefore, HHS 
assessed other relevant factors, including the premium impact of the 
transfer reduction for the applicable State market risk pool. This 
included comparison of the data and supporting information submitted by 
the State and commenters, as well as EDGE premium and enrollment plan-
level data for Alabama's small group market.\122\ It also included 
consideration of the acknowledgement by Alabama in its request that a 
50 percent reduction in 2023 benefit year small group market transfers 
would exceed the applicable de minimis threshold.
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    \122\ HHS does not have the same open enrollment plan selection 
and premium data on the small group market in Alabama as it does for 
the individual market in Alabama; therefore, EDGE premium and 
enrollment plan-level data was used for the small group market 
assessment.

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[[Page 27239]]

    Based on our review of the unredacted supporting evidence submitted 
by the State, 2020 benefit year risk adjustment transfer data,\123\ and 
2020 benefit year EDGE premium and enrollment data available to 
HHS,\124\ we determined it would be appropriate to approve a reduction 
amount for the small group market that is lower than the amount 
requested, consistent with Sec.  153.320(d)(4)(ii). Using the most 
recent 2020 plan-level data available to HHS,\125\ HHS estimated 
transfer calculations as a percent of premiums, which indicated that 
the risk adjustment payment recipient would have to increase premiums 
by approximately 5 percent to cover a 50 percent reduction in 
transfers.\126\ Based on this calculation, HHS concluded that a 10 
percent reduction in risk adjustment transfers would lead to a de 
minimis (less than 1 percent) premium increase in the small group 
market and therefore approves a 10 percent reduction in transfers in 
Alabama's small group market for the 2023 benefit year, exercising our 
flexibility under Sec.  153.320(d)(4)(ii) to approve an amount lower 
than requested.
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    \123\ Issuer specific BY 2020 risk adjustment transfers can be 
found in Summary Report on Permanent Risk Adjustment Transfers for 
the 2020 Benefit Year. (2021, June 30). CMS. https://www.cms.gov/CCIIO/Programs-and-Initiatives/Premium-Stabilization-Programs/Downloads/RA-Report-BY2020.pdf.
    \124\ For BY 2020, issuer specific EDGE premium data have not 
been made public.
    \125\ Issuer specific BY 2020 risk adjustment transfers can be 
found in Summary Report on Permanent Risk Adjustment Transfers for 
the 2020 Benefit Year. (2021, June 30). CMS. https://www.cms.gov/CCIIO/Programs-and-Initiatives/Premium-Stabilization-Programs/Downloads/RA-Report-BY2020.pdf. For BY 2020, the issuer specific 
EDGE premium and enrollment data used for this analysis have not 
been made public. However, plan-level QHP rates are available in the 
Health Insurance Exchange Public Use Files. (2020). CMS.
    \126\ Alabama's request acknowledged that reducing the risk 
transfer by 50 percent in the small group market will result in a 
more than de minimis impact of approximately 4 percent of premium. 
HHS' analysis indicated that the impact would be approximately 5 
percent of premium for the small group market risk payment 
recipient. HHS and Alabama's estimates slightly differ because we 
used different data sources in our analysis. HHS used 2020 benefit 
year data, including risk adjustment transfers and total premiums, 
to calculate the impact, while Alabama used 2020 benefit year data 
from the NAIC's Supplemental Health Care Exhibit for 2020. HHS 
believes our EDGE data most accurately reflects the risk adjustment 
transfer and premium data necessary to calculate the impact of the 
reduced transfers. Therefore, we based our approval of a 10 percent 
reduction in Alabama's small group risk adjustment State transfers 
based on the analysis showing that a 50 percent reduction would have 
an approximately 5 percent premium impact on the small group market 
payment recipient(s).
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    HHS disagrees with assertions that we should not consider 2020 data 
when considering the 2023 benefit year State flexibility reduction 
requests. As described in HHS' ``Summary Report on Permanent Risk 
Adjustment Transfers for the 2020 Benefit Year,'' risk adjustment State 
transfers as a percent of premiums remained relatively steady in 2020 
compared to the 2019 benefit year, and the amount of paid claims 
remained strongly correlated with risk adjustment State payments and 
charges.\127\ Therefore, to assess Alabama's 2023 benefit risk 
adjustment reduction requests, we considered 2020 data, similar to our 
approach in considering Alabama's risk adjustment reduction requests in 
previous years in which we use the most recent data available (for 
example, for the 2022 benefit year, we considered 2019 data as part of 
the analysis). Therefore, HHS followed the established precedent for 
review of these requests. We also considered other data years as part 
of our analysis of the State's individual market request in response to 
the detailed comments and analysis using other data years submitted by 
an impacted stakeholder that called into question whether the requested 
transfer reduction amount for that market would meet the de minimis 
threshold. Other relevant factors HHS considered were the limited 
experience with reduction requests in the individual market,\128\ the 
larger magnitude of risk adjustment transfers under the State payment 
transfer formula in the individual market compared to the small group 
market,\129\ as well as the increased opportunities for adverse 
selection in the individual market.\130\ In addition, the State's 
individual market request included an analysis that estimated the 
transfer impact of its requested reduction would meet the de minimis 
threshold, while its request for the small group market acknowledged 
the requested reduction to transfers would exceed the de minimis 
threshold.
---------------------------------------------------------------------------

    \127\ Summary Report on Permanent Risk Adjustment Transfers for 
the 2020 Benefit Year. (2021, June 30). CMS. https://www.cms.gov/CCIIO/Programs-and-Initiatives/Premium-Stabilization-Programs/Downloads/RA-Report-BY2020.pdf.
    \128\ The 2022 benefit year was the first year Alabama 
requested, and HHS approved, a reduction request for the individual 
market under the State flexibility framework. See, for example, 86 
FR 24187 through 24189. In contrast, Alabama requested, and HHS 
approved, reductions to small group market transfers for several 
years, beginning with the 2020 benefit year and continuing through 
the approval, in this rule, of an amount lower than requested for 
the 2023 benefit year.
    \129\ Summary Report on Permanent Risk Adjustment Transfers for 
the 2020 Benefit Year. (2021, June 30). CMS. https://www.cms.gov/CCIIO/Programs-and-Initiatives/Premium-Stabilization-Programs/Downloads/RA-Report-BY2020.pdf.
    \130\ In the small group market, employers select the plans 
offered to their employees and often pay a significant portion of 
employees' premiums to encourage enrollment. Depending on the 
participation rules and market dynamics in a particular State, risk 
selection can be significantly less in a State's small group market 
compared to the individual market.
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b. Repeal of Risk Adjustment State Flexibility To Request a Reduction 
in Risk Adjustment State Transfers (Sec.  153.320(d))
    In the HHS Notice of Benefit and Payment Parameters for 2023 
proposed rule (87 FR 584, 625), we proposed numerous amendments to 
Sec.  153.320(d) to 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).
    Following our consideration of the State flexibility framework 
consistent with the instructions in E.O. 14009 \131\ and prior comments 
we received on this policy, as well as the general low level of 
interest States have expressed in the policy, we proposed, 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 that 
previously requested this flexibility in prior benefit years, namely, 
Alabama.
---------------------------------------------------------------------------

    \131\ E.O. 14009; 86 FR 7793 (2021, February 2).
---------------------------------------------------------------------------

    For prior participant reduction requests for the 2024 benefit year 
and beyond, we also proposed to remove the option for the State to 
demonstrate that State-specific 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. Instead, we proposed prior participants would 
be required to demonstrate their requests satisfy the de minimis impact 
standard. Under this standard, the requesting State is required to show 
that the requested transfer reduction would not cause premiums in the 
relevant market risk pool to increase by more than 1 percent. We 
proposed conforming amendments to the HHS approval framework under 
Sec.  153.320(d)(4)(i) and clarified that HHS would retain the 
flexibility under Sec.  153.320(d)(4)(ii) to approve a lower reduction 
amount than requested if the State's supporting evidence and analysis 
do not fully support the requested amount. We also clarified 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,

[[Page 27240]]

not to automatically apply previously approved transfer reductions to 
future benefit years. Instead, a prior participant would 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).
    We sought comment on this proposal.
    After reviewing the public comments, we are finalizing as proposed 
the amendments to Sec.  153.320(d) that repeal the State flexibility 
framework for States to request reductions in risk adjustment State 
transfer payments for the 2024 benefit year and beyond, with an 
exception for prior participants. We are also finalizing that beginning 
with the 2024 benefit year, States submitting reduction requests must 
demonstrate that the requested reduction satisfies the de minimis 
standard--that is, the premium increase necessary to cover the affected 
issuer's or issuers' reduced payments does not exceed 1 percent in the 
relevant State market risk pool.\132\ We are finalizing the conforming 
amendments to the HHS approval framework in Sec.  153.320(d)(4)(i) to 
reflect the changes to the applicable criteria (that is, only retaining 
the de minimis criterion) beginning with the 2024 benefit year, as well 
as the proposed definition of ``prior participant'' in Sec.  
153.320(d)(5). In future rulemaking, HHS intends to propose to 
eliminate the prior participant exception beginning with the 2025 
benefit year.
---------------------------------------------------------------------------

    \132\ 83 FR 16957.
---------------------------------------------------------------------------

    We summarize and respond to public comments received on repeal of 
risk adjustment State flexibility to request a reduction in risk 
adjustment State transfers Sec.  153.320(d) below.
    Comment: Several commenters supported the proposal to repeal the 
ability for States to request a reduction in risk adjustment State 
transfers in both the individual and small group markets due to 
concerns that the reduction in transfers would contribute to adverse 
selection, increase premiums, and reduce plan options. Commenters 
stated that reducing the risk adjustment State transfers incentivizes 
issuers to avoid enrolling chronically ill consumers in the individual 
market and companies whose workers have above-average costs in the 
small group market. Commenters supporting the repeal also noted that 
States can run their own risk adjustment programs if they do not think 
the HHS-operated risk adjustment program works for their State. Many of 
the commenters supporting the repeal also opposed the proposal to make 
an exception for prior participating States and requested that HHS 
instead repeal this policy in its entirety.
    Conversely, several commenters opposed the proposal to repeal the 
ability for States to request a reduction in risk adjustment State 
transfers because they support the ability for States to make their own 
decisions about how best to address the unique circumstances of their 
insurance markets. Some of these commenters also noted that HHS has the 
ability to review and reject these requests, indicating that there are 
appropriate guardrails in place such that States should continue to be 
offered this flexibility. Additionally, some of these commenters 
generally opposed the proposed repeal, and in particular opposed 
limiting the ability to request reductions to prior participants, 
noting that other States may develop the same market dynamics as the 
one prior participating State and should have the same ability to 
request reductions. One of the commenters opposed to the repeal noted 
concerns with the ability for States to run their own risk adjustment 
programs, due to the costs to implement such a program within a State.
    Response: We are finalizing, as proposed, the repeal of 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 
prior participants.\133\ As detailed in the proposed rule, our further 
consideration of prior stakeholder feedback, along with consideration 
of the proposals in light of E.O. 14009,\134\ and the very low level of 
interest from States since the policy was adopted, resulted in an 
evaluation of whether the policy should be continued and if so, in what 
manner. After reviewing public comments in response to the proposed 
amendments to Sec.  153.320(d), including the proposed creation of the 
prior participant exception, and further consideration of the State 
flexibility framework under E.O. 14009, we are finalizing this policy 
as proposed with the intention to propose in future rulemaking to 
repeal the exception for prior participants beginning with the 2025 
benefit year to provide impacted stakeholders additional time to 
prepare for this change and the potential elimination of this 
flexibility.
---------------------------------------------------------------------------

    \133\ This includes finalizing, as proposed, the definition in 
Sec.  153.320(d)(5) for prior participants.
    \134\ 86 FR 7793 (Feb. 2, 2021).
---------------------------------------------------------------------------

    For the 2024 benefit year and beyond, we are also finalizing, as 
proposed, the removal of the option for States 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 
market risk pool as the justification for the State's request and the 
criteria for HHS approval under Sec.  153.320(d)(4)(i). This retains 
the de minimis standard as the only option for prior participants to 
justify the reduction and for HHS to approve a request and is designed 
to 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. 
Therefore, the only State to have requested risk adjustment transfer 
reductions from benefit year 2020 to benefit year 2023, Alabama, will 
be the only State permitted to request reductions in benefit year 2024. 
However, the de minimis standard will be the only option for Alabama to 
justify the reduction and for HHS review and approval of the requests. 
We recognize other States may develop the same or similar market 
dynamics in future benefit years. However, currently, only one State 
has sought to exercise the flexibility under Sec.  153.320(d) to tailor 
HHS risk adjustment, which is calibrated using a national dataset, 
pointing to these unique market dynamics. We therefore believe it is 
appropriate to provide a transition for this prior participant State, 
starting with the policies and amendments finalized in this rule that 
apply beginning with the 2024 benefit year. However, we are concerned 
about the potential long-term impact of allowing reductions to risk 
adjustment transfers in any State market risk pool, including the 
potential negative impacts on the program's ability to mitigate adverse 
selection and support stability in the individual and small group 
(including merged) markets. We therefore intend to propose a full 
repeal of the State flexibility framework (for all States) beginning in 
the 2025 benefit year in a future rulemaking.
    We agree with commenters who noted that States are best able to 
make their own decisions about how to address the unique circumstances 
of their insurance markets and remain the primary regulators of their 
insurance markets. At the same time, however, States have had a low 
level of interest in this flexibility. Since the 2020 benefit year, all 
States had the opportunity to submit reduction requests under Sec.  
153.320(d), and yet only one State has done so. Similarly,

[[Page 27241]]

since the 2014 benefit year, all States have had the opportunity to 
operate the risk adjustment program and, to date, only one State has 
done so--Massachusetts operated a State-based risk adjustment program 
from the 2014 through 2016 benefit years. Despite a broad range of 
market conditions across the 50 States and the District of Columbia, 
only two States have expressed interest in tailoring risk adjustment to 
address the unique circumstances of their insurance markets, which 
suggests that States generally do not want to operate their own risk 
adjustment program and demonstrates that the HHS-operated risk 
adjustment can work across a broad range of market conditions to 
mitigate adverse selection in the individual and small group (including 
merged) markets. Additionally, many commenters had concerns about the 
potential negative impacts of the transfer reductions on the State's 
insurance markets. Although, we note these outcomes have not entirely 
come to bear in Alabama, as new entrants have entered Alabama's 
individual market and QHP offerings have increased per county in 
benefit year 2022 \135\, other potential negative impacts include 
reduced plan quality and increased risk selection in the market. We 
reiterate that a strong risk adjustment program is necessary to support 
stability and address adverse selection in the individual and small 
group markets, and under E.O. 14009, we have concerns that this policy 
could undermine these goals in the long-term and therefore intend to 
propose a full repeal of the State flexibility framework under Sec.  
153.320(d) in a future rulemaking. Finally, we appreciate there are a 
number of different factors States consider when weighing whether to 
operate a State-based risk adjustment program, including but not 
limited to the costs associated with establishing and maintaining such 
a program. HHS remains committed to working with States and other 
stakeholders to encourage new market participants, mitigate adverse 
selection, and promote stable insurance markets through strong risk 
adjustment programs.
---------------------------------------------------------------------------

    \135\ Plan Year 2022 Qualified Health Plan Choice and Premiums 
in HealthCare.gov States. (2021, October 15), CMS. https://www.cms.gov/CCIIO/Resources/Data-Resources/Downloads/2022QHPPremiumsChoiceReport.pdf.
---------------------------------------------------------------------------

5. Risk Adjustment Issuer Data Requirements (Sec. Sec.  153.610, 
153.700, and 153.710)
    In the proposed rule, we proposed that issuers collect and make 
available for HHS' extraction from issuers' EDGE servers five new data 
elements--ZIP Code,\136\ race, ethnicity, an ICHRA indicator, and a 
subsidy indicator \137\--as part of the required risk adjustment data 
that issuers make accessible to HHS in States where HHS operates the 
risk adjustment program,\138\ beginning with the 2023 benefit year. We 
also proposed that we would extract these five new data elements 
beginning with the 2023 benefit year. Additionally, beginning with the 
2022 benefit year, we proposed HHS would extract from issuers' EDGE 
servers the following three data elements that issuers already make 
accessible to HHS as part of the required risk adjustment data--plan 
ID, rating area, and subscriber indicator. We proposed 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 proposed to expand 
and clarify the scope of permissible HHS uses for the data and the 
reports extracted from issuer EDGE servers (including summary reports 
and ad hoc query reports). Related to these proposals, we also 
considered the burden associated with the collection and extraction of 
these data elements, and solicited comments on 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, associated burdens, and 
accompanying comment solicitation.\139\
---------------------------------------------------------------------------

    \136\ ZIP Code\TM\ is a trademark of the United States Postal 
Service.
    \137\ The subsidy indicator is intended to indicate whether a 
particular enrollee is (or is not) receiving APTC.
    \138\ HHS has been operating the risk adjustment program in all 
50 states and the District of Columbia since the 2017 benefit year.
    \139\ For a full discussion of the background of the HHS-
operated risk adjustment program and the required risk adjustment 
data, as well as the proposals, see the proposed rule (87 FR 627 
through 632).
---------------------------------------------------------------------------

a. Collection and Extraction of New Data Elements and Extraction of 
Current Data Elements
    We proposed, beginning with the 2023 benefit year, 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, specifically: (1) ZIP Code, 
(2) race, (3) ethnicity, (4) subsidy indicator, and (5) ICHRA 
indicator. For race and ethnicity data, we proposed 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),\140\ which is collected at a granular level that would 
allow HHS to analyze more subpopulations than our current data allows, 
thereby allowing us to better identify and consider policies to address 
discrimination in health care and health disparities.141 142 
In addition to collecting and extracting these new data elements, we 
also proposed, beginning with the 2022 benefit year, to extract plan 
ID, rating area, and subscriber indicator from issuers' EDGE 
servers.\143\
---------------------------------------------------------------------------

    \140\ HHS Implementation Guidance on Data Collection Standards 
for Race, Ethnicity, Sex, Primary Language, and Disability Status. 
(2011, October 30), CMS. https://aspe.hhs.gov/reports/hhs-implementation-guidance-data-collection-standards-race-ethnicity-sex-primary-language-disability-0.
    \141\ As detailed later, we recognize issuers may not have race 
or ethnicity data for certain enrollees since enrollees are 
generally not required to provide race and ethnicity data, and we 
intend to include an option that could be used by issuers in these 
situations.
    \142\ See 87 FR 628 through 630.
    \143\ Ibid.
---------------------------------------------------------------------------

    We sought comments on these proposals.
    After reviewing the public comments, we are finalizing the proposal 
to collect and extract ZIP Code, race, ethnicity, an ICHRA indicator, 
and a subsidy indicator as part of the risk adjustment data issuers of 
risk adjustment covered plans are required to make accessible to HHS on 
their EDGE servers in States where HHS operates the risk adjustment 
program, beginning with the 2023 benefit year. Specifically, we are 
finalizing that starting with the 2023 benefit year, issuers will be 
required to populate the ZIP Code and subsidy indicator fields as part 
of their EDGE data submissions. The ZIP Code field will be formatted at 
the five-digit level, and the subsidy indicator will indicate whether a 
particular enrollee is (or is not) receiving APTC. We are also 
finalizing that starting with the 2023 benefit year, issuers will be 
required to report race, ethnicity, and ICHRA indicator information as 
part of their EDGE data submissions. The ICHRA indicator will indicate 
whether a particular enrollee's health care coverage involves (or does 
not involve) an ICHRA. Regarding formatting for race and ethnicity 
data, we are finalizing the collection of these data elements to be 
consistent with the 2011 HHS Data Standards,\144\ which are the 
standards

[[Page 27242]]

used by the FFE to collect these data through the Exchange 
application.\145\
---------------------------------------------------------------------------

    \144\ HHS Implementation Guidance on Data Collection Standards 
for Race, Ethnicity, Sex, Primary Language, and Disability Status. 
(2011, October 30) CMS. https://aspe.hhs.gov/reports/hhs-implementation-guidance-data-collection-standards-race-ethnicity-sex-primary-language-disability-0.
    \145\ As detailed later, we recognize issuers may not have race 
and/or ethnicity data for certain enrollees since enrollees are 
generally not required to provide race and ethnicity data and intend 
to include a version of ``unknown'' reporting option that could be 
used by issuers in these situations.
---------------------------------------------------------------------------

    For the 2023 and 2024 benefit years, we are adopting a transitional 
period during which issuers are required to populate the fields for 
race and ethnicity using only data they already collect or have 
accessible regarding their enrollees. For example, for the 2023 and 
2024 benefit years, for race and ethnicity data, issuers will be deemed 
in compliance if they submit these data elements using data they 
already have or collect through existing means, including, for example, 
through enrollee data captured and reported to the issuer by the FFE, 
SBE-FPs, and State Exchanges at the time of enrollment. Then, beginning 
with the 2025 benefit year, the transitional approach will end, and 
issuers will be required to populate the fields using available sources 
and, in the absence of such an existing source for particular 
enrollees, to make a good faith effort to ensure collection and 
submission of the race and ethnicity data for these enrollees.
    We are also finalizing, with slight modification to the 
transitional approach, collection of the ICHRA indicator. For the 2023 
and 2024 benefit year, similar to the transitional approach for race 
and ethnicity data, issuers are required to populate the field for the 
ICHRA indicator using only data they already collect or have accessible 
regarding their enrollees.\146\ Then, beginning with the 2025 benefit 
year, the transitional approach will end, and issuers will be required 
to populate the field using available sources (for example, information 
from Exchanges and small employers, and requesting information directly 
from enrollees) and, in the absence of an existing source for 
particular enrollees, to make a good faith effort to ensure collection 
and submission of the ICHRA indicator for these enrollees.
---------------------------------------------------------------------------

    \146\ In the proposed rule, we proposed a transitional approach 
whereby the ICHRA indicator would be optional for the 2023 and 2024 
benefit years. See 87 FR at 631. We are finalizing the adoption of a 
transitional approach for the ICHRA indicator; however, as detailed 
further later, after consideration of comments, for simplicity and 
to mitigate burdens, we are adopting the same approach for assessing 
compliance during the transition for populating the race, ethnicity 
and ICHRA indicator data fields.
---------------------------------------------------------------------------

    HHS will provide additional details on what constitutes a good 
faith effort to ensure collection and submission of the race, 
ethnicity, and ICHRA indicator data elements in the future. For 
example, HHS intends to monitor and leverage ongoing work to outline 
industry-wide standards for collecting health plan demographic data, 
such as the work by the NAIC's Special Committee on Race & Insurance. 
As part of this NAIC Committee's efforts to examine and determine which 
practices or barriers exist in the insurance sector that potentially 
disadvantage people of color or historically underrepresented groups, 
it will consider enhanced data reporting and record keeping 
requirements across product lines to identify race and other 
sociodemographic factors of insureds, including consideration of legal 
and privacy concerns.\147\ We also intend to seek input from issuers 
and other stakeholders as we develop this good faith standard and 
determine the most feasible methods for issuers to ensure collection 
and submission of these data elements.\148\
---------------------------------------------------------------------------

    \147\ For a full explanation of the work of the NAIC Special 
(EX) Committee on Race and Insurance, see https://content.naic.org/cmte_ex_race_and_insurance.htm.
    \148\ If the burden estimate for collection of the race, 
ethnicity, and/or ICHRA indicator data elements changes beginning 
with the 2025 benefit year, the information collection under OMB 
control number 0938-1155 would be revised accordingly and 
stakeholders would be provided the opportunity to comment through 
that process.
---------------------------------------------------------------------------

    Beginning with the 2023 benefit year, HHS will provide additional 
operational and technical guidance on how issuers should submit these 
new data elements to HHS through issuer EDGE servers via the applicable 
benefit year's EDGE Server Business Rules and the EDGE Server Interface 
Control Document, as may be necessary.\149\ For example, even though 
the submission of race and ethnicity data to issuer EDGE servers must 
conform to the 2011 HHS Data Standards, we intend to provide further 
instruction to issuers on how to appropriately map information issuers 
collect to the race and ethnicity EDGE data fields. In addition, we 
recognize that enrollees are not required to submit race and ethnicity 
information to the FFE through the eligibility application process, and 
that SBE-FPs and State Exchanges similarly permit enrollees to decline 
to provide this information. We anticipate similar practices and 
flexibility for enrollees to decline to provide this information also 
currently exists for enrollees seeking coverage off-Exchanges, and that 
such flexibility will continue to exist in the future for consumers 
enrolling in coverage on and off-Exchange. As such, we intend to 
include an option that will allow issuers to indicate that race or 
ethnicity information is not known in these situations.
---------------------------------------------------------------------------

    \149\ 45 CFR 153.610(a), 153.700(a), and 153.710.
---------------------------------------------------------------------------

    Additionally, we are finalizing, as proposed, 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 generally 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 data quality checks and ensure the 
response rate is adequate to support any analytical conclusions. These 
data quality and reliability checks would generally be consistent with 
other data standard checks that HHS performs related to data collected 
through issuers' EDGE servers.
    We are also finalizing the proposals to extract the three data 
elements issuers already report to their EDGE servers--plan ID, rating 
area, and subscriber indicator--with a modification to the 
applicability date for extraction of two of these data elements. As 
detailed further later, we will begin extraction of plan ID and rating 
area as part of the enrollee-level EDGE data and reports extracted from 
issuers' EDGE servers beginning with the 2021 benefit year and will 
begin extraction of subscriber indicator beginning with the 2022 
benefit year. Table 5 provides a summary of the EDGE data collection 
requirements being finalized in this rule.

[[Page 27243]]

[GRAPHIC] [TIFF OMITTED] TR06MY22.004

    We summarize and respond to public comments received on the 
proposed collection and extraction of five new data elements and the 
extraction of three current data elements, along with the other risk 
adjustment issuer data requirements proposals, in the risk adjustment 
issuer data requirement proposals comments and responses section of 
this rule.
---------------------------------------------------------------------------

    \150\ Since the 2014 benefit year, issuers have been required to 
submit plan ID, rating area, and subscriber indicator to their EDGE 
servers to support HHS' calculation of risk adjustment transfers (81 
FR 94101).
---------------------------------------------------------------------------

b. Limited Data Set
    In conjunction with the collection and extraction of the new and 
current data element proposals, we proposed 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.\151\ 
However, we proposed to include race, ethnicity, ICHRA indicator, 
subsidy indicator, and subscriber indicator in the limited data set 
once they are available.\152\
---------------------------------------------------------------------------

    \151\ See 87 FR 630. See also 84 FR 17487.
    \152\ See 87 FR 630.
---------------------------------------------------------------------------

    We sought comments on this proposal.
    After reviewing the public comments, we are finalizing the proposal 
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, and to include race, ethnicity, ICHRA indicator, 
subsidy indicator, and subscriber indicator in the limited data set 
once they become available. As explained earlier in this rule, race, 
ethnicity, ICHRA indicator, and subsidy indicator will become available 
beginning with the 2023 benefit year, and subscriber indicator will 
become available beginning with the 2022 benefit year.
    We summarize and respond to public comments received on the 
enrollee-level EDGE limited data set proposals, along with the other 
risk adjustment issuer data requirements proposals, below.
c. Expansion of Permissible Uses of EDGE Data
    We also proposed 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.\153\ This proposed expansion would apply to 
data that HHS already collects and extracts, as well as the 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 this final 
rule. Specifically, HHS proposed 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 (84 
FR 17488)--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. We also noted that the 
enrollee-level EDGE data, including the data elements proposed for 
collection and extraction, may be subject to disclosure as otherwise 
required by law.\154\
---------------------------------------------------------------------------

    \153\ See 87 FR 630 through 631.
    \154\ See, for example, 2 U.S.C. 601(d).
---------------------------------------------------------------------------

    We sought comment on the proposed expansion of the permissible uses 
of the data and reports HHS extracts from issuers' EDGE servers.
    After reviewing the public comments, we are finalizing, as 
proposed, the expansion of the permitted uses of the data and reports 
HHS extracts from issuers' EDGE servers.
    We summarize and respond to public comments received on the 
proposed expansion of the permissible uses of EDGE data, along with the 
other risk adjustment issuer data requirement proposals, below.
d. Burden for Collecting and Extracting Additional Data Elements
    As stated above, we included information in the proposed rule (87 
FR 631 through 632) on the burdens related

[[Page 27244]]

to the proposals to collect and extract additional data elements.
    We summarize and respond to public comments received on the burden 
for collecting and extracting additional data elements, along with the 
other risk adjustment issuer data requirement proposal below.
e. Encouraging the Use of Z Codes
    In the proposed rule (87 FR 631), we sought 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 SDOH.\155\ We solicited 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 SDOH.
---------------------------------------------------------------------------

    \155\ See Using Z Codes: The Social Determinants of Health; Data 
Journey to Better Outcomes. (2021). CMS. https://www.cms.gov/files/document/zcodes-infographic.pdf. See also Utilization of Z Codes for 
Social Determinants of Health Among Medicare Fee-for-Service 
Beneficiaries. (2019). CMS. https://www.cms.gov/files/document/z-codes-data-highlight.pdf.
---------------------------------------------------------------------------

    We summarize and respond to the public comments related to 
encouraging the use of z codes or additional data elements to support 
the operation of the HHS-operated risk adjustment program below.
f. Risk Adjustment Issuer Data Requirement Proposals Comments and 
Responses
    After reviewing the public comments submitted, we are finalizing, 
with slight modification, the collection and extraction of the five new 
data elements (ZIP Code, race, ethnicity, ICHRA indicator, and subsidy 
indicator) beginning with the 2023 benefit year. Additionally, we are 
finalizing the extraction of plan ID and rating area beginning with the 
2021 benefit year, and the extraction of the subscriber indicator 
beginning with the 2022 benefit year. We are also finalizing, as 
proposed, the expansion of 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, as well as coverage offered by non-Federal 
governmental plans.\156\ Lastly, we are finalizing the proposal to 
exclude plan ID, ZIP Code, and rating area from the limited data set 
HHS makes available to requestors for research purposes, but to include 
race, ethnicity, ICHRA indicator, subsidy indicator, and subscriber 
indicator in that limited data set once available.
---------------------------------------------------------------------------

    \156\ Non-federal governmental plans are subject to many PHS Act 
federal market reform requirements. See, for example, 42 U.S.C. 
300gg-21(a)(1)(A). See also 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, for example, 42 
U.S.C. 300gg-22(b)(1)(B) and 45 CFR 150.301, et seq.
---------------------------------------------------------------------------

    We summarize and respond to public comments received on all of the 
risk adjustment issuer data requirement proposals (Sec. Sec.  153.610, 
153.700, and 153.710) below.
    Comment: Many commenters supported the proposal to collect and 
extract the five new data elements--ZIP Code, race, ethnicity, an ICHRA 
indicator, and a subsidy indicator. Many of these commenters stated 
that they believe collecting ZIP Code, race, ethnicity, an ICHRA 
indicator, and a subsidy indicator would assist in identifying health 
equity issues by allowing for improved tracking of the SDOH and 
discrimination in health care.
    However, several commenters opposed the proposal to collect and 
extract the five new data elements due to general concerns related to 
release of information that issuers consider proprietary and enrollees' 
personally identifiable information (PII). Some of these commenters 
stated that collecting and extracting these additional data elements 
would increase the potential risk of a data security breach. Most of 
these commenters expressed concerns that the extraction of plan ID and 
rating area, and the collection and extraction of ZIP Code, may enable 
outside entities to identify issuers and individual members based on 
identifiers such as State and rating area, particularly when there is a 
small number of issuers in a State. Some of these commenters expressed 
concern about the security of enrollees' PII, explaining that the EDGE 
servers were initially designed so that HHS would receive only 
aggregate, summary-level data to address privacy concerns regarding 
transmitting and storing enrollees' personal information, and that in 
subsequent rulemaking HHS established the policy to receive enrollee-
level data, which raised privacy concerns; therefore, collecting and 
extracting the proposed additional data elements also raises privacy 
concerns. One commenter recommended that HHS maintain the existing risk 
adjustment data collection approach and not collect and extract 
additional EDGE data elements, stating that the existing distributed 
data approach is implemented in a manner that alleviates privacy 
concerns by allowing health plans to control their data assets, which 
allows private health information to be retained by issuers without 
additional risk of transmitting and storing large amounts of sensitive 
data in a central database. This commenter also noted that the existing 
distributed data approach minimizes the risk of data security breaches.
    Response: We are finalizing, with slight modification, the 
collection and extraction of ZIP Code, race, ethnicity, an ICHRA 
indicator, and a subsidy indicator beginning with the 2023 benefit 
year. We believe that the collection and extraction of these five new 
data elements will allow HHS to better analyze and assess risk patterns 
in the individual, small group, and merged markets in relation to 
geographic details (including ZIP Code) and demographic data (including 
ZIP Code, race, ethnicity, subsidy indicator, and ICHRA indicator). 
Specifically, collection and extraction of these data elements will 
allow HHS to analyze data at a more granular level than our current 
data allow and assess risk patterns and the impact of risk adjustment 
policies based on geographic, income, and other demographic 
differences. HHS will also be able to consider whether there are cost 
differentials for certain conditions based on demographic factors like 
race, ethnicity, or subsidy indicator.
    We also agree with commenters that these new data elements will 
allow HHS to better identify and analyze health equity issues within 
the individual, small group, and merged market programs. As explained 
in the proposed rule, HHS' ongoing efforts to continuously improve HHS 
programs include considering ways to improve our analytical capacity to 
assess equity impacts of these programs. This includes improving our 
ability to identify potential refinements to the HHS risk adjustment 
methodology and consider demographic and geographic data when 
considering policy and operational changes to improve other HHS 
individual, small group, and merged market programs.\157\ For example, 
we believe that collecting and extracting these data elements may help 
HHS assess the costs and use of benefits by various subpopulations 
related to our individual, small group, and merged

[[Page 27245]]

market programs, and may allow HHS to better determine whether new 
policies, regulations, or guidance may be necessary or appropriate to 
advance equity within these programs. We note that any changes to the 
risk adjustment methodology or other policies based on HHS' analysis of 
these data elements would generally be set forth through notice-and-
comment rulemaking.
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    \157\ As detailed later, we are finalizing the proposed 
expansion of permitted uses of the enrollee-level EDGE data to 
include other HHS Federal health-related programs outside of the 
commercial individual and small group (including merged) markets, as 
well as coverage offered by non-Federal governmental plans.
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    In response to commenters' concerns that collecting and extracting 
additional data elements would mean transmitting and storing enrollees' 
PII and that there would be increased risk of data security breaches, 
we note that we did not propose and are not finalizing any changes to 
the existing distributed data collection model applicable to the HHS-
operated risk adjustment program. As noted by some commenters, HHS set 
up the distributed data environment to address privacy and security 
concerns regarding transmitting and storing enrollees' PII. In the 
proposed 2014 Payment Notice (77 FR 73118), we explained that using a 
distributed data collection model means that HHS does not directly 
collect data from issuers,\158\ which limits transmission of data 
containing PII.\159\ Instead, HHS accesses enrollment, claims, and 
encounter data on issuers' secure distributed data environments,\160\ 
called EDGE servers.\161\ Under this model, each issuer submits to its 
EDGE server the required data in HHS-specified electronic formats and 
must make these data accessible to HHS for use in the HHS-operated risk 
adjustment program.\162\ This general framework remains unchanged. As 
is current procedure, issuers of risk adjustment covered plans will 
continue to provide HHS access to the applicable required risk 
adjustment data elements through the distributed data environment (that 
is, the issuer's EDGE server) in the HHS-specified electronic formats 
by the applicable deadline.\163\ This includes providing HHS access to 
install, update, and operate common software and specific reference 
tables,\164\ and executing commands provided by HHS to generate the 
EDGE reports within the designated timeframes. In addition, issuers 
will continue to retain control over their data assets subject to the 
requirements of the risk adjustment program operated under sections 
1343 and 1321(c) of the ACA.\165\
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    \158\ 77 FR 73162, 73182 through 73183. This policy was 
finalized in the 2014 Payment Notice final rule. See 78 FR 15497 
through 15500.
    \159\ See 78 FR 15500. We explained that data are particularly 
vulnerable during transmission, and that the distributed data 
collection model eliminates this risk.
    \160\ 77 FR 73162.
    \161\ 81 FR 94101.
    \162\ 78 FR 15497.
    \163\ See 45 CFR 153.610(a). See also 45 CFR 153.700, et. seq.
    \164\ See, for example, 78 FR 15497 through 15498.
    \165\ See 42 U.S.C. 18063 and 18041(c).
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    Furthermore, HHS remains committed to protecting the privacy and 
security of enrollee health information and will continue to require 
issuers to use masked enrollee identification numbers.\166\ 
Specifically, consistent with the requirement first established in the 
2014 Payment Notice, issuers must establish a unique masked enrollee 
identification number for each enrollee that cannot include PII. As we 
explained in the 2018 Payment Notice (78 FR 15500), use of masked 
enrollee-level data safeguards enrollee privacy and security because 
masked enrollee-level data does not include PII.\167\ The policies 
finalized in this rule also do not alter this approach or the existing 
privacy protections for enrollee PII or individual claim-level 
information, such as masked enrollee IDs and masked claims IDs.\168\ We 
also note that the final policy adopted in this rule to exclude plan 
ID, rating area, and ZIP Code from the limited data set is part of our 
commitment to protect enrollee PII and strategy to mitigate the risk 
that entities that receive the limited data set could identify 
individual members, particularly in areas with a small number of 
issuers. Therefore, we generally disagree that the collection and 
extraction of these new data elements will increase risk of disclosure 
of enrollee PII.
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    \166\ See 45 CFR 153.720. See also 78 FR 15509 and 81 FR 94101.
    \167\ See 45 CFR 153.720(b).
    \168\ In addition to use of masked enrollee IDs and masked 
claims IDs, another existing protection for enrollee PII is the 
exclusion of enrollee date of birth from the data issuers must make 
accessible to HHS on their EDGE servers.
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    We also appreciate the sensitivities related to protecting issuers' 
proprietary information and note that HHS has also taken several steps 
to protect information that issuers may consider to be proprietary. 
First, as noted above, the adoption and continued use of the 
distributed data collection model ensures each issuer retains control 
of their respective data. Second, only a limited data set of certain 
masked enrollee-level EDGE data elements is made available and this 
limited data set is available only to qualified researchers if they 
meet the requirements for access to such file(s), including entering 
into a data use agreement that establishes the permitted uses or 
disclosures of the information and prohibits the recipient from 
identifying the information.169 170 Among other 
requirements, the data use agreement requires qualified researchers to 
explain the specific research purpose for which the data will be used 
and generally prohibits disclosure of the data.\171\ We also strictly 
adhere to all requirements and CMS guidelines related to providing the 
limited data set to qualified researchers.\172\ Third, the policy 
adopted in this final rule that excludes plan ID, rating area, and ZIP 
Code from the limited data set further mitigates the risk of disclosure 
of information that issuers may consider to be proprietary. These are 
the data elements that could present an increased risk that entities 
that receive the limited data set file could identify issuers based on 
identifiers such as State and rating area, particularly in areas with a 
small number of issuers.
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    \169\ See Data Use Agreement. CMS. https://www.cms.gov/Medicare/CMS-Forms/CMS-Forms/Downloads/CMS-R-0235L.pdf. See also 84 FR 17486 
through 17490.
    \170\ Data Use Agreement. CMS. https://www.cms.gov/Medicare/CMS-Forms/CMS-Forms/Downloads/CMS-R-0235L.pdf.
    \171\ Ibid. at paragraphs 3, 7.
    \172\ Further details on limited data set files available at 
Limited Data Set (LDS) Files. (2021, December 1). CMS. https://www.cms.gov/Research-Statistics-Data-and-Systems/Files-for-Order/Data-Disclosures-Data-Agreements/DUA_-_NewLDS.
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    For these reasons, we believe the policies finalized in this rule 
appropriately balance the different competing interests. More 
specifically, there are sufficient mitigation strategies in place such 
that the collection and extraction of these additional data elements 
presents no significant additional risk of disclosure of information 
that issuers may consider to be proprietary and it will improve HHS' 
ability to assess health equity impacts of HHS commercial individual 
and small group (including merged) market programs, including the HHS-
operated risk adjustment program, as well as other HHS Federal health-
related programs outside these commercial markets and coverage offered 
by non-Federal Governmental plans.
    Comment: Several commenters noted the limitation of ZIP Code as a 
geographic identifier, asserting that ZIP Codes are not able to 
specifically identify a county or a State in certain situations. They 
also noted that ZIP Codes can change from year-to-year because ZIP 
Codes are established by the United States Postal Service to address 
mail delivery needs, not geographic boundaries. One commenter explained 
that census tract data would be a more accurate data element for 
geographic analysis than use of ZIP Codes because it can be used with 
the

[[Page 27246]]

Social Vulnerability Index (SVI) to obtain measures for SDOH, race, and 
ethnicity at the population level. This commenter also noted, however, 
that census tract data is not currently used by issuers and thus may 
not be readily available. In contrast, some commenters agreed it would 
be relatively easy for issuers to submit ZIP Code, as issuers readily 
have access to this data element.
    Response: We are finalizing, as proposed, the collection and 
extraction of ZIP Code for several reasons. First, ZIP Code is a widely 
understood unit of geography. Second, while we recognize there are some 
advantages for using census tract data to conduct certain assessments 
and analysis of risk patterns based on geographic differences, we are 
concerned that issuers do not currently collect census tract data and 
we believe it would be more burdensome for issuers to collect and 
extract this data element than ZIP Code. In contrast, we believe that 
issuers already have access to enrollees' ZIP Code information. Third, 
while ZIP Codes can change over time, the majority of changes to ZIP 
Code occur at the level of the nine-digit ZIP+4 Code, while five-digit 
area codes generally remain stable from year to year. Therefore, to 
balance the desire to collect more granular geographic data with easing 
the burdens on issuers associated with collection of new data elements, 
we are finalizing the collection and extraction of the five-digit ZIP 
Code beginning with the 2023 benefit year.
    Comment: Some commenters requested that HHS clarify which ZIP Code 
issuers would be required to report to their EDGE servers, for example, 
whether issuers should collect the ZIP Code associated with an 
enrollee's mailing address or rating area.
    Response: Issuers will be required to report the enrollee's mailing 
address ZIP Code as reported by the enrollee. This means that small 
group market issuers will be required to report the employee ZIP Code 
and not employer ZIP Code. Consistent with prior practice, additional 
technical instructions related to how issuers must submit these new 
data elements, including ZIP Code, will be made available to issuers 
through the applicable benefit year's EDGE Server Business Rules and 
the EDGE Server Interface Control Document.
    Comment: Some commenters expressed concern that there is no 
industry standard for collecting the race and ethnicity data elements 
and recommended that these data elements not be collected until such a 
standard is established. These commenters also explained that this lack 
of an industry standard means that the race and ethnicity data elements 
collected may not be accurate, and that there is no way to ensure that 
these data elements are accurate. Some of these commenters also noted 
that some state laws limit the manner by which issuers or SBE-FPs and 
State Exchanges can collect the race and ethnicity data elements, which 
may prevent issuers from collecting and submitting these data to HHS, 
but they did not offer citations or otherwise identify specific State 
laws.
    Response: We are finalizing the proposal to collect and extract 
race and ethnicity data beginning with the 2023 benefit year and are 
also finalizing the accompanying proposal to require issuers to report 
race and ethnicity data in accordance with the 2011 HHS Data Standards 
beginning with the 2023 benefit year. While not an industry standard, 
the 2011 HHS Data Standards were developed under section 4302 of the 
ACA, which requires the Secretary of HHS to establish data collection 
standards for race, ethnicity, sex, primary language, and disability 
status. The 2011 HHS Data Standards \173\ were promulgated to create a 
set of uniform data collection standards for inclusion in surveys 
conducted or sponsored by HHS. They are also the standards used by HHS, 
as the FFE administrator, to collect these data through the Exchange 
application. Therefore, we believe that the 2011 HHS Data Standards are 
an appropriate standard to guide the collection of race and ethnicity 
data by issuers of risk adjustment covered plans.
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    \173\ HHS Implementation Guidance on Data Collection Standards 
for Race, Ethnicity, Sex, Primary Language, and Disability Status. 
(2011, October 30). HHS. https://aspe.hhs.gov/reports/hhs-implementation-guidance-data-collection-standards-race-ethnicity-sex-primary-language-disability-0.
---------------------------------------------------------------------------

    We also believe that by using the 2011 HHS Data Standards, we will 
be supporting the creation of a uniform industry standard that can help 
improve the accuracy and consistency of the data over time. As 
explained earlier, we are finalizing the proposal to structure the race 
and ethnicity data elements similar to current collections, where 
possible. Since the 2011 HHS Data Standards are consistent with how 
these data elements are captured in the current FFE online eligibility 
application, we believe that it is most appropriate to require data 
submission that conforms with the 2011 HHS Data Standards. However, we 
recognize that issuers may currently collect or have race and ethnicity 
data that does not conform to the 2011 HHS Data Standards. To address 
these situations, we intend to provide further instruction to issuers 
in guidance on how to appropriately map information they may currently 
collect or have to the race and ethnicity data fields for EDGE data 
submission.
    We are also finalizing, as proposed, that we will provide a value 
for the race or ethnicity data elements that allows issuers to indicate 
that race or ethnicity are not known for a specific enrollee. This 
option will be available to issuers during the transitional approach. 
After the transitional approach ends (beginning in the 2025 benefit 
year), this option will similarly be available to issuers who comply 
with the good faith standard but are unable to populate the race or 
ethnicity EDGE data field for one or more enrollees.
    We also note that although there may be State laws that limit the 
reporting and collecting of race and ethnicity data elements, the risk 
adjustment issuer data requirements, including but not limited to the 
proposals finalized in this rule related to collection and extraction 
of race and ethnicity data, are rooted in section 1343 of the ACA. 
Consistent with section 1321(c)(1) of the ACA, the Secretary is 
responsible for operating the risk adjustment program in any State that 
fails to do so. Since the 2017 benefit year, HHS has operated risk 
adjustment in all 50 States and the District of Columbia. 45 CFR 
153.610(a) requires issuers of risk adjustment covered plans to submit 
and make accessible all required risk adjustment data in accordance 
with the data collection approach established by HHS in States where 
the Department operates the program. Specifically, HHS requires issuers 
of risk adjustment covered plans to submit specified data elements to 
their EDGE servers to support the calculation of risk adjustment 
transfers.\174\ We also previously finalized policies related to the 
extraction and use of enrollee-level EDGE data (81 FR 94101 and 84 FR 
17488). This rulemaking expands on those requirements and policies, 
including by expanding the list of data fields issuers must submit to 
their EDGE servers as part of the required risk adjustment data 
beginning in the 2023 benefit year.
---------------------------------------------------------------------------

    \174\ 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 
Supporting Statement For Paperwork Reduction Act Submissions. OMB. 
https://omb.report/icr/201712-0938-015/doc/79644301.pdf. The 
previous version is available at Standards Related to Reinsurance, 
Risk Corridors, and Risk Adjustment (CMS-10401). HHS. https://www.reginfo.gov/public/do/PRAViewICR?ref_nbr=201712-0938-01.

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[[Page 27247]]

    As detailed in the proposed rule (87 FR 628 through 629), we 
believe that collecting and extracting these new data elements serves a 
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 accordable for all individuals. Collecting and 
extracting race and ethnicity data will allow HHS to further assess and 
analyze actuarial risk, and risk patterns in the individual, small 
group and merged markets more than current data allows. HHS will also 
be able to analyze more subpopulations than our current data allows, 
thereby allowing consideration of more areas of health equity, as well 
as to better address discrimination in health care and health 
disparities, through pursuit of new risk adjustment policies. This 
policy is also narrowly tailored and represents the minimum data 
anticipated at this time to allow HHS to engage in this additional, 
more granular analysis. We also reiterate that HHS will conduct quality 
checks of the newly collected data elements and ensure that the 
response rate is adequate to support any analytical conclusions that 
could inform policy decisions.
    Further, to the extent that race and ethnicity data could be 
considered protected health information (PHI),\175\ the HIPAA Privacy 
Rule \176\ generally permits health plans and covered health care 
providers to disclose PHI without obtaining authorization from the 
individual where such disclosures are required by law, such as when 
Federal or State statutes or regulations require the disclosure.\177\ 
Additionally, as industry standards and State laws applicable to the 
collection and use of race and ethnicity data elements evolve, HHS will 
consider whether any changes to the risk adjustment program's approach 
for collection of these data elements would be appropriate.
---------------------------------------------------------------------------

    \175\ 45 CFR 164.103 (definition of ``Protected health 
information'').
    \176\ 45 CFR 164.512(a).
    \177\ 45 CFR 164.512(a), 164.103 (definition of ``Required by 
law''). See 65 FR 82462, 82485 (December 28, 2000) for a discussion 
of 45 CFR 164.512(a) in the context of other mandatory Federal or 
state laws.
---------------------------------------------------------------------------

    Comment: Some commenters questioned the need for HHS to collect and 
extract race and ethnicity data as part of the risk adjustment data 
submissions when the FFE already collects these data.
    Response: We acknowledged in the proposed rule (87 FR 631) that 
these data elements may also be collected by HHS from FFE or SBE-FP 
enrollees through the eligibility application process and by some State 
Exchanges from State Exchange enrollees. We further explained how this 
new risk adjustment data collection requirement would provide HHS with 
more uniform and comprehensive information. More specifically, the race 
and ethnicity data collected would represent all enrollees in risk 
adjustment covered plans in States where HHS operates the risk 
adjustment program, including coverage offered inside and outside of 
Exchanges--rather than just reflecting enrollees in coverage offered 
through Exchanges. Additionally, this new data collection provides HHS 
the ability to extract and aggregate race and ethnicity 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.\178\
---------------------------------------------------------------------------

    \178\ For information on the challenges associated with linking 
the extracted enrollee-level EDGE data to other sources, see 87 FR 
631 through 632.
---------------------------------------------------------------------------

    Comment: Some commenters inquired whether issuers would be 
penalized if enrollees decline to provide race and ethnicity 
information, pointing to the fact that Exchange enrollees can decline 
to share these details on their application. One commenter requested 
that HHS consider approaching collection of race and ethnicity the same 
way HHS proposed collection of the ICHRA indicator, with an optional 
data field for the 2023 and 2024 benefit years, so that issuers can 
develop processes for collection, validation, and submission of these 
data elements.
    Response: We are finalizing the proposal to collect and extract 
race and ethnicity data beginning with the 2023 benefit year. More 
specifically, issuers will be required to use the information they 
already have or ensure collection of race and ethnicity information to 
submit to their EDGE servers consistent with the 2011 HHS Data 
Standards.
    Similar to how we have approached other new data collection 
requirements in the past, we agree with the commenter and are adopting 
a transitional approach for the 2023 and 2024 benefit years for the 
race and ethnicity data fields.\179\ During this time, issuers are 
required to populate race and ethnicity data using data the issuers 
already have or collect. As such, an issuer will be required to report 
the race and ethnicity data in situations where a particular enrollee 
has provided these data to the issuer or if the issuer otherwise has 
these data for that particular enrollee. For example, QHP issuers may 
already receive race and ethnicity data elements from the applicable 
FFE, SBE-FP, or State Exchange at the time of enrollment, and reporting 
these data as collected through that process would be compliant with 
standards applicable during the 2023 and 2024 benefit years. We intend 
to provide further instruction to issuers in guidance on how to 
appropriately map information issuers have or collect to the race and 
ethnicity data fields for EDGE data submission.
---------------------------------------------------------------------------

    \179\ After consideration of comments, for simplicity and to 
minimize burden, we are adopting the same transitional approach for 
the ICHRA indicator for the 2023 and 2024 benefit years. For the 
2023 and 2024 benefit year, issuers are required to populate the 
field for the ICHRA indicator using only data they already collect 
or have accessible regarding their enrollees. Then, beginning with 
the 2025 benefit year, the transitional approach will end, and 
issuers will be required to populate the field using available 
sources and, in the absence of an existing source for particular 
enrollees, to make a good faith effort to ensure collection and 
submission of the ICHRA indicator for these enrollees. The 
transition provides issuers with additional time to develop 
processes for collection, validation, and submission of these data 
elements.
---------------------------------------------------------------------------

    Beginning with the 2025 benefit year, issuers will be required to 
populate the field using available sources and, in the absence of an 
existing source to populate these data elements for particular 
enrollees, they will be required to make a good faith effort to ensure 
collection of race and ethnicity data. HHS will provide additional 
details on what constitutes a good faith effort to ensure collection of 
the race and ethnicity data elements in the future. We intend to seek 
input from issuers and other stakeholders as we develop this good faith 
standard and determine the most feasible methods for issuers to ensure 
collection and submission of these data elements.\180\
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    \180\ If the burden estimate for collection of the race, 
ethnicity, and/or ICHRA indicator data elements changes beginning 
with the 2025 benefit year, the information collection under OMB 
control number 0938-1155 would be revised accordingly and 
stakeholders would be provided the opportunity to comment through 
that process.
---------------------------------------------------------------------------

    Finally, we recognize that enrollees are not required to submit 
race and ethnicity information to the FFE through the eligibility 
application process, and that SBE-FPs and State Exchanges, and off-
Exchange issuers, may similarly permit enrollees to decline to provide 
this information. As such, we will include an option for issuers to 
indicate that race or ethnicity are not known for a specific enrollee 
when submitting data to their EDGE servers. For example, an issuer that 
meets the good faith standard and reports this option in its 2025 
benefit year EDGE data for a particular enrollee in these situations 
will be compliant with the applicable standard, and we would not 
penalize an issuer in such situations, as enrollees may decline to 
provide this information.

[[Page 27248]]

    Comment: Several commenters expressed concern that collecting and 
extracting the race, ethnicity, or ICHRA data elements would impose 
additional administrative burden, require costly IT system builds, and 
mandate other operational updates to develop and test the submission of 
these data elements to issuer EDGE servers.
    Response: We acknowledge concerns that the new data collection, 
particularly the data on race, ethnicity, and ICHRA indicator, could 
impose additional administrative burden and may require operational 
changes to develop, test, and validate submission of these data 
elements. As further detailed in the Information Collection section of 
this rule, we are updating our estimates of the burden and costs 
associated with this new data collection. Currently, all issuers that 
submit data to their EDGE servers \181\ have automated the creation of 
data files that are submitted to their EDGE servers for the existing 
required data elements, and each issuer will need to update their file 
creation process to include the five new data elements, which will 
require a one-time administrative cost. In addition to adding this one-
time cost, we also update the estimate to reflect that collection and 
submission of all five of the new data elements will require 5 hours of 
work by a management analyst (one hour of work per new data element 
collected) on an annual basis. We also will revise the information 
collection under OMB control number 0938-1155 to reflect these 
additional costs.
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    \181\ Issuers that elect a risk adjustment default charge are 
not required to submit EDGE data. See 45 CFR 153.740(b) and 81 FR at 
12237 -12238. See also, for example, Summary Report on Permanent 
Risk Adjustment Transfers for the 2020 Benefit Year at 36 (2021, 
June 30). CMS. https://www.cms.gov/CCIIO/Programs-and-Initiatives/Premium-Stabilization-Programs/Downloads/RA-Report-BY2020.pdf.
---------------------------------------------------------------------------

    This estimate recognizes that information to populate the ICHRA 
indicator data field is not routinely collected by all issuers at this 
time, though most issuers currently collect race, ethnicity, ZIP Code, 
and a subsidy indicator information in some manner.\182\ Because we are 
adopting a transitional approach under which issuers will be required 
to populate the race, ethnicity, and ICHRA indicator data fields using 
data they already have or collect for the 2023 and 2024 benefit years, 
issuers are not required to make any changes to the manner in which 
they currently collect the race, ethnicity, and ICHRA data elements for 
the 2023 and 2024 benefit year submissions. This transition period 
allows additional time for issuers to develop processes for collection 
and validation of the data required for the new data fields. After 
consideration of comments, including those related to the burden 
estimates, we are finalizing the collection and extraction of the five 
new data elements, with the modifications discussed in this section. We 
continue to believe that the benefits of collecting and extracting 
these data elements, including race, ethnicity, and the ICHRA 
indicator, outweigh the burdens and costs associated with the new 
requirement.
---------------------------------------------------------------------------

    \182\ The estimated burden associated with collection of the 
race, ethnicity, ZIP Code, and the subsidy indicator data is the 
additional effort and expense for issuers to compile and submit 
these additional data elements to their EDGE servers and to retain 
them as part of their risk adjustment records. If the burden 
estimate for collection of the race, ethnicity, or ICHRA indicator 
data elements changes beginning with the 2025 benefit year (after 
the transitional approach ends), the information collection under 
OMB control number 0938-1155 would be revised accordingly and 
stakeholders would be provided the opportunity to comment through 
that process.
---------------------------------------------------------------------------

    Comment: Several commenters expressed support for the collection 
and extraction of the ICHRA indicator. One of these commenters 
explained that collecting and extracting ICHRA indicator would allow 
HHS to better understand the types of employers offering ICHRAs and the 
characteristics of the employees enrolling in coverage using ICHRAs.
    Conversely, several commenters stated that the ICHRA indicator was 
not readily available to issuers, and thus issuers would be unable to 
collect and submit information to populate the ICHRA indicator data 
field. Specifically, these commenters stated that requiring collection 
of information to populate the ICHRA indicator data field would require 
issuers to collect this data element directly from employers, as the 
FFE, SBE-FPs, and State Exchanges do not currently collect this data 
outside of SEP enrollments. These commenters also noted that collecting 
this data element from employers would be administratively burdensome. 
One commenter requested further guidance on how issuers would be 
expected to collect and report this data element.
    Response: We agree that collecting and extracting ICHRA indicator 
data will allow HHS to better understand the characteristics of the 
employees enrolling in coverage using ICHRAs and will allow HHS to 
conduct analyses to examine whether there are any unique actuarial 
characteristics of the ICHRA population, (such as the health status of 
enrollees with ICHRAs), and to investigate what impact (if any) ICHRA 
enrollment is having on State individual (or merged) market risk pools. 
After considering public comments, we are finalizing this policy with 
slight modification to the transitional approach.
    In the proposed rule (87 FR 631), we acknowledged that the ICHRA 
indicator may be collected by HHS from FFE or SBE-FP enrollees through 
the eligibility application process and that our intention would be to 
structure these data elements for EDGE data submissions similar to 
current collections, where possible. As noted above, the ICHRA 
indicator data element is intended to indicate whether a particular 
enrollee's health care coverage involves (or does not involve) an 
ICHRA. Issuers will be permitted to populate the ICHRA indicator with 
information from FFE or SBE-FP enrollees or enrollees through State 
Exchanges, or from other sources for collecting this information from 
these enrollees.
    Currently, the FFE collects information about ICHRA availability 
from all applicants to determine whether they are eligible for a SEP, 
as individuals and their dependents who become newly eligible for an 
ICHRA may be eligible for a SEP. The FFE will also collect information 
about ICHRA affordability from applicants seeking financial assistance 
who attest to having ICHRA offers, as the details of the offer impact 
APTC eligibility. However, recognizing that issuers may not currently 
routinely collect or otherwise have access to the information for all 
of their enrollees needed to populate the ICHRA indicator, we are 
finalizing the adoption of a transitional approach for the 2023 and 
2024 benefit years.\183\ Under this transitional approach, similar to 
the race and ethnicity data fields, issuers will be required to 
populate the ICHRA indicator using information the issuer currently has 
access to or otherwise collects that could be used to populate the 
ICHRA indicator. For example, where an FFE enrollee is using a SEP, 
information about ICHRA availability is collected by the FFE, and the 
FFE may make these data available to issuers. In addition, an issuer 
may currently have or collect information that could be used to 
populate the ICHRA indicator in situations where the issuer is being 
paid directly by the employer through the ICHRA for the individual 
market

[[Page 27249]]

coverage.\184\ Then, beginning with the 2025 benefit year, the 
transition period will end, and issuers will be required to populate 
the ICHRA indicator data field using available sources (for example, 
with information from Exchanges, small employers, or by requesting 
information directly from enrollees) and, in the absence of such an 
existing source for particular enrollees, to make a good faith effort 
to ensure collection and submission of the ICHRA indicator for these 
enrollees. HHS will provide additional details on what constitutes a 
good faith effort to ensure collection of this data element in the 
future.\185\
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    \183\ In the proposed rule, we proposed a transitional approach 
whereby the ICHRA indicator would be optional for the 2023 and 2024 
benefit years. See 87 FR at 631. After consideration of comments, 
for simplicity and to mitigate burdens, we are adopting the same 
approach for assessing compliance during the transition for 
populating the race, ethnicity and ICHRA indicator data fields.
    \184\ Employers have flexibility to reimburse employees enrolled 
in ICHRAs for covered medical expenses they incur (including 
premiums for individual health insurance coverage) or to make the 
payment on behalf of the enrollee (including premiums for individual 
health insurance coverage).
    \185\ If the burden estimate for collection of ICHRA indicator 
changes beginning with the 2025 benefit year (after the transitional 
approach sends), the information collection under OMB control number 
0938-1155 would be revised accordingly and stakeholders would be 
provided the opportunity to comment through that process.
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    As we typically do with other EDGE data elements, we will provide 
technical guidance to instruct issuers on the format and manner for 
submission of this data element via the applicable benefit year's EDGE 
Server Business Rules and the EDGE Server Interface Control 
Document.\186\ We believe that providing a transitional period for the 
2023 and 2024 benefit years balances the need to provide additional 
time for issuers to develop and test available options for collection, 
validation, and population and submission of the ICHRA indicator, with 
HHS' efforts to better analyze the ICHRA population, the employers that 
offer ICHRAs, as well as to investigate the impact of ICHRAs on the 
individual (and merged) market single risk pools and the HHS-operated 
risk adjustment program. HHS intends to seek input from issuers and 
other stakeholders to inform development of the good faith standard and 
determine the most feasible method for issuers to collect the 
information used to populate this data field.\187\
---------------------------------------------------------------------------

    \186\ 45 CFR 153.610(a), 153.700(a), and 153.710.
    \187\ If the burden estimate for collection of ICHRA indicator 
changes beginning with the 2025 benefit year (after the transitional 
approach ends), the information collection under OMB control number 
0938-1155 would be revised accordingly and stakeholders would be 
provided the opportunity to comment through the information 
collection process.
---------------------------------------------------------------------------

    Comment: Many commenters supported the proposal to extract the 
three data elements issuers already submit to their EDGE servers--plan 
ID, rating area, and subscriber indicator--noting that extraction of 
these data elements would further HHS' ability to analyze and consider 
policy changes to the risk adjustment methodology. Two commenters 
supported the proposal because they believe extracting these data 
elements would allow HHS to assess and consider a plan-based approach 
to risk adjustment. One commenter suggested that HHS consider 
extracting plan ID and rating area earlier, beginning with the 2020 or 
2021 benefit year enrollee-level EDGE data extractions and reports. 
This commenter noted that issuers already collect these data elements, 
and that waiting until the 2022 benefit year to extract these data and 
then using these data to further analyze risk patterns would delay any 
future modifications to improve the risk adjustment methodology until 
the 2026 benefit year at the earliest.
    However, several commenters expressed concern that the extraction 
of plan ID, rating area, and subscriber indicator data would pose a 
risk to information that issuers consider proprietary and enrollee 
privacy, and that plan ID and rating area data are unnecessary for risk 
adjustment purposes since the risk adjustment program analyzes risk at 
the enrollee-level.
    Response: We are finalizing the extraction of plan ID, rating area, 
and subscriber indicator with slight modification to the applicability 
date for extraction of two of these data elements. We will extract plan 
ID and rating area beginning with the 2021 benefit year, and will 
extract subscriber indicator beginning with the 2022 benefit year. HHS 
is committed to continuously considering ways to improve HHS programs, 
including ways to better assess risk patterns in the individual or 
small group (including merged) market programs, and believes that 
extracting plan ID and rating area as soon as feasible will improve 
HHS' ability to assess risk patterns and the impact of risk adjustment 
policies at a plan level. We are finalizing an earlier applicability 
date for extraction of plan ID and rating area because we share the 
commenter's concern that waiting until the 2022 benefit year could 
result in a significant delay in the pursuit of future modifications to 
improve the risk adjustment methodology and program requirements. 
Additionally, taking into consideration that issuers already submit 
plan ID and rating area data elements to their EDGE servers, extracting 
these data sooner would result in little to no additional issuer 
burden. Extracting plan ID and rating area will also improve HHS' 
ability to estimate the transfers impact of potential future policies 
using the enrollee-level EDGE data while minimizing additional burden 
to issuers with respect to analysis of such potential future policies.
    While we acknowledge commenters' concerns that the extraction of 
plan ID, rating area, and subscriber indicator could pose a risk to 
information that issuers may consider to be proprietary and enrollee 
privacy, we believe that there are sufficient mitigation strategies in 
place such that the collection and extraction of these additional data 
elements presents no significant additional risk of disclosure of 
information that issuers consider to be proprietary or to enrollee 
privacy. For example, as discussed above in response to comments 
regarding privacy and security concerns related to the collection of 
new data elements, the adoption and continued use of the distributed 
data collection model ensures that each issuer retains control of their 
respective data. Additionally, HHS releases only a limited data set of 
select masked enrollee-level EDGE data elements only to qualified 
researchers and only if they meet the requirements for access to such 
file, including entering into a data use agreement that establishes the 
permitted uses or disclosures of the information and prohibits the 
recipient from identifying the information. Finally, the policy adopted 
in this final rule that excludes plan ID, rating area, and ZIP Code 
from the limited data set further mitigates the risk of disclosure of 
information that issuers may consider to be proprietary and enrollee 
PII.
    In response to commenters' assertion that plan ID and rating area 
are unnecessary for risk adjustment purposes since the risk adjustment 
program analyzes risk at the enrollee-level, we note that, since the 
2014 benefit year, issuers have been required to submit plan ID, rating 
area, and subscriber indicator to their EDGE servers to support HHS' 
calculation of risk adjustment transfers (81 FR 94101). Furthermore, 
while the risk adjustment models are recalibrated on enrollee-level 
EDGE data, HHS uses available plan-level data, summary reports, and 
enrollee-level EDGE data to evaluate and analyze the performance of the 
risk adjustment program and inform future policy changes for the 
program. As explained in the proposed rule (87 FR 628), we will use 
rating area and plan ID to further assess risk patterns and the impact 
of risk adjustment policies. For example, the extraction of rating area 
will provide HHS more granular data to assess risk patterns and impact 
based on geographic differences. We therefore disagree that plan ID and 
rating area are

[[Page 27250]]

unnecessary for risk adjustment purposes.
    Comment: Several commenters supported the proposed exclusion of 
plan ID, ZIP Code, and rating area from the limited data set. These 
commenters explained that excluding these data elements from the 
limited data set would mitigate concerns related to increased exposure 
of enrollees' PII, data security, and release of information issuers 
consider proprietary. One commenter also recommended that HHS consider 
excluding subscriber indicator from the limited data set, also noting 
concerns surrounding exposure of enrollees' PII.
    Other commenters opposed the proposed exclusion of plan ID, ZIP 
Code, and rating area from the limited data set because exclusion of 
these data elements would limit qualified researchers' abilities to 
gain insight that could better inform policy and would also 
significantly restrict the actuarial use of the limited data set. One 
commenter recommended including a geographic variable in the limited 
data set in lieu of ZIP Code, plan ID, and rating area that would 
indicate placement on the urban-rural continuum. Another commenter 
recommended that HHS adopt a data use standard that would, for example, 
only include geographical data (such as plan ID, ZIP Code, and rating 
area) when there is more than one issuer with at least 5 percent of the 
enrollment in the rating area to mitigate the concerns with release of 
information issuers consider proprietary. Another commenter suggested 
that HHS evaluate whether there is a way to include ZIP Code in the 
limited data set, as this data element is particularly useful in 
community-based health equity research.
    Response: We recognize and agree with commenters' that including 
plan ID, ZIP Code, and rating area would enhance the usefulness of the 
limited data set. However, we are finalizing the exclusion of these 
data elements from the limited data set to address stakeholder concerns 
related to providing geographic information, which they believe could 
result in the identification of certain issuers and the release of data 
these issuers perceive as competitive and proprietary. Specifically, we 
also recognize and agree with the concerns that including plan-level 
data, like plan ID (which represents the HIOS ID, State, product ID, 
standard component ID, and variant ID) and rating area in the limited 
data set could increase the risk of disclosure of information that 
issuers may consider to be proprietary and the risk that outside 
entities that receive the data for research may be able to identify 
issuers using State and rating area, particularly when there is a small 
number of issuers in a State.
    We considered whether we could implement a formal data use standard 
that would only include geographical data based on the number of 
issuers in a rating area and on a threshold percentage of enrollment in 
that rating area. However, in considering this option, we recognize 
that the appropriate threshold percentage may vary based on market 
conditions, which could make it difficult to establish and maintain a 
non-arbitrary threshold. In addition, we would want to solicit comments 
on the establishment of any such threshold. Therefore, since we did not 
propose any such threshold, we are not finalizing one at this time. 
However, we will continue to consider if we can develop a standard for 
including geographical data in the limited data set based on certain 
characteristics in a rating area (for example, number of issuers) and 
would outline such a proposed threshold in future notice-and-comment 
rulemaking.
    We similarly considered whether we could include a geographic 
variable to indicate placement on the rural-urban continuum. However, 
in collecting and extracting plan ID, rating area, and ZIP Code, we 
recognize that we may not have the appropriate data elements to 
accurately determine where on the rural-urban continuum an enrollee 
should be placed because areas are often defined as rural or urban 
based on county data, which we believe we may not be able to accurately 
identify using only plan ID, ZIP Code, and rating area.\188\ In 
addition, ``rural'' and ``urban'' are not defined consistently. For 
example, the Federal government uses two main definitions for 
``rural,'' and generally determines which geographic regions are 
considered urban based on the regions that meet the rural 
classification.\189\ For these reasons, if we were to consider 
including any such geographic variable in the limited data set based on 
collection and extraction of plan ID, ZIP Code, and rating area, we 
would want to solicit comments before implementing such an approach. 
Since we did not propose including any such variable, we are not 
finalizing one at this time. However, we will continue to consider if 
we would be able to develop a geographic variable to indicate enrollee 
placement on the rural-urban continuum and would propose any such 
policy in future notice-and-comment rulemaking.
---------------------------------------------------------------------------

    \188\ See, for example, 2010 Standards for Delineating 
Metropolitan and Micropolitan Statistical Areas, 75 FR 37246 at 
37246 (2010 June 28).
    \189\ See, for example, Defining Rural Population. (2020, June 
25). HHS. https://www.hhs.gov/guidance/document/defining-rural-population. The two main definitions for ``rural'' used across the 
Federal government are developed by the U.S. Census Bureau and OMB. 
In addition, the Federal Office of Rural Health and Policy takes 
components from both of these main definitions when determining how 
to classify a geographic region.
---------------------------------------------------------------------------

    Although one commenter noted that inclusion of ZIP Code in the 
limited data set would be particularly useful for community-based 
health equity research, we believe that including ZIP Code, similar to 
plan ID and rating area, presents the risk that outside entities that 
receive the data for research may be able to identify issuers when 
there is a small number of issuers in a State. At this time, we believe 
that the risk of potential release of information that issuers may 
consider to be proprietary and the risk of identification of individual 
issuers by outside entities outweighs the additional benefits qualified 
researchers would gain from access to the ZIP Code data, as well as 
plan ID and rating area data. As such, we believe excluding ZIP Code, 
plan ID, and rating area from the limited data set but including race, 
ethnicity, ICHRA indicator, subsidy indicator, and subscriber indicator 
as they become available \190\ represents the appropriate balance 
between these concerns and providing a limited data set that is useful 
to qualified researchers.
---------------------------------------------------------------------------

    \190\ The subscriber indicator data field will be included in 
the limited data set beginning with the 2022 benefit year because it 
will be extracted beginning with the 2022 benefit year. The race, 
ethnicity, ICHRA indicator, and subsidy indicator data fields will 
be included in the limited data set beginning with the 2023 benefit 
year because they will be extracted beginning with the 2023 benefit 
year.
---------------------------------------------------------------------------

    As detailed above, we also note that HHS has taken several steps to 
protect information that issuers may consider to be proprietary. With 
respect to the limited data set, we strictly adhere to all the 
requirements and CMS guidelines related to providing the limited data 
set to qualified researchers. This includes a requirement that, prior 
to receiving the limited data set file, qualified researchers must 
enter into a data use agreement that establishes the permitted uses or 
disclosures of the information and prohibits the recipient from 
identifying the information.\191\ The data use agreement also requires 
qualified

[[Page 27251]]

researchers to explain the specific research purpose for which the data 
will be used and generally prohibits disclosure of the data.
---------------------------------------------------------------------------

    \191\ See Data Use Agreement. CMS. https://www.cms.gov/Medicare/CMS-Forms/CMS-Forms/Downloads/CMS-R-0235L.pdf. Further details on 
LDS files available at Limited Data Set (LDS) Files. (2021, December 
1). CMS. https://www.cms.gov/Research-Statistics-Data-and-Systems/Files-for-Order/Data-Disclosures-Data-Agreements/DUA_-_NewLDS.
---------------------------------------------------------------------------

    We also note that the limited data set includes masked enrollee-
level data, and that inclusion of subscriber indicator in the limited 
data set would not create risk to enrollee privacy or security because 
it is intended to identify only whether a masked enrollee is the 
subscriber or dependent on a plan. Further, the limited data set file 
is subject to Federal laws and regulations in addition to CMS 
guidelines, and does not contain specific direct identifiers as set 
forth in the HIPAA Privacy Rule.\192\ Specifically, a limited data set 
must exclude certain direct identifiers of the individual or relatives, 
employers, or household members of the individual, including, but not 
limited to, names, telephone numbers, social security numbers, medical 
record numbers, account numbers, health plan beneficiary numbers, 
biometric identifiers like finger and voice prints, and postal address 
information (not including town or city, State, and ZIP Code).\193\ We 
note that race, ethnicity, ICHRA indicator, subsidy indicator, and 
subscriber indicator are not direct identifiers that must be excluded 
from a limited data set and would not add to the risk of enrollees 
being identified. In addition, consistent with how we created the 
limited data set in prior years, HHS will continue to exclude data from 
the limited data set that could lead to identification of certain 
enrollees.\194\
---------------------------------------------------------------------------

    \192\ See 45 CFR 164.514(e)(1) and (2).
    \193\ For the complete list of direct identifiers that are 
excluded from the limited data set, see 45 CFR 164.514(e)(2)(i)-
(xvi).
    \194\ See, for example, Creation of the 2019 Benefit Year 
Enrollee-Level EDGE Limited Data Sets: Methods, Decisions and Notes 
on Data Use. (2021, August 25). CMS. https://www.cms.gov/files/document/2019-data-use-guide.pdf.
---------------------------------------------------------------------------

    Comment: Several commenters supported expanding the permissible 
uses of the enrollee-level EDGE data as it would help inform HHS policy 
analysis and assessment of equity in health coverage and care, identify 
and address health disparities, and allow HHS to better understand the 
full impact of its policies, including changes to risk adjustment 
methodologies.
    However, several commenters opposed the proposed expansion of the 
permissible uses of enrollee-level EDGE data beyond the uses 
established in the 2020 Payment Notice. Some of these commenters 
expressed concern that issuers submit data to their EDGE servers with 
the belief that the data's primary purpose would be for risk adjustment 
purposes or for development of the AV Calculator. These commenters 
noted that because of this belief, data collected through the EDGE 
servers may not be appropriate, reliable, or sufficiently quality 
checked for the proposed expanded uses.
    Some of these commenters stated specific concerns with data quality 
and reliability of the race, ethnicity, and ICHRA indicator data. These 
commenters also explained that they believed race, ethnicity, and ICHRA 
indicator data were out of scope and not necessary for the purposes of 
operating the risk adjustment program. Several commenters noted that 
the proposal to expand the permissible uses of EDGE data would be 
inconsistent with the intended use of the distributed data environment 
to administer the HHS-operated risk adjustment program. One commenter 
requested that HHS adopt a requirement prohibiting use of EDGE data for 
purposes other than for recalibration of the risk adjustment model and 
development of the AV Calculator.
    Response: In the 2014 Payment Notice (78 FR 15497 through 15500), 
we established the distributed data collection approach and other 
requirements related to data collection and reporting for purposes of 
the HHS-operated risk adjustment program. We also explained that we 
intended for issuers to provide HHS only those data that we believed 
were reasonably necessary for the risk adjustment program.\195\ We 
disagree that expanding the permissible uses of data collected through 
the EDGE servers is inconsistent with the intent to establish the 
distributed data collection approach for collecting risk adjustment 
data. We also do not agree that the collection of the race, ethnicity, 
and ICHRA indicator data elements are out of scope; instead, we believe 
they are reasonably necessary for risk adjustment purposes. As 
explained in the proposed rule, the collection and extraction of these 
data elements, in combination with the other extracted data elements, 
will further HHS' ability to consider more areas of health equity when 
assessing risk patterns, better address discrimination in health care 
and health disparities, and identify ways to address health equity 
issues with regard to the HHS-operated risk adjustment program. More 
specifically, the additional data elements will allow HHS to conduct 
analysis at a more granular level than our current data allow, further 
assess risk patterns and the impact of the risk adjustment policies 
based on geographic, income, or other demographic differences, and 
investigate, by sub-population, whether there are cost differentials 
for certain conditions based on demographic differences (such as race, 
ethnicity, or subsidy indicator). For example, HHS believes that 
analysis of the race and ethnicity data elements will help HHS better 
monitor trends in the health insurance markets and identify potential 
refinements to the HHS risk adjustment methodology, including ways to 
address health equity issues and ensure that risk adjustment is not 
designed in a manner that furthers health inequities. Collection of the 
ICHRA indicator will allow HHS to investigate whether there are any 
unique characteristics of the ICHRA population and if ICHRA enrollment 
is impacting State individual (or merged) market risk pools. This 
analysis will help inform potential refinements to the risk adjustment 
methodology and policies for future benefit years. Therefore, the 
primary purpose and use for the data remains the risk adjustment 
program. We further note that HHS continuously evaluates the risk 
adjustment program and the data elements that we believe are reasonably 
necessary for risk adjustment purposes. For example, we have previously 
updated EDGE server data collection requirements to include two new 
data elements: (1) Regarding pharmacy claims, the number of days' 
supply for prescription drugs, and (2) an in/out-of-network claims 
indicator.\196\ The proposal to collect and extract the race, 
ethnicity, and ICHRA indicator data elements followed a similar 
process.
---------------------------------------------------------------------------

    \195\ 78 FR 15500.
    \196\ 81 FR 94101.
---------------------------------------------------------------------------

    After consideration of public comments, we are finalizing, as 
proposed, the expansion of the permitted uses of enrollee-level data to 
allow for more comprehensive study and analysis of potential changes of 
other HHS Federal health-related programs alongside HHS commercial 
market programs. In the 2018 Payment Notice (81 FR 94101), we noted 
that data collected through the EDGE servers will be most useful for 
risk adjustment purposes. However, we explained that we believed these 
data would also provide valuable information to validate the AV 
Calculator and to calibrate other HHS programs in the individual and 
small group (including merged) markets and finalized our policy to use 
the data provided to HHS through the EDGE servers for these additional 
purposes.\197\ Similarly, we believe these data will be valuable in 
assessing policy and

[[Page 27252]]

operational issues that are not in connection with programs centered 
around the individual or small group (including merged) commercial 
health insurance markets. For example, these data will allow HHS to 
assess the impact of potential policy changes to PHS Act requirements 
enforced by HHS that are applicable market-wide \198\ and those that 
are applicable to non-Federal governmental plans.\199\ In addition, 
many PHS Act provisions added by the No Surprises Act \200\ apply to 
group health plans and health insurance issuers offering group or 
individual health insurance coverage, as well as to providers and 
facilities, rather than being centered around only non-grandfathered 
individual and small group health insurance coverage. As we consider 
policy changes related to implementing the new PHS Act requirements 
added by the No Surprises Act, we will be able to consult the enrollee-
level EDGE data.
---------------------------------------------------------------------------

    \197\ Ibid.
    \198\ See, for example, 42 U.S.C. 300gg--300gg-28.
    \199\ Non-Federal governmental plans are subject to many PHS Act 
Federal market reform requirements. See, for example, 42 U.S.C. 
300gg-21(a)(1)(A). See also 42 U.S.C. 300bb-1, et. seq. HHS is 
generally responsible for enforcement of PHS Act provisions 
applicable to non-Federal governmental plans. See, for example, 42 
U.S.C. 300gg-22(b)(1)(B) and 45 CFR 150.301, et. seq.
    \200\ The Consolidated Appropriations Act, 2021 (CAA) was 
enacted on December 27, 2020 and includes Title I (No Surprises Act) 
in Division BB.
---------------------------------------------------------------------------

    We also acknowledge stakeholders' concerns about the reliability 
and quality of these newly collected data elements. As detailed 
elsewhere in this rule, we will ensure that data quality and 
reliability checks are consistent with other data standard checks that 
HHS performs. Additionally, we will ensure that the response rate with 
respect to the submission of race, ethnicity, and ICHRA indicator data 
is adequate to support any analytical conclusions that could inform 
policy decisions.
    Comment: Most commenters generally supported HHS pursuing efforts 
to improve more consistent collection and use of z codes by providers, 
with several of these commenters stating that using z codes in the HHS-
operated risk adjustment program may incentivize more consistent use of 
z codes by providers. Some commenters also provided specific policies 
for HHS to consider to encourage increased and consistent use of z 
codes, including focusing on increased outreach to providers to improve 
provider awareness of coding guidelines for z codes, working to develop 
a uniform data collection approach and standardized definitions to 
support consistent z code use, developing electronic health records 
certification standards for capturing z codes, and incorporating 
reporting metrics for z codes into value-based programs.
    Some commenters explained that because z codes are immature as a 
clinical tool and can be subjective in nature, HHS should first focus 
on steps to ensure z codes accurately reflect SDOH before pursuing 
other policies. One commenter stated that using z codes in the HHS-
operated risk adjustment program without substantial preparation could 
widen existing gaps in recognized coding standards, and HHS should 
instead focus on promoting consistent and comprehensive diagnostic 
reporting using these recognized coding standards. Similarly, one 
commenter recommended that HHS increase awareness to encourage more 
consistent use of z codes by providers and revise z codes to ensure 
proper documentation of significant socioeconomic barriers to health 
before considering incorporating z codes into the risk adjustment 
program. Other commenters explained that requiring providers to use z 
codes would create additional administrative burden and thus providers 
should not be penalized for not using z codes.
    Response: Given that we only solicited comments on how to encourage 
the use of z codes and did not propose specific policies in this area, 
we are not finalizing any specific policies related to the collection 
and extraction of z codes at this time. We appreciate the feedback and 
will continue to review and consider the public comments related to the 
collection and extraction of z codes to support the operation of the 
HHS-operated risk adjustment program.
    Comment: Several commenters suggested that HHS consider collecting 
and extracting sexual orientation, gender identity, and additional 
diagnosis codes related to obesity to support the operation of the HHS-
operated risk adjustment program. One of these commenters also 
suggested HHS collect and extract data related to nutritional 
deficiencies and excess alcohol use. Another commenter suggested HHS 
collect and extract disability and veteran status, as self-reported by 
enrollees.
    Response: We appreciate these comments but did not propose and are 
not finalizing the collection or extraction of the additional data 
elements suggested by these commenters at this time. We may consider 
the additional data elements presented by these commenters for future 
benefit years and generally note that we would want to research whether 
there are existing data sources for the information as part of the 
consideration of whether to propose changes the risk adjustment data 
collection requirements as suggested. We also note that the more severe 
manifestations of nutritional deficiencies (for example, HCC 023 
Protein-Calorie Malnutrition) and excess alcohol use (HCC 083 Alcohol 
Use with Psychotic Complications and HCC 084 Alcohol Use Disorder, 
Moderate/Severe, or Alcohol Use with Specified Non-Psychotic 
Complications) are among the current payment HCCs in the risk 
adjustment models.\201\
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    \201\ There are also less severe manifestations of alcohol use 
disorder and nutritional deficiencies, but it was determined they 
did not meet the criteria for inclusion in the HHS risk adjustment 
models.
---------------------------------------------------------------------------

6. Risk Adjustment User Fee for 2023 Benefit Year (Sec.  153.610(f))
    HHS proposed a risk adjustment user fee for the 2023 benefit year 
of $0.22 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.\202\ As 
described in the 2014 Payment Notice, HHS' operation of risk adjustment 
on behalf of States is funded through a risk adjustment user fee.\203\ 
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.
---------------------------------------------------------------------------

    \202\ For the 2023 benefit year, HHS will be operating the risk 
adjustment program in every state and the District of Columbia.
    \203\ 78 FR 15409 at 15416 through 15417.
---------------------------------------------------------------------------

    OMB Circular No. A-25 established Federal policy regarding user 
fees, and specifies that a user charge will be assessed against each 
identifiable recipient for special benefits derived from Federal 
activities beyond those received by the general public. The 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.
    For the 2023 benefit year, HHS proposed to use the same methodology 
to estimate our administrative expenses to operate the risk adjustment 
program as used for the 2022 benefit year. To calculate the user fee, 
we divided HHS' projected total costs for administering

[[Page 27253]]

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.
    We estimated 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. We projected 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 between the 2019 and 2020 benefit years (prior to 
implementation of the ARP in 2021). As such, we proposed the 2023 
benefit year risk adjustment user fee rate as $0.22 PMPM. We sought 
comment on the proposed risk adjustment user fee for the 2023 benefit 
year.
    After consideration of comments, we are finalizing the 2023 benefit 
year risk adjustment user fee as proposed.
    We summarize and respond to public comments received on the 2023 
risk adjustment user fee below.
    Comment: We received several comments in support of the 2023 risk 
adjustment user fee rate.
    Response: We appreciate the support and are finalizing, as 
proposed, a risk adjustment user fee rate for the 2023 benefit year of 
$0.22 PMPM.
7. Compliance With Risk Adjustment Standards; High-Cost Risk Pool 
Funds--Audits of Issuers of Risk Adjustment Covered Plans (Sec.  
153.620(c))
    In the proposed rule (87 FR 633), HHS proposed 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 \204\ 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 proposed 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.
---------------------------------------------------------------------------

    \204\ The high-cost risk pool calculations under the HHS risk 
adjustment methodology involve 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 94080 through 94082.
---------------------------------------------------------------------------

    Notwithstanding any reduction to a national high-cost risk pool's 
charges for a given benefit year, this 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 high-cost risk 
pool charges and payments would continue to be calculated in accordance 
with the established policies, terms and factors.205 206
---------------------------------------------------------------------------

    \205\ See 81 FR 94058, 94081. See also 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 did 
not propose changes to the high-cost risk pool parameters for the 
2023 benefit year and therefore will maintain the $1 million 
threshold and 60 percent coinsurance rate.
    \206\ For a visual illustration of the high-cost risk pool terms 
and factors, see 86 FR 24184 through 24185.
---------------------------------------------------------------------------

    We also clarified 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 proposed 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 sought comment on these proposals.
    After review of the comments received, we are finalizing these 
policies as proposed.
    We summarize and respond to public comments received on these 
proposals below.
    Comment: Commenters expressed general support for these proposals.
    Response: After consideration of the relevant comments, we are 
finalizing, as proposed, the policies related to disbursement of high-
cost risk pool funds recouped as a result of audits of risk adjustment 
covered plans under Sec.  153.620(c), actionable high-cost risk pool-
related discrepancies filed pursuant to Sec.  153.710(d), and 
successful high-cost risk pool administrative appeals filed pursuant to 
Sec.  156.1220.
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.\207\
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    \207\ 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 proposed rule, we proposed 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 (87 FR 634 through 639).
    We continue to 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.
    We received some comments on HHS-RADV generally that were unrelated 
to any proposal in the proposed rule. As these comments are outside of 
the scope of this rulemaking, we will not address them at this time. We 
further describe the proposed refinements, as well as summarize and 
respond to comments on the proposals, in the sections that follow.

[[Page 27254]]

a. Coefficient Estimation Groups in Error Estimation
    First, we proposed to modify our process for grouping coefficient 
estimation groups in error estimation. In the 2020 HHS-RADV Amendments 
Rule (85 FR 76984 through 76989), 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 PLRS values and HHS-RADV error 
estimation. To address these rare situations,\208\ we proposed 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 throughout 
HHS-RADV error estimation, rather than just at the sorting step that 
assigns HCCs to failure rate groups, beginning with the 2021 benefit 
year of HHS-RADV. 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 would be calculated under 
the State payment transfer formula.
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    \208\ 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.
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    We also explained in the proposed rule that this update to the 
Super HCC policy would necessitate a change to the policy finalized in 
the 2021 Payment Notice (85 FR 29196 through 29198), 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.\209\
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    \209\ 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.
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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, 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, we proposed to generally maintain the outlier identification 
approach adopted in the 2021 Payment Notice and proposed 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 (85 FR 29196 through 
29198), we also proposed 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 clarified 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.
    We sought comment on these proposals 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.
    After reviewing the public comments, we are finalizing the proposal 
to extend the application of Super HCCs to apply coefficient estimation 
groups throughout the HHS-RADV error rate calculation methodology as 
proposed. Additionally, as proposed, we are finalizing the policy 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. However, 
we will 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. Issuers 
with fewer than 30 de-duplicated EDGE Super HCCs in a failure rate 
group may still be considered an outlier in other failure rate groups 
in which they have 30 or more de-duplicated EDGE Super HCCs.
    We summarize and respond to public comments received on the 
coefficient estimation groups in error estimation proposal below.
    Comment: Several commenters supported the proposal to extend the 
application of Super HCCs to apply coefficient estimation groups 
throughout the error rate calculation process. A few of these 
commenters asserted that this change better aligns the error rate 
calculation with the intent of the HHS-RADV program and will enhance 
the integrity of HHS-RADV. Another commenter asserted this change will 
contribute to market stability and improve predictability.
    Response: We are finalizing this methodological change and the 
accompanying policies as proposed. HHS agrees that these changes will 
contribute to market stability and improve issuers' ability to predict 
HHS-RADV adjustments. More specifically, extending the application of 
Super HCCs to apply coefficient estimation groups through the error 
rate calculation process better ensures that an issuer only needs to 
validate one HCC in a coefficient estimation group to avoid further 
impacting an adjustment to an enrollee's risk score in HHS-RADV and 
aligns the HHS-RADV methodology with the enrollee risk score 
calculation under the State payment transfer formula.
    Comment: One commenter requested more information about the 
prevalence of enrollees that have multiple diagnoses in a Super HCC 
Group.
    Response: As described in the proposed rule, the majority of HCCs 
in a Super HCC are in the same hierarchy, but in rare instances an 
individual enrollee may be recorded as having multiple conditions in a 
coefficient estimation group for HHS-RADV. Specifically, only 0.07 
percent of enrollees sampled for HHS-RADV in 2018 had multiple HCCs 
recorded on EDGE that shared a coefficient estimation group but did not 
share an HCC hierarchy.
b. Defining Super HCCs Separately for Adults, Children, and Infants
    In conjunction with the proposal to modify the application of 
coefficient estimation groups in section III.C.8.a. of this final rule, 
we also proposed 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 finalized 
in the 2020 HHS-RADV

[[Page 27255]]

Amendments Rule (85 FR 76987), coefficient estimation group logic from 
the adult models is applied to all enrollees, including those subject 
to the child and infant models. For a full description of the current 
and proposed Super HCC policies see the proposed rule (87 FR 635 
through 639). In the proposed rule, we proposed 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. These definitions are described in the relevant rows in 
the applicable benefit year's DIY software adult variable logic, child 
variable logic and infant variable logic. For example, for 2021 HHS-
RADV, in the 2021 Benefit Year DIY Software,\210\ the adult coefficient 
group definitions are in the ``HCC group'' rows in Table 6: Additional 
Adult Variables, the child coefficient group definitions are in the 
``HCC group'' rows in Table 7: Additional Child Variables, and the 
infant coefficient group definitions are in 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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    \210\ The January 7, 2022 version of the DIY software is 
available at 2021 Benefit Year Risk Adjustment Updated HHS-Developed 
Risk Adjustment Model Algorithm ``Do It Yourself (DIY)'' Software. 
(2022). CMS.
---------------------------------------------------------------------------

    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 proposed to apply this change beginning 
with the 2021 benefit year of HHS-RADV.
    We sought comment on these proposals and whether Super HCCs should 
continue to be defined for all enrollees based on only the adult 
models, should be defined for adult enrollees based on the adult models 
and for child and infant enrollees based on the child models, or should 
be defined for each age group according to the age group risk 
adjustment model to which they are subject, as proposed.
    After reviewing the public comments, we are finalizing the proposal 
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 proposed.
    We summarize and respond to public comments received on defining 
Super HCCs separately for adults, children, and infants below.
    Comment: Several commenters supported the proposal to define Super 
HCCs for each age group according to the age group risk adjustment 
model to which they are subject as this change better aligns the error 
rate calculation with the intent of the HHS-RADV program and will 
enhance the integrity of HHS-RADV. A few commenters opposed defining 
Super HCCs separately for adults, children and infants and expressed 
concerns with the volatility of the HHS-RADV methodology. One of these 
commenters stated that this change would add more complexity to 
predicting failure rate groups without providing significant benefit. 
Another commenter opposed to this proposal stated that an increase in 
the number of factors used in sorting, compounded by relatively small 
sample sizes, would lead to greater volatility and higher premiums and 
that separating child conditions from adult conditions when defining 
Super HCCs would create more volatility for conditions that are 
potentially more similar to each other than conditions that are grouped 
together in other Super HCCs.
    Response: We appreciate the support for these proposals and are 
finalizing the changes to define Super HCCs for each age group 
according to the age group risk adjustment model to which they are 
subject beginning with the 2021 benefit year of HHS-RADV, as proposed. 
When we established the current Super HCC grouping policy, we 
acknowledged the possibility of defining Super HCCs based on each model 
separately; however, we proposed and finalized Super HCCs based on only 
the adult models for a number of different reasons. These included 
concerns that using the child and infant models separately could lead 
to less stable failure rate group assignments year-over-year due to 
some infant model Super HCCs with very small sample sizes and 
recognition of the fact that the adult models' HCC coefficient 
estimation groups would be applicable to the vast majority of enrollees 
(including most children, considering the strong overlap between the 
structure of the adult and child models). We also believed that the use 
of the HCC coefficient estimation groups present in the adult models 
sufficiently balanced the representativeness and accuracy of HCC 
failure rate estimates across the entire population in aggregate.
    However, in recognition of the differences in each age group 
model's definitions and due to the updates to HCC hierarchies used in 
the risk adjustment models beginning with the 2021 benefit year, we 
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. Based on the results of the further analysis, we do not 
believe that defining Super HCCs separately for adults, children and 
infants, except for where child and adult coefficient estimation groups 
have identical definitions, will increase volatility. Rather, as 
described in the proposed rule, our simulated analysis found evidence 
that this methodological change would increase model stability. The 
analysis found that 93.2 percent of factors would remain in the same 
failure rate group across subsequent benefit years, which contrasts 
with the 91.4 percent of factors that we would expect to remain stable 
between subsequent years if Super HCCs were only based on the 
definitions in the adult models. This minor improvement to stability in 
failure rate groupings may reduce uncertainties issuers face when 
modeling pricing, and thus is unlikely to have a negative impact on 
premiums, contrary to the concerns voiced by the commenter that the 
proposed refinement to the definition of Super HCCs will lead to 
greater volatility and higher premiums increase. Moreover, under the 
policy we are finalizing in this rule, beginning with the 2021 benefit 
year of HHS-RADV, Super HCCs will only be defined separately in cases 
where the child and adult coefficient estimation groups do not have 
identical definitions. This limits the number of cases in which the 
child and adult models diverge, thereby further limiting the volatility 
in the HHS-RADV methodology. Therefore, we generally disagree that the 
adoption of this methodological update and accompanying policies would 
add more complexity without providing significant benefit. Instead, we 
believe this is an appropriate refinement to the HHS-RADV methodology 
and error estimation process based on our experience operating the 
program and analysis of additional years of available data.
c. Negative Failure Rate Constraint
    In the 2020 HHS-RADV Amendments Rule (85 FR 76994 through 76998), 
we finalized a policy to constrain outlier issuers' error rate 
calculations to zero in

[[Page 27256]]

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 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.
    In the proposed rule, we proposed 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. To address cases where a 
positive error rate outlier issuer has a negative failure rate in one 
failure rate group and a positive failure rate in another failure rate 
group, we proposed 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 proposed to adopt this policy 
beginning with the 2021 benefit year HHS-RADV.
    We sought comment on this proposal.
    After reviewing the public comments, we are finalizing the negative 
failure rate constraint policy, as proposed.
    We summarize and respond to public comments received on the 
negative failure rate constraint policy below.
    Comment: All commenters supported this proposal 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. Some of these commenters 
asserted that this modification of the negative failure rate constraint 
better aligns the error rate calculation with the intent of the HHS-
RADV program and will enhance the integrity of HHS-RADV.
    Response: We appreciate these comments and are finalizing the 
negative failure rate constraint policy as proposed and will apply it 
beginning with the 2021 benefit year of HHS-RADV. Although our 
experience to date leads us to believe that this scenario is unlikely 
to occur often, we agree this refinement is consistent with the intent 
of the HHS-RADV program and will enhance the integrity of HHS-RADV by 
further reducing potential incentives for issuers to use HHS-RADV to 
identify more HCCs than were reported to their EDGE servers for an 
applicable benefit year.
    Comment: One commenter who supported the proposed policy stated 
that this change will address instability caused by negative error 
rates. This commenter also suggested it would help issuers understand 
the implications of the policy if HHS provided data to demonstrate the 
impact of extending the negative failure rate constraint from negative 
error rate outlier issuers to all outlier issuers, regardless of 
whether the outlier issuer has a negative or positive error rate.
    Response: As explained in the proposed rule (87 FR 638), we believe 
this is an appropriate modification of the policy adopted in the 2020 
HHS-RADV Amendments Rule 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. It is rare, but possible, for a positive 
error rate outlier to have a negative failure rate in one failure rate 
group and a positive failure rate in another failure rate group. 
Specifically, across 2017, 2018 and 2019 HHS-RADV, there was only one 
instance in which an issuer had a negative failure rate in a failure 
rate group for which that issuer was an outlier, but had a total error 
rate that was positive. Despite the relative rarity of these cases, we 
continue to believe that this is an appropriate modification of the 
policy adopted in the 2020 HHS-RADV Amendments Rule. Therefore, to 
address these types of cases in future years of HHS-RADV, we are 
finalizing, as proposed, the amendment to the application of the 
negative failure rate constraint policy. Beginning with the 2021 
benefit year of HHS-RADV, for the purposes of calculating the GAF, we 
will 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.
9. Disbursement of Recouped High-Cost Risk Pool Funds--Discrepancies of 
Issuers of Risk Adjustment Covered Plans (Sec.  153.710(d))
    HHS proposed 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 proposed to use the high-cost risk pool funds recouped based on an 
actionable 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, we also proposed 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 also 
clarified 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 funds as a result of an 
actionable discrepancy in the next MLR reporting cycle consistent with 
Sec.  153.710(h). We sought comment on these proposals.
    After consideration of the relevant comments, we are finalizing 
these policies as proposed.
    We summarize and respond to public comments received on these 
proposals below.
    Comment: We received several comments expressing general support 
for these proposals.
    Response: We are finalizing, as proposed, the policies related to 
disbursement of high-cost risk pool funds recouped as a result of 
audits of risk adjustment covered plans under Sec.  153.620(c), 
actionable high-cost risk pool-related discrepancies filed pursuant to 
Sec.  153.710(d), and successful high-cost risk pool administrative 
appeals filed pursuant to Sec.  156.1220.
10. Medical Loss Ratio Reporting Requirements (Sec.  153.710(h))
    In the proposed rule (87 FR 639), we explained that HHS established 
a framework in prior rulemakings to guide

[[Page 27257]]

issuer treatment of certain payments and charges that could be subject 
to reconsideration for purposes of risk corridors and MLR 
reporting.\211\ For example, because risk adjustment transfer amounts 
are factors in an issuer's MLR calculations, a delay in 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 final risk adjustment 
transfer amounts could occur due to audits, actionable discrepancies, 
or successful appeals. Therefore, we clarified in Sec.  153.710(h) 
\212\ how issuers should report certain ACA program amounts that could 
be subject to reconsideration for risk corridors and MLR reporting 
purposes.
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    \211\ See 45 CFR 153.710(h).
    \212\ These instructions were previously codified in 45 CFR 
153.710(g) and recently redesignated to 45 CFR 153.710(h). See 79 FR 
13789 through 13790 and 86 FR 24194 through 24195.
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    In the proposed rule, we proposed 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.\213\ We also proposed to add a reference to 
HHS-RADV discrepancies under Sec.  153.630(d)(2) to the introductory 
sentence in Sec.  153.710(h)(1).
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    \213\ For example, the 2022 benefit year HHS-RADV Summary Report 
for non-exiting issuers will be published in summer of 2024 and 
those issuers would be expected to report those amounts in their 
2023 MLR Reports (filed by July 31, 2024).
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    We also proposed 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.
    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.\214\
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    \214\ See, for example, Treatment of Risk Corridors Recovery 
Payments in the Medical Loss Ratio and Rebate Calculations. (2020, 
December 30). CMS. https://www.cms.gov/files/document/mlr-guidance-rc-recoveries-and-mlr-final.pdf.
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    Finally, we proposed 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 (85 FR 786 through 78605 and 
86 FR 24194 through 24195) 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).
    We sought comments on these proposals.
    After reviewing the public comments, we are finalizing the proposed 
amendments to Sec.  153.710(h) 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). For greater 
clarity, the regulation text we adopt in this final rule at Sec.  
153.710(h)(2) contains a non-substantive change to also include a 
reference to HHS-RADV adjustments in the second sentence to align with 
the addition of the same reference in the first sentence.\215\ We are 
also finalizing the technical correction to Sec.  153.710(h)(3) to 
point to the correct sections that contain the relevant reporting 
instructions.
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    \215\ This editorial revision in no way changes or otherwise 
affects the requirements under the proposed text and more clearly 
and consistently captures 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.
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    We summarize and respond to public comments received on proposed 
medical loss ratio (MLR) reporting requirements (Sec.  153.710(h)) and 
policies below.
    Comment: One commenter supported the proposal to amend Sec.  
153.710(h) 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). We received two comments on the MLR 
reporting cycle and its interaction with the risk adjustment payment 
and charge timing, including a suggestion that HHS consider changing 
the deadline for reporting during the current MLR reporting year any 
adjustment (including HHS-RADV adjustments) made or approved by HHS 
before August 15, or the next applicable business day, to June 30 to 
avoid creating the need for issuers to refile MLR reports after the 
July 31 deadline to account for these adjustments.
    Response: We appreciate these comments and are finalizing the 
amendments, as proposed, to address and explicitly capture a reference 
to HHS-RADV adjustments. The changes to the regulation make clear and 
codify HHS' expectation that issuers report HHS-RADV adjustments as 
part of their MLR reports in the same manner as they report and with 
the same deadlines associated with the risk adjustment payment and 
charge amounts (including high-cost risk pool payments and charges) 
that were established in the 2017 Payment Notice (81 FR 12236).
    As for the MLR reporting cycle, we continue to believe that the 
August 15 date provides the necessary flexibility to account for 
adjustments to issuers' MLR reports as a result of risk adjustment 
payment and charge amounts, including HHS-RADV adjustments. Therefore, 
we did not propose, and are not finalizing, changes to the existing 
reporting deadlines in Sec.  153.710(h) as applied to HHS-RADV 
adjustments or other payments and charges that could be

[[Page 27258]]

subject to reconsideration for purposes of risk corridors and MLR 
reporting.
11. Deadline for Submission of Data (Sec.  153.730)
    A risk adjustment covered plan must submit data that is necessary 
for HHS to calculate risk adjustment payments and charges to HHS in 
States where HHS is operating the risk adjustment 
program.216 217 In the 2014 Payment Notice (78 FR 15434), 
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.
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    \216\ 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.
    \217\ 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.
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    In the proposed rule (87 FR 639 through 640), we did not propose to 
change this deadline but proposed 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 exercises enforcement 
discretion to extend the deadline to the next applicable business 
day.\218\ Recognizing there will be future benefit years when April 30 
does not fall on a business day, HHS proposed 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 sought comments on this proposal.
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    \218\ See 81 FR 12204 at 12234 n.20; see also Evaluation of EDGE 
Data Submissions for 2016 Benefit Year. (2016, December 23). CMS. 
https://www.cms.gov/CCIIO/Resources/Regulations-and-Guidance/Downloads/EDGE-2016-Q_Q-Guidance_20161222v1.pdf.
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    After consideration of the comment received, we are finalizing the 
amendment to Sec.  153.730 as proposed.
    Comment: One commenter supported this proposal because this 
amendment would clarify expectations for when reporting must be 
completed.
    Response: We are finalizing the amendment to Sec.  153.730 to 
clarify that when the April 30 following the applicable benefit year 
deadline for issuers to submit the required risk adjustment data falls 
on a non-business day, the deadline for issuers to submit the required 
risk adjustment.

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))
    In the HHS Notice of Benefit and Payment Parameters for 2023 
proposed rule (87 FR 584, 640), we proposed to amend 45 CFR 155.120(c) 
such that its nondiscrimination protections would explicitly prohibit 
discrimination based on sexual orientation and gender identity. As 
explained in the Supplementary Information section earlier in the 
preamble, HHS will address this policy, as well as the public comments 
submitted in response to this proposal, in future rulemaking.
2. Civil Money Penalties for Violations of Applicable Exchange 
Standards by Consumer Assistance Entities in Federally-Facilitated 
Exchanges (Sec.  155.206)
    In the HHS Notice of Benefit and Payment Parameters for 2023 
proposed rule (87 FR 584, 640 through 641), we proposed to make a 
technical correction to 45 CFR 155.206(i) to add language that would 
cross-reference 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).\219\ 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.\220\ Additionally, a reference to Sec.  155.206 and any 
accompanying adjusted CMP amounts have not been included in HHS' annual 
inflation update rulemakings.\221\ Therefore, we proposed 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'' to correct this 
oversight. The associated CMP table in 45 CFR 102.3 is updated 
annually, and Sec.  155.206(i) was added in the recent annual 
update.\222\ To date, no CMPs have been imposed under this authority, 
but any that are imposed 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.
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    \219\ 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) 
(codified as amended at 28 U.S.C.A. Sec.  2461 note 2(a)).
    \220\ See Department of Health and Human Services; Adjustment of 
Civil Monetary Penalties for Inflation; Interim Final Rule, 81 FR 
61538 (2016, September 6).
    \221\ See, for example, the Department of Health and Human 
Services; Annual Civil Monetary Penalties Inflation Adjustment; 
Final Rule, 85 FR 2869 (2020, January 17). See also 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 (2021, November 15).
    \222\ See the Department of Health and Human Services; Annual 
Civil Monetary Penalties Inflation Adjustment, 87 FR 15100 (2022, 
March 17).
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    We did not receive any comments in response to the proposed 
amendments to Sec.  155.206(i) or the accompanying policies detailed in 
the related preamble discussion. For the reasons stated in the proposed 
rule, we are finalizing the proposed amendments to Sec.  155.206(i).
3. 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
    In the HHS Notice of Benefit and Payment Parameters for 2023 
proposed rule (87 FR 584, 641 through 643), we proposed 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)(6),\223\ 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 proposed 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.
---------------------------------------------------------------------------

    \223\ While the citation in the preamble in the proposed rule 
referred to amendments to add new Sec.  155.220(c)(3)(i)(A)(1) 
through (c)(3)(i)(A)(5), the discussion of the proposal and the 
proposed regulations made clear that the proposal would add new 
Sec.  155.220(c)(3)(i)(A)(1) through (c)(3)(i)(A)(6). See, for 
example, 87 FR 641- 642 and 721-722.
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    We proposed to codify new Sec. Sec.  155.220(c)(3)(i)(A)(1) through 
(6) 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

[[Page 27259]]

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.
    In addition, we proposed to modify the language in Sec.  
155.220(c)(3)(i)(A) that served as the basis for the current plan 
detail disclaimer requirement \224\ 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 
proposed to revise Sec.  155.220(c)(3)(i)(A) to state that web-broker 
websites must disclose and display the 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. This disclaimer would state 
that enrollment support for the QHP is available on the Exchange 
website, and provide a web link to the Exchange website. This proposal 
to modify the disclaimer requirement in Sec.  155.220(c)(3)(i)(A) would 
ensure that consumers still receive information on those QHPs for which 
a web-broker website does not provide enrollment support and directions 
to where they can obtain enrollment support.
---------------------------------------------------------------------------

    \224\ The current plan detail disclaimer states: ``[Name of 
Company] isn't able to display all required plan information about 
this Qualified Health Plan at this time. To get more information 
about this Qualified Health Plan, visit the Health Insurance 
Marketplace[supreg] website at HealthCare.gov.'' See Section 5.3.2. 
Federally-Facilitated Exchanges (FFEs) and Federally-Facilitated 
Small Business Health Options Program (FF-SHOP) Enrollment Manual 
(pp.53). (2021, August 18). https://www.cms.gov/files/document/ffeffshop-enrollment-manual-2021.pdf.
---------------------------------------------------------------------------

    We sought comments on these proposals. After reviewing the public 
comments, and for the reasons discussed in this final rule and the 
proposed rule, we are finalizing these requirements as proposed.
    We summarize and respond to public comments received on the 
proposals related to required QHP comparative information on web-broker 
websites and the associated disclaimer.
    Comment: Most commenters supported the proposals to require web-
broker websites to display QHP comparative information and the 
associated disclaimer. Numerous commenters stated the proposals would 
ensure that consumers who use web-broker websites have access to 
standardized comparative information on QHPs so they can review, 
understand, and compare all available options and select the one that 
best fits their needs. Some commenters indicated these proposals would 
increase transparency on web-broker websites and reduce the risk that 
consumers are influenced based on the financial interests of web-
brokers or by providing a favorable display of QHP information for QHPs 
for which the web-broker receives compensation for enrollments.
    Response: We appreciate the support for the proposals related to 
required QHP comparative information on web-broker websites and the 
associated disclaimer. We agree that these proposals will increase 
transparency and better enable consumers using web-broker websites to 
compare and understand the QHP options available to them.
    Comment: Some commenters stated that the proposals were a positive 
step, but that HHS should do more to support consumers' ability to 
compare plans, such as requiring web-broker websites to display all 
plans neutrally and refrain from segregating some QHPs at the bottom of 
their website pages.
    Response: HHS is committed to continuing to consider ways to expand 
support for consumers using non-Exchange websites. However, we did not 
propose a requirement for the neutral display of plans in the proposed 
rule and note that a neutral display requirement generally is 
inconsistent with HHS' proposal under Sec.  155.205(b)(1) to require 
web-broker websites to differentially display HHS-designed standardized 
plan options beginning with the PY 2023 open enrollment period in a 
manner consistent with how standardized plan options are displayed on 
HealthCare.gov, unless HHS approves a deviation.
    We also recognize that some web-broker websites historically have 
displayed limited comparative information for some QHPs at the end of a 
list or the bottom of a website page. HHS disagrees, however, that 
requirements stricter than those we finalize in this rule are necessary 
to address these practices. Current HHS rules prohibit web-broker 
websites from displaying QHP recommendations based on compensation 
\225\ an agent, broker, or web-broker receives from QHP issuers.\226\ 
\227\ Additionally, in the August 17, 2021 Web-broker website Display 
Bulletin,\228\ we reminded web-brokers that, consistent with the 
prohibition in Sec.  155.220(c)(3)(i)(L), their websites must refrain 
from filtering the display of QHPs in a manner that favors QHPs for 
which the web-broker receives compensation from issuers for 
enrollments. Based on our observations and experience, web-brokers that 
in past years displayed limited comparative information on certain QHPs 
at the bottom of their website pages did so because the web-broker did 
not have an appointment or other financial relationship with the QHPs' 
issuers. With the adoption of the amendments and policies in this rule, 
which we believe will further limit the behavior and practices 
identified by the commenter, we are of the view that adopting more 
stringent or different guidelines is not necessary at this time. 
Rather, the combination of the existing requirements and the changes 
finalized in this rule, place sufficient limitations to prevent web-
broker websites from inappropriately segregating some QHPs at the 
bottom of their non-Exchange website pages.
---------------------------------------------------------------------------

    \225\ The term ``compensation'' includes commissions, fees or 
other incentives as established in the relevant contract between an 
issuer and the web-broker.
    \226\ See 45 CFR 155.220(c)(3)(i)(L). See also 84 FR 17515 
through 17521 and 17552 through 17553.
    \227\ As detailed in this rule, we are also finalizing the 
proposals to further expand upon and clarify the prohibition on web-
broker non-Exchange websites from displaying QHP recommendations 
based on compensation received from QHP issuers in 45 CFR 
155.220(c)(3)(i)(L).
    \228\ Web-broker website Display Bulletin. (2021, August 17). 
CMS. https://www.cms.gov/files/document/web-broker-website-display-bulletinfinal08172021.pdf.
---------------------------------------------------------------------------

    Comment: Two commenters requested that we provide flexibility in 
terms of how the new standardized disclaimer under Sec.  
155.220(c)(3)(i)(A) must be displayed. Specifically, they expressed a 
preference for web-brokers to be permitted to display the disclaimer in 
a manner that would not require the disclaimer to be repeated next to 
each QHP for which it applied, so long as the website design otherwise 
clearly indicated to consumers for which QHPs the disclaimer applied 
(for example, by displaying a visual cue beside each QHP for which the 
disclaimer applied that references the text of the disclaimer in a 
single location elsewhere on the website page).
    Response: We are finalizing as proposed the amendments to Sec.  
155.220(c)(3)(i)(A), to require a web-broker's non-Exchange website, to 
the extent that enrollment support for a QHP is not available using its 
non-

[[Page 27260]]

Exchange 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 link to the Exchange 
website. Historically, one of the criteria to satisfy the prominent 
display requirement for the plan detail disclaimer required that it be 
provided separately for each QHP where plan information is not 
displayed, and the text we provided informed consumers that the web-
broker's website is not able to display all required plan information 
about the specific QHP(s) where the disclaimer appeared.\229\ However, 
we recognize that our historical approach governing the prominent 
display of the plan detail disclaimer and the accompanying text does 
not translate well to the new disclaimer requirement in Sec.  
155.220(c)(3)(i)(A) finalized in this rule that shifts the focus to 
informing consumers about any limitations on enrollment support. 
Therefore, we generally agree with these commenters and intend to 
provide some flexibility in terms of how we will interpret and apply 
the requirement to prominently display the new standardized enrollment 
support disclaimer under Sec.  155.220(c)(3)(i)(A). Our goal in 
implementing and enforcing this new requirement will be to ensure 
consumers are clearly informed about any enrollment limitations on a 
web-broker's non-Exchange website and similarly have clear instructions 
for accessing HealthCare.gov if they wish to enroll in those QHPs. We 
note our intent to generally apply the standards for prominent display 
of this new standardized disclaimer as have been described and applied 
previously in relation to the prominent display of other required 
disclaimers on web-broker websites.\230\ For example, we will consider 
this new disclaimer to be prominently displayed if it is displayed in 
close proximity to where QHP plan information appears, so that it is 
noticeable to the consumer. As such, the new enrollment support 
disclaimer must be written in a font size no smaller than the majority 
of text on the website page, be noticeable in the context of the 
website by (for example) using a font color that contrasts with the 
background of the website page, using the exact language provided by 
HHS, and including a functioning link to HealthCare.gov. We also 
clarify that we will consider the display of the new enrollment support 
standardized disclaimer where the enrollment button (or other similar 
mechanisms) would otherwise appear for a particular QHP on the web-
broker's non-Exchange website to comply with the criterion that the 
disclaimer is noticeable to consumers. We further clarify that we would 
similarly consider a web-broker website in compliance with this 
criterion if a visual cue is displayed where the enrollment button (or 
another similar mechanism) would otherwise appear for a particular QHP 
that clearly directs the consumer to the required standardized 
disclaimer on the same website page or otherwise displays the required 
standardized disclaimer (for example, in a pop-up bubble that appears 
while hovering over the visual cue on the website). In both 
circumstances, to be considered fully compliant with the prominent 
display framework, the enrollment support disclaimer must also be 
noticeable using a font color with appropriate contrasts in the context 
of the website page or pop-up bubble, be written in a font size that is 
no smaller than the majority of the surrounding text, use the exact 
language provided by HHS, and include a functioning link to 
HealthCare.gov. We will provide additional operational and technical 
guidance on the display of the enrollment support disclaimer in advance 
of the start of the plan year 2023 open enrollment period to allow time 
for implementation. We will also take appropriate steps to similarly 
finalize the exact language for the new disclaimer so it can be 
implemented in advance of the start of the next open enrollment period.
---------------------------------------------------------------------------

    \229\ Federally-Facilitated Exchange (FFE) and Federally-
Facilitated Small Business Health Options Program (FF-SHOP) 
Enrollment Manual (pp. 53-54). (2021, August 18). https://www.regtap.info/uploads/library/ENR_FFEFFSHOPEnrollmentManual2021_5CR_090921.pdf.
    \230\ Ibid. Also see Guidance for Web-brokers on Displaying 
Mandatory Standardized Disclaimers. (2015, April 24). CMS. https://www.cms.gov/cciio/Programs-and-Initiatives/Health-Insurance-Marketplaces/Downloads/Guidance-web-brokers-displaying-disclaimers.pdf.
---------------------------------------------------------------------------

    Comment: One commenter suggested we establish a safe harbor such 
that web-brokers are not held responsible for the accuracy of QHP 
comparative information obtained from Exchange public use files or the 
Marketplace API and displayed on their websites.
    Response: Although we recognize that the Exchange public use files 
and Marketplace API data may contain errors, we did not propose and 
decline to adopt the suggested safe harbor at this time. First, we note 
that typically when we have discovered incorrect QHP comparative 
information on web-broker websites, it has not been due to incorrect 
Exchange data. Instead, in these circumstances, the errors have been 
attributable to faulty processes adopted by web-brokers to ingest and 
display QHP comparative information, whether the data is sourced from 
the Exchange or directly from QHP issuers. Second, HHS has processes in 
place for addressing Exchange data corrections, which includes making 
necessary updates to the Exchange public use files to reflect the 
corrections.\231\ Web-brokers are expected to update the QHP 
comparative information on their websites when such Exchange data 
errors are corrected, which in cases when web-brokers are using the 
Marketplace API will occur automatically. We also notify web-brokers 
when updates are made to the Exchange public use files so web-brokers 
that do not use the API may make updates to their systems as needed. 
However, we also clarify that we would not otherwise hold web-brokers 
responsible in circumstances where the incorrect QHP comparative 
information is the result of data errors in the Marketplace public use 
files or Marketplace API. Consistent with the standard in Sec.  
155.220(j)(3), HHS would consider the circumstances for why a web-
broker website fails to provide correct information if the web-broker 
otherwise acted in good faith.
---------------------------------------------------------------------------

    \231\ Health Insurance Exchange Public Use Files (Exchange PUFs) 
General Information. (2022). CMS. https://www.cms.gov/files/document/exchange-pufs-geninfofacts-py22.pdf.
---------------------------------------------------------------------------

    Comment: One commenter requested clarification that requiring web-
broker websites to display all available QHPs does not constitute a 
web-broker endorsing QHP issuers with which it is not appointed.
    Response: The amendments to Sec.  155.220(c)(3)(i)(A) that we are 
finalizing in this rule do not modify or otherwise change the long-
standing requirement in Sec.  155.220(c)(3)(i)(B) for web-broker non-
Exchange websites to provide consumers the ability to view all QHPs 
offered through the Exchange.\232\ Instead, the revisions to Sec.  
155.220(c)(3)(i)(A) that we finalize in this rule identify the required 
minimum QHP comparative information that must be displayed on web-
broker non-Exchange websites for all available QHPs in the applicable 
consumer's area. In response to the comment, we further acknowledge 
that requiring web-broker websites to display all available QHPs 
regardless of appointment status with QHP issuers should not be 
perceived as

[[Page 27261]]

an endorsement of QHP issuers with which the web-broker is not 
appointed.
---------------------------------------------------------------------------

    \232\ This requirement was previously codified at Sec.  
155.220(c)(3)(ii) and first established in regulations that were 
effective in 2012. See 77 FR 18309 at 18334 through 18336 and 18449. 
It is designed to ensure that web-broker websites provide consumers 
with access to the same information they would have if they used the 
Exchange website. See 77 FR 18335-18336.
---------------------------------------------------------------------------

    Comment: One commenter requested that we clarify whether Sec.  
155.220(c)(3)(i)(A)(6) requires web-broker websites to host static 
files or whether they are permitted to provide links to issuers' 
websites in instances where information is subject to change and may be 
best presented dynamically (for example, in the case of provider 
directories).
    Response: We clarify that, as finalized, Sec.  
155.220(c)(3)(i)(A)(6) requires web-broker non-Exchange websites that 
assist consumers with Exchange enrollments to include the provider 
directory made available to the Exchange under Sec.  156.230 as part of 
the required minimum QHP comparative information. We further clarify 
that web-broker websites that provide a link to the appropriate 
provider directory web pages on the applicable QHP issuer's website 
would satisfy this requirement. The provider directory field in the 
Exchange public use files consists of links to the applicable QHP 
issuers' provider directory website pages. Finally, we remind web-
brokers and other stakeholders, that web-broker websites may obtain the 
required QHP comparative information from the Exchange (that is, from 
the Exchange public use files or Marketplace API) or directly from QHP 
issuers, as reflected in the introductory clause at Sec.  
155.220(c)(3)(i)(A).
    Comment: Two commenters opposed these proposals. One commenter 
stated that these proposals will add little value for consumers; harm 
the consumer experience when using web-broker websites; and make it 
more difficult for web-brokers to serve their consumers. This commenter 
suggested that the goal of these changes may be to drive consumers to 
use HealthCare.gov. Another commenter expressed concern that these 
proposals encroach on State authority to regulate the business of 
insurance and mentioned a possible, unspecified conflict with existing 
State regulations.
    Response: We respectfully disagree that these changes will harm 
consumers. We believe that these changes will instead make it easier 
for consumers to compare QHPs when using web-broker websites and 
identify the best option for their unique circumstances. For example, 
if web-broker websites are not required to provide basic QHP 
comparative information for all available QHPs, such as premium and 
cost-sharing information, there is no reasonable way for consumers 
using those websites to compare all available options other than 
navigating to multiple websites. Therefore, we also believe these 
changes will make it easier, rather than more difficult, for web-
brokers to assist their customers. This also is not an attempt to drive 
consumers away from non-Exchange websites. The existing web-broker plan 
detail disclaimer requirement mandates that consumers are provided a 
functional link to HealthCare.gov. The maintenance of such a 
requirement for the new disclaimer that must appear when the web-broker 
website does not support enrollment in a QHP is an appropriate and 
necessary exercise of HHS' authority to establish requirements 
governing web-broker participation in FFEs and SBE-FPs. We remain 
committed to the FFE direct enrollment program and believe consumers 
should have access to multiple options to enroll in coverage. In 
addition, we emphasize that these changes largely codify existing 
policies for the interim approach in place beginning with the PY 2022 
open enrollment period pending future rulemaking on these issues. They 
also represent an appropriate evolution of our enforcement approach 
regarding the required display of QHP comparative information on web-
broker websites under Sec.  155.220(c)(3)(i)(A). While we released more 
limited QHP details in the early years of Exchanges, that is no longer 
the case. QHP plan information has been more readily accessible for 
some time, both through public use files and the Marketplace API. In 
addition, enrollment through direct enrollment channels (including web-
broker websites) has continued to grow year after year.\233\ Therefore, 
we continued to consider these issues over the years and continue to 
believe the approach finalized in this rule is in the best interests of 
Exchange consumers using web-broker websites because it will aid them 
in comparing QHP options without having to navigate to multiple 
websites.
---------------------------------------------------------------------------

    \233\ See, for example, CMS Releases Final Snapshot for the 2021 
Federal Exchange Open Enrollment Period. (2021, January 12). 
CMS.https://www.cms.gov/newsroom/press-releases/cms-releases-final-snapshot-2021-federal-exchange-open-enrollment-period.
---------------------------------------------------------------------------

    With respect to the commenter that expressed concern about 
encroachment on State regulatory authority or alleged conflict with 
State regulations, we note that the requirement to display QHP 
comparative plan information and use an appropriate disclaimer has been 
part of the framework governing the use of web-broker websites since 
the inception of the Exchanges.\234\ We are not aware of any potential 
conflicts with existing State regulations and generally welcome 
information from State regulators or other stakeholders about any 
specific suspected conflicts. We also remain committed to working 
collaboratively with States with respect to issues related to agent and 
broker participation in the FFEs and SBE-FPs, including with respect to 
any issues that may cause confusion for web-brokers as to what is 
expected of them with respect to website display requirements 
applicable in FFE and SBE-FP States.
---------------------------------------------------------------------------

    \234\ We note at the time this regulatory provision was codified 
at Sec.  155.220(c)(3)(i). See 78 FR 54134 and 54135.
---------------------------------------------------------------------------

b. Prohibition of QHP Advertising on Web-Broker websites
    Section 155.220(c)(3)(i)(L) currently prohibits web-broker non-
Exchange websites from displaying QHP recommendations based on 
compensation \235\ an agent, broker, or web-broker receives from QHP 
issuers. In the proposed rule (87 FR 643), we proposed to amend Sec.  
155.220(c)(3)(i)(L) to provide 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.
---------------------------------------------------------------------------

    \235\ The term ``compensation'' includes commissions, fees or 
other incentives as established in the relevant contract between an 
issuer and the web-broker. See 84 FR 17515.
---------------------------------------------------------------------------

    We are finalizing the proposal to amend Sec.  155.220(c)(3)(i)(L) 
to ensure that QHP advertisements are not mistakenly understood as QHP 
recommendations that the web broker deems to be in the best interest of 
the consumer. As we discuss in greater detail in the responses to the 
comments in this section, the intent of this amendment is to ensure 
that consumers are able to make informed decisions about the best 
option for their specific circumstances, and are not influenced by 
favorable placement based on advertising or compensation from issuers 
to agents, brokers, or web-brokers. However, this amendment is not 
intended to stifle innovative developments, such as filtering, that can 
help inform customers of the options that best fit their needs.
    We sought comment on the proposed amendments to Sec.  
155.220(c)(3)(i)(L) and the prohibition on QHP advertising on web-
broker websites, which we summarize and respond to below.
    Comment: Most commenters supported the proposals related to

[[Page 27262]]

Sec.  155.220(c)(3)(i)(L) and the prohibition on QHP advertising on 
web-broker websites, or otherwise providing favored or preferred 
placement in the display of QHPs based on compensation agents, brokers, 
or web-brokers receive from QHP issuers. One commenter asserted that 
the display of QHPs on web-broker websites should be based on factors 
that will help consumers choose the best option for their needs and 
allowing preferred placement of QHPs based on compensation from issuers 
does not place consumer interests first. Another commenter noted that 
agents, brokers, and web-brokers have not been required to provide 
unbiased information to consumers, and this proposal would help improve 
transparency for consumers. One commenter stated that this proposal 
will improve the shopping experience on web-broker websites by 
increasing the likelihood that consumers select plans that are the best 
fit for them based on costs, benefits, provider networks, and drug 
formularies instead of advertising paid for by issuers. Another 
commenter stated web-broker websites should not direct a consumer 
toward a plan unless the direction is based on that consumer's needs. 
One commenter indicated they were supportive of the proposals to ensure 
consumers using web-broker websites are not provided biased information 
in a way that benefits the advertiser rather than the consumer. Many 
other commenters shared similar sentiments as those described above.
    Response: We appreciate comments in support of the proposed 
amendments to Sec.  155.220(c)(3)(i)(L) and the prohibition on QHP 
advertising on web-broker websites. We agree that the display of QHPs 
on web-broker websites should be based on factors that assist consumers 
in making informed decisions about the best option for their specific 
circumstances, and should not be influenced by favorable placement 
based on advertising or compensation from issuers to agents, brokers, 
or web-brokers. After consideration of comments, we are finalizing as 
proposed the amendments to Sec.  155.220(c)(3)(i)(L) and the 
prohibition on QHP advertising on web-broker websites.
    At the same time, we remain committed to the development and use of 
innovative consumer-assistance tools by web-brokers to help consumers 
select QHPs that best fit their needs. As such, we also clarify that 
web-brokers will continue to be able to offer filtering capabilities or 
decision support tools that the consumer can use to navigate or refine 
the display of QHPs consistent with existing CMS guidelines.\236\ For 
example, a web-broker can offer consumers additional sort functionality 
to alter the order of the QHPs listed, as long as the web-broker 
website still provides consumers the ability to view all QHPs offered 
through the Exchange regardless of how the consumer chooses to sort the 
QHPs (for example, from lowest to highest premium or deductible). A 
web-broker may also allow the consumer to apply filters (for example, 
metal level, provider network type, issuer) to the full list of 
available QHPs to refine the consumer's search. If a consumer selects a 
certain filter (for example, bronze metal level), the web-broker 
website must display all QHPs offered through the relevant Exchange 
that satisfy that filter's description. The use of any filters or tools 
must comply with other applicable requirements; for example, the use of 
filters or other tools to refine the display of QHPs cannot result in 
the favorable placement of those QHPs for which a web-broker receives 
compensation for enrollments in relation to all other available QHPs 
consistent with Sec.  155.220(c)(3)(i)(L) and applicable guidance on 
permissible filtering of QHPs on web-broker websites. We believe that 
the framework for the display of QHP information captured in Sec.  
155.220(c)(3)(i), as amended by this rule, coupled with the flexibility 
to develop innovative consumer assistance tools to filter or refine the 
list of available QHPs strikes the right balance to protect and support 
consumers enrolling in Exchange coverage through web-broker websites.
---------------------------------------------------------------------------

    \236\ Web-broker website Display Bulletin. (2021, August 17). 
CMS. https://www.cms.gov/files/document/webbroker-website-display-bulletinfinal08172021.pdf.
---------------------------------------------------------------------------

    In response to commenters stating web-broker websites have not been 
required to provide unbiased information, we note a variety of 
requirements have been in place for some time that require web-broker 
websites to provide consumers information about QHPs in an unbiased 
fashion. For example, Sec.  155.220(c)(3)(i)(B) requires web-broker 
websites to provide consumers the ability to view all QHPs offered 
through the Exchange without respect to compensation arrangements web-
brokers have with QHP issuers. Similarly, Sec.  155.220(c)(3)(i)(A) has 
required web-broker websites to provide certain QHP comparative 
information for all available QHPs or a standardized disclaimer with a 
link directing consumers to the Exchange in cases when the comparative 
information is not provided; we note that we are also taking additional 
steps in this rule to ensure consumers using web-broker websites have 
access to the same information for all available QHPs as they would if 
they used the Exchange website. In addition, Sec.  155.220(c)(3)(i)(L) 
already prohibited web-broker websites from displaying QHP 
recommendations based on compensation agents, brokers, or web-brokers 
receive from QHP issuers and will be further enhanced by the changes to 
Sec.  155.220(c)(3)(i)(L) finalized in this rule that will further 
protect consumers by prohibiting QHP advertising and preferred 
placement of QHPs on web-broker websites based on compensation from QHP 
issuers.
    Comment: One commenter did not oppose the proposal if it is limited 
to advertising or preferred placement based on compensation from 
issuers on web-broker website pages for enrollment through the Exchange 
(that is, if the prohibition does not apply to web-broker website pages 
marketing non-QHPs and QHPs for enrollment outside the Exchange). 
Another commenter requested clarification that the proposal was not 
intended to prohibit advertising on website pages marketing other non-
QHP product types, and that the proposal was instead intended only to 
apply the prohibition to web-broker website pages supporting enrollment 
in QHPs through the Exchange.
    Response: We clarify the amendment to Sec.  155.220(c)(3)(i)(L) and 
the prohibition on QHP advertising only applies to web-broker website 
pages displaying or marketing QHPs for enrollment through the Exchange. 
In other words, this framework would extend to web-broker websites and 
pages for which enrollment would occur through a direct enrollment 
pathway (including both the Classic and Enhanced direct enrollment 
pathways). It would not, however, extend to other web-broker website 
pages, such as those marketing products--whether QHPs or non-QHPs--for 
enrollment outside the Exchange. We did not propose to extend it in 
this manner because the framework in Sec.  155.220 is part of the 
procedures the Secretary established under section 1312(e) of the ACA 
under which agents and brokers (including web-brokers) can enroll 
consumers in QHPs offered through Exchanges.
    Comment: One commenter recommended that the proposed prohibition on 
QHP advertising and preferred placement on web-broker websites not be 
interpreted to prohibit the display of additional QHP information 
beyond the required QHP comparative information for a subset of QHPs. 
The commenter explained that

[[Page 27263]]

some web-brokers have arrangements with issuers to display information 
about plan designs or features that include the display of information 
not available in Exchange public use files or the Marketplace API, and 
that the display of this additional information can highlight 
distinctions between plans and help consumers select plans that best 
meet their needs.
    Response: We did not propose and are not finalizing a general 
prohibition on web-broker websites displaying QHP information beyond 
what is provided by the Exchange (for example, made available in the 
Exchange public use files or through the Marketplace API) or directly 
from QHP issuers. Similarly, we confirm that the requirement to display 
minimum required QHP comparative information captured in Sec.  
155.220(c)(3)(i)(A)(1) through (6) as finalized in this rule does not 
prohibit the display of additional QHP information the web-broker 
obtains directly from QHP issuers. We further note and confirm that the 
regulatory text at Sec.  155.220(c)(3)(i)(A) envisions that QHP 
information would be provided to web-brokers by Exchanges and QHP 
issuers. At the same time, however, web-brokers that elect to display 
such additional information must ensure compliance with other 
applicable requirements. For example, the display of additional 
information received from an issuer for its QHPs cannot result in the 
favorable placement of those QHPs in relation to all other available 
QHPs consistent with Sec.  155.220(c)(3)(i)(L) and applicable guidance 
on permissible filtering of QHPs on web-broker websites.\237\ 
Similarly, any payments received from QHP issuers to display additional 
information on web-broker websites cannot result in favored or 
preferred placement in the display of QHPs on the web-broker's website.
---------------------------------------------------------------------------

    \237\ Ibid.
---------------------------------------------------------------------------

    Comment: One commenter supported the proposal only in the context 
of consumer-facing web-broker websites, and requested different 
treatment of agent/broker-facing web-broker websites.\238\ The 
commenter expressed concern that if the proposal applied to agent/
broker-facing web-broker websites, it could inadvertently jeopardize 
innovation by web-brokers related to educating agents and brokers about 
a large number of QHP offerings, in particular those offered by new 
market entrants, and differences in the design of those QHPs' benefits, 
networks, and other plan features. Similarly, the commenter further 
explained that web-brokers often host issuer direct enrollment websites 
\239\ based on compensation from issuers and in doing so often provide 
additional features or integrations associated with those issuer 
partnerships that are available to agents and brokers using their web-
broker websites (for example, better premium payment integration, the 
ability to enroll in the issuers' plans outside the Exchange), and was 
concerned the proposed amendments to Sec.  155.220(c)(3)(i)(L) would 
disincentivize the development of these additional features.\240\ 
Lastly, the commenter requested clarification that visual cues 
associated with the display of particular issuers' QHPs on a web-
broker's website (for example, to indicate the availability of 
additional functionality such as payment integration) are not 
prohibited by this proposal.
---------------------------------------------------------------------------

    \238\ Consumer-facing web-broker websites are those used 
independently by consumers without the assistance of an agent or 
broker. Agent/broker-facing web-broker websites are used by agents 
or brokers assisting consumers; in this case, the consumers agents 
or brokers are assisting may never view the web-broker websites that 
are being used by the agents or brokers assisting them. Generally, 
Exchange rules governing web-broker websites do not distinguish 
between consumer-facing and agent/broker-facing web-broker websites. 
However, this commenter requested that we create such a distinction.
    \239\ Web-brokers may function as QHP issuer direct enrollment 
technology providers. See Sec.  155.20.
    \240\ In this case, we believe the commenter is intending to 
convey that a QHP issuer relying on a web-broker as a QHP issuer 
direct enrollment technology provider would be less likely to engage 
the web-broker to provide these additional features (whether only on 
its issuer-specific direct enrollment website or through the web-
broker's own website) if it could not also pay the web-broker to 
advertise the availability of its QHPs and these additional features 
to agents and brokers using its web-broker website.
---------------------------------------------------------------------------

    Response: We appreciate that some web-brokers may wish to have 
additional flexibility and provide additional resources to their agent 
and broker partners. The amendments to Sec.  155.220(c)(3)(i)(L) and 
the prohibition of QHP advertising on web-broker websites, which we are 
finalizing as proposed, apply to web-broker websites used to enroll 
consumers in Exchange coverage whether or not the web-broker websites 
are consumer-facing (that is, intended to be used by consumers 
independently) or agent/broker-facing (that is, intended to be used by 
agents or brokers assisting consumers). They are intended to prohibit 
these activities to the extent they constitute advertising, preferred 
placement, favorable display, or other types of promotion of particular 
QHPs based on payment from the issuers offering those QHPs. These 
changes build on the existing prohibition on the display of QHP 
recommendations based on the compensation received by the agent, 
broker, or web-broker from QHP issuers.
    As finalized, Sec.  155.220(c)(3)(i)(L) does not prohibit web-
brokers from educating agents and brokers generally about the 
availability and nature of new plan designs or plan features, or the 
existence of QHPs offered by issuers that have newly entered a market. 
Web-brokers may educate agents and brokers by offering filtering 
capabilities that enable agents and brokers to quickly identify 
particular QHPs with certain characteristics and corresponding training 
on the existence and purpose of those filtering capabilities. 
Similarly, Sec.  155.220(c)(3)(i)(L) does not apply to additional 
features web-brokers may make available to QHP issuers that engage them 
to develop or maintain an issuer-specific direct enrollment website 
through which individual consumers--or persons assisting consumers such 
as agents and brokers--may view information on and complete enrollment 
in the issuers' QHPs,\241\ so long as the means through which web-
brokers inform agents and brokers of such features do not constitute 
advertising, preferred placement, favorable display, or other types of 
promotion of particular QHPs based on compensation from the issuers 
offering those QHPs. For example, Sec.  155.220(c)(3)(i)(L) is not 
intended to prohibit a web-broker from informing its agent or broker 
clients of the availability of particular features on its web-broker 
website that may only be available for particular issuers' QHPs,\242\ 
such as enhanced payment integration or the ability to enroll in an 
issuer's plans outside the Exchange, because it is possible to provide 
that information without it being presented as advertising, preferred 
placement, favorable display, or other types or means of promotion of 
particular QHPs. Lastly, in response to comments, we clarify that 
visual cues (such as an icon)

[[Page 27264]]

associated with the display of particular issuers' QHPs (for example, 
to indicate the availability of additional functionality such as 
payment integration) are also not prohibited. However, we reiterate 
that any related compensation or payment received by such web-brokers 
from QHP issuers to display additional information must not result in 
the favorable placement of those QHPs in relation to all other 
available QHPs consistent with Sec.  155.220(c)(3)(i)(L) and our 
guidance on permissible filtering of QHPs on web-broker websites.
---------------------------------------------------------------------------

    \241\ Here, and elsewhere, when we refer to a web-broker's 
website without indicating it is an issuer-specific website hosted 
by a web-broker acting as a QHP issuer direct enrollment technology 
provider, we are referring to the web-broker's own non-Exchange 
website subject to the requirements of Sec.  155.220(c) and other 
applicable rules governing such web-brokers and their non-Exchange 
websites subject to the requirements of Sec.  155.220(c).
    \242\ As described earlier in this rule, web-broker websites may 
not support enrollment in all available QHPs. Web-broker websites 
may provide additional comparative information about some QHPs that 
they have obtained directly from QHP issuers (for example, 
comparative information not available in the Exchange public use 
files or Marketplace API). Similarly, web-broker websites may 
provide additional features that may only be available for 
particular issuers' QHPs, such as enhanced payment integration or 
the ability to enroll in an issuer's plans outside the Exchange.
---------------------------------------------------------------------------

    Comment: One commenter expressed concern that the proposal could 
limit the ability of web-broker websites to offer tools, such as 
filtering capabilities, that enhance the user experience. The commenter 
requested we clarify that functionality that allows plan filtering 
based on user preferences (presumably consumer or agent/broker users) 
is not prohibited, even if the result of a particular user's filtering 
choices is to favor the display of plans for which the web-broker 
receives compensation for enrollments.
    Response: We agree that it is important that web-brokers continue 
to have the flexibility to offer certain permissible filtering tools to 
assist Exchange consumers shopping for QHPs on web-broker non-Exchange 
websites. As noted earlier, we remain committed to supporting the 
development and use of innovative consumer-assistance tools by web-
brokers to help consumers select QHPs that best fit their needs, but 
reiterate that such tools must comply with other applicable 
requirements. This includes, but is not limited to, the existing 
prohibition on the display of QHPs based on the compensation received 
by the agent, broker, or web-broker, as well as the amendment to Sec.  
155.220(c)(3)(i)(L) and the prohibition of QHP advertising on web-
broker websites we are finalizing in this rule. When used in this 
context, ``advertisements'' include any form of marketing or promotion 
of QHPs based on payment from QHP issuers. Consistent with existing CMS 
guidance on permissible filters,\243\ this would not prohibit a web-
broker non-Exchange website from offering consumers filtering 
capabilities that, when applied neutrally, happen to result in the 
favorable display of QHPs offered by issuers from whom the web-broker 
receives compensation for enrollment in those QHPs. For example, HHS 
would not deem a web-broker website out of compliance with applicable 
requirements, as finalized in this rule, if a neutral filter selected 
by the consumer orders all available QHPs from lowest to highest 
premium and the lowest premium QHPs happen to be ones for which the 
web-broker received compensation or payment from QHP issuers. In such 
circumstances, the web-broker website would need to include the 
required minimum QHP comparative information (including premium) for 
all available QHPs and the default listing of QHPs on the web-broker 
website would need to provide that information for all QHPs offered on 
the Exchange by all QHP issuers, unless the consumer or agent/broker 
using the web-broker's non-Exchange website actively removes that 
default filter. Similarly, if an otherwise neutral filter is available 
for a consumer that, if selected, produces a list favoring a particular 
issuer's QHPs (for example, a filter that limits the display of QHPs to 
those offered by specific issuers actively selected by the consumer), 
making that filter available is not prohibited so long as the web-
broker website complies with other applicable requirements. This would 
include the use of a default listing of QHPs that includes the required 
minimum QHP comparative information for all QHPs offered on the 
Exchange unless the consumer actively removes the default filter.
---------------------------------------------------------------------------

    \243\ Web-broker Website Display Bulletin. (2021, August 17). 
CMS. https://www.cms.gov/files/document/webbroker-website-display-bulletinfinal08172021.pdf.
---------------------------------------------------------------------------

    Comment: One commenter expressed concern that the proposal would 
prohibit web-brokers from listing QHPs offered by issuers with which it 
is appointed and from whom it receives compensation for enrollments 
favorably as compared to those offered by issuers with which it is not 
appointed (that is, listing all of the former before all of the 
latter).
    Response: In the 2020 Payment Notice (84 FR 17454), we codified the 
existing prohibition on the display of QHP recommendations based on 
compensation the agent, broker, or web-broker receives from QHP 
issuers. In addition, as explained above, we have transitioned from the 
use of enforcement discretion that permitted web-brokers to only 
display issuer marketing name, plan marketing name, product network 
type, and metal level for some QHPs, beginning with the PY 2022 open 
enrollment period. As part of this transition, we also previously 
clarified that with web-broker websites displaying standardized QHP 
comparative information for all available QHPs beginning with the PY 
2022 open enrollment period, to comply with the current standard in 
Sec.  155.220(c)(3)(i)(L) that prohibits the display of QHP 
recommendations based on compensation an agent, broker, or web-broker 
receives from QHP issuers, web-broker websites must refrain from 
filtering the display of QHPs in a manner that favors QHPs for which 
the web-broker receives compensation from issuers for enrollments. In 
other words, consistent with currently applicable requirements, web-
brokers must not display some QHPs at the bottom of their website pages 
simply because they are not appointed with the issuers that offer those 
QHPs. We did not propose to change the prohibition on the display of 
QHPs based on the compensation received by an agent, broker, or web-
broker from QHP issuers for enrollment in QHPs. Instead, we proposed 
and are finalizing the extension of the prohibition under Sec.  
155.220(c)(3)(i)(L) to also prohibit advertising of QHPs on web-broker 
websites. As outlined above, to comply with the new framework and 
applicable requirements, web-broker websites cannot more favorably 
display QHPs for which the agent, broker, or web-broker receives 
compensation from issuers for enrollment in QHPs and also cannot more 
favorably display QHPs for which the agent, broker, or web-broker 
receives payment for advertising purposes. This includes a prohibition 
on the favorable display based on which QHPs are offered by issuers 
with whom the agent, broker, or web-broker has an appointment.\244\
---------------------------------------------------------------------------

    \244\ See the previous preamble regarding the new standardized 
disclaimer under Sec.  155.220(c)(3)(i)(A), as amended, for details 
on how information about which QHPs the web-broker website does not 
support enrollment in should be shared with consumers. Not having an 
appointment with a particular issuer is the primary reason why web-
broker websites would not support enrollment in particular QHPs.
---------------------------------------------------------------------------

    Comment: Two commenters were opposed to this proposal. One 
commenter asserted that prohibiting QHP advertising on web-broker 
websites lessens the incentive for web-brokers to become direct 
enrollment entities and continue to innovate. Instead, the commenter 
suggested we allow QHP advertising, but require that advertisements be 
identified as such. Another commenter conveyed concern about this 
proposal encroaching on State authority to regulate the business of 
insurance and mentioned a nonspecific possible conflict with existing 
State regulations.
    Response: We appreciate the concern that prohibiting QHP 
advertising on web-broker websites may reduce incentives to become a 
direct enrollment entity, but do not believe that risk outweighs the 
benefit to consumers of the prohibition. We

[[Page 27265]]

considered the option of allowing some form of QHP advertising so long 
as the advertisements were clearly identified as advertisements. 
However, as described in the proposed rule (87 FR 643), even if QHP 
advertisements are clearly identified, we believe it is not in the 
interest of consumers to allow them on web-broker websites that 
facilitate enrollment in Exchange coverage.
    With respect to commenters that expressed concern with encroachment 
on State regulatory authority or alleged conflict with State 
regulations, we note that the requirement at Sec.  155.220(c)(3)(i)(L) 
prohibiting web-broker websites from displaying QHP recommendations 
based on compensation an agent, broker, or web-broker receives from QHP 
issuers is not new.\245\ For additional information in response to this 
comment, please see the response to the same comment on the prior 
proposal in III.D.3.(a).
---------------------------------------------------------------------------

    \245\ See 84 FR 17563.
---------------------------------------------------------------------------

c. Explanation of Rationale for QHP Recommendations on Web-Broker 
Websites
    In the proposed rule (87 FR 643), we proposed to amend Sec.  
155.220 to add a 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 a plan name, from lowest to highest premium, etc.).
    We are finalizing this requirement because we believe it will 
provide consumers with a better understanding of the information being 
presented to them on web-broker websites and enable them to make better 
informed decisions and select QHPs that best fit their needs. We 
believe that a clear explanation for the bases of the recommendations 
displayed to them on web-broker websites (whether explicit or 
implicit), will help consumers assess the value of the recommendations 
(for example, whether a recommendation is based on the factors most 
important to them).
    We sought comment on this proposal, which we summarize and respond 
to below.
    Comment: Most commenters supported this proposal and the addition 
of Sec.  155.220(c)(3)(i)(M). Several commenters stated that requiring 
web-broker websites to disclose the basis for their plan 
recommendations and display of plans increases transparency. Numerous 
other commenters who supported these changes stated these changes would 
help consumers be better informed. One commenter indicated this would 
enhance decision support tools for consumers and increase the chance 
they find the plan that best meets their needs.
    Response: We agree that this proposal and the addition of Sec.  
155.220(c)(3)(i)(M) will increase transparency and ensure consumers are 
better informed and more likely to choose the plan that is best for 
them.
    Comment: Several commenters requested web-broker websites be 
afforded flexibility in terms of the content and placement of the 
required explanations. In particular, some commenters requested that 
the required explanations not be so detailed that they are difficult 
for consumers to understand and may dissuade some consumers from 
completing the enrollment process.
    Response: We appreciate the desire for flexibility and do not 
intend to be prescriptive in terms of the content or placement of the 
required explanations of the rationale for QHP recommendations or the 
methodology for the default display of QHPs. We understand there are 
currently many variations in the design and content of web-broker 
websites and it would be difficult to develop a one-size-fits all 
standardized approach with respect to the content or placement of the 
explanations. In addition, there will necessarily be variations in the 
rationales for the plan recommendations and methodologies for the 
default display of plans used by different web-broker websites and they 
may also frequently change. For those reasons, we intend to allow web-
broker websites significant flexibility in terms of the content and 
placement of the required explanations as long as the explanations are 
prominently displayed, clearly articulated, and provide consumers 
reasonable insight into the rationale for the QHP recommendations and 
the methodology for the default display of QHPs. We expect explanations 
to be short and easy for consumers to understand. Generally, we believe 
that a single phrase or a few sentences will suffice (for example, ``we 
recommend this plan because it has the lowest monthly premium and 
includes your preferred providers in-network''; ``plans are displayed 
alphabetically''; ``plans are displayed from lowest to highest 
premium''). To be considered prominently displayed, web-broker websites 
must adhere to the same general requirements that apply to disclaimers 
that must be prominently displayed on web-broker websites.\246\ For 
example, the explanations must be written in a font size no smaller 
than the majority of text on the website page and be noticeable in the 
context of the website by (for example) using a font color that 
contrasts with the background of the website page.
---------------------------------------------------------------------------

    \246\ See, for example, Federally-Facilitated Exchange (FFE) and 
Federally-Facilitated Small Business Health Options Program (FF-
SHOP) Enrollment Manual (pp. 53-54). (2021, August 18). https://www.regtap.info/uploads/library/ENR_FFEFFSHOPEnrollmentManual2021_5CR_090921.pdf. Also see Guidance 
for Web-brokers on Displaying Mandatory Standardized Disclaimers. 
(2015, April 24). CMS. https://www.cms.gov/cciio/Programs-and-Initiatives/Health-Insurance-Marketplaces/Downloads/Guidance-web-brokers-displaying-disclaimers.pdf.
---------------------------------------------------------------------------

    Comment: Several commenters expressed concerns that the complex 
algorithms web-broker websites may have developed to produce their plan 
recommendations or default plan displays are likely too complicated to 
explain in a consumer-friendly manner. Some other commenters worried 
that requiring these explanations may require the disclosure of 
closely-held proprietary information.
    Response: As explained previously, the intent of Sec.  
155.220(c)(3)(i)(M) is not to require lengthy or complicated 
explanations, but to provide consumers basic insight into the key 
factors underlying the information web-broker websites are presenting 
to consumers (or agents/brokers assisting consumers). We understand 
that in some cases web-broker websites may have adopted very complex 
algorithms for plan recommendations or default display of plans, and we 
do not intend that the intricate details underlying those proprietary 
models be described or disclosed. However, we expect in all cases there 
are core principles or criteria that form the foundation for QHP 
recommendations or default display methodologies and we do expect those 
to be disclosed to assist the consumer with making informed choices. We 
continuously review web-broker websites and will consider future 
updates and clarifications to this policy based on lessons learned and 
our experience implementing this new standard for web-broker websites.
d. Federally-Facilitated Exchange Standards of Conduct (Sec.  
155.220(j))
    In the proposed rule (87 FR 644), we proposed to amend Sec.  
155.220(j)(2)(i) such that its nondiscrimination protections would 
explicitly prohibit discrimination based on sexual orientation and 
gender identity. As we explain in the SUPPLEMENTARY INFORMATION section 
earlier in the

[[Page 27266]]

preamble, HHS will address this policy, as well as the public comments 
submitted in response to this proposal, in future rulemaking.
i. Providing Correct Information to the FFEs
    In the proposed rule (87 FR 644), we proposed to add new Sec.  
155.220(j)(2)(ii)(A) through (D) to codify additional details regarding 
the requirement that agents, brokers, and web-brokers provide correct 
information to FFEs and SBE-FPs. More specifically, we proposed to 
capture specific examples of what it means to provide correct 
information to the FFEs and SBE-FPs for 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 Exchanges rely. We also proposed 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 listed in new Sec.  155.220(j)(2)(ii)(A) 
through (D) are not exhaustive, but are simply illustrative of areas 
where HHS has identified a need for more direct and clear guidance. We 
refer readers to the proposed rule (87 FR 644 through 647) for 
additional information and background on these proposals.
    We are generally finalizing as proposed Sec.  155.220(j)(2)(ii)(A) 
through (D), except that we are not finalizing the proposal to add 
Sec.  155.220(j)(2)(ii)(A)(1) that would have prohibited agents, 
brokers, and web-brokers from entering consumer email addresses with 
`disposable' domains that expire after a set period of time.\247\ \248\ 
We considered that agents, brokers, and web-brokers do not control the 
type of email domains consumers choose to use, own, or have access to. 
We also considered that there are available alternatives that HHS could 
use to systematically block the entry of disposable email addresses 
that expire after a set period of time.
---------------------------------------------------------------------------

    \247\ Gibbs, M. (2006) Disposable email addresses foil marketing 
plan, Real but temporary email addresses to get you through the 
verification process. NetworkWorld. https://www.networkworld.com/article/2301492/disposable-email-addresses-foil-marketing-plans.html.
    \248\ We also removed the reference to this standard (that is, 
the phrase ``that is secure, not disposable'' was removed) in the 
introductory language in Sec.  155.220(j)(2)(ii)(A). In addition, we 
are capturing the email address guidelines proposed to be added at 
new Sec.  155.220(j)(2)(ii)(A)(2) and (3) in new Sec.  
155.220(j)(2)(ii)(A)(1) through (2) instead. We also make a non-
substantive change to eliminate duplicate references to information 
``on an Exchange application'' in Sec.  155.220(j)(2)(ii)(A) through 
(D).
---------------------------------------------------------------------------

    We are finalizing the other provisions we proposed to under new 
Sec.  155.220(j)(2)(ii)(A), which 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 belongs to the consumer or the consumer's authorized 
representative. The regulation text also clarifies that email addresses 
may only be entered on applications submitted to an Exchange with the 
consent of the consumer or the consumer's authorized representative, 
and that properly entered email addresses are required to adhere to 
certain guidelines. The guidelines we are finalizing in this rule, 
which were proposed to be added at new Sec.  155.220(j)(2)(ii)(A)(2) 
and (3), will be captured in new Sec.  155.220(j)(2)(ii)(A)(1) through 
(2), which are renumbered consistent with our decision to not finalize 
Sec.  155.220(j)(2)(ii)(A)(1). We are otherwise finalizing these two 
guidelines for email addresses as proposed.
    We are also finalizing the proposal to add new Sec.  
155.220(j)(2)(ii)(B), which provides 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 reiterate that a telephone number 
belongs to the consumer if they, or their authorized representative, 
are accessible at the number and have access to the number. We are also 
finalizing the addition of text to Sec.  155.220(j)(2)(ii)(B) to 
provide that telephone numbers entered on applications submitted to an 
Exchange 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.
    We are finalizing the proposal to add new Sec.  
155.220(j)(2)(ii)(C), which requires that an agent, broker, or web-
broker may only enter a mailing address on an application for Exchange 
coverage or application for 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. We 
reiterate that consumer mailing addresses entered on applications 
submitted to an Exchange 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. We are also finalizing that mailing addresses entered 
on applications submitted to an Exchange 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.
    Fourth, to minimize consumer harm stemming from the APTC 
reconciliation process on the tax return, as well as to protect 
Exchange operations from inaccurate APTC and CSR determinations, we are 
finalizing Sec.  155.220(j)(2)(ii)(D), which requires that, when 
submitting household income projections used by 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 of their household 
income. Failure to provide correct information on household income can 
harm consumers by creating liability during the APTC reconciliation 
process on the tax return or delaying the issuance of a tax refund, as 
well as preventing the efficient operation of the Exchange. CSRs are 
similarly tied to a consumer's household income reducing 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 QHP issuers and prevent the efficient operation of the 
Exchange. We reiterate that good-faith income projections, versus an 
income projection designed to achieve the lowest monthly rate, would 
better protect the consumer from the unexpected cost and burden of 
repaying large amounts of APTC.
    Finally, for greater clarity, the regulation text we adopt in this 
final rule at Sec.  155.220(j)(2)(ii)(A) through (D) contains a non-
substantive change to each proposed paragraph (A) through (D) to 
eliminate duplicate references to information ``on an Exchange 
application'' or ``entered on an Exchange application.'' These 
editorial revisions in no way change or otherwise

[[Page 27267]]

affect the requirements under the proposed versions of the text and 
more clearly and consistently indicate that the applications that are 
the subject of these provisions are applications submitted to Exchanges 
for coverage under a QHP, with or without APTC and CSR.
    We sought comment on these proposals. After reviewing the public 
comments, and as stated above, we will not finalize Sec.  
155.220(j)(2)(ii)(A)(1) concerning disallowing agents, brokers, and 
web-brokers entry of temporary email addresses on consumers' behalf 
because agents, brokers, and web-brokers do not control the type of 
email domains consumers choose to use, own, or have access to. However, 
we are finalizing the other sections as proposed.\249\ While we are not 
finalizing Sec.  155.220(j)(2)(ii)(A)(1), we strongly encourage agents, 
brokers, and web-brokers to avoid using such temporary email addresses 
in applications as a best practice.
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    \249\ Consistent with the decision to not finalize Sec.  
155.220(j)(2)(ii)(A)(1), the phrase ``that is secure, not 
disposable'' was removed from the introductory language in Sec.  
155.220(j)(2)(ii)(A). In addition, the email address guidelines 
proposed to be added at new Sec.  155.220(j)(2)(ii)(A)(2) and (3) 
will instead be captured in new Sec.  155.220(j)(2)(ii)(A)(1) 
through (2). These guidelines are otherwise being finalized as 
proposed.
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    We summarize and respond to public comments received on the 
proposals related to the standard in Sec.  155.220(j)(2)(ii) that 
agents, brokers, and web-brokers provide correct consumer information 
to the FFEs below.
    Comment: A number of commenters supportive of the proposal 
generally requested that HHS dedicate funds to compliance, monitoring, 
and enforcement efforts in order to address agent, broker, and web-
broker compliance with relevant Exchange standards of conduct. While 
the majority of comments pertaining to monitoring and enforcement were 
general in nature, several commenters indicated they supported 
continuing to clarify standards of agent, broker, and web-broker 
conduct. One commenter also recommended that Exchange user fees could 
be used to fund future oversight initiatives.
    Response: We are finalizing, as proposed, the amendments to Sec.  
155.220(j)(2)(ii) and the accompanying policies related to the 
provision of correct consumer information by agents, brokers, and web-
brokers to the FFEs. These finalized amendments and policies also apply 
to agents, brokers, and web-brokers assisting with enrollments in SBE-
FPs.\250\ The amendments to Sec.  155.220(j)(2)(ii) provide clear, 
concise, and direct guidance to agents, brokers, and web-brokers 
assisting consumers with enrollment in QHPs sold on the FFEs and SBE-
FPs about the standards of conduct and behavior expected of them. We 
also generally note that we intend to include these new, clarifying 
standards as part of existing monitoring and oversight of agents, 
brokers, and web-brokers assisting consumers with enrollments through 
FFEs and SBE-FPs. We appreciate the recommendations provided. They will 
be taken into consideration for future rulemaking and policy 
development. However, we are not finalizing the amendment to Sec.  
155.220(j)(2)(ii)(A)(1) because agents, brokers, and web-brokers do not 
control the type of email domains consumers choose to use, own, or 
access.
---------------------------------------------------------------------------

    \250\ See 45 CFR 155.220(l).
---------------------------------------------------------------------------

    Comment: Many commenters supportive of the proposal requested that 
HHS add regulatory text to require agents, brokers, and web-brokers to 
check consumers' eligibility for Medicare and Medicaid in addition to 
their eligibility for private insurance through the FFEs.
    Response: We agree with the commenters that consumers eligible for 
Medicare and Medicaid should be informed about those options. Indeed, 
in order to enroll a consumer in QHP coverage on the Exchange, agents, 
brokers, and web-brokers must use the Exchange's Single Streamlined 
Application, which first verifies Medicare and Medicaid eligibility, 
where applicable. If a web-broker's website is used to complete the 
application, the application and website must, among other 
requirements, request the minimum amount of information to verify 
eligibility for the programs and benefits included in the Single 
Streamlined Application as enumerated in Sec.  155.405(a), which, 
again, would include a requirement to collect information necessary to 
verify Medicare and Medicaid eligibility, as applicable.\251\ HHS also 
provides training to agents, brokers, and web-broker entities 
participating in the FFEs and SBE-FPs on how to help connect Medicare-
eligible consumers to Medicare and potentially Medicaid-eligible 
consumers with Medicaid enrollment resources.\252\ HHS is finalizing 
the amendment to Sec.  155.220(j)(2)(ii)(D) to require agents, brokers, 
and web-brokers only to enter a household income projection for a 
consumer that the consumer, or the consumer's authorized 
representative, has authorized and confirmed as an accurate estimate. 
However, we did not propose and are not finalizing regulatory text to 
mandate agents, brokers, and web-brokers assisting with enrollments in 
FFEs and SBE-FPs to check a consumer's eligibility for Medicare and 
Medicaid.
---------------------------------------------------------------------------

    \251\ See 45 CFR 155.220(c)(1) and (c)(3)(ii)(B).
    \252\ See Returning Agents' and Brokers' Guide to Plan Year 2022 
Marketplace Registration and Training. (2021). CMS. https://www.cms.gov/files/document/plan-year-2022returning-agents-and-brokers-guide-marketplace-registration-and-training.pdf and New 
Agents' Guide to Training. (2021). CMS. https://www.cms.gov/files/document/plan-year-2022new-agents-and-brokers-guide-marketplace-registration-and-training.pdf.
---------------------------------------------------------------------------

    Comment: Some commenters who were neutral on the proposal stated 
that HHS already has the established infrastructure which allows for 
agents, brokers, and web-brokers to be penalized for their misconduct, 
and additional standards of conduct, including submitting an 
attestation to the accuracy of the information, relying on consumers to 
provide accurate household income projections, and clarifying 
parameters around consumer contact information, create an extra burden 
on compliant agents, brokers, and web-brokers.
    Response: With the exception of Sec.  155.220(j)(2)(ii)(A)(1), we 
are generally finalizing, as proposed,\253\ the amendments to Sec.  
155.220(j)(2)(ii) and the accompanying policies related to the FFE 
standard of conduct that agents, brokers, and web-brokers provide 
correct consumer information to the FFEs. HHS does not agree that these 
revisions will create an extra burden on compliant agents, brokers, and 
web-brokers because the revisions only further elucidate what was 
already required under HHS' rules. The proposals we finalize do not 
create new obligations or standards of conduct, and should not cause an 
appreciable increase in the burden on agents, brokers, and web-brokers 
that already comply with the FFE standards of conduct. Rather, they 
provide clarity and additional examples consistent with existing 
guidance on how to provide correct consumer information on applications 
submitted to the FFEs or SBE-FPs. As detailed in the proposed rule, 
these amendments and

[[Page 27268]]

clarifications were developed in response to common errors HHS 
identified on applications submitted by agents, brokers, and web-
brokers to the FFE, and will help supplement existing guidance to 
facilitate the submission of accurate information to the FFEs. The 
supplementary guidance clarifies how to come into compliance with the 
existing requirements in Sec.  155.220(j)(2)(ii), which HHS believes 
will make the process of enrolling consumers more straightforward, due 
to clearer expectations concerning existing standards from the agency 
and a reduction in errors filling out the application. Moreover, it 
protects consumers and enhances the efficient operation of the 
Exchange.
---------------------------------------------------------------------------

    \253\ Consistent with the decision to not finalize Sec.  
155.220(j)(2)(ii)(A)(1), the phrase ``that is secure, not 
disposable'' was removed from the introductory language in Sec.  
155.220(j)(2)(ii)(A). In addition, the email address guidelines 
proposed to be added at new Sec.  155.220(j)(2)(ii)(A)(2) and (3) 
will instead be captured in new Sec.  155.220(j)(2)(ii)(A)(1) 
through (2). We also make a non-substantive change to eliminate 
duplicate references to information ``on an Exchange application'' 
in Sec.  155.220(j)(2)(ii)(A) through (D). These guidelines are 
otherwise being finalized as proposed.
---------------------------------------------------------------------------

ii. Prohibited Business Practices
    In the proposed rule (87 FR 647), we proposed to amend Sec.  
155.220(j)(2) to add several 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 
(81 FR 12203), these additional standards are also intended to protect 
against agent, broker, and web-broker conduct that is harmful to 
consumers or frustrates the efficient operation of the Exchange. 
Specifically, we proposed to codify standards related to the use of 
scripting and other automation interactions with our 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 proposed 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. We described these proposals, as well as 
summarize and respond to the comments on each, in the sections that 
follow.
iii. Prohibited Automated Interactions With CMS Systems
    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.\254\ 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),'' \255\ 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 the regulation. Therefore, we proposed to amend Sec.  155.220(j)(2) 
to add the 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 (87 FR 647). The codification of the 
requirements and limitations in the 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. 
CMS Systems to which CMS-registered agents, brokers, and web-broker may 
have access include HealthCare.gov, and the CMS Enterprise Portal.
---------------------------------------------------------------------------

    \254\ 45 CFR 155.220(d).
    \255\ Agent Broker General Agreement for Individual Market 
Federally-Facilitated Exchanges and State-Based Exchanges on the 
Federal Platform. (2019). HHS. https://www.hhs.gov/guidance/sites/default/files/hhs-guidance-documents/ab_py2020_im_general_agreement_final_1.pdf.
---------------------------------------------------------------------------

    HHS proposed this standard of conduct because it has observed 
instances where unauthorized automated browser-based interactions with 
Exchange systems have led to unauthorized enrollments or unauthorized 
application changes. 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. Allowing automation would 
also create significant traffic in the system, which could result in an 
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. We sought comments on these concerns and 
this proposal.
    We also sought comments on the appropriate uses of automation that 
may contribute to the efficient operation of the FFEs and SBE-FPs, and 
the DE Pathways.
    We received one comment generally supportive of the proposal 
because it would codify HHS' enforcement authority and align the 
regulation with requirements applicable to agents, brokers, and web-
brokers in agreements with the FFE and SBE-FPs.
    After considering the responsive comments, we are finalizing the 
addition of the new Sec.  155.220(j)(2)(vi) as proposed.
iv. Identity Proofing
    HealthCare.gov utilizes identity proofing to verify the identity of 
a consumer when a new Exchange account is created. We proposed to amend 
Sec.  155.220(j)(2) to add the 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 (87 FR 648 through 649).
    We are finalizing this amendment to Sec.  155.220(j)(2) because we 
have observed situations, despite the current identity proofing 
process,\256\ in which agents have used the same identity information 
to complete the identity proofing process for multiple consumer 
Exchange accounts, which can harm consumers and prevent the efficient 
operation of the Exchange. Such behavior also undermines the purpose of 
identity proofing consumers and is often associated with unauthorized 
enrollments, identity theft, and fraud.
---------------------------------------------------------------------------

    \256\ 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. Under the existing process, 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.
---------------------------------------------------------------------------

    We sought comment on this proposal.
    We received one comment responsive to and supportive of the 
proposed amendment to add new Sec.  155.220(j)(2)(vii) clarifying that 
agents, brokers, and web-brokers must use a consumer's correct 
information for RIDP

[[Page 27269]]

process and only for the RIDP process for that consumer.
    After considering the responsive comment, we are finalizing the 
addition of a new Sec.  155.220(j)(2)(vii) as proposed.
v. Providing Information to Federally-Facilitated Exchanges in 
Connection With Special Enrollment Periods
    Section 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 proposed to amend Sec.  155.220(j)(2) to add the 
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 (87 FR 648). Under this 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 
proposed this requirement to address circumstances HHS has observed 
during 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 the proposed new Sec.  
155.220(j)(2)(viii) is to ensure the validity and integrity of the SEP 
process, avoid Exchange destabilization, and 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 sought comment on these proposals.
    We received one comment responsive to and generally supportive of 
the proposal that when providing information to the Exchange related to 
an SEP enrollment, agents, brokers, and web-brokers must obtain 
authorization from the consumer to submit the request for an 
eligibility determination, make the consumer aware of the specific 
triggering event, and of the specific SEP for which the agent, broker, 
or web-broker is submitting the eligibility determination request on 
the consumer's behalf.
    After considering the responsive comment, we are finalizing the 
addition of a new Sec.  155.220(j)(2)(viii) as proposed.
4. Premium Calculation (Sec.  155.240(e))
    In the HHS Notice of Benefit and Payment Parameters for 2023 
proposed rule (87 FR 584, 648), we proposed 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. 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 final rule where we proposed 
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 sought comment on these proposals.
    We received public comments on the proposed amendments to the 
premium calculation at Sec.  155.240(e). After considering of the 
comments received, we are not finalizing any amendments to Sec.  
155.240.
    Comments related to the proposed amendments at Sec.  155.240(e) are 
addressed in section III.D.9 of the preamble, regarding the 
Administration of Advance Payments of the Premium Tax Credit and Cost 
Sharing (Sec.  155.340), where we present a unified summary of comments 
on the proposal to clarify that an Exchange is required to prorate the 
calculation of premiums for individual market policies and the 
calculation of APTC. We are codifying the proposed APTC proration 
methodology as the methodology Exchanges on the Federal platform (FFE 
and SBE-FP) will continue to use, but we are not finalizing the 
requirement for State Exchanges to use the FFE's methodology to prorate 
premium or APTC amounts. Additional information on the policy we are 
finalizing is also provided in section III.D.9. of the preamble of this 
final rule.
5. Eligibility Standards (Sec.  155.305)
    In the HHS Notice of Benefit and Payment Parameters for 2023 
proposed rule (87 FR 584, 648), we proposed 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 that 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 noted 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.
    We are finalizing the proposal as proposed.
    Comment: Two commenters provided general support for this technical 
amendment and no commenters opposed it.
    Response: We thank the comments for their general support of this 
technical amendment and believe this change aligns with current 
practice and will ensure greater consistency going forward.
6. Eligibility for Advance Payments of the Premium Tax Credit (Sec.  
155.305(f)(5))
    In the HHS Notice of Benefit and Payment Parameters for 2023 
proposed rule (87 FR 584, 648), we proposed to amend Sec.  
155.305(f)(5) to require that Exchanges must calculate APTC in 
accordance with 26 CFR 1.36B-3, which defines the calculation of the 
PTC amount, and subject to the prorating methodology at proposed Sec.  
155.340(i). We further discussed these proposals in the Administration 
of Advance Payments of the Premium Tax Credit and Cost-Sharing 
Reductions (Sec.  155.340) section of the proposed rule. We sought 
comment on this proposal.

[[Page 27270]]

    We received public comments on the proposed amendments to Sec.  
155.305(f)(5). In the following comments and responses, we discuss 
comments specific to the proposal for this section. We are codifying 
the proposed APTC proration methodology as the methodology Exchanges on 
the Federal platform (FFE and SBE-FP) will continue to use, but we are 
not finalizing the requirement for State Exchanges to use the FFE's 
methodology to prorate premium or APTC amounts. For a unified summary 
of all comments on the proposal (to clarify that an Exchange is 
required to prorate the calculation of premiums for individual market 
policies and the calculation of APTC and for more information on the 
policy we are finalizing), we refer readers to the section III.D.9 of 
the preamble on Administration of Advance Payments of the Premium Tax 
Credit and Cost Sharing (Sec.  155.340).
    Comment: A few commenters noted that the proposed regulatory 
amendment to part Sec.  155.305(f)(5) did not appear in the 
corresponding section of the Regulatory Text section of the proposed 
rule.
    Response: HHS appreciates the comments identifying this technical 
error. The proposed regulatory amendment at Sec.  155.305(f)(5) was 
inadvertently omitted from the published proposed regulation text. HHS 
is correcting this technical error by including amendments to Sec.  
155.305(f)(5) in the Regulatory Text section of this final rule as 
described in the preamble to the proposed rule, and consistent with the 
policy adopted in this final rule, as described in the section III.D.9 
of the preamble on Administration of Advance Payments of the Premium 
Tax Credit and Cost Sharing (Sec.  155.340).
7. 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, 
in the proposed rule (87 FR 649 through 651), we proposed 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.
    Specifically, we proposed 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. We refer to the proposed rule (87 FR 
649), where we provided additional background and rationale for the 
proposals.
    First, we proposed 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 and 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 proposed 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 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 proposed 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.
    Third, we proposed to remove 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 
continue to believe that 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 the 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 proposed 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.\257\ 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 the preamble.
---------------------------------------------------------------------------

    \257\ In the proposed rule, we neglected to delete a reference 
to Sec.  155.320(d)(4)(ii) in the regulation text. We are deleting 
that reference in the regulation text in this final rule, consistent 
with the proposal.
---------------------------------------------------------------------------

    We are finalizing these proposals as proposed. Specifically, we 
require that any risk-based verification process be reasonably designed 
to ensure the accuracy of the data and be based on the activities or 
methods used by an Exchange such as studies, research, and analysis of 
an Exchange's enrollment data. We expect 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. 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 are 
allowed APTC/CSRs.
    Given that the 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

[[Page 27271]]

an Exchange's assessment of risk and unique populations, we noted in 
the proposed rule that we believe that there are various ways in which 
a risk-based approach can be 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 does 
not 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.
    Because we found that the risk for improper APTC payment is low in 
Exchanges using the Federal eligibility and enrollment platform, these 
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? ''. We would also accept attestations related to 
employer sponsored coverage because we currently lack 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, we 
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. We 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. We noted that 
additional data source access, such as the NDNH, would improve accuracy 
and reduce the administrative burden to consumers for the income 
verification step during the eligibility process.
    Finally, under this proposal, we clarified 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 us. 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 proposing this policy was to ensure that only applicants 
eligible for APTC/CSRs benefit from 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 continue to believe 
that 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 continue to 
believe that the new policy we proposed 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.
    We sought comment on these proposals.
    After reviewing the public comments, we are finalizing these 
proposals as proposed, with some non-substantive revisions for clarity. 
These include removing the reference to paragraph (d)(4)(ii) in 
paragraph (d)(4), as this paragraph has been removed and is no longer 
necessary, and streamlining language under paragraph (d)(4)(i)(A) to 
make it clearer that Exchanges must notice employers, if employer 
notification is part of an Exchange's risk-based approach.
    We summarize and respond to public comments received on the 
verification process related to eligibility for insurance affordability 
programs--employer sponsored plan verification (Sec.  155.320) below.
    Comment: The majority of commenters supported HHS' proposal to 
provide all Exchanges with the flexibility to tailor their employer 
sponsored coverage verification procedures based on the Exchange's own 
assessment of the risk for inappropriate payments of APTC/CSRs in their 
enrolled populations. The commenters agreed with HHS' prior study 
findings that the current sampling process outlined in paragraph 
(d)(4)(i) requires significant Exchange resources with little return on 
investment given the low volume and risk of consumers with offers of 
employer sponsored coverage who inappropriately enroll in Exchanges 
with APTC/CSRs and stated that HHS' study results were consistent with 
State Exchanges' own observations. Commenters also agreed with HHS that 
an employer sponsored coverage verification approach should provide 
State Exchanges with enough flexibility and more opportunities to use 
verification processes that are evidence-based, while imposing the 
least amount of burden on consumers, States, employers, and taxpayers. 
Commenters also noted that increased flexibility to use a risk-based 
approach allows all Exchanges to focus and expend resources on 
expanding coverage. Finally, commenters stated that they appreciated 
how the proposed risk-based approach provides State Exchanges with the 
freedom to review their own data and determine the most appropriate 
verification approach for

[[Page 27272]]

employer sponsored coverage that accurately reflects the risk for 
inappropriate APTC/CSR payments within their unique populations.
    Response: HHS agrees that the current random sampling process 
required under Sec.  155.320(d)(4)(i) is not only burdensome for 
States, employers, consumers, and taxpayers, but it also does not 
provide enough flexibility to all Exchanges to develop a process for 
employer sponsored coverage verification that more accurately reflects 
their respective enrolled Exchange populations. As discussed in the 
proposed rule (87 FR 649), HHS shares the same concerns regarding the 
feasibility and effectiveness of sampling and agrees that a 
verification process should be evidence-based and informed by certain 
risk-factors for inappropriate payment of APTC/CSRs. HHS also agrees 
that additional flexibilities are important to help States better serve 
their populations and to allow for Exchange staff time and resources to 
be better spent on activities that help promote and retain enrollment 
in Exchanges.
    Comment: A few commenters supported the proposed changes, but also 
recommended that HHS revise paragraph (d)(4)(i) to state that all 
Exchanges can accept an applicant's attestation when an Exchange 
determines that the risk for improper APTC/CSR payment is low and does 
not have access to an available, approved data source to verify whether 
an applicant has an offer of or is enrolled in coverage offered through 
an employer. Some of these commenters further questioned what 
additional information or value a State's own study or risk assessment 
would bring if HHS already conducted studies on the risk for 
inappropriate APTC/CSR payments and as discussed in the preamble of the 
proposed rule that, as part of their risk-based approach, Exchanges 
using the Federal eligibility and enrollment platform would accept 
attestations in absence of an approved data source, and requested that 
HHS clarify who is responsible for conducting the risk assessment, how 
it should be conducted, and how State Exchanges can meet this 
assessment requirement.
    Response: HHS reiterates and reminds State Exchanges that it is 
their responsibility to conduct their own risk-assessments for 
inappropriate APTC/CSRs payments; while HHS determined based on its 
study that the Exchanges that use the Federal platform will use an 
attestation-based approach to employer sponsored coverage verification, 
State Exchanges cannot rely on the findings of the studies that HHS 
conducted to serve as the basis for their risk-based approaches for 
employer sponsored coverage verification as this study pertained to 
Exchanges that use the Federal eligibility and enrollment platform. 
Similarly, the risk-based approach and subsequent verification 
processes for employer sponsored coverage verification must be based on 
an Exchange's own data analysis and research, and State Exchanges may 
not solely rely on previously published literature, research, and/or 
the studies conducted by HHS as justification for their risk-based 
approach. Furthermore, State Exchanges have the sole responsibility and 
flexibility to determine the manner of assessment that is suitable for 
their respective populations and markets, and should propose their 
assessment approach to HHS for review. However, the process that is 
appropriate for some State Exchanges may not be to solely accept 
attestation for all applicants. Therefore, HHS disagrees with 
commenters that changes to paragraph (d)(4)(i) to explicitly state that 
all Exchanges may accept attestation when an Exchange does not have 
access to an available data source are necessary.
    Comment: A few commenters stressed the importance of and urged HHS 
to explore other relevant, reliable third-party data sources that could 
be used to verify offers of or enrollment in employer sponsored 
coverage, such as whether HHS could gain access to firm-level data 
about employer sponsored insurance through the annual ACA reports that 
are filed with the IRS or access to the NDNH to help Exchanges 
determine whether certain companies offer coverage to their employees.
    Response: We agree with the importance of relevant and reliable 
third-party data sources to verify offers of or enrollment in employer 
sponsored coverage such as the NDNH. As part of the 2019 study 
discussed in the preamble to the proposed rule and this final rule, HHS 
explored the feasibility of using the NDNH, or other data sources such 
as reporting from IRS, the Department of Labor (DOL), or State 
quarterly wage data to verify eligibility for employer sponsored 
coverage. However, HHS determined that either available data sources 
were insufficient and did not provide the necessary information to 
satisfy the requirement, or, in the case of the NDNH, legislative 
changes would be required to give Exchanges permission to access and 
use the data source for verification of employer sponsored coverage.
    For example, HHS found that these data sources, such as IRS Forms 
1095-B and 1095-C, DOL, and State wage quarterly data, are subject to 
significant time lags and that HHS would not have access to reliable, 
up-to-date information regarding employment when needed the most, 
immediately before and after the annual individual market Exchange open 
enrollment period. Finally, HHS also considered using data available to 
Exchanges using the Federal eligibility and enrollment platform to 
automatically verify the loss of minimum essential coverage for 
verification of special enrollment period eligibility (see preamble 
discussion at Sec.  155.420 in section III.D.10. of the final rule). 
However, not all employers participate in the database to verify loss 
of minimum essential coverage nor does it provide information on 
whether an applicant has an offer of employer sponsored coverage so it 
would not be a reliable verification source for verifying employer 
sponsored coverage.
    Additionally, Exchanges are not among the entities Congress 
authorized to access NDNH data.\258\ HHS explored the feasibility of 
creating a new database that Exchanges could leverage with employer 
contact information and information on the coverage offered, but 
because HHS currently lacks the statutory authority to require 
employers to share contact information or information about coverage 
offered for this purpose, employer participation in such a database 
would be purely voluntary, and therefore, may not be sufficiently 
effective. Granting HHS and Exchanges the authority to pursue either of 
these options would require an act of Congress.
---------------------------------------------------------------------------

    \258\ See 42 U.S.C. 653(j) (identifying the entities that are 
authorized to access NDNH data and the permissible purposes for 
which those entities may use NDNH data).
---------------------------------------------------------------------------

    Comment: Two commenters that were neutral in their support of the 
proposed changes, stressed that Exchanges should be prohibited from 
implementing risk-based approaches that are discriminatory in nature, 
specifically that Exchanges cannot target consumers solely based on 
income status, as a targeted, income-based verification process for 
employer sponsored coverage would have disproportionate, adverse 
impacts on applicants of color and other underserved groups. One 
commenter further recommended that HHS modify the language under 
paragraph (d)(4) to prevent States from needlessly imposing procedural 
burdens on consumers seeking to enroll in coverage offered through 
Exchanges.
    Response: HHS agrees with commenters that an Exchange's risk-based 
approach to verify whether an applicant is enrolled in or has been

[[Page 27273]]

offered coverage through an employer must not be discriminatory in 
nature, especially towards applicants who have household income levels 
within a certain percentage of the Federal Poverty Level (FPL), as 
applicants of color or other underserved groups are more likely to be 
targeted by such practices. As such, HHS reminds States and Exchanges 
that per 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, nor should an Exchange and/or a 
State's risk-based approach place any additional, unnecessary 
procedural burdens or barriers to enrollment for consumers seeking to 
enroll in Exchange coverage.
    Comment: Two commenters opposed HHS' proposal that Exchanges use a 
risk-based approach to determine the best process to verify whether an 
applicant has an offer of or is enrolled in coverage through an 
employer. One commenter stated that HHS should continue to verify 
offers of or enrollment in employer sponsored coverage and that 
Exchanges using the Federal eligibility and enrollment platform should 
not rely solely on consumer attestations as the ACA states that these 
applicants are not eligible to receive APTC/CSRs; this is similar to 
how Exchanges verify other eligibility criteria like annual household 
income, or enrollment in other qualifying coverage such as Medicare, 
Medicaid, CHIP, or, if applicable, the Basic Health Program (BHP). 
Another commenter opposed the proposal and stated that, in addition to 
many individuals with offers of or enrollment in coverage offered 
through an employer benefitting from APTC/CSRs inappropriately, HHS 
should consider the tax consequences for individuals and liability 
concerns for applicable large employers (ALE) that receive IRS 226-J 
letters because one or more of their employees received APTC through an 
Exchange. The commenter further noted that the process of penalty 
enforcement is arduous and costly for the IRS and affected ALEs and 
that more effective employer sponsored coverage verification could 
significantly reduce the volume of enforcement actions that are 
ultimately resolved in the favor of the ALE and that HHS should work 
with the IRS to improve the verification process at the national level 
and not pursue the risk-based approach.
    Response: As discussed in the preamble, HHS has confirmed via two 
separate research studies conducted multiple years apart that the risk 
of an applicant choosing to forego enrolling in employer sponsored 
coverage that is affordable and meets minimum value standards to enroll 
in an Exchange QHP with APTC/CSR remains low. Also, HHS has determined 
that reliable and accurate data sources exist for the other eligibility 
criteria that commenters flagged, such as IRS data for annual household 
income, Medicare enrollment data that is provided to CMS via the Social 
Security Administration, and State Medicaid Agency data to verify 
Medicaid/CHIP enrollment. As HHS has noted, the same quality and 
caliber of data on employer sponsored coverage do not exist due to the 
various limitations discussed earlier in the preamble.
    Furthermore, HHS understands the concerns raised by the commenter 
regarding the process of assessing employer shared responsibility 
payments (ESRP), and that more robust real-time verification of 
consumers' access to employer sponsored coverage may result in some 
employers avoiding the ESRP process. However, as noted in an earlier 
response in this section of the preamble, options for obtaining the 
necessary data are limited. In the absence of Congressional action to 
provide access to the NDNH or to create a new database with mandatory 
employer reporting, HHS remains committed to working with IRS to use 
the information currently available to ensure our processes are fair to 
both consumers and employers.
8. Annual Eligibility Redetermination (Sec.  155.335)
    We solicited 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 on additional criteria or mechanisms 
HHS could consider to ensure the Exchange hierarchy for re-enrollment 
aligns with plan generosity and consumer needs, with consideration for 
the potential impact of the proposed amendments to the actuarial value 
de minimis guidelines. 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. Please see 
the proposed rule preamble (87 FR 651 through 652) for a complete 
description of the comment solicitation.
    We will consider proposing amendments to the re-enrollment 
hierarchy at Sec.  155.335(j) in future rulemaking.
    We summarize and respond to public comments received on annual 
eligibility redetermination (Sec.  155.335) below.
    Comment: Some commenters opposed the proposal to revise the re-
enrollment hierarchy and explicitly expressed that HHS should retain 
the current re-enrollment hierarchy. These commenters stated that 
consumers choose to enroll in plans for a number of reasons and that 
the Exchange cannot accurately predict the factors most valuable to 
consumers; thus, revising the re-enrollment hierarchy could lead to 
consumer confusion and dissatisfaction. A few commenters noted that the 
discretion to select the most appropriate plans for consumers should be 
left to the issuers. Two commenters expressed concern about enrollees 
being auto enrolled without their knowledge or explicit approval.
    A few commenters encouraged HHS to focus on enhancing the consumer 
shopping experience and decision support tools to improve initial plan 
selection and alert consumers of plans that better meet their needs 
instead of altering the re-enrollment hierarchy in the Exchanges. A 
couple of commenters explained that improving consumer education can 
help ensure consumers understand all aspects of cost-sharing and how 
they impact coverage, which will help consumers make an initial plan 
selection that best meets their needs. One commenter suggested that HHS 
could rebrand the concept of metal levels to make actuarial values more 
accessible to consumers.
    Response: HHS understands the importance of ensuring a revised re-
enrollment hierarchy does not result in consumer confusion or harm and 
will take these comments into account in considering whether to revise 
the current re-enrollment hierarchy as part of future rulemaking.
    Comment: Commenters submitted comments regarding the incorporation 
of consumer cost into the re-enrollment hierarchy. Several commenters 
encouraged HHS to take net premium and/or total OOPC into account for 
the re-enrollment hierarchy. Some commenters cited research in Covered 
California's market which showed that 30 percent of households whose 
coverage was automatically renewed were certain to be better off in a 
different plan. Furthermore, these commenters referenced that, on 
average, families in California were charged an extra $466 a year in 
annual premiums, as a result of remaining with a plan that

[[Page 27274]]

no longer served their interests. For this reason, a number of 
commenters expressed that re-enrollment should prioritize consumer 
affordability rather than continuity of issuer and product line, 
stating that the vast majority of consumers who do not make active 
selections during the OEP care more about cost than issuer or provider 
network. One commenter cautioned that net premium itself is not always 
a reliable factor to determine the best plan for a consumer. Another 
commenter recommended that the plan's net premium, MOOP, deductible, 
and annual OOPC be considered only when 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. A few commenters stated that including OOPC 
and plan generosity into re-enrollment rules will be particularly 
beneficial for when enrollees are eligible for cost-sharing reductions 
and are not enrolled in a silver plan. One commenter explicitly 
requested that if an enrollee is shifted to a different metal level 
plan, then that enrollee should remain enrolled in a plan offered by 
the same issuer to prevent potential adverse consequences of an 
enrollee losing access to medications or experiencing increased drug 
costs. However, two commenters expressed that incorporating OOPC into 
the hierarchy would likely lead to increased enrollment in plans with 
lower OOPC for prescription drugs. Two other commenters explained the 
critical importance of auto re-enrollment policies for immigrants and 
racial and ethnic minorities who face barriers, such as lack of in 
language outreach and notices, and are disproportionately impacted by 
cost increases due to lower wealth and discretionary income.
    Response: HHS will take comments regarding the incorporation of 
consumer costs into the re-enrollment hierarchy into account in future 
rulemaking.
    Comment: We received multiple comments with specific 
recommendations regarding how the priority of the current hierarchy 
could be modified. Multiple commenters raised concerns with Sec.  
155.335(j)(1)(i) which ensures the enrollee's coverage will be renewed 
in the same plan as their current QHP, unless the current QHP is not 
available through the Exchange. Commenters explained that the current 
policy does not provide flexibility for enrollees to be re-enrolled 
into a different plan even if market conditions increase costs. For 
this reason, some commenters recommended that Sec.  155.335(j)(1)(i) be 
amended to allow the enrollee's coverage to be renewed into a different 
plan if there is no change in the issuer, product, service area, 
provider network, and prescription drug formulary, and the new plan is 
more generous and has lower net premiums. These commenters urged the 
Exchange to provide accessible notices and reasonable opportunities for 
the consumer to return to their former plan or drop coverage. 
Furthermore, a few commenters recommended that enrollees should be 
eligible for a 60-day special enrollment period after the close of the 
annual individual market Exchange Open Enrollment Period or at the 
start of the plan year to allow enrollees whose was coverage was 
shifted to choose a different plan. This commenter stated that if the 
de minimis guidelines proposed in this rule at Sec. Sec.  156.135 and 
156.140 are finalized HHS should not alter the hierarchy for within-
metal level changes.
    Some commenters raised concerns with Sec.  155.335(j)(1)(ii) 
through (iv) and (j)(2)(iii), which outline the re-enrollment rules 
when an enrollee's current QHP is no longer available, since consumers 
may be re-enrolled in a plan with far higher costs if the issuer and 
provider networks types are prioritized. These commenters expressed 
that the vast majority of enrollees who do not make active selections 
during the open enrollment period care more about cost than the issuer 
or provider network. All of these commenters recommended that HHS 
prioritize keeping the consumer's net premium and approximate actuarial 
value (AV) at levels as close as possible to the enrollee's current 
QHP. One commenter recommended HHS should perform targeted outreach to 
consumers who have been auto re-enrolled and whose premium has 
increased and should extend the open enrollment period, outlined in 
Sec.  155.410, to January 31 and require coverage to begin February 1.
    Response: HHS will take comments on factors to consider 
prioritizing in the re-enrollment hierarchy into account in future 
rulemaking. HHS understands the importance of comments that urged the 
Exchange to provide accessible notices and reasonable opportunities for 
enrollees to select a QHP that is different from their auto 
reenrollment option. Currently, 45 CFR 156.1255 and its implementing 
guidance outline the information a QHP issuer must provide in renewal 
and re-enrollment notices to qualified individuals. Additionally, a 
qualified individual is eligible under Sec.  155.420(d)(1)(i) for a 
special enrollment period (SEP) to enroll in or change from one QHP to 
another if the qualified individual loses minimal essential coverage. 
If the enrollee's current plan is no longer available for renewal, HHS 
would consider this a loss of minimum essential coverage that would 
trigger a SEP.
    Comment: Several commenters recommended provider network 
considerations be incorporated into any revised re-enrollment 
hierarchy. Commenters explained that a revised hierarchy that does not 
incorporate provider networks could result in enrollees losing access 
to their providers, increased out-of-network costs, and/or being placed 
in narrower network plans. Furthermore, two commenters cautioned that 
not including provider network considerations in the re-enrollment 
hierarchy could have negative consequences for racial and ethnic 
minority groups and those living with disabilities who rely on 
providers with certain cultural backgrounds or longtime key providers. 
Two commenters recommended that HHS use provider network as the 
foremost criterion.
    Response: HHS will take these comments regarding incorporating 
provider networks in the re-enrollment hierarchy into account in future 
rulemaking.
    Comment: A few commenters recommended that SBEs, SBE-FPs, or States 
performing plan management functions should have the flexibility to 
determine the appropriate criteria for re-enrollment determinations 
with respect to their unique markets. One commenter explained that 
incorporating new criteria and mechanisms into re-enrollment 
determinations could impose significant operational and financial 
burdens on SBEs. Another commenter stated that a substantial number of 
enrollees actively select their auto re-enrollment option which could 
indicate enrollees trust their State or issuer. One commenter proposed 
HHS should work with States to design safe and appropriate flexibility 
for issuers to facilitate plan changes after open enrollment, but only 
when the change would lower premiums and/or OOPC for members with 
everything else (network, benefits, deductibles, MOOPs) being the same 
or better for consumers. This commenter raised the concern that the 
examples HHS provided in the comment solicitation could conflict with 
State law requirements.
    Response: HHS will take these comments regarding State flexibility 
into account in future rulemaking.
    Comment: A few commenters urged HHS to conduct stakeholder 
engagement and provide transparency on the re-

[[Page 27275]]

enrollment process to all stakeholders. Two commenters requested 
additional clarification on the proposed changes to the re-enrollment 
hierarchy for the Exchanges while one commenter requested that HHS 
provide further transparency into the alternate enrollment process. One 
commenter recommended that HHS conduct further stakeholder feedback and 
consumer testing prior to finalizing any revisions to the re-enrollment 
hierarchy.
    Response: HHS will take these considerations into account in future 
rulemaking, including how to incorporate transparency and stakeholder 
feedback into a revised re-enrollment hierarchy.
9. Administration of Advance Payments of the Premium Tax Credit and 
Cost-Sharing Reductions (Sec.  155.340)
    In the HHS Notice of Benefit and Payment Parameters for 2023 
proposed rule (87 FR 584, 648 through 653), we proposed 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. The proposed APTC proration methodology was 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 on that policy during the applicable month. 
HHS proposed to require all Exchanges, including the Exchanges on the 
Federal platform (FFE and SBE-FP) and State Exchanges that operate 
their own eligibility and enrollment platforms, to implement this 
proposed proration methodology beginning with PY 2024. Please see the 
proposed rule preamble (87 FR 648 through 649 and 652 through 653) for 
a complete description of the proposed policy.
    After considering the comments received, under HHS' authority to 
administer APTC, we are codifying the proposed APTC proration 
methodology as the methodology Exchanges on the Federal platform will 
continue to use, but we are not finalizing the requirement for State 
Exchanges to use the proposed methodology to prorate premium or APTC 
amounts. Rather, we will formalize additional efforts under existing 
Exchange program integrity and oversight authorities to ensure that, 
beginning with PY 2024, State Exchanges will implement an APTC 
methodology consistent with the requirement we are finalizing at Sec.  
155.305(f)(5) at 155.340(i), described later in this section, that will 
not cause the amount of APTC applied to an enrollee's monthly premium 
to exceed their total monthly PTC amount as defined in 26 CFR 1.36B-3. 
We note that all the Exchanges on the Federal platform (FFE and SBE-FP) 
would implement HHS' codified methodology because all Exchanges on the 
Federal platform rely on the Federal platform to perform the proration 
calculations, and the Federal platform is not designed to implement 
different methodologies by State. We believe that this final policy 
will ensure Exchange compliance with IRS rules and equal treatment for 
enrollees across Exchanges, while minimizing the burden for State 
Exchanges and granting State Exchanges flexibility in how to comply 
with these APTC calculation requirements 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. We will require State 
Exchanges to prospectively report their PY 2024 methodology in the year 
prior to implementation (in 2023) and will allow State Exchanges the 
option to report their PY 2023 methodology in 2022. Any State that 
begins operating a State Exchange for PY 2024, or for subsequent plan 
years, will also be required to comply with this timeline by 
prospectively reporting the methodology for the following plan year 
during their first reporting cycle.
    To support this policy, we are finalizing a series of conforming 
amendments to parts Sec. Sec.  155.305(f)(5) and 155.340. We are not 
amending as proposed Sec.  155.240(e), which establishes the 
methodology the Exchanges on the Federal platform (FFE and SBE-FP) use 
to prorate premiums, to add new paragraph Sec.  155.240(e)(2), which 
would have established a methodology for State Exchanges using their 
own platform to prorate premiums. However, we are amending Sec.  
155.305(f)(5), which currently provides that Exchanges must calculate 
APTC in accordance with 26 CFR 1.36B-3, by adding that Exchanges must 
also calculate APTC in accordance with new paragraph Sec.  155.340(i) 
where we describe the requirements for calculating APTC when policy 
coverage lasts less than the full coverage month. In new paragraph 
Sec.  155.340(i)(1), we establish that Exchanges on the Federal 
platform will be required to use the APTC proration methodology 
described at Sec.  155.340(i)(1)(i) and (ii), and at new paragraph 
Sec.  155.340(i)(2) we establish that State Exchanges will be required 
to calculate APTC in accordance with a methodology that does not cause 
the amount of APTC applied to an enrollee's monthly premium to exceed 
their expected total monthly PTC amount when an 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, and to report the methodology to HHS 
in accordance with the requirements of 155.1200(b)(2).
    Most of the comments on proposed amendments to the administration 
of APTC (Sec.  155.340) were presented in combination with comments on 
the other proposed amendments that made up the proposal to require 
premium and APTC proration (Sec. Sec.  155.240(e), 155.305(f)(5)). We 
summarize and respond to public comments received on all three sections 
in a unified summary below.
    Comment: Several commenters expressed their support for the 
proposal to require that all Exchanges prorate both premium amounts and 
APTC amounts and noted that the proposal would ensure accurate and 
consistent calculation of APTC which would support consumer protection. 
One commenter observed that the proposal would lower the operational 
burden for issuers participating across multiple types of Exchanges. 
One commenter stated that the proposed policy would encourage enrollees 
to enroll in a new QHP if enrollment was terminated mid-month.
    However, the majority of commenters opposed the proposal and 
criticized the proposed APTC proration methodology, and its potential 
impact on enrollees. Several commenters asserted that the proposed 
methodology is not necessary to ensure that the calculation of APTC 
does not cause excess APTC because calculating APTC in the same way as 
PTC; that is, using the calculations defined at 26 CFR 1.36B-3(d) will 
not result in excess APTC. Several commenters included examples of how 
the proposed proration methodology would result in less generous 
amounts of APTC for enrollees, and asserted that the proposed 
methodology would reduce plan affordability, in contrast to the stated 
goals of HHS and the Administration. Others stated that the requirement 
to prorate premiums is not supported by the PTC regulation.
    Response: We are not finalizing the policy as proposed. We will 
codify the method of APTC proration as proposed

[[Page 27276]]

for the Exchanges using the Federal platform, but we will grant 
flexibility to State Exchanges to use a methodology that does not cause 
the amount of APTC applied to an enrollee's monthly premium to exceed 
their expected total monthly PTC amount when an 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. We will require State Exchanges to 
report their methodology to HHS in accordance with the requirements of 
Sec.  155.1200(b)(2).
    PTC is calculated for each month of the tax year retrospectively, 
and therefore can account for the changes in an applicable enrollee's 
premium month to month before the final amount is calculated at the 
time of tax filing. However, Exchanges administer APTC prospectively to 
issuers by advancing premium assistance to issuers based on enrollees' 
eligibility determinations and elections, which may also change month-
to-month (and before final reconciliation occurs), putting affected 
enrollees at risk of repaying the excess APTC.
    The proposal sought to align the manner in which HHS administers 
APTC with the IRS' PTC calculation for all Exchanges, by establishing a 
consistent methodology for administering APTC in instances when there 
is a change in the applicable enrollee's coverage mid-month, which the 
PTC regulation accounts for at 26 CFR 1.36B 3(d)(1)(i) by 
retrospectively calculating the monthly enrollment premiums to ensure 
that PTC does not exceed that amount. We believe the ability to account 
for mid-month coverage changes is most important when an enrollee is 
enrolled in two policies in the same coverage month. The examples 
included by commenters take into consideration only mid-month 
terminations, but do not consider mid-month terminations followed by 
mid-month enrollments into a new plan. In such instances when there are 
multiple policies in a single policy month, HHS data on APTC payment 
reflects that some State Exchanges are not prorating or otherwise 
accounting for a potential over-payment of APTC.
    Under 26 CFR 1.36B-3(d), PTC eligibility for a partial month of 
coverage is calculated as the lesser of the premiums for the month 
(reduced by any amount of such premiums refunded), or the adjusted 
monthly premium for the applicable second lowest cost silver plan 
(SLCSP) reduced by the taxpayer's monthly contribution amount.
    HHS remains concerned that when an enrollee is enrolled in more 
than one policy during a single coverage month, and the Exchange 
applies APTC to each of those policies based on the eligibility 
requirements under 26 CFR 1.36B-2 without prorating both policies or 
conducting a reconciliation between them, the calculation will in some 
cases cause the total monthly APTC to exceed the amount that would be 
calculated under 26 CFR 1.36B-3(d). HHS data indicate that when 
Exchanges do not link the two policies to account for the excess APTC, 
the Exchanges tend to apply the maximum eligible APTC amounts, capped 
at the prorated premium amount, for both policies. When added together 
the total applied APTC often exceeds the maximum expected PTC amount 
for which the enrollee will be eligible for that month.
    However, if the Exchange applied the proration methodology used by 
the Exchanges on the Federal platform (that is, FFE and SBE-FPs) which 
is the product of (1) the APTC applied on the 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 for that policy during the 
applicable month, the calculation would not cause the total APTC for 
the month to exceed the PTC allowed for the month.
    Further, we acknowledge the concern raised by commenters that under 
the proposed policy, prorating the APTC amounts applied to enrollee's 
monthly premium could result in a lower total amount of APTC than if 
the non-prorated amounts of APTC capped at the reduced premium were 
applied to an enrollee's monthly premium. We appreciate the perspective 
on affordability, and agree that the non-prorated amount of APTC would 
likely be more generous than the prorated amount if a mid-month 
termination was not followed by enrollment in another plan. However, 
since many mid-month terminations are followed by enrollment in a new 
plan, we remain concerned that applying both plans' non-prorated APTC 
amounts could exceed the maximum expected monthly PTC amount for which 
the enrollee taxpayer will be eligible. When an enrollee is enrolled in 
more than one plan during one coverage month and has APTC from both 
policies applied to their premium, the generosity of non-prorated APTC 
amounts described by commenters has the potential to result in APTC 
over-payments and to trigger a costly tax liability which could 
surprise the enrollee later. Income tax liability due to excess APTC 
could pose a significant financial burden to applicable enrollees, 
particularly low-income enrollees. Further, if this partial month of 
coverage triggered a higher applied APTC, it has the potential to 
confuse enrollees about their true monthly member responsibility for 
their new plan, creating confusion about the affordability of health 
care coverage offered by an Exchange. Therefore, we determined that the 
benefit of avoiding potential, unexpected tax liability and of reducing 
potential confusion outweighs the cost to enrollees of potentially 
lower APTC payments for those enrolled in two policies for partial 
months within one coverage month.
    We acknowledge that proration based on the number of coverage days, 
like the methodology currently used by Exchanges on the Federal 
platform, is not the only approach to address the issue of excess APTC. 
For example, a monthly calculation linking two partial month policies 
for an applicable taxpayer to account for changes in APTC could also 
align with the current PTC regulation at 26 CFR 1.36B-3(d). However, in 
practice, HHS has noticed that State Exchanges often do not prorate or 
link the two mid-month policies, which leads to APTC payments that 
exceed an enrollee's expected monthly PTC amount.
    However, in an effort to preserve State Exchange flexibility and to 
be responsive to the concerns regarding the proposed methodology, we 
are modifying the finalized policy to require only that State Exchanges 
use a methodology that ensures that their calculation of APTC does not 
cause the amount of APTC applied to an enrollee's monthly premium to 
exceed their expected monthly PTC amount when an 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, and to report the methodology to HHS 
in accordance with the requirements of Sec.  155.1200(b)(2).
    Comment: A few commenters who supported the proposal expressed 
hesitancy regarding the State Exchanges' ability to implement the 
proposed methodology and requested maximum flexibility for the State 
Exchanges in their implementation of the policy and the timing of 
implementation. Additionally, many opposing commenters, specifically 
several State Exchanges, noted that the proposal would impose 
significant implementation burden on States Exchanges. These commenters 
expressed concern that the estimated implementation cost would be 
extremely burdensome to State

[[Page 27277]]

Exchanges, and the complex, resource-intensive IT and administrative 
systems builds would require them to divert large portions of their 
budget away from other priority operations such as Medicaid unwinding 
related to the PHE among other projects. In addition, several 
commenters explained that State Exchanges are already implementing 
their own successful methods of ensuring that their calculation of APTC 
does not cause excess APTC, some of which already include prorating 
premiums, and that these State Exchanges should not be required to 
cease their effective methods, in favor of the proposed proration 
methodology. One commenter asserted that HHS does not have the 
authority to require Exchanges to implement the proposed proration 
methodology for premium and APTC amounts. Several of these commenters 
remarked that State Exchanges have the best insight into their Exchange 
populations and HHS should defer to their authority on how to approach 
the issue of APTC over-payment in their jurisdiction without limiting 
their flexibility.
    Response: We maintain that regulating the administration of APTC is 
within HHS' statutory authority, as defined in section 1412 of the ACA, 
which grants authority to the Secretary of HHS to establish a program 
for APTC, and in HHS regulation under Sec.  155.340, which establishes 
HHS' requirements regarding administration of the APTC. However, in 
light of comments regarding the need for more State Exchange 
flexibility, as noted earlier, we are not finalizing the policy as 
proposed.
    We appreciate the competing priorities of State Exchanges and the 
potential costs of implementing the proposed policy. In the proposed 
rule, we acknowledged that implementing the proposed methodology would 
require implementation and operational costs and time on the part of 
most State Exchanges. We estimated a one-time implementation cost of 
approximately $1 million dollars for each State Exchange, and we 
address specific comments on the estimated cost of implementation 
further in the comment and response section of the Regulatory Impact 
Analysis in this final rule. In an effort to be responsive to State 
Exchange concerns, we are finalizing the method of APTC proration as 
proposed for the Exchanges using the Federal platform, but HHS will 
require only that, beginning with PY 2024, State Exchanges use a 
methodology that ensures that the calculation of APTC does not cause 
APTC applied to an enrollee's monthly premium to exceed the enrollee's 
expected monthly PTC amount when 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, and to report the methodology to HHS in 
accordance with the requirements of Sec.  155.1200(b)(2). We estimate 
that State Exchanges will be required to prospectively submit their 
planned PY 2024 methodology for the first time through the State-based 
Marketplace Annual Reporting Tool (SMART) tool in the summer of 2023 
and will provide the option for State Exchanges to submit their 
methodology for PY 2023 through the SMART tool in the summer of 2022. 
HHS believes that finalizing this modification will provide the State 
Exchanges flexibility and sufficient time to implement a new 
methodology, if necessary, and to report the methodology to HHS.
    HHS will be available to work with State Exchanges and address 
questions as they prepare to report on their methods to ensure that 
APTC calculations do not cause excess APTC for enrollees.
    Comment: Several commenters opposing the proposal asserted that 
there is no need to issue regulations on the issue of APTC over-
payment. Some of these commenters noted that the topic of APTC over-
payment and the potential resulting income tax liability is not being 
reported as a problem by States Exchanges, consumers, or consumer 
advocacy groups. A few commenters noted that if this type of over-
payment does occur, it is rare, and affects very few enrollees. 
Further, some of these commenters stated that if State Exchanges were 
over-paying APTC and exceeding premium amounts for partial-month 
coverage, enforcing compliance with the existing PTC rule would 
sufficiently address the issue.
    Response: We remain concerned about the issue of APTC over-payments 
among State Exchanges, as described in the previous response. Recent 
APTC payment data indicates that APTC over-payments due to mid-month 
coverage changes cost the Federal government approximately $0.5 million 
to $1 million annually. While the issue of APTC over-payment may not 
impact very many enrollees annually, we believe that these over-
payments are a legitimate source of consumer harm and may trigger a 
Federal income tax liability for the applicable enrollee. However, we 
agree that the reference at Sec.  155.305(f)(5) to current PTC 
regulations at 26 CFR 1.36B-3(d) sets a clear enough standard to hold 
all Exchanges sufficiently accountable to making correct payments of 
APTC. In an effort to ensure compliance with the existing IRS PTC 
rules, we are finalizing the requirement that State Exchanges use a 
methodology that ensures that their calculation of APTC does not cause 
the amount of APTC applied to an enrollee's monthly premium to exceed 
their expected monthly PTC amount when an 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, and to report the methodology to HHS 
in accordance with the requirements of Sec.  155.1200(b)(2).
10. Special Enrollment Periods--Special Enrollment Period Verification 
(Sec.  155.420)
    In 2017, the 2017 Market Stabilization final rule preamble (82 FR 
18346, 18355 through 18358) explained that HHS would implement pre-
enrollment verification of eligibility for certain special enrollment 
periods in all Exchanges on the Federal platform. HHS also clarified 
its intention to not establish a regulatory requirement that all 
Exchanges conduct special enrollment period verifications to allow 
State Exchanges additional time and flexibility to adopt policies that 
fit the needs of their State (82 FR 18355 through 18358). 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.
    In the HHS Notice of Benefit and Payment Parameters for 2023 
proposed rule (87 FR 584, 653), we proposed 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 in 
special circumstances, which could include natural disasters or public 
health emergencies that impact consumers or the Exchange. We further 
proposed that Exchanges' pre-enrollment verification process must be 
implemented in a manner that is not based on a prohibited 
discriminatory basis. This is 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

[[Page 27278]]

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 (82 FR 18355 through 
18360), 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.
    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 also proposed that the Exchanges on the Federal platform 
would conduct pre-enrollment verification of eligibility for only one 
type of special enrollment period--the special enrollment period for 
new consumers who attest to losing minimum essential coverage.\259\ 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.
---------------------------------------------------------------------------

    \259\ See 45 CFR 155.420(d)(1)(i).
---------------------------------------------------------------------------

    We sought comment on these proposals.
    After reviewing the public comments, we are finalizing this 
provision as proposed, except that we have added a specific reference 
to Sec.  155.120(c) to the new regulation text at Sec.  155.420(g) to 
clarify the precise nondiscrimination standards that are applicable to 
an Exchange's process for granting exceptions to pre-enrollment 
verification for special enrollment periods.
    We summarize and respond to public comments received on the special 
enrollment period verification proposal.
    Comment: The majority of commenters supported HHS' proposal. Many 
commenters agreed that this policy helps minimize barriers to 
enrollment while still maintaining program integrity. Most also agreed 
that this policy will advance health equity by alleviating barriers to 
enrollment for historically disadvantaged and marginalized communities. 
Several commenters mentioned that pre-enrollment special enrollment 
period verification can be especially burdensome for low-income 
individuals, since they are more likely to have inadequate internet 
access at home and are more likely to use a primary language other than 
English. Commenters also noted additional groups that would benefit 
from this policy: Immigrants, Native Americans, and those living in 
rural areas who may not have high-quality internet access.
    Several commenters agreed that special enrollment period 
verification requirements can cause gaps in coverage and stated that 
reducing these barriers will encourage continuous coverage. Commenters 
mentioned that it can be difficult to verify life events, such as 
proving a change in household size when someone becomes a tax 
dependent. One commenter noted that pre-enrollment verification is not 
only time consuming for consumers, but also for brokers who could be 
using that time to help more clients enroll in coverage. Many 
commenters agreed that this proposal will encourage younger and 
healthier consumers who are eligible for a special enrollment period to 
enroll and that this will be good for the risk pool. Several commenters 
highlighted that concerns from issuers about scaling back pre-
enrollment verification for special enrollment periods harming market 
stability have not been proven.
    Response: We appreciate the comments highlighting that this policy 
will have a positive impact on consumers from historically 
disadvantaged and marginalized communities. We agree that this policy 
will decrease consumer burden and barriers to enrollment for eligible 
consumers, while still supporting program integrity. We also agree that 
this policy will increase enrollments among younger and healthier 
consumers and that this will have a positive impact on the risk pool.
    Comment: Several commenters mentioned that, as written, this 
proposal would still pose a barrier for consumers, particularly those 
who face disproportionately high rates of being uninsured, such as 
immigrants and Black and African American consumers. Some commenters 
explained accessing documents from past employers to prove loss of 
minimum essential coverage can be challenging, especially for 
immigrants or those who are more likely to have unstable employment or 
work in the informal economy. One commenter also raised concern that 
losing coverage can place significant stress on a household and 
consumers may not have the bandwidth to complete a pre-enrollment 
verification process for a special enrollment period. Several 
commenters recommended that HHS further act to reduce consumer burden 
and barriers to enrollment by eliminating pre-enrollment verification 
for all special enrollment period types. A few commenters advocated for 
self-attestation in lieu of document verification and mentioned that 
many other Federal programs rely on self-attestation.
    Response: We appreciate commenters' concerns related to health 
equity and consumer burden. We believe that by scaling back pre-
enrollment verification for special enrollment periods, this policy 
will decrease consumer burden and barriers to enrolling through a 
special enrollment period. At this time, we believe that pre-enrollment 
verification for special enrollment periods is appropriate for the most 
commonly used special enrollment period type in order to support 
program integrity. HHS works to reduce consumer burden imposed by pre-
enrollment verification for special enrollment periods based on loss of 
minimum essential coverage while still supporting program integrity by 
using available data to automatically verify loss of minimum essential 
coverage for a large portion of consumers requesting a loss of minimum 
essential coverage

[[Page 27279]]

special enrollment period, which requires no additional consumer action 
and does not delay enrollment. We will continue to evaluate whether 
additional changes are appropriate.
    Comment: Some commenters supported the clarified flexibility for 
State Exchanges. Commenters stated that this change will enable State 
Exchanges to implement pre-enrollment special enrollment period 
verification processes that are tailored to their respective Exchanges 
and consumer populations. One commenter also appreciated that Exchanges 
may provide an exception to pre-enrollment special enrollment period 
verification for special circumstances. A couple of commenters 
highlighted that the new paragraph (g) language is redundant since 
State Exchanges already have flexibility to exercise discretion under 
current rules.
    Many commenters expressed concern that State Exchanges may conduct 
pre-enrollment verification for additional special enrollment period 
types--outside of loss of minimum essential coverage--which could cause 
barriers to enrollment in those States, particularly for younger and 
Black and African American consumers. Due to this concern, these 
commenters recommended that HHS should not permit State Exchanges to 
have broader pre-enrollment verification of eligibility for special 
enrollment periods than the FFEs.
    One commenter urged HHS to monitor how State Exchanges implement 
pre-enrollment verification for special enrollment periods to ensure 
their processes are not discriminatory. Another commenter suggested 
that HHS prohibit State Exchanges from implementing pre-enrollment 
verification that differs from that of the FFEs, unless the State 
Exchange can prove that pre-enrollment verification for special 
enrollment periods will not have a disproportionate impact on 
communities of color in their State.
    Response: We agree that the new paragraph (g) allows State 
Exchanges to continue to implement pre-enrollment verification 
processes for special enrollment periods that are tailored to their 
respective populations and needs. We also agree that clarifying that 
Exchanges may provide an exception for pre-enrollment special 
enrollment period verification for special circumstances will enable 
Exchanges to be flexible so that eligible consumers can easily enroll 
in coverage when they may need it most, such as during the current 
COVID-19 PHE unwinding period. HHS is committed to equity in health 
care and plans to monitor use of SEP pre-enrollment verification in 
State Exchanges to ensure that they are following the non-
discrimination standards under Sec.  155.120(c).
    Comment: Several commenters, particularly issuers, opposed this 
proposal due to concerns that scaling back pre-enrollment verification 
for special enrollment periods would lead to an increase in fraud and 
abuse that would negatively impact market stability and premium costs. 
A few of these commenters mentioned concerns about consumers 
temporarily relocating to a State for medical care, which could lead to 
increased costs in areas with renowned medical centers. Commenters 
stated that HHS should encourage year-long continuous coverage. One 
commenter cautioned that this policy, combined with other recent policy 
changes such as a longer open enrollment period and the special 
enrollment period for individuals with incomes under 150 percent of the 
Federal poverty level, will harm market stability.
    Several commenters stated that before the 2017 Market Stabilization 
final rule (82 FR 18346), the market was unstable and costs were higher 
due to fraud and abuse in consumers' use of special enrollment periods 
as consumers would wait to enroll until they needed care. One commenter 
noted that data from a 2018 CMS report showed that most consumers with 
special enrollment period verification issues submitted the necessary 
documents to resolve their issue.\260\ In addition, the report revealed 
that fewer consumers enrolled through an exceptional circumstance SEP 
(suggesting less abuse), and that the average age of special enrollment 
period enrollees was younger than that of open enrollment period 
enrollees.
---------------------------------------------------------------------------

    \260\ The Exchanges Trends Report (2018, July 2). CMS. https://www.cms.gov/CCIIO/Programs-and-Initiatives/Health-Insurance-Marketplaces/Downloads/2018-07-02-Trends-Report-3.pdf.
---------------------------------------------------------------------------

    Commenters also stated that risk adjustment data suggests that 
consumers with chronic conditions are abusing special enrollment 
periods and are waiting to enroll until they need care. One commenter 
highlighted that the loss ratios after risk adjustment for special 
enrollment period enrollments, relative to open enrollment period 
enrollments, has increased for some of their plans since 2019. They 
stated that this is likely due to Exchanges relaxing pre-enrollment 
verification for special enrollment periods during the PHE.
    Response: We disagree that this policy will destabilize the market 
and cause large increases in premium costs. We believe that while pre-
enrollment special enrollment period verification can decrease the risk 
of 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. By 
verifying eligibility for the most commonly used special enrollment 
period type and removing verification for other special enrollment 
periods, we believe that the Exchanges on the Federal platform will 
successfully mitigate the negative impacts of special enrollment period 
verification without substantially sacrificing program integrity or 
market stability.
    We acknowledge the data from the 2018 CMS report regarding special 
enrollment period verification. While most SEP verification issues have 
been resolved, current HHS data shows that younger 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 as younger consumers are often 
healthier. We believe that improving access for younger and healthier 
eligible consumers will be good for the risk pool and offset the effect 
of potential increased adverse selection. Current HHS data also shows 
that Black and African American consumers submit acceptable 
documentation at much lower rates than White consumers. This suggests 
that pre-enrollment verification may be a barrier to enrollment for 
eligible Black and African American consumers. This policy change may 
improve health equity, and access to affordable, quality coverage for 
all.
    Comment: Many commenters who opposed this proposal, agreed that 
document verification for special enrollment periods can be a barrier 
to enrollment for some eligible consumers. Therefore, they expressed 
support for more automation of special enrollment period verification. 
One commenter also encouraged HHS to evaluate why some consumers submit 
acceptable documents at lower rates and recommended redesigning the 
document collection process accordingly.
    Response: We acknowledge these concerns and will continue to 
conduct automated, pre-enrollment verification when possible for the 
loss of minimum essential coverage SEP type. We note that automated 
verification is not always possible. However, we continue to believe 
that the approach we are adopting balances the priorities of reducing 
consumer burden with supporting program integrity. HHS

[[Page 27280]]

continues to evaluate document submission rates and consumer outcomes 
to inform process and policy improvements for successful SEP 
verification.
11. General Program Integrity and Oversight Requirements (Sec.  
155.1200)
    The Payment Integrity Information Act of 2019 (PIIA) \261\ 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 Payment Integrity 
Information Act of 2019 (PIIA),\262\ 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.
---------------------------------------------------------------------------

    \261\ Public Law 116-117 (2020, March 2).
    \262\ Public Law 116-117 (2020, March 2).
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    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. 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.
    We proposed 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, under the 
proposal, 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 had 
also proposed to amend Sec.  155.1200(c) to cross-reference proposed 
Sec.  155.1200(e) to ensure the coordination of these two requirements. 
Please see the proposed rule preamble for a complete description of the 
proposed policy and the SEIPM program.\263\
---------------------------------------------------------------------------

    \263\ 87 FR 654 through 660.
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    We sought comment on these proposals.
    After reviewing the public comments, we are not finalizing this 
proposed provision at this time as it is interrelated with the SEIPM 
program proposal, which will not be finalized at this time through this 
final rule. HHS will continue to engage with the State Exchanges as we 
continue to develop the SEIPM program, which we plan to codify in 
future rulemaking. Please refer to section 12 for further details.
    We summarize and respond to public comments received on general 
program integrity and oversight requirements (Sec.  155.1200) below.
    Comment: Several commenters generally opposed the amendment to the 
programmatic audit requirement to permit a State Exchange to meet the 
requirement under Sec.  155.1200(c) by completing the SEIPM program 
process, as proposed under subpart P. Commenters noted that the 
proposed change is duplicative because the existing programmatic audit 
requirement under Sec.  155.1200(d) already addresses eligibility and 
enrollment compliance. One commenter explained that imposing a new 
audit requirement under SEIPM creates additional burden that is not 
offset by the amendment to the programmatic audit requirement under 
Sec.  155.1200(e). Another commenter stated that while HHS is 
permitting a State Exchange to meet the programmatic audit requirement 
under Sec.  155.1200(c) by completing the SEIPM program process, State 
Exchanges will need to spend substantial time and resources to prepare 
for SEIPM. Commenters noted that State Exchanges are already subject to 
extensive oversight under Sec. Sec.  155.1200 and 155.1210 and 
requested HHS clarify how the SEIPM will impact the SMART for Plan 
Years 2023-2025. Another commenter requested that HHS grant 
programmatic audit relief while State Exchanges prepare to comply with 
the SEIPM program and also consider how the existing programmatic audit 
requirement may be able to meet SEIPM goals. A few commenters requested 
that HHS consider alternative approaches to the implementation of the 
proposed SEIPM program, such as enhancing the current programmatic 
audit requirement under Sec.  155.1200 to review for improper payments 
or maintain the programmatic audit requirement intact, as it permits 
flexibility and does not add undue burden. One commenter recommended 
that HHS use onsite audits to reduce burden on the State Exchanges 
resulting from the SEIPM program.
    Response: HHS will continue to evaluate how to minimize duplicative 
requirements and reduce burden on State Exchanges as we work toward 
implementation of the proposed SEIPM program. After considering the 
comments received, we are not finalizing this provision at this time, 
as it is interrelated with the SEIPM program proposal, which will not 
be finalized through this final rule. We clarify that the existing 
oversight and audit requirements under 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, and updated through PIIA. The maintenance of records 
requirement under Sec.  155.1210 requires that State Exchanges keep 
eligibility and enrollment records, but it does not establish 
requirements specific to improper payments. The independent external 
programmatic audits required under 155.1200(c) do not review, estimate, 
or report the amounts or rates of improper payments and do not allow 
for standardized comparison or analysis across State Exchanges. In 
order to comply with the PIIA, HHS will continue to develop the SEIPM 
program and plans to engage in future rulemaking to codify the SEIPM 
program.
    Regarding the SMART, we clarify that State Exchanges will continue 
to report on Exchange compliance through the annual SMART process, as 
required under Sec.  155.1200(b)(2).
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.\264\ At that 
time, we also announced that we would undertake rulemaking before 
implementing the improper payment measurement methodology.
---------------------------------------------------------------------------

    \264\ Presentation and materials provided to the then 
operational State Exchanges as part of `All States' meeting held on 
February 21, 2019.
---------------------------------------------------------------------------

    In line with our prior announcement,\265\ and as mentioned in 
section 11 of the preamble, HHS proposed regulations governing HHS' 
SEIPM program.
---------------------------------------------------------------------------

    \265\ Ibid.
---------------------------------------------------------------------------

    As noted in the HHS Notice of Benefit and Payment Parameters for 
2023 proposed rule (87 FR 584, 655), current regulations found at 45 
CFR 155.1200 and 155.1210 require that a State

[[Page 27281]]

Exchange have financial and operational safeguards in place to avoid 
making inaccurate eligibility determinations, including those related 
to APTC, CSR, and enrollments. The regulations at Sec.  155.1200(c) 
require State Exchanges to hire an independent qualified auditing 
entity and submit the external audit results to HHS. The 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 proposed to update 
programmatic auditing requirements such that the completion of the 
annual SEIPM program would satisfy the current auditing requirements 
prescribed in Sec.  155.1200(c). Therefore, we proposed 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. Please see 
the proposed rule preamble (87 FR 654 through 655) for a complete 
description of the proposed policy.
    After reviewing and considering the public comments, we will not 
finalize the SEIPM proposals at this time due to commenters' concerns 
surrounding the proposed implementation timeline and other burdens that 
would be imposed by the proposed SEIPM program.
    We summarize and respond to public comments received on the State 
Exchange Improper Payment Measurement Program (Sec. Sec.  155.1500 
through 1540) below.
    Comment: Several commenters addressed the implementation timeline 
for the SEIPM program. One commenter expressed concerns with the 
relatively short implementation time frame and questioned whether it 
was operationally, fiscally, and technologically feasible for State 
Exchanges to comply with the program's requirement by the proposed PY 
2023 effective date. A few commenters characterized the timeline for 
SEIPM implementation as inadequate. One commenter recommended several 
years of implementation in a pilot before HHS publishes error rates to 
ensure the data accurately reflect errors. One commenter characterized 
the implementation timeline as administratively and financially 
burdensome and unrealistic because State Exchanges would need to 
implement new processes and possibly technology changes by the end of 
2022 to meet the proposed 2024 reporting requirements. One commenter 
proposed an effective date of plan year 2024 rather than 2023. One 
commenter requested extending the deadline for SEIPM.
    Response: Given the additional burden that was placed upon State 
Exchange resources during the PHE, we agree that additional time should 
be provided for implementation and consequently we are not finalizing 
the provision at this time to allow for a longer implementation 
timeline. We also generally agree with the commenter who stated that 
additional piloting is needed. Because piloting efforts have also been 
hindered by the PHE, HHS will consider more robust piloting options in 
which the State Exchanges can participate prior to HHS publishing 
estimates of improper payment rates.
    Comment: Several commenters supported the need for review of 
eligibility determinations that result in improper payments of APTC and 
encouraged HHS to collect more detailed documentation of eligibility 
denials.
    Response: We thank the commenters for their support of the SEIPM 
program and we will consider this feedback as we continue to develop 
the program. We address the commenters' specific suggestions in the 
data collection section below.
    Comment: One commenter indicated that it was neutral as to the 
establishment of the SEIPM program. The commenter noted that there are 
obvious potential benefits to the Federal oversight model instead of 
the programmatic audit model currently in use by State Exchanges, and 
the commenter also noted that it is currently too early to fully assess 
whether the tradeoffs regarding the cost and work related to the audit 
model will be more or less than the cost and work to meet the reporting 
requirements of the proposed Federal oversight model.
    Response: We thank the commenter for sharing its view of the SEIPM 
program.
    Comment: Many commenters expressed opposition regarding the SEIPM 
proposal noting it is duplicative because the existing SMART and 
programmatic audit requirements under Sec.  155.1200 address 
eligibility and enrollment compliance.
    Response: We address these comments under section 11 of the 
preamble.
    Comment: A few commenters stated that the SEIPM program is 
duplicative because consumers already reconcile APTC on their tax 
returns.
    Response: We appreciate the commenters' observation, but note that 
the APTC reconciliation process on the tax return only addresses the 
APTC calculation and not the accuracy of the eligibility determination. 
The IRS uses the annual enrollment data and monthly reconciliation data 
provided by HHS to calculate the PTC and to verify reconciliation of 
APTC made to the QHP issuers on enrollees' individual tax returns. 
However, the IRS does not address other issues related to the APTC 
calculation, particularly in examining the eligibility and enrollment 
processes including the verification of citizenship, social security 
number, residency, minimum essential coverage, special enrollment 
period circumstance, income, family size, and data matching issues 
related to document authenticity. Examination of these areas would be 
necessary to identify any underlying issues that could lead to improper 
payments, and therefore may need to be addressed through corrective 
action as stipulated under the PIIA.
    Comment: A few commenters stated that the data HHS is proposing to 
collect are already available to HHS through the Federal Data Services 
Hub (FDSH), the State-based Marketplace Inbound (SBMI), or enrollment 
and disenrollment reports, making the additional SEIPM collection 
effort burdensome and duplicative.
    Response: We appreciate the feedback regarding the potential 
duplication of Federal requirements and increased burden. As we 
continue to develop the SEIPM program, we intend to work 
collaboratively with State Exchanges to continue to evaluate how to 
best minimize duplicate requirements and reduce burden on the State 
Exchanges, as well as how HHS can use data submitted by State Exchanges 
under existing Federal requirements to help streamline SEIPM processes. 
We note that as of this writing, HHS does not collect data regarding 
verification and eligibility determination, enrollment reconciliation, 
or plan management from the State Exchanges to determine whether they 
comply with existing regulations. While the FDSH does provide applicant 
verification information, it does not provide evidence that the State 
Exchange used FDSH data to conduct verifications or whether 
verification inconsistencies were resolved properly. Moreover, the FDSH 
does not provide the information needed to determine whether a State 
Exchange evaluated the verified information properly to determine an 
applicant's eligibility for enrollment in a QHP and receipt of APTC. We 
recognize that the State-Based Marketplace Inbound (SBMI) data provides 
the policies and payments for an applicant, however, that data cannot

[[Page 27282]]

be matched to a specific application submission, which prevents HHS 
from using the data to verify that eligibility determinations and 
associated APTC payments were made correctly. Further, the SBMI data 
does not include the reconciliation that occurs with the State Exchange 
and its issuers to provide evidence that the State Exchange resolved 
any data discrepancies with the issuers that may result in incorrect 
APTC payments being made. Additionally, the SBMI data does not indicate 
whether policies were certified as QHPs. HHS currently uses this data 
to understand the sampling of policies from each State Exchange and to 
determine an appropriate sample that would be selected to reflect the 
State Exchange's applicant population. We will continue to evaluate 
this and other data that HHS currently collects and will use it to the 
maximum extent feasible as we continue to develop the SEIPM program.
    Comment: A few commenters expressed concern that the proposed rule 
does not provide enough information to assess the SEIPM program 
proposal or to evaluate the tradeoffs related to the current Federal 
programmatic audit requirements under Sec.  155.1200(c) compared to the 
proposed audit processes under the SEIPM program.
    Response: Although commenters did not specify what additional 
information would have been helpful in assessing the program, HHS 
believes that this concern is related to potential duplication of 
effort and whether current requirements under Sec.  155.1200(d) are 
consistent with SEIPM requirements. Though we are not finalizing this 
proposed provision, we will consider these comments as we continue to 
develop the SEIPM program.
    Comment: One commenter requested that the SEIPM program not collect 
data from the State Exchanges during the annual individual market 
Exchange Open Enrollment Period (OEP) timeframe, which is from the end 
of October (final preparation for annual OEP) to the end of January 
(distribution of Forms 1095-A).
    Response: We will consider this feedback as we continue to develop 
the SEIPM program. As we continue to develop the program, we aim to 
coordinate with State Exchanges to offer maximum flexibility to account 
for State's enhanced workloads during the OEP.
    Comment: One commenter noted that despite the provision allowing 
completion of the SEIPM requirements to satisfy the existing 
independent external programmatic audit requirement under Sec.  
155.1200(c), State Exchanges would have to spend time and resources to 
prepare for and procure a separate audit when participating in the 
SEIPM program.
    Response: We appreciate the feedback around potential duplication 
of Federal requirements and increased burden. We address these concerns 
in section 11 of the preamble.
    Comment: One commenter suggested that HHS convene an HHS and State 
Exchanges working group to identify approaches to the specific areas 
that HHS wants to address through current Federal audit requirements.
    Response: We appreciate the commenter's suggestion and value the 
feedback we have received from the State Exchanges during the SEIPM 
pilot process. We have been engaging in discussions regarding the SEIPM 
with the State Exchanges since 2019 and we continue to meet with State 
Exchanges individually to gather feedback on the SEIPM approach. We 
will continue these efforts as we move forward in the development of 
the SEIPM program.
    Comment: One commenter recommended that the SEIPM program operate 
as a minimum threshold for State Exchanges to meet the proposed SEIPM 
requirements and to allow flexibility for any individual State Exchange 
to create more stringent auditing criteria above and beyond what is 
required in the proposed SEIPM program. The commenter suggested 
allowing State Exchanges to meet their independent external 
programmatic audit requirements by complying with the SEIPM program. In 
cases where the State Exchange has more stringent auditing criteria 
than the SEIPM program, the commenter suggested that the State Exchange 
should be able to maintain its criteria.
    Response: We understand that the State Exchanges may expand on the 
Federal regulations to create more stringent policies and procedures. 
In addition to evaluating compliance with Federal requirements during 
the planned SEIPM review process, our goal is to also measure 
compliance with State Exchange specific policies and procedures to the 
extent that State Exchange specific policies and procedures do not 
conflict with Federal requirements. As we continue to develop the SEIPM 
program, we will collaborate with each State Exchange to modify the 
review criteria so that each State Exchange is evaluated against their 
own policies and procedures.
    Comment: One commenter encouraged HHS to take a risk-based approach 
that focused on reviews of a specific area or areas that have a higher 
risk of over-payments. The commenter suggested HHS use a more proactive 
approach that used test scenarios to demonstrate APTC accuracy.
    Response: We appreciate the feedback and recognize that certain 
State Exchange system functions may have more risk than others in 
implementing Federal regulations. We appreciate the recommendation to 
use test scenarios and have begun to do so, in some instances, as we 
engage with State Exchanges on SEIPM pilot and preparatory activities. 
We will consider this comment as we continue to develop the SEIPM 
program.
    Comment: One commenter recommended modifying the SEIPM's scope to 
focus on APTC in addition to the SEIPM process replacing the annual 
programmatic audit requirement.
    Response: As we continue to develop the SEIPM program, we plan for 
the SEIPM review process to focus on identifying, measuring, 
estimating, and reporting errors made in determining eligibility for 
APTC greater than $0 that resulted in improper payments. We plan for 
this to include the examination of eligibility and enrollment 
processes, which consists of verifications of citizenship, social 
security number, residency, minimum essential coverage, special 
enrollment period circumstance, income, family size, and data matching 
issues related to document authenticity. Examination of these areas 
would be necessary to identify any underlying issues that could lead to 
improper payments, and therefore would need to be addressed through 
corrective action, as stipulated under the PIIA.
    Comment: One commenter suggested that HHS observe trends that 
emerge during SEIPM implementation and propose Corrective Action Plan 
parameters in future rulemaking, and then release the first improper 
payment report in November 2025, at the earliest.
    Response: We appreciate the comments offering support to defer the 
CAP parameters. We plan to engage in future rulemaking to codify the 
SEIPM program and will solicit comments regarding the CAP at that time.
a. Purpose and Definitions (Sec.  155.1500)
    We proposed 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 proposed the purpose of subpart P as 
setting forth the requirements of the SEIPM program for State 
Exchanges.
     At paragraph (b), we proposed to codify the definitions 
that are specific to the SEIPM program and key to

[[Page 27283]]

understanding the process requirements.
     We proposed 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 proposed the definition of ``Corrective action plan 
(CAP)'' to mean the plan a State Exchange develops to correct errors 
resulting in improper payments.
     We proposed 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 QHP; APTC, including the calculation of APTC; redeterminations of 
eligibility determinations during a benefit year; or annual eligibility 
redeterminations.
     We proposed 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 proposed 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 proposed 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 proposed the definition of ``State Exchange improper 
payment measurement (SEIPM) program'' to mean the process for 
determining 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.
    After reviewing the public comments, we are not finalizing this 
provision at this time. We summarize and respond to public comments 
received on purpose and definitions (Sec.  155.1500) below.
    Comment: One commenter recommended that HHS also define the 
following terms: (1) Annual Program Schedule, (2) Measurement Cycle, 
(3) Measurement Year, and (4) Reporting Year. The commenter also 
recommended clarifying the meaning of two statistical terms: (1) Pre-
sampling Data and (2) Sampled Unit Data.
    Response: HHS agrees that the defining these additional terms would 
provide greater clarity to State Exchanges regarding SEIPM program 
requirements. We will consider defining these terms in future 
rulemaking.
b. Program Notification and Planning Process (Sec.  155.1505)
    We proposed to add new Sec.  155.1505 to outline the annual program 
notification requirements related to the SEIPM program.
     At paragraph (a), we proposed 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 proposed notification would 
occur during the benefit year (that is, the year under review for which 
data would be collected), which immediately precedes the proposed 
measurement year (that is, the year in which the measurement will be 
completed). The proposed 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 proposed the requirements associated 
with HHS' responsibility to notify the State Exchanges prior to the 
proposed measurement year regarding SEIPM schedules, which will include 
relevant timelines. For example, among other things, the proposed SEIPM 
annual program schedule would detail the time period during which HHS 
would provide the proposed SEIPM data request form to State Exchanges 
with instructions regarding how to complete each part of the form. The 
proposed SEIPM annual program schedule would also provide the deadlines 
prescribed for State Exchanges to complete each part of the form.
     At paragraph (c), we proposed 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 proposed 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. Please see the proposed rule preamble (87 FR 656) for a 
complete description of the proposed policy.
    We did not receive any comments in response to the proposals on the 
program notification and planning process.
    As previously stated, we are not finalizing this provision at this 
time.
c. Data Collection (Sec.  155.1510)
    We proposed to add new Sec.  155.1510 to address the data 
collection requirements to support the SEIPM process.
     At paragraph (a)(1), we proposed the requirement that the 
State Exchange annually provide pre-sampling data to HHS by the 
deadline provided in the annual program schedule. The proposed pre-
sampling data request would provide HHS with essential information 
about the composition of the State Exchange's application population to 
appropriately stratify and sample the population.
    Please see the proposed rule preamble for a complete description of 
the sampling methodology for this proposal (87 FR 656).
     At paragraph (a)(2) we proposed annual requirement that 
the State Exchange provide sampled unit data to HHS. To meet this 
requirement under the proposal, 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 proposed sampled unit data request would include 
the list of sampled units and the associated information specific to 
each unit. The information required under the proposal 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 proposed the State Exchange submit 
the pre-sampling and sampled unit data specified in paragraph (a) to be 
submitted to HHS in a manner and within a deadline

[[Page 27284]]

specified in the annual program schedule. We also proposed language 
regarding requests for extension which may be submitted by State 
Exchanges. Given the importance of the time frames associated with the 
measurement process, through this proposal, we did not anticipate 
granting extensions in most situations. Rather, the approval of 
extension requests was envisioned to be reserved for extreme 
circumstances that would directly impact operations of the particular 
State Exchange. Such situations might include natural disasters, 
interruptions in business operations such as major system failures, or 
other extenuating circumstances.
     At paragraph (c), we proposed 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). Under the proposal, as a result of not 
timely providing required data, we may have cited errors due to lack of 
documentation to support the State's eligibility or payment decisions.
    After reviewing the public comments, we are not finalizing this 
provision at this time.
    We summarize and respond to public comments received on data 
collection (Sec.  155.1510) below.
    Comment: A few commenters pointed out that there may be differences 
between State Exchanges in terms of database structures, data fields, 
and reporting. A few commenters stated that implementing the SEIPM data 
requirements will create a financial and operational burden as it will 
require them to change their information technology systems, and they 
will need to employ new staff or forgo other activities such as 
standing up other programs.
    Response: We appreciate these comments and will take them into 
consideration as we continue to develop the SEIPM program. However, we 
emphasize that it was not the intention of the proposed SEIPM program 
to drive changes to a State Exchange's information technology systems. 
One goal of HHS is to reduce burden by requesting State Exchanges to 
populate the information elements of the data request form by using 
existing data elements from their current IT system. Still, we 
recognize there is a cost burden related to the employment of staff 
resources required to conduct data analysis, perform data mapping 
activities, and extract data to support submission requirements. We 
will consider these costs in future rulemaking to codify the SEIPM 
program.
    Comment: A few commenters noted a desire for flexibility in the 
data fields they provide to HHS. One commenter appreciated that under 
the pilot program, State Exchanges were allowed flexibility in what 
data fields could be provided.
    Response: We recognize that State Exchange systems and business 
processes may vary in the way that data is used and stored. For this 
reason, we are conducting information review sessions with State 
Exchanges to address State Exchange-specific needs. There are many 
complex elements that must be met for any applicant who is deemed 
eligible for APTC. Because of the complexity and breadth of those 
elements, a very structured review methodology is required. To meet 
that need, certain data fields have been identified that are required 
for the purposes of conducting a review of this nature. The data 
request form was designed to aid in the matching of information fields 
that are needed by HHS with the States' data in order to conduct the 
required measurement in a consistent manner across all State Exchanges. 
The ongoing review sessions will allow opportunities to identify the 
most efficient means for collecting the information that is ultimately 
deemed necessary. We will continue to engage with State Exchanges 
through such sessions as we continue to develop the SEIPM program.
    Comment: A few commenters suggested changes to the program sample 
size. One commenter recommended that the sample size be from 100-1,000 
tax households to account for the variation in State Exchange 
populations. One commenter suggested that HHS choose a different method 
for sampling and auditing eligibility and enrollment data to instead 
allow a State Exchange to pull data records for a ``reasonable'' sample 
size, which it did not further define, and work with an HHS auditor for 
data review.
    Response: We appreciate and thank commenters for their suggestions 
regarding sample size. We clarify that the PIIA and OMB Circular A-123, 
Appendix C require HHS to produce a statistically valid point estimate 
of the improper payment rate aggregated across all State Exchanges. 
This requires determining the sample size that is necessary for meeting 
the targeted margin of error to estimate a total improper payment rate 
across all State Exchanges and determining the sample sizes for the 
individual State Exchanges under that parameter. To reduce State 
burden, we plan to assess various stratification variables which may 
optimize the sample size and will continue to assess the benefits and 
deficiencies of various other sampling methodologies.
    Comment: A few commenters suggested that HHS require State 
Exchanges to collect additional information such as data on erroneous 
coverage denials and incorrect financial assistance allocations.
    Response: We appreciate the commenters' suggestions to expand the 
scope of CMS data collection to include erroneous coverage denials and 
incorrect financial assistance allocations. The focus of the planned 
SEIPM program, however, is to identify, measure, estimate, and report 
on erroneous determinations of eligibility for APTC payments in an 
amount greater than $0 that result in improper payments. We continue to 
assess and identify improvements to the planned SEIPM review process 
with a focus on the statutory and regulatory requirements and 
compliance with OMB guidance.
    Comment: A few commenters suggested requiring State Exchanges to 
disaggregate eligibility and enrollment data by race and ethnicity. One 
commenter also suggested disaggregating data by primary language, sex, 
sexual orientation, gender identity, and disabilities. One commenter 
suggested disaggregating data by applicants who indicate their primary 
language is other than English.
    Response: We will consider the commenters' suggestions as we 
continue to develop the SEIPM program. We also respectfully remind 
commenters that the focus of the planned SEIPM program is to identify, 
measure, estimate, and report on erroneous determinations of 
eligibility for APTC payments in an amount greater than $0 that result 
in improper payments. As we continue to develop the SEIPM program, we 
plan to audit State Exchanges in compliance with the PIIA and OMB 
guidance to estimate improper payments.
    Comment: One commenter suggested that HHS explicitly require any 
protected health information (PHI) or personally identifying 
information (PII) shared with HHS or contractors be transmitted using a 
secure file transfer mechanism such as Secure File Transfer Protocol 
(SFTP).
    Response: HHS will consider how to establish a secure file transfer 
mechanism between the State Exchanges and HHS to support the exchange 
of files that may contain PII and PHI data.

[[Page 27285]]

    Comment: A few commenters noted that they had worked in pilots of 
the SEIPM program with CMS and that the process was difficult either 
because the program based its effort to standardize audits across State 
Exchanges on the FFE data model or because the program required manual 
review of records.
    Response: We recognize that State Exchange systems and business 
processes may vary in the way that data is used and stored. For this 
reason, we are conducting information review sessions with State 
Exchanges to address State Exchange-specific needs. The data request 
form was designed to aid in the matching of information fields that are 
needed by HHS in order to conduct the required measurement in a 
consistent manner across all State Exchanges. The information review 
sessions allow opportunities to identify the most efficient means for 
collecting this information from each State Exchange. We will continue 
to engage with State Exchanges through such sessions as we continue to 
develop the SEIPM program. HHS developed a review modules document 
(RMD) to establish the baseline set of review criteria that will be 
applied across all State Exchanges. Each review criterion is based on 
specific Federal regulations or on a State Exchange's own policies that 
may expand on how a regulation is implemented in their State Exchange. 
In support of the review criteria in the RMD, CMS developed the data 
request form detailed above. We note that CMS developed the data 
request form to define a set of generalized data elements that are not 
specific to the FFE data model. These data elements should be common to 
all State Exchanges as they would be needed to execute general Federal 
regulation requirements established for the enrollment and eligibility 
process.
    Comment: One commenter noted that there are not clear standards for 
the data that would satisfy an SEIPM audit. The commenter noted that 
the State Exchanges may not have the requested data available where 
self-attestation is accepted.
    Response: We recognize the need for clear standards for data to 
satisfy an SEIPM review. As we continue to develop the SEIPM program, 
we will continue with our current communications with State Exchanges 
to address State Exchange-specific needs and to convey planned 
standards and data requirements that can be found in the corresponding 
PRA package, including the pre-sampling and sampled unit data request. 
State Exchanges that have voluntarily chosen to participate in the 
current engagement process will continue to benefit from receiving 
guidance regarding planned standards and data requirements. HHS 
encourages all State Exchanges to voluntarily engage with HHS to better 
understand the planned data collection requirements. During these 
engagement sessions, HHS can better understand the unique business 
rules and environment the State Exchange is operating within and make 
appropriate modifications to the review criteria and data that is 
requested to evaluate the State Exchange against those criteria. In 
addition, HHS recognizes that utilization of self-attestation may limit 
the availability of certain data and is taking this into account as we 
continue to develop the SEIPM program. Finally, we note that additional 
detail regarding the proposed SEIPM data request form is provided above 
in the preamble to the data collection process.
d. Review Process and Improper Payment Rate Determination (Sec.  
155.1515)
    We proposed to add new Sec.  155.1515 to address the review process 
and the determination of the improper payment rate.
     At paragraph (a), we proposed 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 proposed 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 proposed 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 proposed 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.
    We did not receive any comments in response to the proposals on the 
review process and improper payment rate determination.
    As previously stated, we are not finalizing this provision at this 
time.
e. Error Findings Decisions (Sec.  155.1520)
    We proposed 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 proposed 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 
under the proposal, 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, we proposed that, should these types of events 
warrant the 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 would still issue an error 
findings decision to the State Exchange indicating that no errors were 
identified. As proposed, 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 proposed language regarding the 
specific information that would be included in error findings 
decisions. We proposed 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.
    After reviewing the public comments, we are not finalizing this 
provision at this time.
    Comment: One commenter expressed concern that each State Exchange's 
error findings decision would not be made easily accessible to the 
public and requested that HHS post each State Exchange's error findings 
decision on the HHS website to ensure transparency.
    Response: We thank the commenter for the recommendation to make 
each State Exchange's error findings decisions easily accessible to the 
public by posting each State Exchange's error findings decision on the 
HHS website to ensure transparency. We will take the recommendation 
into consideration as we continue to develop the SEIPM program.
f. Redetermination of Error Findings Decisions (Sec.  155.1525)
    We proposed 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.

[[Page 27286]]

     At paragraph (a), we proposed 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. 
As proposed, 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, as proposed, 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 the publication of the 
improper payment rate.
     At paragraph (a)(1), we proposed language requiring that 
the State Exchange identify the specific error(s) for which the State 
Exchange would be requesting a redetermination. As proposed, this 
identification may pertain to a single individual's application or to a 
type of error affecting a class of applications. As proposed, a 
redetermination would constitute a review of the initial decision and 
not a de novo investigation. Thus, we proposed that the State Exchange 
would base its request on documentation and other information already 
submitted to HHS (for example, we proposed that if the application 
lacked income information, the State Exchange may not retrospectively 
seek this documentation and add it to the record). As proposed, any 
issues unrelated to an error identified by HHS in the initial error 
findings decision would not be addressed.
     At paragraph (a)(2), we proposed language that the State 
Exchange must include all data and information that support the State 
Exchange's request for a redetermination. Note that, as proposed, while 
State Exchanges can 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. In the proposal, we explained that 
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 proposed 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) 
specified in paragraph (a)(1). In the proposal, we stated that the 
State Exchange should clearly articulate how the data and information 
is related to HHS' findings, and how it impacts HHS findings. We 
proposed that if a State Exchange did 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 proposed language regarding the 
issuance of redetermination decision. As proposed, the redetermination 
of an error findings decision would be issued within the deadline 
prescribed in the annual program schedule. The goal of this proposal 
was 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. Thus, we 
also proposed that if circumstances like natural disasters or other 
extenuating circumstance resulted in HHS needing additional time to 
render the redetermination decisions, a State Exchange would be 
notified of the delay.
     At paragraph (c), we proposed language conveying the 
minimum content requirements for HHS' redetermination decision.
     At paragraph (c)(1), we proposed 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 proposed 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.
    After reviewing the public comments, we are not finalizing this 
provision at this time.
    We summarize and respond to public comments received on 
redetermination of error findings decisions (Sec.  155.1525) below.
    Comment: A few commenters expressed concern that HHS would consider 
only the initial data submitted in response to the data request form 
when a State Exchange requests redetermination of an error findings 
decision. These commenters requested that HHS allow State Exchanges to 
introduce new information that could help clarify the process used by a 
State Exchange and possibly negate the need for an error findings 
decision.
    Response: We will take this feedback into consideration as we 
continue to evaluate any adjustments that may be needed to the 
redetermination process as State Exchanges participate in the pilot 
program, prior to SEIPM implementation.
g. Appeal of Redetermination Decision (Sec.  155.1530)
    We proposed to add a 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 proposed 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 
proposed 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.
     At paragraph (b), we proposed 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. As proposed, no 
additional new data or information submitted in support of the request 
for appeal would be considered.
     At paragraph (c), we proposed language that the appeal 
decision would be issued within the deadline prescribed in the annual 
program schedule unless there is a delay, and that the State Exchange 
will be notified in the event of any delay in the appeal entity's 
ability to reach a decision.
     At paragraph (d), we proposed the content of the appeal 
decision.
     At paragraph (d)(1), we proposed that the appeal decision 
would include the findings on the error for which an appeal was 
requested and that those findings would be limited to the errors that 
were identified in the request for appeal.
     At paragraph (d)(2), we proposed that the appeal decision 
would include the final disposition of the appeal request.
     At paragraph (e), we proposed that upon completion of the 
review and the closure of all appeals, HHS may issue to

[[Page 27287]]

each individual State Exchange, a report containing the error findings 
and the estimated improper payment rate for their respective program. 
As proposed, that report would not be made public. Additionally, 
through the proposal, it was described that the estimated improper 
payment rates for each State Exchange would be used to estimate an 
aggregate improper payment rate across all State Exchanges and that the 
aggregate rate would be published in the agency's Annual Financial 
Report.
    After reviewing the public comments, we are not finalizing this 
provision at this time.
    We summarize and respond to public comments received on the appeal 
of the redetermination decision (Sec.  155.1530) below.
    Comment: One commenter requested that HHS provide more detail 
regarding the effects of a fully adjudicated error and specifically 
asks whether an enrollee would be retroactively impacted by a fully 
adjudicated error or whether the IRS would require changes through Form 
1095-A reporting.
    Response: At this time, HHS has not determined to what extent, if 
at all, fully adjudicated error findings decisions may impact an 
enrollee. HHS, in collaboration with IRS, the Department of the 
Treasury, and other agencies as required, will make this decision based 
on further research and evaluation of how recoveries could be 
implemented, including the authority to pursue any such recoveries. 
Further, any decision relating to the recovery will be communicated 
through future rulemaking. HHS is not aware of any intended changes in 
Form 1095-A reporting to support the planned SEIPM program.
    Comment: One commenter expressed concern that publishing aggregate 
error rates across all State Exchanges rather than publishing error 
rates for each State Exchange could negatively reflect on higher-
performing State Exchanges. The commenter also stated that SEIPM design 
flaws could result in a higher assessed rate of improper payments.
    Response: We appreciate the comment. As we continue to develop the 
SEIPM program, HHS will consider methodologies for identifying errors 
with the goal of determining an accurate estimate of improper payments 
that meet OMB criteria. With regard to SEIPM design flaws, HHS is 
continuing to engage State Exchanges in order to test the planned SEIPM 
data collection, sampling, and review processes to determine if any 
adjustments are needed.
h. Corrective Action Plan (Sec.  155.1535)
    Under the proposed rule, we proposed to add a new Sec.  155.1535 to 
address the scenario in which a State Exchange's improper payment rate 
for a given benefit year, in HHS' reasonable discretion, necessitates a 
CAP to correct the causes of any payment errors. With regard to the CAP 
process, we proposed the minimum set of requirements with the intent to 
define full CAP parameters 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.
    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.
     At paragraph (a), we proposed that, depending on a State 
Exchange's error rate for a given benefit year, we would require the 
State Exchange to develop and submit a CAP to HHS to correct errors 
resulting in improper payments.
     At paragraph (b), we proposed 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.
     At paragraph (c), we proposed 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.
     At paragraph (d), we proposed 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.
    After reviewing the public comments, we are not finalizing this 
provision at this time.
    We summarize and respond to public comments received on the 
corrective action plan (Sec.  155.1535) below.
    Comment: A few commenters supported the proposal to implement CAP 
under Sec.  155.1535. One commenter supported deferring the CAP 
parameters to future rulemaking to observe trends that emerge from the 
SEIPM implementation. One commenter requested that all State Exchange 
CAPs be made public. Another commenter stated that State Exchanges are 
already subject to CAPs to remedy eligibility and enrollment errors.
    Response: We appreciate the comments offering support to defer the 
CAP parameters to future rulemaking. Based on the public comments 
received, we are not finalizing this provision at this time.
i. Failure To Comply (Sec.  155.1540)
    We proposed to add a new Sec.  155.1540 that would address failures 
to comply with SEIPM requirements. At paragraph (a), we proposed that 
if a State Exchange fails to substantially comply with the SEIPM 
collection requirements or CAP provisions and HHS determines such 
failures undermine or prohibit HHS' efficient administration of 
improper payment measurement activities of the State Exchange, HHS 
would have the discretion to address failures of compliance with audit 
data submission and CAP requirements contained in subpart P under 
paragraph (a)(1), and consistent with authorities HHS possesses under 
title I of the ACA or any other Federal law as proposed under paragraph 
(a)(2).
    HHS considered exercising its authority under Sec.  1313(a)(5) of 
the ACA 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 State Exchange personnel capable of displaying requested data 
directly to HHS personnel or contractors.\266\ 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 sought comment on these measures and invited 
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 APTC.
---------------------------------------------------------------------------

    \266\ 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).
---------------------------------------------------------------------------

    Please see the proposed rule preamble (87 FR 658 through 659) for a 
complete description of the proposed policy. After reviewing the public 
comments, we are not finalizing this provision at this time.

[[Page 27288]]

    We summarize and respond to public comments received on failure to 
comply (Sec.  155.1540) below.
    Comment: One commenter expressed support for the failure to comply 
with provisions that allow HHS to require a State Exchange to revise 
their corrective action plan and implementation plan where there is a 
compliance failure to curtail flawed eligibility processes and ensure 
CAP compliance in a timely fashion.
    Response: We clarify that the purpose of this proposed provision 
was to incentivize compliance with the planned data collection and CAP 
requirements. As we continue to develop the SEIPM program, we do not 
anticipate broad or willful noncompliance with planned requirements.

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 health insurance issuers offering a QHP 
through an FFE or SBE-FP 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 an 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
    Based on estimated costs, enrollment, and premiums for the 2023 
benefit year, in the HHS Notice of Benefit and Payment Parameters 
proposed rule (87 FR 584, 660), we proposed a 2023 benefit year user 
fee rate for all issuers offering a plan through an FFE of 2.75 percent 
of monthly premiums charged by the issuer for each policy under the 
plan where enrollment is through an FFE. This is the same user fee rate 
that we established for the 2022 benefit year (86 FR 53412). We stated 
that we believe the proposed 2023 user fee rate would not result in a 
substantial increase to consumer premiums from prior years, and would 
also ensure adequate funding for Federal Exchange operations. We refer 
readers to the proposed rule (87 FR 660) for further discussion of this 
proposal and a description of the cost, premium, and enrollment 
projections that went into calculating the proposed 2023 FFE user fee 
rates.
    As we explained in the proposed rule (87 FR 660), activities 
performed by the Federal government that do not provide issuers 
offering a plan 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 offering a plan 
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).
b. SBE-FP User Fee Rates for the 2023 Benefit Year
    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 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, in the 
proposed rule (87 FR 661), we proposed 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 sought comment 
on these proposed user fee rates. We refer readers to the proposed rule 
(87 FR 660 through 661) for a complete description of the proposal and 
calculation methodology.
    After reviewing the public comments, for the reasons discussed in 
this rule and the proposed rule, we are finalizing for the 2023 benefit 
year, as proposed, a user fee rate for all issuers offering QHPs 
through an FFE of 2.75 percent of the monthly premium charged by the 
issuer for each policy under the plan where enrollment is through an 
FFE, and a user fee rate for all issuers offering QHPs through an SBE-
FP of 2.25 percent of the monthly premium charged by the issuer for 
each policy under plans offered through an SBE-FP.
    We summarize and respond to public comments received on FFE and 
SBE-FP user fee rates for the 2023 benefit year (Sec.  156.50).
    Comment: Several commenters supported the proposed user fee rates 
and appreciated the rates being held constant with 2022. One supporting 
commenter stated that avoiding an increase in user fees may help to

[[Page 27289]]

incentivize additional issuers to participate in the Exchanges, 
providing consumers with additional choice. Another commenter noted 
that maintaining the user fee level has the benefit of steady 
administrative costs to issuers, which translates to stable premiums 
for consumers.
    Other commenters disagreed with the proposed user fee rates, asking 
HHS to either increase or decrease the user fee rates. One commenter 
encouraged HHS to lower user fee rates based on decreasing technology 
costs. Another suggested decreasing the user fee rates noting that 
higher rates raise premiums and are unnecessary due to user fee 
collections that could have carried over from prior years. Other 
commenters requested that HHS increase the user fee rates in order to 
improve Exchange functions, and requested that HHS increase funding for 
Navigators, HealthCare.gov, appeals, investments in technology, 
investments in language services, investments in disability 
accessibility, and access to back-end data with approval from clients.
    Response: We appreciate the support for the proposed user fee rates 
of 2.75 percent of monthly premiums charged by FFE issuers and 2.25 
percent of monthly premiums charged by SBE-FP issuers and are 
finalizing the user fee rates as proposed. We will continue to examine 
cost estimates for the special benefits provided to issuers offering 
QHPs on the FFEs and SBE-FPs for future benefit years, and will 
continue to establish the user fee rates that are reasonable and 
necessary to fully fund user fee eligible Exchange operation costs.
    As we discussed in the proposal to maintain the user fee rates for 
the 2023 benefit year (87 FR 660), we developed the user fee rates 
based upon estimated costs, enrollment, and premiums. We specifically 
noted that the user fee rates incorporate our estimates of premium and 
enrollment changes for the 2023 benefit year, and are not solely a 
reflection of the total expenses estimated to operate and maintain the 
Federal platform and FFE operations. Finally, we noted that technology 
upgrades and maintenance efforts will continue to be evaluated annually 
and funded at levels appropriate to ensure a smooth enrollee 
experience. We do not believe that a decrease in user fee rates is 
appropriate as HHS remains committed to providing a seamless enrollment 
experience for Federal platform consumers and applying resources to 
cost-effective, high-impact enrollment activities that offer the 
highest return on investment. While we did not anticipate any new 
services or contracts to require the expenditure of additional FFE user 
fees for the 2023 benefit year, we believe that we have estimated 
adequate funding for these services in the 2023 benefit year user fees.
    As for commenters requesting increased funding for language 
services and disability accessibility, we note that under Sec.  
155.205(c)(2)(i)(A), HHS currently provides telephonic interpreter 
services in at least 150 languages at no cost to applicants and 
enrollees. Translation services are provided telephonically and for 
written communications at no cost to the consumer. HHS additionally 
notes that under Sec.  155.205(c)(1), information must be provided to 
applicants and enrollees in plain language and in a manner that is 
accessible and timely to individuals living with disabilities including 
accessible websites and the provision of auxiliary aids and services at 
no cost to the individual in accordance with the Americans with 
Disabilities Act and section 504 of the Rehabilitation Act. We have 
included the costs of these services in the estimates used in setting 
the 2023 benefit year user fees.
    For the request that we increase funding for Navigators, 
HealthCare.gov, and access to back-end data, we anticipate spending on 
the management of a Navigator program and consumer assistance tools 
will be similar to what was estimated for the 2022 benefit year, as we 
believe that was an adequate level of funding for these activities, and 
thus we do not believe it is necessary to increase user fees for these 
purposes. As discussed in the proposed rule (87 FR 660), for the 2023 
benefit year, we anticipate that spending on consumer outreach and 
education, eligibility determinations, and enrollment process 
activities will increase above the 2022 benefit year level.
    Comment: Some commenters believed that changes should be made to 
how user fees are charged. Specifically, several commenters requested 
that HHS explore a PMPM user fee structure.
    Response: HHS did not propose any changes to the user fee 
structure, as such the user fee rates will continue to be set as a 
percent of the premium. However, HHS will continue to engage with 
stakeholders regarding how the FFE and SBE-FP user fee policies can 
best support consumer access to affordable, quality health insurance 
coverage through the Exchanges that use the Federal platform.
    Comment: Some commenters requested additional transparency into 
user fees; specifically, one commenter requested a report reflecting 
how much of the user fee is used for the Navigator program. Other 
commenters requested additional information about how funds generated 
by the user fees are allocated across Exchange functions, as well as 
greater transparency regarding the cost of the Federal platform, call 
center, other programs associated with running the Exchanges, 
individual State usage of Federal resources, allocated costs, and how 
State user fees compare with each State's applicable costs. To further 
transparency of the development of the SBE-FP user fee rates, one 
commenter urged HHS to provide the enumeration and specific calculation 
of costs associated with FFE infrastructure and services provided to 
each State.
    Response: HHS provided additional information in the proposed rule 
(87 FR 660 through 661) to show how we expect costs to grow under 
certain categories. We are limited by two main constraints when it 
comes to projecting costs. First, we are projecting contracts and costs 
into the future. Second, we are projecting revenues against these 
costs, which are based on estimated enrollments and premiums. 
Additionally, HHS is not permitted to publicly provide information that 
is confidential due to trade secrets associated with contracting. As 
such, we believe that providing a range of premium and enrollment 
projections in setting the 2023 benefit year FFE and SBE-FP user fee 
rates is sufficient to project revenues for user fee rate setting 
purposes. 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 2023 FFE and 
SBE-FP user fee rates. The assumption that the enhanced PTC 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. We expected 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 waivers. We projected that 2023 benefit year premiums will 
generally increase at the rate of medical inflation after expiration of 
the enhanced PTC

[[Page 27290]]

subsidies in section 9661 of the ARP. After considering the range of 
costs, premium and enrollment projections, we proposed a 2023 user fee 
rate that will not result in a substantial increase in consumer 
premiums from prior years, and that also ensures adequate funding for 
Federal Exchange operations.
    As for transparency in the Navigator program, the Navigator program 
makes the most recent awards public.\267\ We anticipate spending on 
consumer assistance tools, management of a Navigator program, 
regulation of agents and brokers, and certification of QHPs will be 
similar to what was estimated for the 2022 benefit year, as we believe 
that was an adequate level of funding for these activities.
---------------------------------------------------------------------------

    \267\ CMS Navigator Cooperative Agreement Awardees. (2021). CMS. 
https://www.cms.gov/files/document/2021-navigator-grant-recipients.pdf.
---------------------------------------------------------------------------

    FFE and SBE-FP user fee costs are not allocated to or provided to 
each State. User fees cover activities performed by the Federal 
government that provide issuers offering a plan in an FFE or SBE-FP 
with a special benefit. As stated, these services are generally IT, 
eligibility, enrollment, and QHP certification services that are more 
efficiently conducted in a consolidated manner across the Federal 
platform, rather than by State, so that the services, service delivery, 
and infrastructure can be the same for all issuers in the FFEs and SBE-
FPs. For example, all FFE and SBE-FP issuers send their 834 enrollment 
transactions to the Federal platform database, which are processed 
consistently regardless of State. Contracts are acquired to provide 
services for the Federal platform. The services do not differ by State, 
and therefore, we do not calculate costs on a State-by-State basis.
    As we explained in the proposed rule (87 FR 660 through 661), to 
calculate the SBE-FP rates for the 2023 benefit year, we used the same 
assumptions on contract costs, enrollment, and premiums as we use to 
develop 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 benefits provided to issuers in SBE-FPs by 
the Federal government include the use of the Federal Exchange 
information technology and call center infrastructure 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.
    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.
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 (86 FR 
53412, 53424 through 53429, 53445),\268\ in the HHS Notice of Payment 
and Benefit Parameters for 2023 proposed rule (87 FR 584, 661), we 
proposed 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 part 3 of the 2022 Payment Notice (86 FR 53429), 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. As such, in the proposed rule (87 FR 661), we 
proposed to make conforming changes to Sec. Sec.  156.50(c) and (d) to 
remove all references to the Exchange DE option and 155.221(j). 
Specifically, we proposed 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 sought comment on these 
proposed technical amendments.
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    \268\ 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 53427.
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    We received one comment offering general support for these 
technical amendments. After consideration of this comment, for the 
reasons set forth in this rule and in the proposed rule, we are 
finalizing, as proposed, the amendments to Sec.  156.50(c) and (d) to 
remove all references to the Exchange DE option and Sec.  155.221(j); 
specifically, we are removing Sec.  156.50(c)(3), and amending 
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.
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.
    Accordingly, in the HHS Notice of Benefit and Payment Parameters 
for 2023 proposed rule (87 FR 584, 661), we proposed that the first 
Wednesday in May that is 2 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 proposed 
corresponding edits to Sec.  156.111(d) and (e) to reflect the proposed 
deadline. We stated in the proposed rule that 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. 
We refer readers to the proposed rule (87 FR 661) for further 
background and information regarding this proposal. We invited comments 
on this approach, including whether there are any unforeseen 
consequences to establishing this perpetual deadline.
    After reviewing the public comments, for the reasons set forth in 
this rule and in the proposed rule, we are finalizing the proposal with 
minor edits to the language for clarity. Specifically, in the proposed 
rule, we proposed 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-

[[Page 27291]]

benchmark plan selection for that PY, and we gave the example that the 
deadline for PY 2025 would be May 3, 2023, and the deadline for PY 2026 
would be May 4, 2024. To more clearly reflect the examples provided in 
the proposed rule, we are finalizing minor edits to the proposed 
regulation text to establish the permanent deadline for States to 
submit the required documents for the State's EHB-benchmark plan 
selection as the first Wednesday in May ``of the year'' that is 2 years 
before the effective date of the new EHB-benchmark plan. Moving 
forward, we will not be proposing deadlines for the process in annual 
Notices of Benefit and Payment Parameters. We summarize and respond to 
public comments received on States' EHB-benchmark plan options below.
    Comment: All commenters expressed support for the proposed 
deadline. Some noted that the set deadline would make the process more 
predictable for both States and stakeholders involved with EHB-
benchmark development. Others noted that the proposed timeline should 
give States and HHS sufficient time to solicit comments and opinions on 
proposed benchmarks while also enabling issuers to determine how they 
will provide EHB consistent with the new EHB-benchmark plan.
    Response: We agree with commenters that the permanent deadline will 
provide more predictability to the EHB-benchmark plan selection process 
for all parties involved. Since we finalized the 2019 Payment Notice, 
we have set an early-May deadline for the submission of EHB-benchmark 
plans by States for each year from PY 2021-2024.\269\ We believe that 
requiring these submissions in the first week of May of the year 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 plan submissions. It 
also provides us 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-benchmark plan changes.
---------------------------------------------------------------------------

    \269\ For PY 2021, the deadline was May 6, 2019 (see 84 FR 
17534); for PY 2022, it was May 8, 2020 (84 FR 17534); for PY 2023, 
it was May 7, 2021 (85 FR 29226); for PY 2024 it is May 6, 2022 (86 
FR 24232).
---------------------------------------------------------------------------

    Comment: We also received several comments that were outside the 
scope of the proposal. One commenter noted that most States currently 
have no established process for updating their EHB-benchmark plans and 
could add benefits to address unmet health care needs in their States 
without exceeding generosity limits. They urged HHS to identify best 
practices in EHB-benchmark plan selection and provide additional 
guidance and training for States to update their EHB-benchmark plans. 
Several commenters urged HHS to strengthen the transparency of the 
public comment process for EHB-benchmark plan selection to ensure that 
stakeholders and other interested parties have ample opportunity to 
provide meaningful input. A commenter suggested that HHS should require 
States to adopt standards for public commenting that mirror those 
specified by HHS for States requesting demonstration projects through 
section 1115 of the Act. One commenter expressed support for the 
flexibility provided to States under the EHB-benchmark plan selection 
policy. Another commenter cautioned HHS to remain vigilant that any 
changes in a State's EHB-benchmark plan do not result in a decreased 
availability of EHB. The commenter requested that HHS collect and 
report data on States that utilize flexibility under the policy to 
allow consumers, advocates, and other stakeholders to better identify 
and understand any trends with regard to EHB-benchmark plans.
    Response: Although these comments are outside the scope of HHS' 
proposal regarding the deadline for EHB-benchmark plan submissions, we 
note that HHS is committed to ensuring access to EHB while providing 
States with flexibility under the EHB-benchmark plan selection policy. 
We will consider these comments and requests for future guidance or 
proposals. However, as they are out-of-scope with regard to this 
specific proposal, we decline to comment further on them at this time.
b. Annual Reporting of State-Required Benefits
    In the HHS Notice of Benefit and Payment Parameters for 2023 
proposed rule (87 FR 584, 662), we proposed 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 proposed 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.'' As we explained in the proposed rule, 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 commenters on the 
annual reporting requirement in the 2021 and 2022 Payment Notices. 
Although some commenters agreed 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. We refer readers to the proposed 
rule (87 FR 661 through 662) for further information and background 
regarding this proposal. We solicited comment on this proposal, 
including on whether we should retain the reporting requirement or make 
it voluntary.
    After considering the public comments, for the reasons set forth in 
this rule and in the proposed rule, we are finalizing, as proposed, 
repeal of the annual reporting requirement at Sec.  156.111(d) and (f), 
including revising the section heading to Sec.  156.111 to instead 
read, ``State selection of EHB-benchmark plan for PYs beginning on or 
after January 1, 2020.'' Thus, States will no longer be required 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'' or any benefits the State has identified as not in 
addition to EHB and not subject to defrayal. We note that we will 
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 and will 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 also note 
that, although this policy will relieve States of the annual reporting 
requirements, it will not pend or otherwise impact the defrayal 
requirements under section 1311(d)(3)(B) of the ACA, as implemented at 
Sec.  155.170.
    We summarize and respond to public comments on the proposal to 
eliminate the annual reporting of State-required benefits.
    Comment: The majority of commenters supported the repeal of the 
annual reporting policy at Sec.  156.111(d) and (f), reiterating many 
of the same

[[Page 27292]]

objections and concerns raised by commenters on the initial proposal 
for this policy in the 2021 Payment Notice and echoed by States and 
stakeholders since the finalization of the policy. Many commenters 
stated that the annual reporting policy is unnecessary and overly 
burdensome as the requirements already in regulation at Sec.  155.170 
are sufficient at instructing States and issuers on how to comply with 
the defrayal requirement. Many commenters supporting repeal of the 
policy also noted the policy was an unjustified new administrative 
burden and duplicative of State efforts, as many States already engage 
in in-depth processes with their State legislatures to evaluate State 
defrayal obligations, make actuarially sound analyses regarding State 
benefit requirements, and subsequently make defrayal payments if 
necessary in compliance with Sec.  155.170. These commenters stated 
that the reporting requirement would unnecessarily burden both State 
and Federal officials, requiring State officials to either procure 
consultants or divert existing staff from other work to comply with an 
entirely new reporting process.
    One commenter expressed that States are the primary regulators of 
the individual and small group markets, and therefore, maintain the 
authority to mandate benefits in those markets and monitor issuer 
compliance, which is at odds with the duplicative oversight required 
through the annual reporting requirement.
    Many commenters stated that HHS already has the requisite authority 
to investigate States that the agency believes are not in compliance 
with the defrayal requirement. Such commenters emphasized that there is 
therefore no demonstrated need to require States to report all State 
mandates on an annual basis to show compliance and that this is 
particularly true for States that do not have any State-required 
benefits that are in addition to EHB. Other commenters supporting 
repeal of the policy stated HHS had not demonstrated evidence of 
widespread State noncompliance with defrayal requirements to warrant 
the policy and expressed concern regarding ambiguity around how HHS 
would enforce the annual reporting policy.
    Some commenters expressed support for repealing the annual 
reporting policy because they believe it was designed to discourage 
States from expanding upon EHB in their State to improve benefit 
coverage, which one commenter explained is concerning as enhanced EHB 
benefits are particularly beneficial for people with chronic conditions 
and disabilities, who are disproportionately women, LGBTQI+ people, and 
people of color. As an example, one commenter explained that Colorado's 
enhanced EHB-benchmark plan effective beginning in plan year 2023 
includes coverage of an annual mental wellness exam, services related 
to substance use disorder, and comprehensive gender-affirming care.
    Commenters objecting to the repeal of the annual reporting policy 
expressed that the policy was justified to protect Federal expenditures 
as only a small number of States have actually identified State-
required benefits that are in addition to EHB and have transparent 
processes in place to identify and defray costs as required by section 
1311(d)(3)(B) of the ACA. Commenters objecting to repeal further 
explained that the policy would have supported transparency and 
increased understanding of the costs of State-required benefits and 
promoted uniformity in the application of the ACA. Commenters also 
stated that the policy would have promoted accountability and helped to 
ensure that benefit packages remain affordable. Some commenters noted 
that requiring States to report in this manner would have made issuer 
compliance with defrayal requirements easier to manage and others 
explained it would have promoted a more consistent understanding of new 
benefit mandates that a State enacts to better inform policymaking. One 
commenter noted that absent State reporting, it is unclear how the 
defrayal requirement may be enforced.
    Commenters objecting to the repeal of the annual reporting policy 
also challenged claims that the policy was overly burdensome. Such 
commenters noted that States should already have determined the status 
and cost of State-required benefits and that, therefore, the reporting 
requirement should not place a burden on States of conducting new 
analyses. Commenters further noted that the minimal administrative 
burden on States would decrease further after the initial reporting 
cycle.
    Response: We continue to believe that repealing the annual 
reporting policy at Sec.  156.111(d) and (f) is warranted and would not 
weaken State compliance with the defrayal requirement. Therefore, we 
are finalizing the repeal of the policy, as proposed, including 
revising the section heading to Sec.  156.111 to instead read, ``State 
selection of EHB-benchmark plan for PYs beginning on or after January 
1, 2020.''
    We understand the frustration expressed by States that already may 
appropriately identify which State-required benefits are in addition to 
EHB and provide defrayal, for which reporting this information to HHS 
on an annual basis would have added burden without increasing 
compliance. However, we acknowledge the concerns of many commenters 
that emphasized the importance of the annual reporting policy to 
address inconsistent State compliance and application of the defrayal 
requirements at Sec.  155.170. Although we continue to share concerns 
that some States may not be properly identifying all State-required 
benefits that are in addition to EHB, we also believe alternative 
approaches to the annual reporting policy--such as expanded technical 
assistance and issuing clarifying guidance--can achieve improved State 
adherence with Sec.  155.170 without imposing a requirement on States 
to submit detailed annual reports on State-required benefits.
    We acknowledge that the information States would have submitted 
through annual reporting would have supported increased oversight over 
whether States are appropriately identifying which State benefit 
requirements are in addition to EHB and promoted increased transparency 
for stakeholders. We further acknowledge that receipt of such reports 
by HHS would have been helpful for identifying noncompliant States, 
although this would not have been accomplished without also requiring 
already compliant States to submit reports. However, after carefully 
considering the comments, we believe that a more targeted approach 
where HHS provides written guidance on how to assess State-required 
benefits, paired with continued individualized technical assistance and 
outreach to States better balances the goal of increased State 
compliance with the competing priority of preserving State resources 
and reaffirming State authority as the entity responsible for 
identifying which State-required benefits are in addition to EHB.
    We reiterate that the obligation for a State to defray the cost of 
QHP coverage of State-required benefits in addition to EHB is a 
statutory requirement independent from the annual reporting policy we 
are now repealing at Sec.  156.111(d) and (f). Therefore, even with the 
repeal of the annual reporting policy, States remain responsible for 
identifying which State-required benefits are in addition to EHB and 
require defrayal, making payments to defray the cost of additional 
required benefits to either the issuer or the enrollee, and note that 
issuers are still responsible for quantifying the cost of these 
benefits and reporting the cost to the State. With regard to future HHS 
enforcement of the defrayal policy in

[[Page 27293]]

instances where we have State compliance concerns, we intend to work 
closely with any such State to monitor compliance and address any areas 
of confusion through continued outreach and technical assistance.
    Even though defrayal is a statutory requirement, we understand the 
critique that it can function as a restriction on States in mandating 
coverage of benefits in addition to EHB by requiring States to absorb 
new State expenditures. We are very supportive of States making 
improvements to the scope of EHB in their markets within the limits 
imposed by the generosity and typicality standards at Sec.  
156.111(b)(2) and encourage State utilization of any of the three 
methods available to States for selecting a new EHB-benchmark plan at 
Sec.  156.111, a process Colorado used to select a new EHB-benchmark 
plan that will be effective for the 2023 plan year and many other 
States utilized in years past. We note as a reminder that the act of 
selecting a new EHB-benchmark plan does not alone create new State 
mandates, but it also does not relieve the State of its obligation to 
continue defraying the cost of QHPs covering any State-mandated 
benefits that are in addition to EHB. The annual reporting policy would 
not have changed that standard, nor does repeal of the annual reporting 
policy.
    Although we are finalizing the repeal of the annual reporting 
policy, we maintain that it would have imposed a minimal burden on 
States as the information that States would have been required to 
report to HHS should already be readily accessible to States, as every 
State should already be identifying which State-required benefits are 
in addition to EHB and should be defraying any such costs. However, 
even if the State burden from the annual reporting policy would have 
been minimal, we still believe it is appropriate to repeal the annual 
reporting policy and instead take a more targeted approach of engaging 
with individual States on questions of compliance with the defrayal 
requirement. We believe this modified approach will yield similar 
results to the annual reporting policy without requiring all States, 
including compliant States, to expend additional time and resources 
submitting a report with this detailed information.
    Comment: The majority of all commenters--both those supporting and 
those objecting to repeal of the annual reporting policy--encouraged 
HHS to issue additional technical assistance and guidance clarifying 
the defrayal policy. Commenters supporting repeal expressed gratitude 
for the existing technical assistance HHS provides. Such commenters 
further agreed it would be helpful for HHS to issue additional written 
guidance paired with additional outreach regarding how HHS analyzes and 
expects States to analyze whether a State mandate is in addition to 
EHB, especially given how often questions regarding defrayal arise in 
States.
    Commenters objecting to the repeal of the annual reporting policy 
stated that if the policy is ultimately rescinded, HHS should still 
take the alternative, but a less effective step, of publishing 
technical guidance. Such commenters urged HHS to include guidance on 
the standards, including required actuarial analyses, to determine if a 
benefit exceeds EHB and, if so, the cost of the mandated benefit, to 
ensure States and issuers have a consistent understanding of whether a 
State-mandated benefit will actually increase health care costs. Other 
commenters acknowledged that there are other ways to achieve the 
oversight goals of the annual reporting policy if the reporting 
requirement is removed, such as providing additional written guidance 
or performing targeted audits of States. Other commenters stated that, 
although technical assistance and outreach are important, the periodic 
reporting that would have been required under the annual reporting 
policy would have had a valuable sentinel effect that cannot be 
duplicated through simple outreach and assistance.
    Response: We agree that engaging in technical assistance with 
States to help ensure State understanding of when a State-benefit 
requirement is in addition to EHB and requires defrayal will bolster 
State compliance with defrayal requirements in the absence of the 
annual reporting policy. We also reaffirm our intent to provide 
additional written guidance 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 that a more targeted approach where HHS provides written 
guidance on how to assess State-required benefits, paired with 
continued individualized technical assistance and outreach to States 
will still effectively promote State compliance with the defrayal 
requirement. It will enable us to instead concentrate HHS efforts on 
providing better, more tailored technical assistance to States rather 
than reviewing detailed reports for compliance across all States, even 
those that are already compliant. Although we acknowledge that the 
annual reporting policy may have ultimately had a sentinel effect on 
State adherence to the defrayal policy, we also believe continued ad 
hoc monitoring of States will yield similar compliance results without 
requiring all States to report each year. We believe our future 
technical assistance and guidance will ultimately facilitate an 
environment where States are more confident that their analysis of 
State-required benefits aligns with Sec.  155.170 and will be 
instructive for States that need to subsequently make any necessary 
adjustments to State policy to comply with the defrayal policy.
    Comment: Many commenters that supported issuing additional 
technical assistance provided policy recommendations with regard to the 
content of such guidance that are not within the scope of HHS' proposal 
regarding annual reporting of State-required benefits, such as 
requesting that HHS interpret the defrayal policy to be more lenient 
for States (for example, interpreting more State mandates to fall 
within the ``benefit delivery method'' exception that would not require 
defrayal or otherwise allowing States to change their benefit 
requirements to keep up with medical advancements without being 
required to defray). Other commenters urged HHS to include additional 
guidance on the defrayal requirements for habilitative services. One 
commenter urged HHS to require that State calculations for defrayal 
also be performed by a member of the American Academy of Actuaries.
    Response: Although such comments are out-of-scope, we will consider 
such recommendations as we continue to develop guidance and conduct 
outreach. We encourage States to reach out to CMS with specific 
defrayal questions in the interim.
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.
    In the HHS Notice of Benefit and Payment Parameters for 2023 
proposed rule (87 FR 584, 662 through 663), we proposed to withdraw 
this flexibility by amending Sec.  156.115 to no longer allow States to 
permit issuers to substitute benefits between EHB categories.
    In addition, in the event we did not finalize the proposal to 
eliminate the State option for between-category

[[Page 27294]]

substitution, we proposed to establish a static, permanent annual 
deadline for States to notify HHS that they wish to permit issuers to 
substitute benefits between EHB categories.
    We sought comment on these proposals. We refer readers to the 
proposed rule for further discussion of these proposals and our 
rationale (87 FR 662 through 663).
    After reviewing the public comments, for the reasons set forth in 
this rule and in the proposed rule, we are finalizing, as proposed, an 
amendment to Sec.  156.115 to no longer allow States to permit issuers 
to substitute benefits between EHB categories. We are therefore not 
establishing a static, permanent annual deadline for States to notify 
HHS that they wish to permit issuers to substitute benefits between EHB 
categories.
    We summarize and respond to public comments regarding the proposal 
to eliminate substitution of benefits between EHB categories.
    Comment: The majority of the commenters supported the proposal to 
amend Sec.  156.115 to no longer allow States to permit issuers to 
substitute benefits between EHB categories. Many of the commenters 
opposed the between-category substitution when it was proposed in the 
2019 Payment Notice. Some of these commenters noted that Congress 
expressly included each EHB category in the ACA to ensure a 
comprehensive and appropriate range of benefits to meet patients' needs 
across their lifespan. They added that Congress selected those benefits 
because they were not often covered by private insurance prior to the 
ACA and recognized that they were not interchangeable. A few commenters 
expressed concerns that substitution of benefits between EHB categories 
would result in issuers creating narrowed plans that would not ensure 
access to and would increase out-of-pocket costs for the items and 
services consumers need to manage their health conditions, particularly 
for consumers with chronic conditions and disabilities. They added that 
between-category substitution could lead to adverse selection and 
discrimination by allowing issuers to cut benefits needed by people 
with significant health needs and substituting them with benefits meant 
to attract healthier enrollees.
    One commenter noted that the argument that benefit substitution 
will allow consumers to find a plan that is better tailored to their 
needs is based on the false assumption that consumers can accurately 
predict their health needs. The commenter noted that this rationale 
undercuts the purpose of health insurance: To ensure access to 
affordable and comprehensive coverage even when one enters a period of 
unanticipated, increased health care need.
    Commenters noted that if a State were to permit issuers to 
substitute benefits between EHB categories, it would make it difficult 
for regulators to ensure that issuers are actually covering the EHBs 
they are required to provide and confusing for consumers who expect to 
have coverage for all EHBs in ACA plans. Many commenters noted that any 
potential benefit of flexibility to States in selecting EHB-benchmark 
plans does not justify the policy given the potential harm to 
consumers.
    Response: We agree with commenters that the negative effects on 
consumers of allowing States to permit issuers to substitute benefits 
between EHB categories outweigh any flexibility it could have afforded 
to States and issuers. For example, we agree with commenters that 
allowing States to permit issuers to substitute benefits between EHB 
categories could negatively affect access to and increase out-of-pocket 
costs for the items and services consumers need to manage their health 
conditions, and could lead to adverse selection and discrimination by 
allowing issuers to substitute benefits needed by people with 
significant health needs with benefits meant to attract healthier 
enrollees. In addition, we agree that allowing such substitution would 
make it difficult for regulators to ensure that issuers are actually 
covering the EHBs they are required to provide and could be confusing 
for consumers.
    As we stated in the proposed rule (87 FR 662), to date, no State 
has ever notified HHS that it would permit issuers to substitute 
benefits between EHB categories. 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, as we explained in the proposed rule (87 FR 662), HHS is of the 
view that it may only create potential harm for consumers with chronic 
conditions and disabilities and that whatever theoretical flexibility 
this policy could have afforded to States is not justified given the 
potential negative effects on consumers.
    Comment: One commenter opposed eliminating the option for States to 
permit issuers to substitute benefits across categories and stated that 
theoretical harm from allowing substitution of benefits between EHB 
categories and the fact that this option has not been used are not 
sufficient justifications for withdrawing the policy. The commenter 
noted that States' use of other flexibilities to make changes to their 
EHB-benchmark plans is an indication of their continued interest in 
exploring flexibilities and that States may have been too overwhelmed 
with the COVID-19 PHE to avail themselves of this particular 
flexibility. They requested that HHS leave the flexibility in place.
    Response: We do not agree with the commenters that opposed 
eliminating the option for States to permit issuers to substitute 
benefits across categories. HHS is of the view that whatever untapped 
theoretical flexibility this policy could have afforded to States is 
not justified given the potential negative effects on consumers, 
including increased out-of-pocket costs for consumers with chronic 
conditions and disabilities and adverse selection and discrimination of 
consumers with significant health needs. We note that States continue 
to be able to use existing flexibilities to make changes to their EHB-
benchmark plans.
    Comment: Several of the supportive commenters included additional 
points that were outside the scope of the proposal. Many commenters 
urged HHS to prohibit substitution within EHB categories. They noted 
that the potential harm to consumers with chronic conditions and 
disabilities that may arise from substitution between EHB categories 
may also arise from substitution within EHB categories. Commenters 
noted that benefit components are not interchangeable within EHB 
categories that list multiple components, such as the ``mental health 
and substance use disorder services including behavioral health 
treatment,'' the ``preventive and wellness services and chronic disease 
management,'' and the ``rehabilitative and habilitative services and 
devices'' categories.
    One commenter expressed concerns that the flexibility to adopt 
benchmark plans from other States and replace EHB categories with 
categories of benefits from another State's less generous benchmark 
plan could lead to a ``race to the bottom'' and erode EHB benefits. The 
commenter noted the effect could be even more damaging if a State chose 
the least generous coverage categories from various EHB-benchmark plans 
around the country to aggregate as their new EHB-benchmark plan. One 
commenter requested that CMS collect and publish data on State EHB-
benchmark plan substitution so that interested parties can better 
assess the coverage of specific services.
    Response: Although these comments are outside the scope of the 
proposal, we will consider these comments and suggestions and also note 
that benefit

[[Page 27295]]

designs that are discriminatory or intended to discourage enrollment by 
certain populations or individuals with significant health needs are 
prohibited under 45 CFR 156.125(b). In addition, we note that States 
may collect data on EHB benefit substitution. However, as the comments 
are outside the scope of this specific proposal, we decline to comment 
further on them at this time.
5. Prohibition on Discrimination (Sec.  156.125)
    Section 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. In the 
proposed rule (87 FR 584, 671), we proposed to amend Sec.  156.200(e) 
to explicitly prohibit different forms of discrimination based on sex--
specifically, discrimination based on sexual orientation and gender 
identity. As explained in the Supplementary Information section earlier 
in this preamble, HHS will address this policy, as well as the public 
comments submitted in response to this proposal, in a future 
rulemaking.
6. Refine EHB Nondiscrimination Policy for Health Plan Designs (Sec.  
156.125)
    We proposed to refine HHS' EHB nondiscrimination policy under Sec.  
156.125 and proposed a regulatory framework for entities that are 
required to comply with the EHB nondiscrimination policy.
    Under Sec.  156.125(a), an issuer does not provide EHB if its 
benefit design, or the implementation of its benefit 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.\270\ Section 156.125(b) requires 
that issuers must also comply with Sec.  156.200(e), which provides 
that a QHP issuer must not, with respect to its QHP, discriminate on 
the basis of race, color, national origin, disability, age, or 
sex.\271\ Section 156.110(d) states that an EHB-benchmark plan may not 
include a discriminatory benefit design that contravenes Sec.  156.125. 
In the 2016 Payment Notice (80 FR 10750, 10822), we provided examples 
of potentially discriminatory practices,\272\ and in the 2017 Payment 
Notice (81 FR 12244), we noted that we would consider providing further 
guidance regarding discriminatory benefit designs in the future.
---------------------------------------------------------------------------

    \270\ 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.
    \271\ 45 CFR 156.200(e) states that a QHP issuer may not 
discriminate based on ``race, color, national origin, disability, 
age, or sex.''
    \272\ 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. 80 FR 10750, 
10822.
---------------------------------------------------------------------------

    In the proposed rule, we first proposed to revise Sec.  156.125(a) 
to provide that a nondiscriminatory 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.
    Second, we proposed examples of health plan designs and practices 
that HHS would deem to be presumptively discriminatory. HHS identified 
these examples as presumptively discriminatory practices based on 
whether the issuer's benefit design or coverage decisions were 
adequately supported by appropriate clinical evidence relevant to each 
circumstance. Through these examples, HHS sought to further clarify its 
EHB nondiscrimination policy to better ensure that unlawful 
discrimination does not impede consumers' ability to access benefits 
for medically necessary treatment.
    Third, we proposed to further refine our EHB nondiscrimination 
policy by describing and identifying examples of guidelines and 
resources (such as medical journals) that HHS would deem appropriate to 
counter a claim that an issuer's benefit design or its implementation 
of the design is discriminatory. We proposed that unscientific \273\ 
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. We stated that we did not intend to 
limit 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 proposed that HHS 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. Notwithstanding, we also proposed that 
articles that are not peer-reviewed or that are written primarily for a 
lay audience would be insufficient to dispute a claim that an issuer's 
benefit design is discriminatory. We proposed that we would not 
consider sufficient a peer-reviewed journal article that has not been 
accepted for publication in a reputable medical publication.
---------------------------------------------------------------------------

    \273\ Merriam-Webster.com Dictionary, s.v. ``unscientific,'' 
Retrieved November 5, 2021, from 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 further sought comment on the types of clinically-based 
justifications and the level of clinical evidence that should be 
acceptable. Specifically, we sought comment on whether we should 
further define the types of acceptable clinical evidence.
    We stated in the proposed rule that presumptively discriminatory 
practice examples may point to a State's EHB-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. We stated that a 
benefit design that is discriminatory and inconsistent with Sec.  
156.125 must be cured regardless of how it originated. For example, if 
a State EHB-benchmark plan has a discriminatory benefit design, we 
explained that a 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 
discriminatory design. Similarly, if a State-mandated benefit has a 
discriminatory benefit design, the State may attempt to remedy this by 
revising the mandate or issuing guidance. Regardless, we stated that 
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 sought comment on whether there are any 
unforeseen barriers in the ability to remedy inconsistencies with this 
refined EHB nondiscrimination policy.
    We also stated in the proposed rule that, in ensuring that benefit 
designs are not discriminatory, issuers should also consider the method 
in which EHBs are delivered and not inadvertently discriminate based on 
the service delivery model. Accessibility to EHB delivered virtually 
has significantly

[[Page 27296]]

increased during the COVID-19 PHE as enrollees had limited options for 
in-person health care visits. We noted that some issuers have designed 
health plans that deliver services virtually with no copay, compared to 
in-person health care services with a copay. We stated that this type 
of health plan design could inadvertently incentivize enrollees to 
access EHB using a certain delivery method. We further stated that 
although this approach may not amount to a discriminatory practice 
under 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 noted that we intend to monitor the issue and 
remind issuers that while we encouraged expanded use of EHB virtually, 
it should be done in a nondiscriminatory manner.
    In relation to the proposed refinements of the nondiscrimination 
standard under Sec.  156.125, we proposed that the policy would become 
effective 60 days after the publication of the final rule in the 
Federal Register. We sought comments regarding whether the proposed 
effective date would be sufficient to allow issuers to come into 
compliance with our proposed refinements to our EHB nondiscrimination 
policy.
    In addition, we recognized 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 
generally, but a parallel provision applies to EHB furnished by 
Medicaid Alternative Benefit Plans.\274\ We sought comment on the 
examples of presumptively discriminatory benefit designs.
---------------------------------------------------------------------------

    \274\ See 42 CFR 440.347(e).
---------------------------------------------------------------------------

    After reviewing the public comments, we are finalizing the proposed 
revisions to Sec.  156.125(a) to provide that a nondiscriminatory 
health plan design that provides EHB is one that is clinically based, 
but we do not finalize the proposed regulation text that would have 
provided that a nondiscriminatory health plan design that provides EHB 
is one that incorporates evidence-based guidelines into coverage and 
programmatic decisions, and relies on a current and relevant peer-
reviewed medical journal article(s), practice guidelines, 
recommendations from reputable governing bodies, or similar sources. We 
also do not finalize our proposal to further refine our EHB 
nondiscrimination policy by describing and identifying examples of 
guidelines and resources (such as medical journals) that HHS would deem 
appropriate to counter a claim that an issuer's benefit design or its 
implementation of the design is discriminatory. Rather, under Sec.  
156.125(a), we finalize only that an issuer does not provide EHB if its 
benefit design, or the implementation of its benefit 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; and that a non-discriminatory 
benefit design that provides EHB is one that is clinically based. As we 
explain in further detail in the comment responses later in this 
section, we credit commenter concerns that information relevant to 
whether a benefit design is unlawfully discriminatory could appear in 
reputable publications or come from sources that are not peer-reviewed 
medical journals or those that are otherwise dissimilar to the sources 
and information HHS discussed in the proposed rule's preamble 
discussion on Sec.  156.125(a). Although we do not finalize the 
proposal to specifically define the evidence and sources that would be 
sufficient to counter a claim that a plan's benefit design is 
discriminatory, this should not be construed to mean that HHS will deem 
unscientific \275\ evidence, disreputable sources, or other bases or 
justifications that lack the support of relevant, clinically-based 
evidence as sufficient to dispute a claim that an issuer's benefit 
design is discriminatory.
---------------------------------------------------------------------------

    \275\ Merriam-Webster.com Dictionary, s.v. ``unscientific,'' 
Retrieved November 5, 2021, from 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 are also providing final versions of the examples of 
presumptively discriminatory benefit designs outlined in the proposed 
rule, except that we do not address the example related to gender-
affirming care. For the reasons explained in the Supplementary 
Information section earlier in the preamble, HHS will address the 
gender-affirming care example, including the public comments that 
addressed this example, in future rulemaking.
    For the final examples included in this final rule, we have revised 
the examples in response to commenter questions and concerns to clarify 
key points in relation to HHS' refined EHB nondiscrimination policy. 
First, we clarify that the requirement Sec.  156.125 and HHS' refined 
EHB nondiscrimination policy apply only to services that are covered as 
EHB under a plan and do not require a plan to cover services that the 
plan does not already cover as EHB. Second, we clarify that neither 
Sec.  156.125 nor the examples reflecting HHS' refined EHB 
nondiscrimination policy require health care professionals to perform 
services outside of their normal specialty area or scope of practice.
    Lastly, we do not finalize the proposed applicability date of HHS' 
refined EHB nondiscrimination policy. Instead, to allow issuers 
sufficient time to come into compliance with our refined 
nondiscrimination policy and to better align with the ability of plans 
to make uniform modifications of coverage at the time of renewal, we 
are finalizing that the refined EHB nondiscrimination policy will be 
applicable starting on the earlier of January 1, 2023 (the start of PY 
2023) or upon renewal of any plan subject to the EHB requirements. We 
have added text to Sec.  156.125(a) to reflect this applicability date.
General Comments on the Proposal To Refine EHB Nondiscrimination Policy 
for Health Plan Designs (Sec.  156.125)
    Comment: Many commenters broadly supported the proposals to refine 
the EHB nondiscrimination policy, implement a clinical evidence 
framework, and provide discriminatory benefit design examples in an 
effort to reduce discriminatory benefit designs and safeguard consumers 
who depend on nondiscrimination protections. Such commenters recognized 
the need for such safeguards and stated that many aspects of health 
plan design may be arbitrary, not clinically based, and have 
discriminatory impacts. These commenters noted that these proposals 
would reduce the incidents of discriminatory benefit design, which 
still occur despite the ACA's nondiscrimination protections. One 
commenter provided feedback that, by implementing consistent 
requirements under Sec.  156.125, the proposal ensures that enrollees 
can fairly access covered benefits.
    Response: We agree with commenters that despite current EHB 
nondiscrimination protections, enrollees may be harmed by 
discriminatory health plan designs. We also agree with commenters that 
requiring nondiscriminatory benefit designs to be clinically based will 
help ensure that plan limitations on benefits covered as EHB will not 
discriminate on the bases prohibited under Sec.  156.125.

[[Page 27297]]

Specifically, Sec.  156.125(a) prohibits plans from discriminating in 
their benefit design, or the implementation of its benefit design, 
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. Further, Sec.  156.125(c) requires that an 
issuer providing EHB must comply with the requirements of Sec.  
156.200(e). Section 156.200(e) currently prohibits discrimination on 
the basis of race, color, national origin, disability, age, and sex. 
Thus, any limitation on coverage of an EHB in a plan (that is subject 
to EHB standards) based on an individual's age, expected length of 
life, present or predicted disability, degree of medical dependency, 
quality of life, other health conditions, race, color, national origin, 
disability, age, or sex, must be based on clinical evidence. We believe 
that the clinical evidence standard that we are finalizing at Sec.  
156.125 in this rule will reduce incidents of discriminatory benefit 
design of EHBs by ensuring that any plan design limiting coverage of an 
EHB on a protected basis in Sec.  156.125 is clinically based, better 
safeguarding all consumers' access to medically necessary care.
    We emphasize that issuers of EHB-compliant plans may continue to 
utilize reasonable medical management techniques in accordance with 
Sec.  156.125(c). Further, our refined EHB nondiscrimination policy 
does not require issuers subject to Sec.  156.125 to cover services 
under a health plan that are not already covered by the plan as EHB; 
and it does not create a general requirement that a health plan cover 
any and all medically necessary services.
    Even when not intended, health plan designs that limit coverage of 
EHBs on the basis of characteristics protected from discrimination in 
Sec.  156.125 can lead to negative health outcomes when such 
limitations lack clinical justification. We believe the refinements to 
our EHB nondiscrimination policy will improve issuer compliance with 
the nondiscrimination standards at Sec.  156.125 and help ensure that 
enrollees can fairly and more easily access benefits covered as EHB, 
ultimately promoting improved health outcomes.
Comments on the Impact on Issuers and States
    Comment: One commenter expressed concern that the proposal would 
require States to update their EHB-benchmark plans to remove 
unjustifiable discriminatory benefit designs, like age limitations and 
limitations based on health conditions. Some commenters requested that 
HHS clarify whether issuers modifying existing plan designs to conform 
with nondiscriminatory benefit design requirements would meet uniform 
modification exceptions to uniformly modify the benefits in their 
plans.
    Response: As we stated in the proposed rule, a plan's benefit 
design that is discriminatory and inconsistent with Sec.  156.125 must 
be cured regardless of how it originated. The nondiscrimination 
requirements at Sec.  156.125, including the clinical evidence standard 
we are finalizing, apply to an issuer's benefit design or 
implementation of a benefit design for all benefits the issuer covers 
as EHB. Because some current EHB-benchmark plans continue to be based 
on plan year 2014 plans, some of the EHB-benchmark plan designs may not 
comply with current Federal requirements such as nondiscrimination 
requirements at Sec.  156.125. Therefore, when designing plans that are 
substantially equal to the EHB-benchmark plan, issuers may need to 
further conform plan benefits, including coverage and limitations, to 
comply with current Federal requirements, such as the nondiscrimination 
requirement of Sec.  156.125. This requirement is not new. Plans 
subject to the EHB requirement have always been required to comply with 
the nondiscrimination requirements in Sec.  156.125 regardless of the 
presence of any noncompliant discriminatory language in the relevant 
EHB-benchmark plan.
    Under the guaranteed renewability provision at 45 CFR 147.106, a 
health insurance issuer offering non-grandfathered health insurance 
coverage in the individual, small group, or large group market is 
required to renew or continue in force the coverage at the option of 
the plan sponsor or the individual, unless the issuer discontinues all 
coverage, the product is discontinued, or the issuer's action is 
otherwise excepted from this requirement. One such exception is for the 
modification of coverage made uniformly and solely pursuant to 
applicable Federal or State requirements, as described at Sec.  
147.106(e)(2). This allows an issuer to, at the time of renewal, modify 
its plans uniformly if the modification is made within a reasonable 
time period after the imposition or modification of a Federal or State 
requirement and the modification is directly related to the imposition 
or modification of the Federal or State requirement. An issuer revising 
its benefit design to conform with these nondiscrimination requirements 
could constitute a modification under a Federal requirement; thus, 
issuers may exercise the exception at Sec.  147.106(e)(2) to uniformly 
modify their plans in accordance with guaranteed renewability 
requirements. As explained later in this section, we are finalizing 
that the refined EHB nondiscrimination policy at Sec.  156.125 will be 
applicable on the earlier of PY 2023 or upon renewal of any plan 
subject to the EHB requirements and, therefore, this policy should not 
conflict with uniform modification requirements.
    To address State EHB-benchmark plan compliance with the non-
discrimination standards, we further stated in the proposed rule that, 
if a state EHB-benchmark plan has a discriminatory benefit design, the 
State may issue guidance to issuers in the State explaining that plans 
providing benefits that are substantially equal to the EHB-benchmark 
must not replicate that discriminatory benefit design. We clarify that 
we will not consider State EHB-benchmark plan designs to be out of 
compliance with Sec.  156.110(d) or Sec.  156.111(b)(2)(v) if the State 
provides such guidance or otherwise directs issuers to comply with 
these refined nondiscrimination standards, notwithstanding any aspects 
of the EHB-benchmark plan that are not consistent with these refined 
nondiscrimination standards. Under this approach, States are not 
required at this time to go through the formal process at Sec.  156.111 
to update their EHB-benchmark plans solely for the purpose of removing 
any such discriminatory benefit designs. But States that do elect to 
update their EHB-benchmark plans at any point going forward will be 
expected to ensure their new EHB-benchmark plans are compliant with 
Federal discrimination law and policy.
    Comment: Several commenters asserted that the proposed rule 
violates the Administrative Procedure Act (APA). Some commenters 
expressed concern that the lack of a cost-benefit analysis in the 
proposed rule could be a violation of the APA, noting HHS did not cite 
how many plans already cover the procedures specified in the examples 
in a nondiscriminatory manner, how the refined EHB policy will impact 
utilization, and any premium impact. Other commenters asserted that the 
proposed changes to Sec.  156.125 are overly broad. Some of these 
commenters expressed concerns that the proposed rule may impede States' 
ability to regulate and put forth benefit packages that are affordable 
and best meet the needs of their residents and recommended that HHS 
should

[[Page 27298]]

alternatively continue to work with States and issuers to develop 
sufficient coverage for enrollees while applying protections against 
discrimination. Other commenters expressed concern that issuers may see 
increased utilization of benefits and therefore higher costs. Some 
commenters recommended that HHS should conduct and publish the results 
of a detailed cost study demonstrating premium impacts for consumers 
prior to finalizing the proposal.
    Response: We do not agree with commenters that our proposals under 
Sec.  156.125 violate the APA. Additionally, the revisions we are 
finalizing in this rule do not impose an unreasonable burden on States, 
are not overly broad, and do not impede States' ability to regulate or 
put forth benefit packages that are affordable and meet the needs of 
consumers. The revisions to Sec.  156.125 clarify existing Federal 
regulation regarding the prohibition on discriminatory benefit designs 
for plans subject to the requirement to provide EHB.
    Specifically, this final rule affirms the existing requirement that 
an issuer provides EHB when its benefit design or implementation of its 
benefit design does not discriminate on bases prohibited under Sec.  
156.125. This final rule further clarifies that a plan design that 
includes limitations on EHB on a basis prohibited under Sec.  156.125 
must be clinically based in order to be considered nondiscriminatory. 
We reiterate that these nondiscrimination requirements at Sec.  156.125 
apply to any benefit design or implementation of a benefit design to 
the extent that the issuer covers benefits as EHB. This does not 
substantively alter or broaden the regulatory requirements under this 
section, as issuers of non-grandfathered individual and small group 
health insurance are already prohibited from offering plans with 
discriminatory benefit designs under Sec.  156.125 in the provision of 
EHB.
    We explained in the proposed rule the potential that there would be 
administrative burden on States and issuers when coming into compliance 
with the proposal to require clinical evidence to support EHB 
limitations that may otherwise be considered discriminatory under Sec.  
156.125. However, we clarify that States are not required at this time 
to formally update their EHB-benchmark plans through Sec.  156.111 
solely for the purpose of removing any such discriminatory benefit 
designs. Therefore, any such administrative burden on the part of 
States would be limited to instances where, at the State's discretion, 
the State updates its EHB-benchmark plans to remove discriminatory 
benefit designs or otherwise issues guidance to issuers on how to 
comply with Sec.  156.125 in spite of any discriminatory limits that 
may be present in the State's EHB-benchmark plan. The examples in the 
final rule of presumptively discriminatory plan designs do not 
substantively change the existing regulatory EHB nondiscrimination 
requirements, but provide further guidance for plans to design benefit 
limitations that follow those requirements. Accordingly, we are unable 
to isolate and identify the burdens of providing those additional 
examples as a tool to guide issuers' efforts to comply with the 
existing requirements.
    We disagree with commenters that suggest that the proposals we are 
finalizing in this rule will result in increased utilization and higher 
costs due to an unintended adverse impact on issuers' ability to 
administer packages that are safe and clinically effective. We stated 
in the proposed rule that, based on our experience with States updating 
benefits \276\ covered as EHB in their EHB-benchmark plans under Sec.  
156.111, any actions necessary to come into compliance with the 
requirement to justify potentially discriminatory benefit limitations 
with clinical evidence will cause only a minimal increase in premiums. 
Thus, we do not find credible those assertions that the policy 
finalized in this rule will have a significant cumulative effect on 
issuers' ability to administer packages of benefits that are 
affordable.
---------------------------------------------------------------------------

    \276\ See, for example, Colorado 2023 EHB- Benchmark Plan 
Actuarial Report. CMS. https://www.cms.gov/CCIIO/Resources/Data-Resources/ehb Suite of Gender-affirming care benefits to treat 
gender dysphoria resulted cost estimate was 0.04 percent of the 
total allowed claims assuming utilization would be for adults.
---------------------------------------------------------------------------

    We acknowledge that States are generally the primary enforcers of 
EHB requirements and HHS will continue to provide technical assistance 
to assist States as applicable. HHS will also consider whether 
additional guidance is necessary as we monitor issuer compliance with 
EHB nondiscrimination requirements and States' oversight and 
enforcement activities.
Comments on the Requirement That Health Plan Designs Be Supported by 
Clinical Evidence
    Comment: Many commenters were broadly supportive of including a 
clinical evidence standard at Sec.  156.125, but disagreed with or had 
recommendations regarding the appropriate scope of such a standard. For 
example, many commenters noted that the clinical evidence required 
under Sec.  156.125 should not be limited to evidence provided by 
doctors of medicine and that HHS should allow evidence provided by 
other qualified, licensed health professionals, including nurses. Such 
commenters also urged HHS to include the relevant ``standard of care'' 
within the list of appropriate clinical evidence to rely upon as 
standards of care are the leading guide for treatment. Other commenters 
urged HHS to clarify that the list of reputable sources is only 
illustrative and recommended that HHS add more peer-reviewed journals 
to the sources list in the preamble. One commenter noted the concern of 
overlapping or potentially inconsistent standards as issuers already 
use clinical evidence in plan designs.
    Other commenters strongly supported the incorporation of evidence-
based guidelines and recommendations from appropriate governing bodies 
into coverage decisions, but recommend that HHS not further define the 
acceptable types of clinical evidence. Some commenters recommended that 
the opinion of recognized, disease-specific experts be included as 
additional appropriate evidence sources.
    Response: In light of the myriad comments we received regarding the 
appropriate scope of clinical evidence to include at Sec.  156.125, we 
have reconsidered whether the proposed clinical evidence standard 
appropriately reflects the breadth and types of clinical evidence that 
issuers may rely upon to demonstrate that a plan design limitation is 
not discriminatory under Sec.  156.125. We are therefore finalizing 
Sec.  156.125 only to require that a nondiscriminatory benefit design 
that provides EHB be one that is clinically based. We are declining to 
finalize that a nondiscriminatory benefit design that provides EHB must 
incorporate evidence-based guidelines into coverage and programmatic 
decisions, and rely on current and relevant peer-reviewed medical 
journal articles, practice guidelines, recommendations from reputable 
governing bodies, or similar sources, or the related examples of 
acceptable sources included in the preamble of the proposed rule. We 
believe that requiring plan designs providing EHB to be clinically 
based, without these additional requirements, is sufficient to protect 
consumers from discriminatory benefit designs. We will reassess whether 
refining this standard in future rulemaking is warranted as we continue 
to monitor issuer compliance with the nondiscrimination standards at 
Sec.  156.125.

[[Page 27299]]

    We did not propose a requirement that clinically-based benefit 
designs be supported by evidence provided by individuals with specific 
credentials or areas of expertise, and we do not finalize any such 
requirement in this final rule. The presence or absence of any specific 
degree by the individual(s) that develops resources for clinical 
evidence is not by itself sufficient to satisfy or preclude compliance 
under this rule, nor is inclusion of particular types of expert.
    When designing nondiscriminatory plan designs and ensuring that any 
limitations on EHB on a basis prohibited under Sec.  156.125 are 
clinically indicated, we encourage issuers to seek current and relevant 
clinical evidence, rather than utilizing standards that tend to overlap 
or are potentially inconsistent with the scope of the plan design. 
However, we also acknowledge that limitations in medical research may 
restrict availability of such clinical evidence. Since we are not 
finalizing our proposal to specify sources of acceptable clinical 
information an issuer may use to show that a coverage limitation or a 
benefit design is not discriminatory, we also decline to include any 
specific ``standard of care'' within a list of appropriate clinical 
evidence that issuers may rely upon. HHS is of the view that the 
requirements of this rule and the guidance provided are sufficient to 
enable issuers to set coverage limitations that comply with the EHB 
requirements. We will continue to assess issuer compliance under this 
rule and will consider if future rulemaking is warranted.
    We also clarify that HHS would not consider a plan design subject 
to Sec.  156.125 to be discriminatory when the plan design limits 
coverage of an EHB on a basis that is prohibited under the regulation, 
but the limitation is a direct result of the issuer's compliance with 
other applicable Federal coverage requirements. For example, Federal 
law requires issuers of plans that must meet EHB standards to cover all 
evidence-based items or services that have in effect a rating of A or B 
in the current recommendations of the United States Preventive Services 
Task Force (USPSTF).277 278 However, evidence-based items 
and services with A or B ratings in effect by USPSTF often contain age 
limits. We would not consider a plan design subject to Sec.  156.125 to 
be discriminatory when the plan design limits an EHB on a prohibited 
basis under Sec.  156.125 but such limitation is due to compliance with 
an otherwise applicable Federal requirement. As explained in greater 
detail later in this final rule in relation to the finalized example of 
discrimination based on age, this policy is not meant to conflict with 
or supersede the policy at Sec.  156.115(d), which prohibits coverage 
of, among other things, routine non-pediatric dental services and eye 
exam services as EHB.
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    \277\ 45 CFR 156.115(a)(4).
    \278\ U.S. Preventative Services Task Force (n.d.) USPSTF A & B 
Recommendations. https://www.uspreventiveservicestaskforce.org/uspstf/recommendation-topics/uspstf-a-and-b-recommendations.
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    Comment: Many commenters supported the proposal to require clinical 
evidence for health plan designs. Some commenters who supported the 
proposal cautioned HHS that clinical evidence used to defend plan 
designs may itself be discriminatory due to embedded systemic racism 
and bias in medical research.
    Response: We recognize that embedded systemic racism and bias are 
pervasive and limit many aspects of medical research. HHS is committed 
to reducing the effects of such racism and bias on consumers and 
consumer health outcomes, which is why we are finalizing that a 
nondiscriminatory plan design that provides EHB is one that is 
clinically based, without specifying that the plan design must rely on 
current and relevant peer-reviewed medical journal article(s), practice 
guidelines, recommendations from reputable governing bodies, or similar 
sources. Overall, we are working to advance health equity by designing, 
implementing, and operationalizing policies and programs that promote 
and support health coverage that provides fair access to covered health 
care services for all person who purchase (or would purchase) the plan, 
eliminating avoidable differences in health outcomes experienced by 
people who are disadvantaged or underserved, and providing access to 
the care and support that enrollees need to thrive.
    Finalizing this proposal is another step towards achieving that 
goal, but we recognize that this policy, by itself, is insufficient to 
address broader concerns that the existing clinical evidence on which 
issuers may design nondiscriminatory benefit limitations cannot be 
cured of the effects of embedded systemic racism, bias, and limits in 
available medical research. We expect issuers to work cooperatively 
with States to design nondiscriminatory plans and expect States to 
evaluate the clinical evidence for plan designs while conducting form 
reviews and issuing guidance.
    Comment: Some commenters expressed concern that clinical evidence 
may be used by issuers as justification to perpetuate discriminatory 
plan designs and urged HHS to clarify that lack of clinical evidence 
does not provide the license to deny access to new innovations or 
therapies that are difficult to research. They noted that some services 
and treatments that may be beneficial may not be conducive to 
conventional methodologies for developing a clinical evidence-base, 
such as some treatments for rare diseases.
    Response: The policy finalized in this final rule at Sec.  
156.125(a) provides mandatory guidelines to issuers to support their 
design and implementation of benefit packages that conform to EHB 
nondiscrimination requirements. Under Sec.  156.115, plans subject to 
the requirement to provide EHB must provide benefits that are 
substantially equal to the EHB-benchmark plan, including covered 
benefits; limitations on coverage, including benefit amount, duration, 
and scope; and prescription drug benefits. Thus, issuers cannot omit 
coverage of an EHB by asserting a lack of clinical evidence to support 
a discriminatory limitation on that EHB. However, separate from the 
policy finalized in this rule, issuers continue to have the ability to 
substitute benefits provided in the EHB-benchmark plan under Sec.  
156.115(b). In fact, utilizing the flexibility available under Sec.  
156.115(b) to substitute benefits may be a way for issuers to cover new 
and innovative benefits.
    Comment: Some commenters expressed concern that the new proposed 
policy will unintentionally limit plan designs that strive to address 
health disparities. They noted that HHS should clarify that actions 
taken to reduce health disparities would not violate EHB 
nondiscrimination requirements. They expressed concern that limitations 
in clinical evidence may hinder innovative plan designs and issuers' 
ability to respond to a public health emergency.
    Response: We disagree with commenters that assert this policy will 
inhibit efforts to advance health equity or efforts to address public 
health emergencies. We also do not find credible any assertion that the 
pursuit of sound clinical evidence in coverage decisions will in any 
way hinder the creation of innovative plan designs. We believe that 
requiring issuers to ensure their plan designs are clinically based is 
essential to achieving health equity and reducing health disparities.

[[Page 27300]]

    Comment: One commenter expressed concern that relying on clinical 
guidelines exclusively to determine discriminatory design may lead to 
issuers using clinical evidence or research as a shield to escape valid 
claims of discriminatory benefit. The commenter noted that if issuers 
begin to counter enrollee's arguments with clinical evidence, it may be 
hard to evaluate the validity of their sources as there is often a lack 
of transparency about the data or underlying assumptions in research. 
The commenter suggested that HHS should continue to employ other tools 
such as outlier analyses to reveal problematic plan design and consider 
approaches to compliance borrowed from mental health parity 
enforcement, such as disclosure requirements.
    Response: We appreciate these recommendations and are exploring 
ways to improve our nondiscrimination reviews and develop new tools to 
detect discriminatory practices. In addition, we note that previously 
awarded State grants have focused on enhancing policy filing review 
processes to enhance enforcement of nondiscrimination (among several 
others).
Comments on Unforeseen Barriers and Remedying Inconsistencies With the 
EHB Nondiscrimination Policy
    Comment: Some commenters expressed concern that the proposed 
changes may preempt State benefit mandates, which could create 
inconsistencies and impact health care affordability and accessibility. 
One commenter expressed concerns that State legislatures may enact 
mandates that are limited to a specific sub-population, as they often 
balance expanding coverage with the potential additional cost to those 
purchasing health insurance and their defrayal obligations pursuant to 
Sec.  155.170. As such, this commenter noted that it is not appropriate 
for HHS to designate benefits being offered in accordance with State 
law as presumptively discriminatory. The commenter further stated that 
HHS should clarify that benefits offered in accordance with a duly 
enacted State law would not be considered presumptively discriminatory 
and that HHS finalize a process by which a health insurer could rebut 
any allegations that a benefit design is discriminatory. Another 
commenter urged HHS to provide additional compliance resources to allow 
plans and States to assess both what State mandates may not be allowed 
under this proposal, and how plans and States can work together to 
ensure consistent benefit coverage. Some commenters expressed concern 
that it is premature and inappropriate for HHS to include the examples 
given in the proposed rule without further analysis of how the examples 
relate to existing State and Federal nondiscrimination policies.
    Response: We disagree with the premise that it is inappropriate to 
apply this policy to issuer plan designs that are the result of State-
required benefits. We also clarify that Sec.  156.125 would only apply 
to State-required benefits that are considered EHB. For example, 
benefits required by a State mandate enacted on or after January 1, 
2012, are generally not considered EHB pursuant to Sec.  155.170. 
Therefore, an issuer covering a State-required benefit that is not EHB 
would not be required to modify the benefit in its plan design to 
comply with the nondiscrimination standards under Sec.  156.125. A 
State-required benefit enacted on or before December 31, 2011, is 
considered EHB, and issuers covering that State-required benefit would 
therefore be required to comply with the nondiscrimination standards in 
Sec.  156.125 when including that State-required benefit in their plan 
designs.
    If a State-mandated benefit that is considered EHB is 
discriminatory under this policy, the State may attempt to remedy this 
through various ways, including revising the mandate, issuing guidance 
as described earlier in this section of the preamble, or otherwise 
furthering issuer compliance such as by amending form filing checklists 
or providing technical assistance to issuers. Regardless, issuers 
subject to Sec.  156.125 would need to modify any discriminatory 
benefit designs for benefits the issuer is covering as EHB or be 
prepared to justify their approach with clinical evidence when 
designing plans that meet EHB nondiscrimination requirements. We would 
expect an issuer to be able to rebut a presumption of discriminatory 
plan design by demonstrating that such plan designs are clinically 
based.\279\ This policy does not disallow any benefit mandates required 
under State law, but does require issuers to comply with the non-
discrimination provisions if benefits mandated by the State are EHB.
---------------------------------------------------------------------------

    \279\ See proposed example of Age Limits for Infertility which 
provides a rationale when plans include age limitation due to 
variations in clinical effectiveness of treatment for infertility, 
defined as not being able to achieve pregnancy after 1 year of 
having regular, unprotected intercourse, or after 6 months if the 
woman is older than 35 years. Infertility and Fertility. (2017, 
January 31). NIH. https://www.nichd.nih.gov/health/topics/infertility.
---------------------------------------------------------------------------

    The preceding clarifications should address the concerns raised by 
commenters regarding how this policy impacts State mandates and 
potential defrayal implications. As noted in relation to the policy we 
are finalizing to repeal the annual reporting requirement for State 
benefit requirements at Sec.  156.111, we intend to provide additional 
guidance regarding the defrayal of State-required benefits in the 
future. We encourage States to reach out to HHS when regulatory 
concerns arise in this area in the interim. We further note that, under 
defrayal regulations at Sec.  155.170, State mandates imposed for 
purposes of coming into compliance with Federal requirements are not 
`in addition to EHB' and do not require defrayal.
Comments on Telehealth Oversight
    Comment: Many commenters supported oversight to ensure that 
telehealth is not being utilized in a discriminatory fashion. They 
noted that telehealth utilization is often preferred for clinical 
reasons or to increase convenience. One commenter recommended that HHS 
continue to monitor this issue closely and ensure that the decision for 
an in-person or virtual visit is made between the health care provider 
and the patient, based on medical necessity and convenience, and not 
based on preferential plan structuring. Another commenter noted that 
telehealth is best utilized when it is provided within the context of 
the medical home and utilized as a component of, and coordinated with, 
longitudinal care. Some commenters noted that some issuers have 
arbitrarily terminated coverage of telehealth services which they noted 
is not based on any clinical rationale. Further, some commenters stated 
that the arbitrary and inconsistent coverage impedes care coordination 
and transition care planning, and adds to the stress on the patient, 
their family, and the treatment team. Some commenters provided consumer 
survey information related to patients' concerns that telehealth 
coverage may be denied as an available option upon the expiration of 
the COVID-19 PHE. They urged HHS to not define plan designs that 
incentivize the use of virtual services as discriminatory.
    Response: We are aware that States have primary oversight of 
telehealth practices and coverage. We encourage the commenters to work 
with States to help ensure consistent coverage considering the 
increased availability of telehealth services experienced during the 
COVID-19 PHE. As we noted in the proposed rule, we do not currently 
believe that the practice of health plans

[[Page 27301]]

covering services delivered virtually with no copay while requiring a 
copay for in-person health care services amounts to be a discriminatory 
practice under Sec.  156.125. However, we intend to monitor telehealth 
utilization as it pertains to the delivery of benefits and how the 
utilization of telehealth may impact nondiscriminatory access to EHB.
General Comments Relating to Examples of Presumptively Discriminatory 
Benefit Designs
    As noted earlier, we made some clarifying changes to the examples 
of presumptively discriminatory benefit designs after considering 
public comments, and the final examples follow later in this section of 
this preamble. Our explanations and rationale for the changes are noted 
in this response to comments section.
    Comment: Several commenters supportive of the examples of 
presumptively discriminatory plan designs asked HHS to include 
additional specific examples or provided their own examples of what 
they believed to be presumptively discriminatory plan designs.
    Response: We acknowledge and appreciate the additional examples 
from the commenters. As discussed in the proposed rule, we provided 
examples that illustrate presumptively discriminatory practices that 
HHS believes amount to prohibited discrimination under Sec.  156.125. 
However, it is not the intent of HHS to imply that any of the services 
or specific benefits noted in the examples are always EHB, as that can 
vary among States. We also do not plan at this time to add additional 
examples. The examples provided are non-exhaustive and provide adequate 
guidance for setting coverage limitations that comply with existing 
regulatory requirements prohibiting discriminatory benefit design. We 
emphasize that it is not the intent of HHS to list every possible 
instance of presumptively discriminatory plan design and that the 
absence of a specific plan design practice within these examples does 
not mean it does not constitute a presumptively discriminatory 
practice. Rather, the refined policy provides guidance to issuers on 
the kind of evidence that we would find acceptable to justify 
limitations to benefits, to the extent they are EHB.
Comments on the Example Illustrating a Discriminatory Benefit Design 
Based on Age
    Comment: One commenter supporting the age limitation example 
asserted that labeling certain benefits as ``pediatric'' should be 
considered age discrimination as this labeling could potentially 
exclude coverage for adults with chronic health conditions.
    Response: As finalized at Sec.  156.125, plan designs may include 
age limitations on coverage for EHB so long as those limitations are 
supported by or consistent with relevant clinical guidelines or 
standards. We also recognize that in defining the EHB package at 
section 1302(b) of the ACA, Congress included pediatric services among 
the items and services that must be covered as EHB. As such, in 
implementing this section, we recognize that the statute explicitly 
requires certain medically necessary services to be covered as EHBs, 
such as those services required under the preventive services and 
pediatric service category. Therefore, plan designs may be limited to 
pediatric enrollees without running afoul of discriminatory benefit 
design concerns when such limitations are permitted under Federal law. 
Further, the policy is not meant to conflict with or supersede the 
policy at Sec.  156.115(d), which prohibits coverage of, among other 
things, routine non-pediatric dental services and eye exam services as 
EHB. However, to the extent an issuer's plan provides coverage of an 
EHB other than oral and vision care only for pediatric enrollees and no 
applicable Federal requirement only requires covering such EHB for that 
limited age group, the issuer will be held to the clinically based 
standard finalized at Sec.  156.125. HHS will continue to monitor 
issuer compliance with EHB nondiscrimination requirements to discern 
whether additional assistance, policy changes, or rulemaking is 
necessary.
Finalized Examples: Discrimination Based on Age
    We are finalizing these examples as proposed, but with minor 
clarifications to the conclusion of each example to clarify that these 
examples apply and are presumptively discriminatory to the extent 
issuers cover benefits as EHB.
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.\280\ 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.'' \281\
---------------------------------------------------------------------------

    \280\ National Institute on Deafness and Other Communication 
Disorders FAQ on Hearing Aids (2017). NIH. https://www.nidcd.nih.gov/health/hearing-aids#hearingaid_01.
    \281\ 21 CFR 801.420(a)(1). Please note that this provision is 
subject to a pending rulemaking. See 86 FR 58150.
---------------------------------------------------------------------------

    b. Circumstance: 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 a 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 is for ``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.\282\
---------------------------------------------------------------------------

    \282\ Blazer, D.G., Domnitz, S., & Liverman, C.T. (2016). 
Hearing Health Care for Adults: Priorities for Improving Access and 
Affordability. National Academies of Sciences, Engineering, and 
Medicine. National Academies Press (US). https://doi.org/10.17226/23446.
---------------------------------------------------------------------------

    d. Conclusion: Age limits are presumptively discriminatory under 
Sec.  156.125 when applied to EHB and there is no clinical basis for 
the age limitation. A plan subject to Sec.  156.125 that covers 
medically necessary hearing aids as an EHB, but limits such coverage 
based on age is presumptively discriminatory under Sec.  156.125 unless 
the limitation is clinically based. For example, it would be 
presumptively discriminatory for an issuer subject to Sec.  156.125 to 
cover medically necessary hearing aids as EHB under its plan, but limit 
such coverage to a subset of individuals, such as enrollees who are 6 
years of age or younger, since hearing aids may be medically necessary 
for enrollees over the age of 6.\283\ The

[[Page 27302]]

policy reflected in this example does not apply to benefits that are 
not covered by a plan as EHB. For example, pursuant to Sec.  155.170, a 
health benefit an issuer covers under a plan pursuant to a State 
mandate adopted on or after January 1, 2012, other than for purposes of 
compliance with Federal requirements, is not considered EHB and would 
not be subject to the policy reflected in this example.
---------------------------------------------------------------------------

    \283\ In the 2016 Payment Notice proposed rule, 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.
---------------------------------------------------------------------------

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.'' \284\
---------------------------------------------------------------------------

    \284\ Autism Spectrum Disorder. (2013). American Psychiatric 
Association. https://www.psychiatry.org/File%20Library/Psychiatrists/Practice/DSM/APA_DSM-5-Autism-Spectrum-Disorder.pdf.
---------------------------------------------------------------------------

    b. Circumstance: We noted that some States have mandated coverage 
for the diagnosis and treatment for of 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' EHB-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.\285\ Under the DSM-5 criteria, individuals with ASD must show 
symptoms from early childhood, but may not be fully recognized until 
later in life.\286\ We noted 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.\287\
---------------------------------------------------------------------------

    \285\ Autism Spectrum Disorder (ASD). (2020, June 29). CDC. 
https://www.cdc.gov/ncbddd/autism/hcp-dsm.html.
    \286\ American Psychiatric Association. Diagnostic and 
statistical manual of mental disorders. 5th ed. Arlington, VA: 
American Psychiatric Association; 2013.
    \287\ Key Findings: CDC Releases First Estimates of the Number 
of Adults Living with Autism Spectrum Disorder in the United States. 
(2020, April 27). CDC. https://www.cdc.gov/ncbddd/autism/features/adults-living-with-autism-spectrum-disorder.html.
---------------------------------------------------------------------------

    d. Conclusion: Age limits are presumptively discriminatory under 
Sec.  156.125 when applied to services that are covered as EHB and 
there is no clinical basis for the age limitation. A plan subject to 
Sec.  156.125 that covers diagnoses and treatment of ASD as an EHB, but 
limits such coverage in its plan benefit design based on age is 
presumptively discriminatory under Sec.  156.125 unless the limitation 
is clinically based. This example does not apply to benefits that are 
not EHB. For example, pursuant to Sec.  155.170, a benefit required by 
State action taking place on or after January 1, 2012, other than for 
purposes of compliance with federal requirements, is not considered 
EHB, and this example would not apply.
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 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).\288\
---------------------------------------------------------------------------

    \288\ Infertility Statistics. (2021, December 20). CDC. https://www.cdc.gov/nchs/fastats/infertility.htm.
---------------------------------------------------------------------------

    b. Circumstance: We noted 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 noted 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.\289\ However, we also noted that the mean 
age for individuals experiencing their first childbirth has increased 
in recent years.\290\ 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.
---------------------------------------------------------------------------

    \289\ Having a Baby After Age 35: How Aging Affects Fertility 
and Pregnancy. (2020). American College of Obstetricians and 
Gynecologists. https://www.acog.org/womens-health/faqs/having-a-baby-after-age-35-how-aging-affects-fertility-and-pregnancy.
    \290\ Mean Age of Mothers is on the Rise: United States, 2000-
2014. (2016, January 14). CDC. https://www.cdc.gov/nchs/products/databriefs/db232.htm.
---------------------------------------------------------------------------

    d. Conclusion: Age limits are presumptively discriminatory under 
Sec.  156.125 when applied to EHB services and there is no clinical 
basis for the age limitation. A plan subject to Sec.  156.125 that 
covers treatment of infertility as an EHB but limits such coverage in 
its plan benefit design based on age is presumptively discriminatory 
under Sec.  156.125 unless the limitation is clinically based. An 
issuer could rebut the presumption that the plan's age limit on the 
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. This example does not apply to 
benefits that are not EHB. For example, pursuant to Sec.  155.170, a 
benefit required by State action taking place on or after January 1, 
2012, other than for purposes of compliance with federal requirements, 
is not considered EHB and this example would not apply.\291\
---------------------------------------------------------------------------

    \291\ Key Statistics from the National Survey of Family Growth. 
(2017, June 20). CDC. https://www.cdc.gov/nchs/nsfg/key_statistics/i.htm.
---------------------------------------------------------------------------

Comments on the Example Illustrating a Discriminatory Benefit Design 
Based on Health Conditions
    We did not receive substantive comments related to the example, 
Limitations on Foot Care Coverage Based on Diagnosis (Whether Diabetes 
or Another Underlying Medical Condition).
Finalized Example: 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.\292\ Although basic foot care 
is part of an individual's personal self-care, a health care provider 
in

[[Page 27303]]

certain situations may perform routine foot care for a patient to the 
degree that is medically necessary to prevent the perpetuation of 
chronic conditions.
---------------------------------------------------------------------------

    \292\ Routine Foot Care. Medicare Benefit Policy Manual (pp. 
265). CMS. https://www.cms.gov/Regulations-and-Guidance/Guidance/Manuals/Downloads/bp102c15.pdf.
---------------------------------------------------------------------------

    b. Circumstance: We noted 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 
billion for direct medical costs.\293\ 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.\294\
---------------------------------------------------------------------------

    \293\ Statistics About Diabetes. (2022, February 4). American 
Diabetes Association. https://www.diabetes.org/resources/statistics/statistics-about-diabetes.
    \294\ Hicks, C.W., Selvarajah, S., Mathioudakis, N., Sherman, 
R.E., Hines, K.F., Black, J.H., 3rd, & Abularrage, C.J. (2016). 
Burden of Infected Diabetic Foot Ulcers on Hospital Admissions and 
Costs. Annals of vascular surgery, 33, 149-158. https://doi.org/10.1016/j.avsg.2015.11.025.
---------------------------------------------------------------------------

    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.\295\
---------------------------------------------------------------------------

    \295\ Foot Care Coverage Guidelines. (2010). CMS. https://wayback.archive-it.org/2744/20191012061156/https:/www.cms.gov/Outreach-and-Education/Medicare-Learning-Network-MLN/MLNMattersArticles/Downloads/SE1113.pdf.
---------------------------------------------------------------------------

    d. Conclusion: Benefit designs that restrict coverage on the basis 
of health condition are presumptively discriminatory under Sec.  
156.125 when applied to EHB services and there is no clinical basis for 
the limitation. A plan subject to Sec.  156.125 that covers routine 
foot care as EHB in its health plan but limits such coverage on the 
basis of health condition to only apply to individuals diagnosed with 
diabetes despite clinical evidence demonstrating that routine foot care 
may also be medically necessary for treatment of other conditions, such 
as metabolic, neurologic, or peripheral vascular disease, is presumed 
to be discriminatory under Sec.  156.125. This example does not apply 
to benefits that are not EHB. For example, pursuant to Sec.  155.170, a 
benefit required by State action taking place on or after January 1, 
2012, other than for purposes of compliance with federal requirements, 
is not considered EHB and this example would not apply.
Comments on the Example Illustrating a Discriminatory Benefit Design 
Based on Adverse Tiering of Prescription Drugs
    After reviewing the public comments for the Adverse Tiering example 
(87 FR 667 through 668), we are finalizing this proposed example in our 
EHB nondiscrimination policy for health plan benefit designs under 
Sec.  156.125 as proposed with some minor clarifications. We clarify 
that this example applies to benefits that are EHB. This example does 
not apply to benefits that are not EHB; for example, under Sec.  
155.170, coverage of a specific drug that a State mandated on or after 
January 1, 2012 be covered does generally not qualify as EHB and this 
example does not apply.
    Comment: Many commenters supported the example related to 
discrimination in accessing prescription drugs for chronic health 
conditions and adverse tiering, as the further emphasis on the existing 
prohibition against adverse tiering would only further expand access to 
care and improve health outcomes. One commenter noted that the 
prohibition of adverse tiering under Sec.  156.125 is consistent with 
Medicare Part D and emerging State practices. Commenters agreed with 
the application of Sec.  156.125 to adverse tiering because using cost 
as the primary factor in formulary decisions can cause tangible patient 
harm including nonadherence and negative health outcomes.
    Response: We agree with commenters that the inclusion of the 
Adverse Tiering example clarifies our existing position that adverse 
tiering, which occurs when an issuer assigns all or the majority of 
drugs for certain medical conditions to a high-cost prescription drug 
tier to discourage enrollment by people with those medical conditions, 
is presumptively discriminatory under Sec.  156.125. Allowing this 
practice would allow issuers to discourage enrollment for entire 
segments of the population with a particular medical condition by 
placing all or the majority of drugs for that medical condition on a 
high-cost tier.
    To be clear, and as reiterated below, in finalizing this example, 
we are not prohibiting issuers from considering drug cost in setting 
drug formularies. On the contrary, we believe that it is prudent for a 
plan to consider a drug's cost in determining on which tier to place a 
particular drug. For example, if there are two effective drugs 
available to treat a particular condition, and one drug is less 
expensive than the other, it may be appropriate for the issuer to place 
the less expensive drug on a lower tier to incentivize usage of the 
less expensive drug. However, under this example, it is presumptively 
discriminatory for an issuer to place both of these drugs on a high-
cost prescription drug tier in order to actively discourage enrollment 
by those with that condition in the plan. HHS or the State, in 
determining whether the issuer has rebutted this presumption that a 
formulary that places all drugs for a particular condition on a high-
cost tier is discriminatory, will look at the totality of the 
circumstances, including whether the issuer demonstrated 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 pharmacy benefit manager (PBM) weighed 
both cost and clinical guidelines in setting tiers).
    Thus, we urge issuers and PBMs to pay close attention to any 
instance where all or the majority of drugs to treat a particular 
condition are placed on the highest-cost tiers. As we noted in the 
proposed rule, 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 a 
specialty tier that has the highest cost sharing. We acknowledge that 
cost is often an important factor in how issuers and PBMs that service 
issuers 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.
    We believe finalizing this example is consistent with the 
requirement finalized in this rule at Sec.  156.125 to justify 
limitations on EHBs with clinical guidelines. As explained in the 
proposed rule and in more detail below, this example and the existing 
pharmacy and therapeutics (P&T) committee requirements at Sec.  
156.122(a)(3) operate together to require issuers to base their drug 
formulary tier decisions on clinically indicated evidence.
    Comment: Some commenters recommended that HHS allow individual plan 
P&T committees to determine formularies, as P&T committee 
recommendations are flexible in the face of constant change in the 
clinical evidence and other industry considerations. These commenters 
stated that formulary plan designs developed through the P&T committee 
process should not be deemed

[[Page 27304]]

discriminatory simply because the formularies place higher cost drugs 
in higher drug tiers. They noted that the proposed EHB policy would not 
only undermine the role of the P&T committee, but would also impact the 
ability of issuers to develop cost-effective formulary plan designs and 
may compel plans to include at least some high-cost specialty drugs in 
lower tiers, contrary to clinical evidence. In addition, they asserted 
that the proposed EHB policy would encourage manufacturers of these 
drugs to impose higher drug prices, which will drive up premiums.
    Response: We acknowledge the importance of P&T committees in 
setting clinically indicated, non-discriminatory drug formularies; 
since 2017, we have required plans subject to the requirement to 
provide EHB to utilize P&T committees that meet the standards at Sec.  
156.122(a)(3). Based in part on those standards, we expect that P&T 
committees for issuers of such plans provide recommendations consistent 
with the most current and relevant clinical evidence for their 
respective service area.
    Formulary plan designs are not discriminatory simply because 
formularies place higher cost drugs in higher drug tiers. Under this 
finalized example, formularies are presumptively discriminatory when 
all or a majority of drugs for a particular condition are placed on a 
high-cost prescription drug tier to discourage enrollment by those with 
that condition. As we noted in the proposed rule, HHS or the State may 
determine that an issuer can rebut this presumption by a totality of 
the circumstances, including by showing that neutral principles were 
applied consistently across the entire formulary in assigning all or a 
majority of drugs for a particular condition on a high-cost 
prescription drug tier. These principles harmonize with the existing 
requirements for P&T committees at Sec.  156.122(a)(3)(iii) in 
establishing and managing an EHB-compliant formulary drug list. In this 
way, this example places even greater importance on the independent 
nature and clinically-based endeavors of P&T committees. Further, we do 
not agree that a P&T committee's input would likely compel plans to 
include at least some high-cost specialty drugs in lower tiers. We do 
not agree with commenters who asserted that this example will encourage 
manufacturers of these drugs to impose higher drug prices, which will 
drive up premiums. We believe this example will contribute to 
controlling the costs of drugs by ensuring that issuers do not 
inappropriately place additional drugs on higher cost drug tiers.
    Comment: Some commenters suggested that HHS needs to promulgate 
clear parameters of what is considered discriminatory, including a tool 
for QHP issuers to perform their own verification that their 
formularies meet the new non-discrimination requirements in advance of 
their plan submission. One commenter urged HHS to monitor issuers for 
compliance with nondiscrimination requirements, and to assist States 
with oversight and enforcement. One commenter recommended HHS should 
review issuers' internal coverage guidelines for discriminatory benefit 
designs as part of the QHP certification process.
    Response: We believe that this final rule provides issuers clear 
guidance regarding the EHB nondiscrimination policy and encourage 
issuers to utilize tools that are appropriate for their own practices 
to aid with meeting EHB nondiscrimination requirements. For example, 
HHS currently uses and makes available a non-discrimination cost 
sharing review tool to identify and analyze outlier plans seeking 
certification as QHPs on the FFEs, as a means to identify potentially 
discriminatory benefit designs and strives to enhance such techniques. 
In the proposed rule, we stated that we will continue to monitor issuer 
compliance with EHB nondiscrimination requirements and States' 
oversight and enforcement activities to discern whether additional 
guidance, policy changes, or rulemaking are necessary. HHS will also 
consider whether additional guidance is necessary as we monitor issuer 
compliance with EHB nondiscrimination requirements and States' 
oversight and enforcement activities.
Finalized Example: Discrimination Based on Health Conditions
5. Access to Prescription Drugs for Chronic Health Conditions (Adverse 
Tiering)
    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 that issuers make 
about their formulary structure, including decisions made on the basis 
of cost. 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.\296\
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    \296\ Jacobs, D.B., & Sommers, B.D. (2015). Using drugs to 
discriminate--adverse selection in the insurance marketplace. The 
New England journal of medicine, 372(5), 399-402. https://doi.org/10.1056/NEJMp1411376.
---------------------------------------------------------------------------

    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, the 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.\297\ 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).
---------------------------------------------------------------------------

    \297\ Boersma, P., Black, L.I., & Ward, B.W. (2020). Prevalence 
of Multiple Chronic Conditions Among US Adults, 2018. Preventing 
chronic disease, 17, E106. https://doi.org/10.5888/pcd17.200130.
---------------------------------------------------------------------------

    d. Conclusion: It is presumptively discriminatory under Sec.  
156.125 for an issuer providing EHB to place all drugs for a particular 
condition on a high-cost tier to discourage enrollment by those with 
that condition. To rebut the presumption that a formulary that places 
all drugs for a particular condition on a high-cost tier is 
discriminatory, HHS or the State will consider the totality of the 
circumstances, including whether the issuer has demonstrated 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).
    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 could be found to discriminate against 
individuals who have those chronic high-cost conditions under the Sec.  
156.125(a) standard. We clarified that

[[Page 27305]]

such instances of adverse tiering are presumptively discriminatory and 
that issuers and PBMs assigning tiers to drugs should weigh the 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 2016 Payment Notice and 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 are not based on clinically 
indicated, reasonable medical management practices.298 299 
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.
---------------------------------------------------------------------------

    \51\ Letter to Issuers on Federally-facilitated and State 
Partnership Exchanges (pp.15). (2013, April 5). CMS. https://www.cms.gov/cciio/resources/regulations-and-guidance/downloads/2014_letter_to_issuers_04052013.pdf.
    \299\ 2015 Letter to Issuers in the Federally facilitated 
Marketplaces (pp.29). (2014, March 14). CMS. https://www.cms.gov/CCIIO/Resources/Regulations-and-Guidance/Downloads/2015-final-issuer-letter-3-14-2014.pdf.
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Comments on Implementing the Refined EHB Nondiscrimination Policy 60 
Days After Final Rule Publication
    Comment: One commenter supported the proposed effective date of 60 
days after the publication of the final rule, given the negative 
effects that discriminatory benefit designs can have on enrollees with 
chronic conditions, especially during a public health emergency. 
Another commenter supported the 60-day effective date, noting that 
since the proposed clinical standards framework is consistent with HHS' 
earlier rulemaking and plan compliance reviews, it should not unduly 
burden issuers to review and update their plans for compliance.
    Many commenters objected to the proposed implementation timeframe 
as too immediate. Commenters requested that HHS extend the effective 
date until one year after the publication of this final rule to allow 
time for review of benefits coverage and making necessary adjustments. 
Other commenters recommended implementation of the policy no earlier 
than the 2024 plan year, while two other commenters recommended that 
the policy become effective at the beginning of a plan year so that 
formularies do not change in the middle of a plan year. Commenters 
explained that issuers will need to work with States to assess this 
requirement and administrative changes while reviewing existing 
networks and any new benefits. Commenters also noted they need adequate 
implementation time to prevent duplicative health plan designs and 
potential inconsistent standards as many health plans already use 
clinical evidence-based guidelines.
    Response: We recognize that issuers subject to Sec.  156.125 
requirements may choose to carefully review the refined EHB 
nondiscrimination final rule. We recognize that such reviews may take 
time and that issuers may experience added burden to the extent that 
issuers make additional changes to their EHB plan designs in response 
to those reviews. While we expect that issuers are already compliant 
with current Sec.  156.125 requirements, we recognize that in reviewing 
and implementing the refined EHB nondiscrimination policy, issuers may 
still have to make changes to benefits covered as EHB to ensure 
compliance, which may not always be done mid-plan year. Therefore, the 
refined EHB nondiscrimination policy will be applicable starting on the 
earlier of PY 2023 or upon renewal of any plan subject to the EHB 
requirements. We encourage issuers to promptly update their practices 
to more immediately reduce the impact of presumptively discriminatory 
practices, consistent with applicable State and Federal requirements. 
HHS intends to work collaboratively to address compliance issues with 
issuers that are acting in good faith to comply with the refined EHB 
nondiscrimination policy.
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. In the HHS Notice of Benefit and Payment 
Parameters for 2023 proposed rule (87 FR 584, 668), we noted that these 
parameters were not included in the proposed rule, as HHS did not 
propose to change the methodology for these parameters for the 2023 
benefit year, and therefore, HHS published these parameters in guidance 
on December 28, 2021 (Premium Adjustment Percentage, Maximum Annual 
Limitation on Cost Sharing, Reduced Maximum Annual Limitation on Cost 
Sharing, and Required Contribution Percentage for the 2023 Benefit 
Year).\300\
---------------------------------------------------------------------------

    \300\ Letter for Premium Adjustment Percentage, Maximum Annual 
Limitation on Cost Sharing, Reduced Maximum Annual Limitation on 
Cost Sharing, and Required Contribution Percentage for the 2023 
Benefit Year (2021, December 28). CMS. https://www.cms.gov/files/document/2023-papi-parameters-guidance-v4-final-12-27-21-508.pdf.
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8. Levels of Coverage (Actuarial Value) (Sec. Sec.  156.140, 156.200, 
156.400)
    In the HHS Notice of Benefit and Payment Parameters for 2023 
proposed rule (87 FR 584, 668), HHS proposed 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,\301\ for which HHS proposed a de minimis range of +5/-2. Under 
Sec.  156.200, HHS proposed, as a condition of QHP certification, to 
limit the de minimis range to +2/0 percentage points for individual 
market silver QHPs; HHS also proposed 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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    \301\ 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.
---------------------------------------------------------------------------

    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 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.

[[Page 27306]]

    We sought comments on this proposal. We refer readers to the 
proposed rule (87 FR 668 through 671) for further discussion of these 
proposals and our rationale.
    After reviewing the public comments, for the reasons set forth in 
this rule and in the proposed rule, we are finalizing the proposed 
changes to the de minimis ranges at Sec. Sec.  156.140(c), 156.200, and 
156.400 as proposed.
    First, beginning in PY 2023, we are finalizing that all individual 
and small group market plans subject to the AV requirements under the 
EHB package will be subject to a de minimis range of +2/-2 percentage 
points, except for expanded bronze plans, for which we finalize a de 
minimis range of +5/-2 percentage points.
    As we explained in the proposed rule (87 FR 668), since we 
finalized these de minimis ranges in the 2018 Payment Notice (81 FR 
94058, 94142) and the 2017 Market Stabilization final rule (82 FR 
18346, 18368), 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 expect more bronze plans 
to have an AV of at least 64 percent in future PYs.
[GRAPHIC] [TIFF OMITTED] TR06MY22.005

    During PYs 2018 through 2021, as the percentage of bronze plans 
within the upper limit of the +5/-4 percentage point range increased, 
the percentage of silver plans offered on HealthCare.gov within the 
lower end of the current +2/-4 percentage point range remained 
consistent, with less than a third of silver plans having an AV between 
66 and 68 percent.
[GRAPHIC] [TIFF OMITTED] TR06MY22.006

    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] TR06MY22.007

    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 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, with 
current de minimis ranges, 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 the expanded bronze plan and the base silver plan 
is also apparent.

[[Page 27307]]

[GRAPHIC] [TIFF OMITTED] TR06MY22.008

    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 high 
deductible health plans (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 are changing the de minimis range for standard silver plans as 
proposed.
    Additionally, as shown in Tables 10 and 11, we stated that 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] TR06MY22.009

[GRAPHIC] [TIFF OMITTED] TR06MY22.010

    Because of this shift, and for consistency across the metal levels, 
which would help reduce potential consumer confusion, we believed it is 
appropriate, 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 change above, starting with PYs 
beginning in 2023, we are changing 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 final rule (82 FR 18369), we stated that 
States are the primary enforcers of AV requirements and can apply 
stricter AV standards that are consistent with Federal law. 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 sections 
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 final 
rule, a State cannot apply an AV range that exceeds +2/-2 percentage 
points, except for under the expanded bronze range originally provided 
for in Sec.  156.140(c).
    In addition to the changes applicable to non-grandfathered 
individual and small group market health insurance coverage market-
wide, we are also amending 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 are finalizing this narrower de minimis range for 
individual market silver QHPs to maximize PTC and APTC for subsidized 
enrollees. We believe that narrowing the

[[Page 27308]]

de minimis range of individual market silver QHPs will influence the 
generosity of the SLCSP, the benchmark plan used to determine an 
individual's PTC. We note that a subsidized enrollee who has an SLCSP 
that is currently below 70 percent AV will 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 8, 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 ten to one.
    In addition, as we stated in the proposed rule (87 FR 670), after 
the 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. We believe the amendment we are finalizing to the de 
minimis range for individual market silver QHPs will reduce the cost of 
insurance coverage for an increasing population of subsidized 
enrollees. It will 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 Exchanges.
    Thus, we believe increasing PTC for all subsidized enrollees 
justifies a narrower de minimis range on individual market silver QHPs 
that have fewer enrollments each year.
    Finally, we are changing the de minimis variation for individual 
market income-based silver CSR plan variations from +1/-1 to +1/0 with 
a revision to the definition of ``De minimis variation for a silver 
plan variation'' at Sec.  156.400. Similar to the +2/0 de minimis 
change for individual market silver QHPs, we believe the change to the 
de minimis variation for individual market income-based silver CSR plan 
variations will 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 
will be an expected increase to the premium for the CSR plan variations 
as a result of the increased generosity, it will be substantially 
offset by increases to the APTC and PTC.
    We summarize and respond to public comments received on levels of 
coverage (actuarial value) (Sec. Sec.  156.140, 156.200, 156.400).
    Comment: Many commenters expressed general support for the proposed 
changes to the de minimis ranges, agreeing with the rationale from the 
proposed rule that narrowing the de minimis ranges would increase PTC 
and APTC, and make coverage more affordable for subsidized enrollees. 
Many other commenters did not support the proposal and expressed 
satisfaction with the current de minimis ranges, asserting that not 
every enrollee would be eligible for the increased subsidies that would 
offset any premium increases due to the narrowed de minimis ranges. 
These commenters noted that the expanded PTC under section 9661 of the 
ARP is set to expire after PY 2022.
    Response: We agree with commenters that the proposed de minimis 
changes would increase PTC and APTC to make coverage more affordable 
for subsidized enrollees. As we noted in the proposed rule, 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, 
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.
    We recognize that this change will increase premiums for enrollees 
in the individual and small group market. We estimated that the 
premiums would increase approximately 2 percent on average because of 
this change, which accounts for changes after the expiration of the 
expanded PTC under section 9661 of the ARP. We received no comments 
that addressed the accuracy of this estimate or its effects as a whole. 
While we recognize that not every enrollee in plans subject to the AV 
requirement is eligible for APTC and lives in an area with a SLCSP that 
is currently below 70 percent AV, we believe that the benefit of 
increased PTC and APTC for the majority of enrollees in the Exchanges 
outweighs the effects of wider de minimis ranges and the burden of 
premium increases.
    Comment: Some commenters requested clarification on the 
applicability of uniform-modification-of-coverage rules should the 
narrower de minimis ranges be finalized. One such commenter requested 
clarification that plans within the current de minimis ranges, but 
outside of the proposed narrower ranges for PY 2023, will be allowed to 
renew within the same metal level of coverage under the Federal 
uniform-modification-of-coverage rules. These commenters generally 
contended that discontinued plans not subject to those rules would 
cause disruption for enrollees.
    Response: Under the guaranteed renewability provision at 45 CFR 
147.106(e), a health insurance issuer offering health insurance 
coverage in the individual, small group, or large group market is 
required to renew or continue in force the coverage at the option of 
the plan sponsor or the individual, unless the issuer discontinues all 
coverage, the product is discontinued, or the issuer's action is 
otherwise excepted from this requirement. One such exception that 
applies to individual and small group coverage is the modification of 
coverage at the time of renewal made consistent with State law, 
effective uniformly and solely pursuant to applicable Federal or State 
requirements, as described at Sec.  147.106(e)(1)-(2). This allows an 
issuer to modify its plans uniformly if the modification is made within 
a reasonable time period after the imposition or modification of a 
Federal or State requirement and the modification is directly related 
to the imposition or modification of the Federal or State requirement. 
As finalizing these changes to the de minimis ranges constitutes a 
modification of a Federal requirement, issuers that, consistent with 
State law, uniformly modify their plans solely to bring the plans' AV 
levels into the narrower de minimis ranges to maintain the same metal 
level will be considered to have modified their plans consistent with 
the Federal uniform-modification-of-coverage rules outlined in 45 CFR 
147.106(e). Such changes would not cause any product, or any plan 
within a product, to be a different product or plan, as explained in 
the definitions of product and plan in 45 CFR 144.103.
    Comment: Many commenters opposed the proposed +2/0 de minimis range 
for individual market silver QHPs and +2/-2 de minimis range for other 
silver plans and recommended keeping the +2/-2 de minimis range 
consistent across the individual market. These commenters cited 
concerns about the effects of non-uniform de minimis ranges for silver 
plans across the individual market, asserting that applying different 
de minimis ranges on- and off-Exchange could destabilize the individual 
market. They further believe that the different de minimis ranges could 
adversely impact

[[Page 27309]]

consumers who choose to buy health coverage off-Exchange.
    Response: We strive to maintain consistency for the de minimis 
ranges as much as possible. A consistent de minimis range allows for 
the most reliable determination of the differences between metal levels 
of coverage which, overall, improves the consumer shopping experience. 
We diverge from that goal only to the extent necessary to achieve 
compelling policy interests. For example, we previously regulated by 
this guideline in the 2017 Market Stabilization final rule, changing 
the de minimis ranges to +2/-4 from the original +2/-2 allowable AV 
variation finalized in the Final 2018 Payment Notice, in an attempt to 
achieve the compelling policy interest of improving plan variability 
and choice. In this rule, we believe it is appropriate to adopt 
separate de minimis ranges for individual market silver QHPs to achieve 
the compelling policy interest of addressing the rising costs of health 
insurance premiums by influencing the generosity of the SLCSP to 
increase the amounts of PTC and APTC.
    Comment: Many commenters urged that we not finalize changes to de 
minimis ranges for small group market plans, asserting that the 
proposed rule's rationale for changing the de minimis ranges applies 
only to changes to individual market plans. These commenters pointed 
out that HHS did not describe similar shifts in enrollments in small 
group QHPs offered on HealthCare.gov that are towards the upper end of 
the expanded bronze de minimis range as done with enrollment in 
individual market QHPs offered on HealthCare.gov, and that enrollees in 
small group market plans would experience premium increases as a result 
of the proposal, without the benefit of increased PTC or APTC. Further, 
these commenters stated that, because small group enrollees purchase 
their coverage through employers, they are not involved with plan 
comparison in the same way as individual market enrollees and HHS' 
justification for maintaining the integrity between metal levels is 
inapplicable to the small group market. These commenters also asserted 
that sponsors of small group market plans prefer the variety of plan 
choices under a wider de minimis range, and explained that these 
employers would experience disruption to existing plans or decide to 
drop coverage entirely.
    Response: We recognize the concern raised by commenters that the 
proposed de minimis changes will lead to increased premiums for small 
group market enrollees without any subsidies to offset the cost. We are 
of the view that the burden of small premium increases in the small 
group market does not outweigh the benefits of ensuring that all 
purchasers of health coverage, including small group employers and 
their employees, can discern the material differences in benefits 
provided under competing health insurance plans. In response to the 
assertion that sponsors of small group market plans prefer the variety 
of plan choices that wider de minimis ranges allow for, and that these 
employers would experience disruption to existing plans or decide to 
drop coverage entirely, we believe that the benefits of improved plan 
comparability outweigh the advantages of wider de minimis ranges.
    We do not have sufficient data to confidently describe enrollment 
trends in small group market QHPs. However, enrollment trends were not 
the basis for proposing to change the de minimis range for small group 
market plans. As we explained in the proposed rule (87 FR 669 through 
670), the rationale for making equivalent changes to the de minimis 
ranges across the individual and small group markets is to maintain 
consistency across the metal levels, as an effort to reduce potential 
consumer confusion. Maintaining consistency for the metal level de 
minimis ranges allows for the greatest degree of confidence that 
consumers can recognize and understand the differences between metal 
levels. We diverge from the standard +2/-2 de minimis range for 
expanded bronze plans (+5/-2) for the reasons described in the preamble 
of the proposed rule, and for individual market silver QHPs offered 
both on-Exchange and off-Exchange (+2/0) and income-based silver CSR 
plan variations (+1/0) only to further the compelling policy interests 
described elsewhere in this section.
    Comment: Many commenters supported the proposed de minimis ranges 
by citing the expected improvement in consumers' ability to 
meaningfully compare plans and make informed decisions related to their 
health coverage. These commenters stated that the current de minimis 
ranges are too permissive and blur the distinction between the metal 
levels of coverage envisioned by the ACA, which makes the plan 
comparison process difficult for consumers. They noted that the 
proposed de minimis ranges would narrow the allowable variation in plan 
generosity per metal level and should improve the plan comparison 
process for consumers, leading to more informed decisions on effective 
health coverage. The commenters also stated that the proposed de 
minimis ranges could lead to higher enrollment, as consumers would 
better understand the difference between metal level QHPs and more 
efficiently choose their health coverage. Additionally, one of the 
commenters noted that narrowing the allowable levels of coverage would 
positively impact plan marketing and display practices across issuers 
and keep consistent thresholds across competitors. They particularly 
noted that the narrow de minimis ranges would end the ``race to the 
bottom'' of underbidding high generosity competitor plans by offering 
plans with lower generosity that still display under the same metal 
level of coverage within marketing.
    Opposing commenters expressed a preference for the current de 
minimis ranges, asserting that the proposed ranges are too disruptive 
to the current market of plan offerings and could lead to more 
difficulty for consumers during plan selection. According to these 
commenters, consumer feedback indicates a preference for consistently 
similar plan offerings year-over-year. These commenters also generally 
asserted that the proposed ranges would cause fluctuations in available 
plan offerings, and could lead to consumers choosing coverage that is 
not in their best interests. These commenters also noted that the 
proposal may eliminate popular plan options at lower bound levels of 
coverage and that the gap in the allowable de minimis range could lead 
to limited plan design flexibility. Some commenters raised concerns 
about the effect of the proposed de minimis ranges on future plan 
designs as well, stating that narrowing the ranges for plans on and off 
the Exchanges would reduce issuers' ability to create plan designs that 
meet the specific needs of enrollees. These commenters further 
contended that popular plan designs would become non-compliant, with 
one State Exchange commenting that a standardized gold plan design, 
currently at 76 percent AV and accounting for 51 percent of the 
Exchange's gold metal level enrollment, would be non-compliant under 
this proposal. Some commenters also expressed general concerns about 
market disruption and requested a delay of any changes to the de 
minimis ranges to at least PY 2024.
    Response: We agree with commenters that this policy will improve 
comparability, ensuring that consumers can more meaningfully 
distinguish between plans in different metal levels of coverage, and 
ensure consistency across metal levels. Increased recognition by 
consumers of the fundamental differences between the benefits offered 
under different health

[[Page 27310]]

plans means that consumers will be less likely to choose a health plan 
ill-fitted to their circumstances, which may discourage consumers from 
using and maintaining their coverage in the future.
    Furthermore, we believe that the implementation of the proposed de 
minimis ranges can lead to higher enrollment in plans. Requiring that 
plans offer the levels of coverage described at section 1302(d) of the 
ACA promotes consumers' ability to more easily recognize, understand, 
and compare plan offerings. As commenters noted, there is a general 
consensus of a connection between the ease of consumer plan selection 
and their enrollment decisions. These narrower de minimis ranges will 
allow consumers to better differentiate between plan offerings and 
reduce consumer confusion, which we believe will motivate increased 
overall enrollment.
    In response to comments that the new de minimis ranges may 
eliminate popular plan options at lower bound levels of coverage and 
could lead to limited plan design flexibility, we are of the view that 
the burdens to issuers of conforming their plan offerings to the new de 
minimis ranges will be offset by the positive impacts on the consumer 
plan selection process. We reiterate our note from the proposed rule 
that we have no evidence that the expanded variation in allowable 
levels of coverage under current rules actually improved the consumer 
experience, including a consumer's ability to choose the plan that best 
meets their needs. As we stated previously, we believe the revised de 
minimis ranges we are finalizing in this rule will improve 
comparability, ensuring that consumers can more meaningfully 
distinguish between plans in different metal levels of coverage.
    Although initial compliance with the new de minimis ranges may 
require additional effort from stakeholders, we still believe that this 
change is necessary to respond to observed changes in consumer plan 
selection behavior. We note that any initial disruption to issuer plans 
in the -4 to -2 percentage point de minimis range will be limited to a 
one-time cost-sharing adjustment to conform with up to a 2-percentage 
point change in the AV (except for individual market silver QHPs, which 
would have up to a 4-percentage point change). Issuers will be 
permitted to make these changes to existing plans consistent with the 
uniform modification provisions under the guaranteed renewability 
statute and regulation. Furthermore, while we believe issuers can 
operationalize these changes in time for plan year 2023, we recognize 
that this one-time cost-sharing adjustment may create substantial 
burden for issuers. This is a burden we do not impose lightly; in 
addition to increasing PTC and APTC for eligible enrollees, these 
changes to the de minimis ranges are necessary to assure consumers that 
a plan's generosity conforms to the appropriate metal level and to 
prevent overlap in plan generosity across metal levels.
    Comment: Some commenters stated that plans within States requiring 
the individual and small group insurance markets to be merged into a 
single risk pool under Sec.  156.80 would be disrupted by the proposal 
to establish different de minimis ranges for individual market silver 
QHPs and for other individual and small group plans.
    Response: Vermont, which previously had merged its individual and 
small group markets transitioned to separate individual and small group 
market risk pools beginning January 1, 2022.\302\ While both 
Massachusetts and the District of Columbia have State-specific factors 
that combine certain aspects of their individual and small group plans, 
we do not consider their individual and small group markets to be 
merged into a single risk pool under Sec.  156.80.\303\ For example, 
Massachusetts permits issuers in its small group market to update their 
index rates once every quarter, allowing small group market rating to 
operate separately from individual market rating in a manner that does 
not reflect a merged single risk pool. Similarly, the District of 
Columbia permits issuers to use different premium rating factors for 
its individual and small group markets in a manner that does not 
reflect a merged single risk pool. As such, there are currently no 
States with individual and small group markets that meet the Federal 
definition of a merged market under Sec.  156.80. Therefore, we do not 
agree with commenters that there will be disruption to existing plans 
in merged markets in 2023. However, we recognize that if a State 
chooses to merge risk pools in future plan years, plans in that State 
could not utilize separate de minimis ranges for individual and small 
group market silver QHPs, and would need to conform all individual 
market silver QHPs to a +2/0 de minimis range, and income-based silver 
CSR plan variations to a +1/0 de minimis range.
---------------------------------------------------------------------------

    \302\ Information on state specific rating variation is 
available at Market Rating Reforms. (2021, December 10). CMS. 
https://www.cms.gov/CCIIO/Programs-and-Initiatives/Health-Insurance-Market-Reforms/state-rating. Also see Green Mountain Care Board 
Reduces Rate Requests for Individual and Family Plans for 2022. 
(2021, August 5). Green Mountain Care Board. https://gmcboard.vermont.gov/sites/gmcb/files/documents/GMCB%20Press%20Release%20-%202022%20BCBSVT%20and%20MVP%20Individual%20Decisions.pdf.
    \303\ Massachusetts is considered to have a merged market for 
purposes of the HHS-operated risk adjustment program. See https://regtap.cms.gov/uploads/library/RA_MergedMarketsFAQ_021522_5CR_021522.pdf.
---------------------------------------------------------------------------

9. QHP Issuer Participation Standards (Sec.  156.200)
    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. In the HHS Notice of Benefit and Payment 
Parameters for 2023 proposed rule (87 FR 584, 671), we proposed to 
amend 45 CFR 156.200(e) such that its nondiscrimination protections 
would explicitly prohibit discrimination based on sexual orientation 
and gender identity. As explained in the Supplemental Information 
section earlier in this preamble, HHS will address this proposed 
policy, as well as the public comments submitted in response to this 
proposal, in future rulemaking.
10. Standardized Plan Options (Sec.  156.201)
    In the 2023 Payment Notice proposed rule (87 FR 584, 671 through 
680), HHS proposed a requirement that issuers offering QHPs through 
FFEs and SBE-FPs, for PY 2023 and beyond, must offer through the 
Exchange standardized QHP options designed by HHS 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. We did not propose to limit the 
number of non-standardized plan options that issuers can offer but 
noted that we were considering whether it would be appropriate to do so 
in a future plan year. Furthermore, we did not propose to subject 
issuers in State Exchanges to this requirement to avoid duplicative 
standardized plan option requirements on State Exchange issuers and 
because we are of the view that State Exchanges are best positioned to 
design and implement standardized plan option requirements for their 
State. We also proposed that FFE and SBE-FP issuers that are already 
required to offer standardized plan options under State action taking 
place on or before January 1, 2020, such as issuers in the State of 
Oregon,\304\ be exempt from the standardized plan option requirements 
in the proposal.
---------------------------------------------------------------------------

    \304\ See Or. Admin. R. 836-053-0009.
---------------------------------------------------------------------------

    HHS proposed the following standardized plan options: one bronze 
plan, one bronze plan that meets the

[[Page 27311]]

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 
did not propose standardized plan options for the Indian CSR plan 
variations as provided for at Sec.  156.420(b) since the cost sharing 
parameters for these plans are already largely specified.
    HHS proposed two sets of standardized plan options to accommodate 
different States' cost sharing laws. HHS proposed that the first set 
apply to all FFE and SBE-FP issuers excluding issuers in Delaware and 
Louisiana, and that the second set apply to issuers in Delaware and 
Louisiana.
    HHS also noted that it was considering exercising the existing 
authority under Sec.  155.205(b)(1) to differentially display 
standardized plan options on HealthCare.gov. Similarly, HHS noted that 
it was considering resuming enforcement of the existing standardized 
plan 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 Direct Enrollment 
(DE) and enhanced direct enrollment (EDE) Pathways--at Sec. Sec.  
155.220(c)(3)(i)(H) and 156.265(b)(3)(iv), respectively. HHS noted that 
if it did exercise these existing authorities, these entities would be 
required to differentially display standardized plan options beginning 
with the PY 2023 open enrollment period in accordance with the 
requirements under Sec.  155.205(b)(1) in a manner consistent with how 
standardized plan options are displayed on HealthCare.gov, unless HHS 
approves a deviation. We also noted that any requests from web-brokers 
and QHP issuers seeking approval for an alternate differentiation 
format would be reviewed based on whether the same or a similar level 
of differentiation and clarity is being provided under the requested 
deviation as is provided on HealthCare.gov.
    We proposed this approach for several reasons. To begin, the 2019 
Payment Notice final rule eliminated standardized plan options with the 
intention of maximizing innovation and variety at a time when the 
individual market was considered to be at risk of destabilization. In 
the proposed rule, we explained that we believe that current market 
conditions differ significantly from the market conditions that defined 
the individual market when standardized plan 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 plan options 
were discontinued in the 2019 Payment Notice final rule.
    We explained in the proposed rule that with increased enrollment, 
increased issuer participation, decreased single issuer counties, and 
increased plan options available to consumers, HHS is of the view that 
resuming standardized plan options at this time could play a 
constructive role in enhancing the consumer experience, increasing 
consumer understanding, simplifying the plan selection process, 
combatting discriminatory benefit designs that disproportionately 
impact disadvantaged populations, and advancing health equity. We also 
explained that we 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 did not propose to require issuers in State Exchanges to offer 
standardized plan options for several reasons, including that eight 
State Exchanges already require or will require issuers to offer 
standardized plan options by PY 2023. In addition, imposing duplicative 
standardized plan option requirements on issuers in State Exchanges 
that already have existing State standardized plan option requirements 
runs counter to our goals of enhancing the consumer experience, 
increasing consumer understanding, simplifying the plan selection 
process, combatting discriminatory benefit designs, and advancing 
health equity. We also explained that we believe that State Exchanges 
are uniquely positioned to best understand the nature of their 
respective markets as well as the consumers in these markets. As such, 
we explained in the proposed rule that we believe that State Exchanges 
are best positioned to design standardized plan options suitable for 
their respective markets.
    We further explained in the proposed rule that we 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 explained that we do not wish to 
impede these innovative policies so long as they comply with existing 
legal requirements. However, because we proposed to impose this 
requirement in the FFEs, and because the SBE-FPs use the same platform 
as the FFEs, we proposed to apply these requirements equally on FFEs 
and SBE-FPs. We explained that 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.
    In the proposed rule, we explained that we proposed to exempt FFE 
and SBE-FP issuers that are subject to State standardized plan option 
requirements from these standardized plan option requirements since we 
do not wish to impose duplicative requirements that could conflict with 
these existing State standardized plan option requirements and the QHP 
plan designs applicable in such States. Regardless, we proposed to 
differentially display these existing State standardized plan options 
on the Federal platform in the same manner as the standardized plan 
options in this rule to ensure a consistent experience for all 
consumers utilizing the Federal platform.
    In the proposed rule, we explained that we designed two sets of 
standardized plan options to accommodate applicable State cost sharing 
laws in different sets of FFE and SBE-FP States. We also explained that 
we designed these standardized plan options to be similar to the most 
popular QHPs in FFEs and SBE-FPs in PY 2021 in terms of cost sharing 
parameters, MOOPs, and deductibles in order to ensure these plans are 
similar to plans that most consumers are already currently enrolled in, 
thereby reducing the risk of disruption for consumers and issuers 
alike.
    In the proposed rule, we explained that we believe that resuming 
the differential display of standardized plan options on HealthCare.gov 
per the existing authority at Sec.  155.205(b)(1) would further 
streamline the plan selection and enrollment process for Exchange 
consumers, aid consumers in distinguishing standardized plan options 
from non-standardized plan options, and enhance consumer understanding 
of the benefits of standardized plan options, such as having more pre-
deductible coverage. We also explained that we believe that resuming 
enforcement of the existing standardized plan options display 
requirements applicable to approved web-brokers and QHP issuers using a

[[Page 27312]]

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, and that doing so will 
ensure a consistent consumer experience whether consumers are selecting 
plans on or off the Exchanges.
    We refer readers to the proposed rule (87 FR 671 through 680) for a 
complete description of the proposals and rationale.
    After considering comments received, for the reasons set forth in 
this rule and in the proposed rule, HHS finalizes the policies as 
proposed. Specifically, HHS finalizes the requirement for PY 2023 and 
beyond that issuers offering QHPs through FFEs and SBE-FPs must offer 
through the Exchange standardized QHP options designed by HHS at every 
product network type (as described in the definition of ``product'' at 
Sec.  144.103), at every metal level, and throughout every service area 
that they offer non-standardized QHP options in the individual market. 
We note that we added the phrase ``at every'' to the metal level 
component of the above requirement for additional clarification and to 
minimize the risk of misunderstanding these requirements. We also 
clarify that these requirements are applicable to the FFE and SBE-FP 
issuers offering QHPs in the individual market but not the small group 
market.
    Similar to its stance in the proposed rule, HHS will not 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. We also finalize, as 
proposed, that issuers in State Exchanges be exempt from the 
requirement to offer standardized plan options. Similarly, we finalize, 
as proposed, that issuers of QHPs in FFEs and SBE-FPs that are already 
required to offer standardized plan options under State action taking 
place on or before January 1, 2020, such as issuers in the State of 
Oregon,\305\ are exempt from these requirements.
---------------------------------------------------------------------------

    \305\ See Or. Admin. R. 836-053-0009.
---------------------------------------------------------------------------

    HHS finalizes the following standardized plan options, as proposed: 
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. HHS did not propose 
standardized plan options for the Indian CSR plan variations as 
provided for at Sec.  156.420(b), and therefore is not finalizing 
standardized plan options for these plan variations.
    HHS also finalizes two sets of standardized plan options to 
accommodate different States' cost sharing laws, as proposed. 
Specifically, the first set of standardized plan options will apply to 
all FFE and SBE-FP issuers, except issuers in Delaware and Louisiana. 
We add as a point of clarification that this first set of standardized 
plan options will also not apply to issuers in Oregon, since Oregon 
enacted standardized plan options requirements before January 1, 2020 
and issuers in Oregon are thus exempt from these requirements. The 
second set of standardized plan options will apply only to issuers in 
Delaware and Louisiana in order to accommodate these two States' 
specialty tier prescription drug cost sharing laws.
    In the first set of standardized plan options finalized in this 
rule (see Table 12), applicable to all FFE and SBE-FP issuers, except 
issuers in Delaware, Louisiana, and Oregon, 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 
copay for the mental health/substance use disorder in-network 
outpatient office visit sub-classification is equal to the least 
restrictive level for copays for medical/surgical benefits in the in-
network, outpatient office visit sub-classification (and copays apply 
to substantially all medical/surgical benefits in this sub-
classification), to ensure issuers can 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.\306\
---------------------------------------------------------------------------

    \306\ In general, MHPAEA and its implementing regulations apply 
to group health plans and health insurance issuers in the group and 
individual markets, and require 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.
---------------------------------------------------------------------------

    The second set of standardized plan options finalized in this final 
rule (see Table 13), applicable only to issuers in Delaware and 
Louisiana, has copays of $150 or less for the specialty drug tiers of 
standardized plan options at all metal levels. This copay limitation 
for specialty drug tiers is the key feature that distinguishes the 
second set of standardized plan options from the first.
    The two sets of standardized plan options finalized in this rule 
were designed to reflect the benefit categories in the actuarial value 
calculator (AVC), along with the addition of the ``Urgent Care'' 
benefit category. The cost sharing values for ``Mental/Behavioral 
Health Inpatient Services'' and ``Substance Abuse Disorder Inpatient 
Services'' benefits were not included in the proposed rule. However, we 
clarify that the ``Mental/Behavioral Health Inpatient Services'' and 
``Substance Abuse Disorder Inpatient Services'' cost sharing values are 
populated based on the ``Inpatient Hospital Services (for example, 
Hospital Stay)'' cost sharing values since this benefit correlates to 
admission in a hospital or mental health facility. We further clarify 
that for the ``Inpatient Hospital Services'' benefit category in Tables 
12 and 13, the ``(Including Mental Health and Substance Use Disorder)'' 
portion of the benefit category name was mistakenly excluded in the 
proposed rule. We therefore amended the name of this benefit category 
to more closely align with the corresponding benefit category in the 
AVC.
    We also clarify that the AVs for several of the plans in each set 
differ slightly from the AVs of the corresponding plans in the proposed 
rule, due to a miscalculation with the AVC. We clarify that when a 
prescription drug formulary tier has copay after deductible as the form 
of cost sharing, both the ``Subject to Deductible? '' and ``Copay only 
applies after deductible?'' boxes must be selected in the AVC for that 
particular tier, or an incorrect AV will be calculated.
    In both sets of standardized plan options, expanded bronze, 
standard silver, the silver 73 CSR variant, and the silver 87 CSR 
variant were affected by this miscalculation. After resolving this 
miscalculation, in the first set of standardized plan options, the AV 
for expanded bronze changed from 64.06 percent to 64.18 percent; the AV 
for standard silver changed from 70.04 percent to 70.06 percent; the AV 
for the silver 73 CSR variant changed from 73.10 percent to 73.11 
percent; and the AV for the silver 87 CSR variant changed from 87.04 
percent to 87.05 percent. In the second set of standardized plan 
options, the AV for expanded bronze changed from 64.07 percent to 64.18 
percent; the AV for standard silver changed from 70.05 percent to 70.06 
percent; the AV for the silver 73 CSR variant changed from

[[Page 27313]]

73.01 percent to 73.03 percent; and the AV for the silver 87 variant 
changed from 87.05 percent to 87.06 percent. The AVs for other metal 
levels were not affected by this miscalculation since these plans did 
not have copay after deductible as the cost sharing type for any 
benefits.
    We also note that one asterisk (*) was mistakenly excluded in the 
plan designs in the proposed rule. Specifically, in the second set of 
standardized plan options, the gold plan's specialty drug tier should 
be exempt from the deductible and should thus have an asterisk next to 
its cost sharing amount. All other cost sharing parameters in both of 
the below sets of standardized plan options remain unchanged from the 
original plans in the proposed rule.
    HHS also finalizes, as proposed, that we will exercise our existing 
authority under Sec.  155.205(b)(1) to resume the differential display 
of standardized plan option plans on HealthCare.gov beginning with the 
PY 2023 open enrollment period.\307\ Similarly, also beginning with the 
PY 2023 open enrollment period, HHS finalizes, as proposed, that we 
will resume enforcement of the existing standardized plan options 
display requirements under Sec. Sec.  155.220(c)(3)(i)(H) and 
156.265(b)(3)(iv) for approved web-brokers and QHP issuers using a 
direct enrollment pathway to facilitate enrollment through an FFE or 
SBE-FP--including those using the Classic DE and EDE Pathways--meaning 
that these entities are required to differentially display standardized 
plan options in a manner consistent with how standardized plan options 
are displayed on HealthCare.gov, unless HHS approves a deviation.
---------------------------------------------------------------------------

    \307\ The PY 2023 OEP is scheduled from November 1, 2022 to 
January 15, 2023. See 45 CFR 155.410(e)(3).
---------------------------------------------------------------------------

    HHS also finalizes, as proposed, that any requests from web-brokers 
or QHP issuers that seek approval for an alternate differentiation 
format will be reviewed based on whether the same or similar level of 
differentiation and clarity would be provided under the requested 
deviation as is provided on HealthCare.gov. We also 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--only needs to differentially display those standardized plan 
options it offers.\308\ To minimize the burden of complying with these 
display requirements, HHS will provide access to information on 
standardized plan options to web-brokers and QHP issuers through the 
Health Insurance Exchange Public Use Files (PUFs) and QHP Landscape 
file.
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    \308\ See 81 FR 94118.

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[[Page 27314]]

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[[Page 27315]]


[GRAPHIC] [TIFF OMITTED] TR06MY22.012

    We summarize and respond to public comments received on the 
proposals related to the standardized plan options.\309\ We also offer 
several points of clarification.
---------------------------------------------------------------------------

    \309\ In connection with HHS' proposal to require FFE and SBE-FP 
issuers to offer standardized plan options, HHS sought comment on: 
(1) Requiring FFE and SBE-FP issuers to offer standardized plan 
options at every product network type, metal level, and throughout 
every service area that they offer non-standardized plan options; 
(2) not limiting the number of non-standardized plan 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 plan 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 plan 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 plan options; (9) exempting FFE 
and SBE-FP issuers that are subject to existing state standardized 
plan options requirements under state action taking place on or 
before January 1, 2020 from being required to offer the standardized 
plan options in this proposal; (10) the methodology used to design 
these standardized plan options; (11) if the proposed standardized 
plan 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 plan 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 PY 2023 and 
beyond; and (15) having two sets of standardized plan options (that 
is, a separate set for Delaware and Louisiana). See 87 FR 671 
through 680.

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[[Page 27316]]

    Comment: Many commenters supported requiring issuers offering QHPs 
through FFEs and SBE-FPs to offer standardized plan options at every 
product network type, at every metal level, and throughout every 
service area that they offer non-standardized plan options, explaining 
that standardized plan options could play an important role in 
simplifying the plan selection process. These commenters explained this 
approach will enable consumers to more easily compare plans by 
standardizing cost sharing parameters, thereby allowing individuals to 
focus on other factors crucial to their health, such as premiums, 
networks, quality, and customer satisfaction.
    Many commenters also explained that requiring issuers to offer 
standardized plan options could improve affordability by requiring pre-
deductible coverage of key services. These commenters explained that 
lowering cost barriers to services and supplies that address health 
conditions that disproportionately affect historically underserved 
communities aligns with broader Federal efforts intended to reduce 
health disparities. These commenters also explained that consumers 
frequently choose plans based only on premiums--without a clear 
understanding of additional out-of-pocket costs they might experience. 
These commenters thus explained that requiring issuers to offer 
standardized plan options with enhanced pre-deductible coverage could 
reduce the risk of consumers experiencing unexpected financial costs 
for receiving care.
    Several commenters explained that the effectiveness of plan 
standardization in improving access to care and enhancing affordability 
is evinced by the experience of the nine States that have already 
adopted standardized plan option requirements in their respective State 
Exchanges. These commenters explained that several of these State 
Exchanges have required issuers to offer standardized plan options 
since their inception in 2014. These commenters also explained that 
standardized plan option requirements have played an important role in 
achieving some of the lowest rates of premium growth in the country in 
these State Exchanges.
    Response: We agree that consumers will benefit from tools that 
further streamline the decision-making process, especially given that 
there has been a proliferation of plan offerings on the Exchanges in 
the last several years. We also agree that standardized plan options 
can play an important role in that simplification by allowing consumers 
to compare offerings based on other meaningful features, such as 
premiums, networks, formularies, and quality ratings. We believe that 
employing standardized plan option requirements while simultaneously 
narrowing the AV de minimis ranges will allow consumers to more easily 
and more meaningfully differentiate between choices and select a plan 
that meets their unique needs.
    We believe the approach to standardized plan options finalized in 
this rule strikes an appropriate balance between simplifying the plan 
selection process, making it easier for consumers to more meaningfully 
compare available plan options, combatting potentially discriminatory 
benefit designs, reducing health disparities, and advancing health 
equity, while simultaneously preserving a sufficient range of consumer 
choice, minimizing the degree of disruption arising from the 
implementation of these requirements, and continuing to foster 
competition in the Exchanges.
    We also agree that implementing the standardized plan option 
requirements finalized in this rule will improve access to care, 
enhance affordability, and advance health equity. The standardized plan 
options finalized in this rule include several important plan design 
features that we believe will provide additional consumer protections 
and mitigate health disparities, aligning with several of HHS' top 
priorities. Several of these design features include enhanced pre-
deductible coverage for many EHB services, greater consumer certainty 
from having copays instead of coinsurance as the form of cost sharing 
for as many benefits as possible, and having copays for all 
prescription drug tiers, including for the specialty drug tier.
    Comment: Several commenters disagreed that HHS is legally obligated 
to resume standardized plan options, explaining that the City of 
Columbus, et al. v. Cochran ruling simply stated that the prior 
administration provided insufficient justification for discontinuing 
standardized plan options, but not that doing so was unlawful. These 
commenters noted that instead of resuming standardized plan options, 
HHS should issue a new rule with a more thorough explanation than what 
was provided in the 2019 Payment Notice final rule explaining why 
standardized plan options should remain discontinued.
    Response: As we discussed in the proposed rule, we first introduced 
standardized plan options in the 2017 Payment Notice. We then 
discontinued standardized plan options 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.\310\ The court specifically vacated the portion of the 
2019 Payment Notice that ceased HHS' practice of designating some plans 
in the FFEs as ``standardized plan options,'' a policy that the 2019 
Payment Notice (83 FR 16930, 16974 through 16975) described as seeking 
to maximize innovation by issuers in designing and offering a wide 
range of plans to consumers. As such, we announced our intent to engage 
in rulemaking under which we would propose to resume standardized plan 
options in time for PY 2023.\311\ More recently, President Biden's 
Executive Order on Promoting Competition in the American Economy 
directed HHS to implement standardized plan options to facilitate the 
plan selection process for consumers on the Exchanges.\312\
---------------------------------------------------------------------------

    \310\ 523 F. Supp. 3d 731 (D. Md. 2021).
    \311\ 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 plan 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.
    \312\ Executive Order 14036 on Promoting Competition in the 
American Economy. (2021, July 9). 86 FR 36987.
---------------------------------------------------------------------------

    Although we agree with commenters that the City of Columbus ruling 
did not require HHS to resume standardized plan options, it did cause 
HHS to reevaluate its prior decision to discontinue the designation of 
standardized plan options in the 2019 Payment Notice. As we explained 
in the proposed rule (87 FR 672), we believe that the conditions that 
currently define the individual market differ significantly from the 
conditions that defined the market when standardized plan options were 
discontinued in 2019, when the market was considered to be at risk of 
destabilization. We believe that the risk of market destabilization has 
subsided, as is demonstrated by the proliferation of plan offerings, 
increased issuer participation in the Exchanges, and record high 
enrollment. We believe that resuming standardized plan options at this 
time can play a constructive role in enhancing the consumer experience, 
increasing consumer understanding, and simplifying the decision-making 
process for consumers on the Exchanges

[[Page 27317]]

despite the fact that the City of Columbus ruling does not legally 
obligate HHS to do so.
    Comment: Several commenters who opposed these standardized plan 
option requirements noted that the current degree of standardization 
enabled by plan AV, different metal tiers of coverage, and mandatory 
coverage of EHB is sufficient to allow for easier plan comparison.
    Response: We disagree that the current degree of standardization 
enabled by AV, different metal tiers of coverage, and mandatory 
coverage of EHB is adequate to enable sufficiently easy plan 
comparison, especially given the proliferation of plan offerings in 
recent years. As discussed later in the Choice Architecture and 
Preventing Plan Choice Overload Comment Solicitation, the proliferation 
of plan offerings available to consumers increases the risk of choice 
overload, coverage disruption, and suboptimal plan selection. We 
believe that given this proliferation of plan offerings, additional 
standardization is needed, and that consumers will benefit from 
additional tools that facilitate decision-making, including from the 
standardized plan option requirements finalized in this rule.
    Comment: Some commenters stated that HHS should not require issuers 
to offer standardized plan options since consumer uptake of 
standardized plan options was low in previous years.
    Response: We believe it is appropriate to require FFE and SBE-FP 
issuers to offer standardized plan options despite the comparatively 
low uptake of these plans in PY 2017 and PY 2018 for several reasons. 
As previously discussed, there has been a considerable proliferation of 
plan offerings available to consumers on the Exchanges over the last 
several years, and we believe that requiring issuers to offer these 
standardized plan options will play an important role in mitigating the 
risk of plan choice overload associated with the proliferation of plan 
offerings.
    We also believe that these standardized plan options contain 
several plan design features, such as enhanced pre-deductible coverage, 
copays for as many benefit categories as possible, and copays for all 
tiers of prescription drug coverage, that provide important consumer 
protections. We believe these design attributes can play a significant 
role in decreasing barriers to access for several important health 
services, reducing the risk of unexpected costs and the associated 
financial harm, mitigating the risk of health disparities, combatting 
potentially discriminatory benefit designs, and advancing health 
equity. Altogether, we believe the advantages of standardized plan 
options outweigh the fact that consumer uptake of these options was 
comparatively low in previous plan years.
    Comment: Many commenters opposed to requiring issuers to offer 
standardized plan options generally noted that these requirements would 
impede innovative plan designs that are tailored to meet the unique 
needs of enrollees. These commenters explained that when issuers 
develop plan offerings, they conduct extensive research to develop 
innovative plans that meet the needs of the populations and communities 
within their service areas. These commenters also expressed concerns 
that standardized plan options would not be able to keep pace with the 
innovation in the market.
    Response: We disagree that requiring issuers to offer these 
standardized plan options will impede innovative plan designs tailored 
to meet the unique needs of enrollees. After considering comments 
received in response to the proposed rule, and based on our experience 
with reviewing plan cost-sharing structures during QHP certification, 
we are not of the view that non-standardized plans have sufficiently 
innovated with cost-sharing structures to justify not requiring issuers 
to offer standardized plans. We believe these standardized plan options 
requirements will increase enrollment and improve health outcomes 
without impeding issuers' ability to innovate in plan designs in their 
non-standardized offerings. We also note that we will continue to 
investigate whether there are lessons that we can draw from non-
standardized plan options in terms of innovative plan designs that can 
apply to standardized plan options in future plan years.
    Comment: Many commenters opposed to requiring standardized plan 
options stated that these requirements would unnecessarily constrain 
consumer choice. These commenters pointed out that some consumers 
choose less generous plans while others choose more generous plans, 
suggesting that there is not a one-size-fits-all plan design capable of 
satisfying all enrollees' unique health needs.
    Response: We disagree that requiring issuers to offer standardized 
plan options would unnecessarily constrain consumer choice. First, the 
standardized plan options finalized in this rule reflect the most 
popular plan design attributes that consumers are already accustomed 
to. Second, as discussed elsewhere in this section, there has been a 
proliferation of plan choices available to consumers on the Exchanges. 
This proliferation significantly complicates the plan selection 
process, and increases the risk of choice overload, coverage 
disruption, and suboptimal plan selection. Contrary to the claim that 
these standardized plan option requirements will constrain consumer 
choice, we believe they will facilitate consumer choice by allowing 
consumers to more meaningfully compare between plans. Finally, if 
consumers believe that their unique health needs are not met with the 
standardized plan options finalized in this rule, they retain the 
ability to choose from non-standardized plan options.
    Comment: Several commenters stated that requiring issuers to offer 
standardized plans at every product network type, at every metal level, 
and throughout every service area in which they offer non-standard 
plans could increase the total number of plan offerings on Exchanges 
that rely on the Federal platform, exacerbating consumer confusion and 
increasing the risk of choice overload.
    To circumvent this problem, some of these commenters recommended 
that HHS simply not require issuers to offer standardized plans, while 
others recommended requiring issuers to offer standardized plan options 
while also simultaneously limiting the number of non-standardized plan 
options that issuers can offer. The commenters who supported limiting 
the number of non-standardized plan options issuers can offer cited the 
increased number of plans that HHS described in the proposed rule as 
evidence that the number of plan choices on the Exchanges has increased 
to a point where it is difficult for consumers to make informed 
decisions, which can result in decreased enrollment. Several of the 
commenters who supported limiting the number of non-standardized plan 
options issuers can offer also cited the success of State Exchanges 
that limit the number of plan offerings in order to facilitate consumer 
decision-making.
    Response: We are aware that these standardized plan option 
requirements could potentially increase the total number of plan 
offerings on the Exchanges. We also agree that the number of plan 
offerings on the Exchanges has increased to a point that is detrimental 
to consumers. That said, we chose to require issuers to offer 
standardized plan options while not also simultaneously limiting the 
number of non-standardized plan options issuers can offer in order to 
strike the greatest balance between simplifying the plan selection 
process and not causing

[[Page 27318]]

an excessive amount of disruption in too condensed a timeframe. 
Considering that the QHP certification cycle for PY 2023 will have 
begun by the time this rule has been published, we do not believe it 
feasible to limit the number of non-standardized plan options that 
issuers can offer without causing significant disruption to issuers' 
portfolios of plan offerings, which would also increase the risk of 
enrollment disruption.
    In addition, we believe it would be important to first conduct 
extensive stakeholder engagement in order to determine whether limiting 
the number of non-standardized plan options that issuers can offer 
would be appropriate before proposing adoption of such an approach. We 
anticipate initiating this stakeholder engagement in the coming months 
and applying the lessons learned from this stakeholder engagement to 
our approach to standardized plan options in the 2024 Payment Notice.
    Furthermore, we encourage issuers to modify their existing non-
standardized plan offerings--in accordance with uniform modification 
requirements at 45 CFR 147.106(e)--to conform with the cost-sharing 
parameters of the standardized plan options finalized in this rule, if 
possible and so desired. This would significantly reduce the number of 
total new plan offerings on the Exchanges, which would also reduce the 
risk of choice overload, while allowing issuers to easily crosswalk 
enrollees from their current non-standardized plan offering to the 
standardized plan option equivalent.
    Comment: Some commenters explained that requiring issuers to offer 
standardized plan options would increase issuer burden by increasing 
the total number of plan offerings in their portfolios. Several of 
these commenters stated that this increased burden could discourage 
issuers from entering new markets, thus reducing competition.
    Response: We believe that requiring issuers to offer the 
standardized plan options finalized in this rule will not significantly 
increase issuer burden. As previously discussed, we encourage issuers 
to modify their existing non-standardized offerings to conform with the 
cost sharing parameters for the standardized plan options finalized in 
this rule so they do not have to offer both their non-standardized plan 
offerings and standardized plan option equivalents side by side in 
order to minimize issuer burden, if so desired. We also believe that 
issuers will be able to utilize the same provider networks and 
formularies for these standardized plan options as they do for their 
current non-standardized offerings, which we believe will further 
minimize issuer burden. Given these considerations, we do not expect 
these requirements to impose an excessive amount of issuer burden that 
will discourage issuers from entering new markets, and we therefore do 
not expect these requirements to reduce competition in this regard.
    Comment: Several commenters recommended that HHS narrow the scope 
of the proposed rule and require issuers to offer only one standardized 
plan option at the silver metal level if it requires issuers to offer 
them at all. These commenters generally noted that HHS should only 
expand standardized plan options gradually, if at all, to minimize 
disruptions.
    Response: We disagree that we should narrow the scope of the rule 
and require issuers to offer only one standardized plan option at the 
silver metal level, and that we should only expand standardized plan 
options gradually to minimize disruption. We believe that our approach 
of requiring issuers to offer standardized plan options at every 
product network type, at every metal level, and throughout every 
service area (but not at product network types, metal levels, or 
service areas where issuers do not offer non-standardized plan options) 
while also not limiting the number of non-standardized plan options 
that issuers can offer strikes an appropriate balance between 
simplifying the plan selection process while also minimizing the risk 
of disruption.
    Comment: Many commenters explained that resuming the meaningful 
difference standard (previously codified at 45 CFR 156.298) would be an 
effective and targeted method to prevent duplicative plan offerings 
while simultaneously ensuring that issuers continue to have the 
flexibility necessary to innovate. Several of these commenters 
supported resuming the meaningful difference standard in conjunction 
with requiring issuers to offer standardized plan options, while 
several of these commenters supported resuming the meaningful 
difference standard in place of the standardized plan option 
requirements finalized in this rule. Many of the commenters who 
supported resuming the meaningful difference standard recommended that 
HHS adopt a more stringent approach than that previously taken, 
explaining that the standard in its previous iteration failed to 
prevent duplicative plan offerings.
    Several commenters cited States' role in regulating individual 
market health insurance plans, requesting that HHS coordinate with 
State regulators in the event of HHS implementing a meaningful 
difference standard.
    Response: Although we do agree that resuming the meaningful 
difference standard in conjunction with the standardized plan option 
requirements finalized in this rule could be an effective and targeted 
method to prevent duplicative plan offerings, we do not believe it is 
appropriate to resume the meaningful difference standard for PY 2023. 
We believe that additional research is needed to build upon and refine 
the previous version of the meaningful difference standard. We also 
believe that resuming the meaningful difference standard for PY 2023 
would not grant issuers and States sufficient time to modify their 
portfolio of plan offerings prior to the PY 2023 QHP certification 
cycle.
    Comment: Several commenters requested that HHS clarify if issuers 
are required to offer these standardized plan options off-Exchange.
    Response: We clarify that issuers are generally required to offer 
standardized plan options off-Exchange pursuant to guaranteed 
availability requirements at 45 CFR 147.104. That said, issuers are not 
required to actively market these plans off-Exchange.
    Comment: Several commenters requested that HHS clarify if issuers 
are required to offer the standardized plan options finalized in this 
rule in the small group market.
    Response: We clarify that FFE and SBE-FP issuers are only required 
to offer the standardized plan options finalized in this rule in the 
individual market, but not the small group market.
    Comment: Several commenters requested that HHS clarify whether 
issuers are required to offer standardized plan options for family 
plans, and if so, if HHS has designed standardized plan options for 
family plans.
    Response: HHS affirms that issuers are required to offer 
standardized plan options for family plans. HHS also clarifies that 
issuers are able to offer standardized plan options as family plans by 
applying a family (other than self-only) MOOP and a family (other than 
self-only) deductible that is double the self-only MOOP and the self-
only deductible, respectively, provided for in the standardized plan 
options finalized in this rule. We note that this approach is 
consistent with the approach taken in the 2017 Payment Notice (81 FR 
12204, 12292).
    Comment: Several commenters supported exempting FFE and SBE-FP 
issuers that are already subject to State standardized plan option 
requirements

[[Page 27319]]

from the standardized plan option requirements finalized in this rule.
    Response: We agree that it is appropriate to exempt FFE and SBE-FP 
issuers that are already required to offer standardized plan options 
under State action taking place on or before January 1, 2020 from the 
standardized plan option requirements finalized in this rule. We 
believe imposing duplicative Federal standards on these issuers would 
yield no benefit to consumers or issuers and that it would 
unnecessarily increase issuer burden. We further believe that FFE and 
SBE-FP States that have enacted standardized plan option requirements 
and implemented specific plan designs are positioned to best understand 
the unique needs and conditions in their respective markets.
    Comment: Several commenters requested that HHS clarify whether the 
requirement for FFE and SBE-FP issuers to offer standardized plan 
options applies to issuers in States that are transitioning to a State 
Exchange model type in a future plan year.
    Response: We clarify that all FFE and SBE-FP issuers are subject to 
these requirements, even if they anticipate that their State will 
transition from having an FFE or SBE-FP to a State Exchange in a future 
plan year (such as issuers in the State of Virginia). We reiterate that 
the only FFE and SBE-FP issuers exempt from the requirement to offer 
standardized plan options at every product network type, at every metal 
level, and throughout every service area they offer non-standardized 
plan options are those that are already subject to State requirements 
enacted prior to January 1, 2020, such as issuers in the State of 
Oregon.
    Comment: Several commenters recommended applying these standardized 
plan options requirements to State Exchange issuers that are not 
already required to offer standardized plan options per existing State 
requirements, while many were opposed to this approach, citing that 
State Exchanges are most familiar with the nuances and demands of their 
respective markets and should therefore be allowed to determine if 
issuers should be required to offer standardized plan options in these 
markets.
    Response: We do not believe it is appropriate to apply the 
standardized plan option requirements finalized in this rule to State 
Exchange issuers, including issuers that are not already required to 
offer standardized plan options per existing State requirements, 
because we believe State Exchanges are best positioned to understand 
both the nuances of their respective markets and consumer needs within 
those markets. We also believe that State Exchanges are best positioned 
to determine whether standardized plan options would be beneficial to 
consumers in their respective States. However, because the SBE-FPs use 
the same platform as the FFEs, we are finalizing 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.
    Comment: Several commenters requested that HHS clarify whether 
pediatric dental benefits can be included in standardized plan options.
    Response: We affirm that pediatric dental benefits can be included 
in these standardized plan options if so desired, but note that the 
cost sharing parameters for these benefits are not standardized.
    Comment: Several commenters requested that HHS clarify if 
telehealth services can be offered at a lower cost sharing amount than 
in-person services.
    Response: Telehealth services cannot be offered at a lower cost 
sharing amount than in-person services, primarily due to limitations in 
the AVC. We intend to consider whether this flexibility should be 
afforded for future plan years.
    Comment: Several commenters asked HHS to clarify how they should 
assign cost sharing to benefits not included in the AVC or the 
standardized plan options finalized in this rule.
    Response: We note that when offering the standardized plan options 
finalized in this rule, issuers only have to match the cost sharing 
parameters for the benefits specified in the plan designs for the 
standardized plan options finalized in this rule. Issuers retain the 
ability to determine the cost sharing for benefits not included in the 
standardized plan options finalized in this rule, subject to State and 
Federal law.
    Comment: Many commenters made recommendations regarding specific 
features of the plan designs. Several commenters disagreed with the 
methodology used in designing these standardized plan options, stating 
that designing standardized plan options to reflect popular plan design 
features (in the form of enrollee-weighted medians) would fail to meet 
the unique health needs of consumers. Commenters also stated that 
health care markets vary dramatically between States, as do the most 
popular plan design features in each of these markets, and therefore, 
that these plan designs would not resonate with consumers in every 
State.
    Response: We designed the standardized plan options in this 
proposal by mirroring the most popular plan design features of QHPs 
offered through the FFEs and SBE-FPs in PY 2021 (in the form of 
enrollee-weighted medians), meaning that these plan designs are similar 
to those that millions of consumers are already currently enrolled in. 
Furthermore, though we do agree that there are some differences between 
the health care markets of different States, as well as between the 
most popular plan design features in these States, there are many 
similarities between different States and plan design features, as 
well.
    For example, in the FFEs and SBE-FPs in PY 2021, 90 percent of non-
CSR silver plan enrollees had plans with copays exempt from the 
deductible as the form of cost sharing for primary care visits. The 
30th percentile copay amount for this benefit category was $30 per 
visit, while the 70th percentile was $40 per visit. Thus, the range 
between the 30th and 70th percentiles for copay amounts for primary 
care visits for non-CSR silver plan enrollees in all FFEs and SBE-FPs 
in PY 2021 was only $10, meaning the standardized plan options 
finalized in this rule have design features that are largely compatible 
with plan design features that millions of enrollees are already 
accustomed to. The fact that there is little variation in many of the 
most frequently utilized benefit categories across FFEs and SBE-FPs 
supports the decision to employ an enrollee-weighted median methodology 
in designing these plans.
    To ensure these standardized plan options are able to meet the 
unique health needs of all consumers, we reiterate that we intend to 
conduct extensive stakeholder engagement (including with State 
regulators, issuers, provider groups, health advocacy groups, and 
consumer groups) over the next year. We anticipate incorporating the 
feedback we receive during this stakeholder engagement when designing 
standardized plan options for future plan years so that we can design 
plans that meet the unique health needs of all consumers. In the 
meantime, we believe the fact that consumers can still select from an 
unlimited number of non-standardized plan options in PY 2023 means that 
all consumers can select plans that meet their unique health needs.
    Comment: Several commenters expressed concern with having one set 
of standardized plan options apply to all FFE and SBE-FP States. These 
commenters stated that a uniform national set of plan designs is 
unlikely to be attractive to consumers since health care markets vary 
dramatically between States, as do the most popular

[[Page 27320]]

plan design features in these States. These commenters also stated that 
having State-specific plan designs could help mitigate the degree of 
disruption to local markets and increase consumer uptake of 
standardized plan options. These commenters also requested 
clarification on how these standardized plan options would interact 
with State cost sharing laws.
    Response: We designed two sets of standardized plan options to 
apply to different sets of States in order to more precisely tailor 
these plan designs to the unique market conditions in different States 
and to comply with the unique cost sharing laws in these different 
States. We also conducted extensive stakeholder engagement with more 
than 30 State departments of insurance to ensure that these plan 
designs comply with unique cost sharing laws. We also solicited 
comments on potentially relevant State cost sharing laws that could 
affect plan designs in the proposed rule. We also note that we intend 
to assess the feasibility and utility of designing State-specific 
standardized plan options to further mitigate the risk of disruption 
and to increase consumer uptake of these plans in future plan years.
    Comment: Several commenters requested clarification regarding how 
these standardized plan options interact with State-mandated benefits.
    Response: Nothing in the design of these standardized plan options 
supersedes the obligation to cover State-mandated benefits, as 
applicable. Similar to other benefits not included in these 
standardized plan options, issuers retain the ability to set the cost 
sharing parameters for these benefits, subject to State and Federal 
law.
    Comment: Several commenters requested that HHS confirm that the 
standardized plan options finalized in this rule are compliant with 
MHPAEA and its implementing regulations.
    Response: We affirm that the cost sharing parameters for these plan 
designs are designed so that issuers can design standardized plan 
options that are compliant with the MHPAEA and its implementing 
regulations. For example, copays for mental health or substance use 
disorder benefits in the outpatient, in-network office visit sub-
classification in each plan design are equal to the least restrictive 
level for copays that apply to substantially all medical and surgical 
benefits in that sub-classification. Since standardized plan options do 
not include standardized treatment limitations on any of these 
benefits, issuers will be responsible for ensuring that the plan 
features they design outside of these standardized cost sharing 
parameters are compliant with MHPAEA and its implementing regulations.
    Comment: Several commenters suggested that HHS incorporate VBID 
principles into future iterations of standardized plan options, 
explaining that doing so could further reduce barriers to necessary 
services and promote health equity among consumers. Similarly, many 
commenters supported including low deductibles and pre-deductible 
coverage for as many benefits as possible in plan designs, explaining 
that doing so would improve accessibility to important services. Some 
commenters requested that HHS modify the plan designs to include more 
pre-deductible coverage for particular benefits, including for 
preventive services beyond those mandated by Federal requirements, 
maternity care, laboratory and radiologic services, and some or all 
tiers of prescription drug coverage. Several commenters added that by 
improving the affordability of basic services that underserved 
populations typically lack access to, standardized plan options could 
also help address health disparities.
    Response: We affirm that VBID principles were incorporated into 
these plan designs by exempting particular services from the 
deductible, decreasing barriers to access for particular services and 
prescriptions drug tiers, and having copays as the form of cost sharing 
instead of coinsurance rates for particular benefit categories. We also 
intend to explore the utility of incorporating additional VBID 
principles into future iterations of standardized plan options.
    We attempted to exempt as many benefits as possible from the 
deductible while also maintaining the lowest deductible possible, 
designing a plan that has an AV within the permissible de minimis range 
of the metal level AVs, and ensuring the competitiveness of these 
plans' premiums by having AVs near the floor of these de minimis 
ranges. Given these constraints, we are not able to exempt other 
benefits, such as laboratory and radiologic services, from the 
deductible without also raising the deductible or increasing the AV and 
therefore the expected premiums of these plans. We are also unable to 
decrease the deductibles for these plans without offsetting the change 
to AV by subjecting additional benefits to the deductible or increasing 
these plans' AV or premiums.
    Comment: Several commenters requested that HHS clarify the specific 
types of specialist visits that are exempt from the deductible in these 
standardized plan options and if there are any limits on the number of 
visits exempt from the deductible. One commenter requested that HHS 
clarify that deductible exemptions apply to the full range of pediatric 
preventive services, including those provided by a pediatric 
specialist.
    Response: We clarify that we defer to issuers in how they classify 
which benefits belong to which benefit category, including how issuers 
classify ``specialist visits'' and therefore which specialist visits 
are exempt from the deductible per the cost sharing parameters in these 
plan designs. We also clarify that there are no visit limits for any of 
the benefit categories, including specialist visits, for any metal 
level in either of the two sets of standardized plan options finalized 
in this rule. We also reiterate that nothing in the design of these 
standardized plan 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 plan 
option.
    Comment: Several commenters recommended including separate medical 
and drug deductibles in the plan designs to allow those who rely on 
prescription drugs to manage a particular health condition to more 
quickly meet their drug deductible.
    Response: We chose integrated medical and drug MOOPs and 
deductibles for these plan designs because this was the most popular 
plan design feature in the FFEs and SBE-FPs in PY 2021. Since the 
majority of enrollees have a plan with this design feature, and since 
we wish to minimize the risk of disruption, we included this feature in 
these standardized plan options. We also note that we intend to 
consider the utility of splitting medical and drug MOOPs and 
deductibles in future iterations of standardized plan options for 
future plan years.
    Comment: Several commenters requested that HHS clarify how 
deductibles and cost sharing should be applied to the specific benefit 
categories included in the standardized plan options finalized in this 
rule.
    Response: We clarify that in both sets of the standardized plan 
options above in Tables 12 and 13, if a cost sharing amount for a 
particular metal level is accompanied by a (*), this benefit category's 
cost sharing is exempt from the deductible.
    Comment: Many commenters supported including copays instead of 
coinsurance for as many benefits as

[[Page 27321]]

possible. These commenters explained that coinsurance 
disproportionately burdens persons with chronic illness and 
disabilities and that by improving affordability for basic services 
that underserved populations typically lack access to, these plan 
designs would help address health disparities. Some commenters further 
explained that copays are more transparent than coinsurance and that 
copays make it easier to predict out-of-pocket costs.
    Several commenters recommended applying copays to more benefit 
categories, including for the emergency room, hospital inpatient, 
imaging, and lab work benefit categories. Several other commenters 
recommended eliminating coinsurance from the plan designs altogether. 
Several other commenters expressed concern that copays were too high 
for certain services.
    Response: We affirm that we applied copays instead of coinsurance 
rates for as many benefits as possible in order to enhance consumer 
certainty and decrease barriers that obstruct access to these services. 
We agree this design feature will play an important role in improving 
affordability and transparency for important services, and that this 
design feature will also address health disparities. That said, since 
we designed these standardized plan options to reflect the most popular 
design features of QHPs in the FFEs and SBE-FPs in PY 2021, and since 
the majority or plurality of consumers did not have copays for 
particular benefit categories (such as for hospital inpatient), we 
chose coinsurance rates for these particular benefit categories. For 
this reason, we are unable to eliminate coinsurance from the plan 
designs altogether. We also note that we are unable to decrease copays 
for certain services without concurrently offsetting these changes with 
increases to deductibles, MOOPs, or subjecting additional benefits to 
the deductible.
    Comment: Many commenters supported including copays as opposed to 
coinsurance specifically for prescription drugs, including for the non-
preferred and specialty tiers, explaining that doing so would alleviate 
the burden for persons with chronic illnesses and disabilities. 
Commenters who supported the use of copays rather than coinsurance for 
prescription drugs explained that high cost sharing on prescription 
drugs negatively affects medication adherence, leading to increased 
health care costs overall. Several commenters requested that HHS exempt 
all drugs from the deductible, lower copays for the different drug 
tiers, and cap all specialty drug copays at $150 (as was done in the 
second set of standardized plan options).
    Conversely, some commenters were opposed to both incorporating 
copays instead of coinsurance for all tiers of prescription drugs as 
well as exempting non-preferred and specialty tier prescription drugs 
from the deductible. These commenters expressed concern that these plan 
design features would increase the risk of adverse selection and could 
therefore contribute to an increase in premiums that would undermine 
access to affordable health coverage. These commenters also explained 
that these plan designs are more generous than existing plan offerings, 
demonstrating that plan designs with these features are not sustainable 
within current market conditions. One commenter requested that HHS 
clarify whether the plan designs allow prescription drugs associated 
with preventive services to be covered with zero cost sharing.
    Response: We agree that having copays for all prescription drug 
tiers (including the non-preferred brand and specialty tiers) will 
enhance predictability, increase medication adherence, and decrease 
overall health care costs. We note that we were unable to exempt all 
drugs from the deductible and lower the cost sharing for all tiers due 
to constraints with AV. Exempting additional tiers from the deductible 
and lowering the cost sharing amounts for these tiers would require 
subjecting other medical benefits to the deductible, increasing the 
cost sharing for other medical benefit categories, or increasing the 
AV, and therefore increasing the premiums of these plans. We also note 
that we decided not to apply the $150 copay cap to both sets of 
standardized plan options because only Delaware and Louisiana had State 
cost sharing laws that necessitated this design feature.
    We understand that these design features may increase the risk of 
adverse selection, but we believe this risk is sufficiently mitigated 
by the fact that all FFE and SBE-FP issuers are required to offer these 
plans at every product network type, at every metal level, and 
throughout every service area they offer non-standardized plan options. 
Therefore, we believe this risk to be distributed evenly among issuers. 
Furthermore, we reiterate that we designed these plans to have AVs near 
the floor of the de minimis range for each AV metal level to ensure 
these plans' premiums are competitive.
    HHS reiterates once more that nothing in the design of these 
standardized plan 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 plan 
option. We clarify that these plan designs allow prescription drugs 
associated with preventive services to be covered with zero cost 
sharing.
    Comment: Several commenters expressed concern with the plan design 
including only four tiers of prescription drug cost sharing, stating 
that this plan design feature would be difficult for issuers to 
implement and disruptive for consumers. These commenters explained that 
having six tiers of formulary cost sharing is becoming increasingly 
common among commercial issuers and that this design feature is 
permitted under Medicare Part D. These commenters therefore recommended 
that HHS include six tiers of prescription drug cost sharing in the 
plan designs to allow issuers the flexibility to develop formularies in 
a way that is most effective in promoting affordability. Conversely, 
several commenters supported including only four tiers of prescription 
drug cost sharing in the plan designs, explaining that doing so would 
offer more affordable, predictable, understandable prescription drug 
coverage.
    Response: We agree that including only four tiers of prescription 
drug cost sharing in these plan designs offers more affordable, 
predictable, and understandable drug coverage, and that this design 
feature will play an important role in facilitating the consumer 
decision-making process by allowing consumers to more easily compare 
formularies between plans. That said, we intend to explore the 
feasibility and utility of including more than four tiers of 
prescription drug cost sharing in future iterations of standardized 
plan options in future plan years.
    Comment: Several commenters requested that HHS clarify if 
standardized plan options are permitted to have more than one tier of 
provider networks.
    Response: We clarify that we designed the standardized plan options 
finalized in this rule to have only one cost sharing tier such that no 
standardized plan option may have a tiered provider network. This 
approach aligns with the goals of simplifying the consumer decision-
making process and making health insurance more understandable for 
consumers on the Exchanges. Furthermore, considering that the vast 
majority of plans offered through the Exchanges (nearly 90 percent) do 
not have tiered provider networks, we believe this plan design feature 
reflects

[[Page 27322]]

current market realities and minimizes the risk of disruption for both 
issuers and enrollees.
    Comment: Several commenters requested that HHS include health 
savings account (HSA)-eligible HDHPs in these sets of standardized plan 
options.
    Response: We have not included HSA-eligible HDHPs in these sets of 
standardized plan options because enrollees still have the opportunity 
to enroll in non-standardized HSA-eligible HDHPs, if they so desire.
    Comment: Many commenters supported differentially displaying 
standardized plan options on HealthCare.gov. Most of these commenters 
also supported extending standardized plan options differential display 
requirements to web-brokers and issuers' direct enrollment websites. 
Citing the overwhelming number of plan offerings available for 
consumers, these commenters urged HHS to improve and simplify the 
shopping experience by allowing consumers to easily identify 
standardized plan options. Many of these commenters noted that 
differentially displaying standardized plan options assumes even 
greater importance if issuers are permitted to offer an unlimited 
number of non-standardized plan options. These commenters also noted 
that extending these display requirements to web-brokers' and issuers' 
direct enrollment websites would promote consistent messaging across 
platforms. Several commenters also explained that several State 
Exchanges have had success in differentially displaying standardized 
plan options and that HHS should draw from this experience.
    In contrast, many commenters opposed differentially displaying 
standardized plan options, explaining that doing so could direct 
consumers to more expensive plans that may not be best suited for their 
needs. Several of these commenters urged HHS to give web-brokers and 
issuers that utilize alternative enrollment pathways--including Classic 
DE and EDE--flexibility in how to display standardized plan offerings 
to consumers utilizing their platforms due to concerns over technical 
and platform limitations.
    Response: We agree that differentially displaying standardized plan 
options on HealthCare.gov and direct enrollment websites will improve 
and simplify the shopping experience by allowing consumers to more 
easily identify the standardized plan options. We also disagree that 
differentially displaying standardized plan options could direct 
consumers to more expensive plans that may not be best suited for their 
needs. We first note that we designed these standardized plan options 
to have AVs near the floor of the AV de minimis range for each metal 
level to ensure the competitiveness of these plans' premiums. We also 
note that we designed these plans to reflect the most popular plan 
design features throughout the FFEs and SBE-FPs in PY 2021 and we 
therefore do not believe these plans' premiums will differ 
significantly from the premiums of non-standardized plan options.
    Further, since we are differentially and not preferentially 
displaying these standardized plan options, we believe that we can 
structure choice architecture in a way that allows consumers to 
meaningfully evaluate other non-standardized plan options and select 
these plans, if they so desire. A comment summary regarding specific 
recommendations for the differential display of standardized plan 
options is discussed in the Comment Solicitation on Choice Architecture 
and Preventing Choice Overload section later in this rule.
    We also note that we will continue to provide web-brokers and 
issuers that utilize alternative enrollment pathways--including Classic 
DE and EDE--the ability to request to deviate from how standardized 
plan options are differentially displayed on HealthCare.gov due to 
concerns over technical and platform limitations. We will provide 
additional technical guidance on how to submit this request to deviate 
in the future.
    Comment: Several commenters expressed concern about the timing of 
the implementation of these requirements. These commenters explained 
that complying with these requirements would impose a significant 
burden on issuers as they try to meet filing deadlines for PY 2023, 
with several commenters requesting that HHS delay the implementation of 
these requirements until the plan year 2024, if they are implemented at 
all.
    Response: We are finalizing our proposal to require issuers to 
offer standardized plan options for PY 2023 and beyond, as proposed. We 
first announced in part 2 of the 2022 Payment Notice final rule (86 FR 
24140, 24265) our intent to resume standardized plan options and to 
propose specific plan designs in the 2023 Payment Notice. We also 
sought comment on the best method to resume standardized plan options 
in part 3 of the 2022 Payment Notice proposed rule (86 FR 35156, 35162 
through 25163). We then affirmed our intent to resume standardized plan 
options in PY 2023 and explained our rationale for doing so in part 3 
of the 2022 Payment Notice final rule (86 FR 53412, 53419 through 
23420). We believe these announcements provided ample notice of our 
intent to propose standardized plan option requirements in the 2023 
Payment Notice proposed rule such that States, issuers, and other 
affected stakeholders should have sufficient time to prepare for 
compliance with the requirements we finalize in this rule.
    Additionally, since the cost sharing parameters for the EHBs 
covered under these plans are already specified, issuers will be able 
to utilize existing networks and formularies they already utilize in 
connection with other plans in their portfolios, and since issuers are 
not required to offer standardized plan options at product network 
types, metal levels, or services areas in which they do not already 
offer non-standardized plan options, we do not anticipate that issuers 
will be unable to meet the filing deadlines.
11. Network Adequacy (Sec.  156.230)
    We proposed 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 engaged and received 
feedback from numerous stakeholders representing diverse perspectives 
in developing the proposed policies. We are finalizing the following 
provisions as proposed, with two exceptions: (1) We are not finalizing 
the proposal on network tiering; (2) for appointment wait time 
standards, we are finalizing and delaying implementation until PY 2024. 
We are also finalizing the following updates to Sec.  156.230: 
Substituting the phrase ``substance use disorder'' in place of 
``substance abuse''; and retaining paragraph (f), which was deleted in 
error.
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

[[Page 27323]]

Care Act; Establishment of Exchanges and Qualified Health Plans; 
Exchange Standards for Employers final rule (77 FR 18309) and codified 
at Sec.  156.230. HHS seeks to ensure that quantitative, prospective 
network adequacy reviews occur for QHPs offered through the FFEs so 
that enrollees have reasonable, timely access to health care providers.
    The FFEs conducted network adequacy reviews of time and distance 
standards for QHPs for PYs 2015-2017. The 2017 Market Stabilization 
final rule (82 FR 18346) 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 (83 FR 16930.) 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.\313\ 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.
---------------------------------------------------------------------------

    \313\ 523 F. Supp. 3d 731 (D. Md. 2021).
---------------------------------------------------------------------------

    As such, we announced in Parts 2 and 3 of the 2022 Payment Notice 
final rules (86 FR 24140; 86 FR 53412) our intent to undertake 
rulemaking to establish network adequacy standards, beginning in this 
rulemaking for PY 2023.
b. FFE Network Adequacy Reviews
    In the 2023 Payment Notice proposed rule (87 FR 584), HHS proposed 
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 beginning with the QHP certification cycle for 
PY 2023. HHS proposed not to evaluate QHP network adequacy in FFE 
States performing plan management functions that elect to perform their 
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 before QHP certification. States 
performing plan management functions are States served by an FFE where 
the State has agreed to assume primary responsibility for reviewing 
issuer-submitted QHP certification material and making certification 
recommendations to HHS.
    We are finalizing this policy as proposed.
    We summarize and respond to public comments received on this 
proposal below.
    Comment: Many commenters expressed strong support for HHS' proposal 
to conduct network adequacy reviews of the provider networks of QHPs 
offered through the FFEs. Key reasons for this support included 
ensuring consistency of network adequacy standards and reviews across 
States; providing a minimum set of network adequacy standards that 
States can meet or exceed; and addressing various issues related to 
consumer access.
    Response: We concur that conducting robust network adequacy reviews 
of QHPs on the FFEs will have numerous benefits, including 
strengthening QHP enrollees' access to a variety of health care 
providers.
    Comment: Some commenters stated that HHS should defer to States' 
reviews as they believe States are the most appropriate regulators of 
network adequacy. These commenters expressed that States understand and 
can tailor network adequacy reviews based on unique market conditions 
and that HHS network adequacy reviews could be duplicative and 
burdensome.
    Response: We understand that some States, issuers, and other 
stakeholders believe that States are best positioned to regulate 
network adequacy. Given that States have unique knowledge and 
experience that are beneficial to assessing QHPs' provider networks, 
HHS will continue to partner with and learn from States as we conduct 
network adequacy reviews and pursue future network adequacy rulemaking. 
In recognition of this viewpoint, and as proposed, HHS will allow 
States performing plan management functions to choose to conduct their 
reviews, as long as they adhere to standards as stringent as HHS' 
standards and conduct prospective reviews. For all other FFEs, HHS will 
conduct network adequacy reviews to assure that QHP enrollees across 
States have reasonable access to a variety of health care providers to 
meet their needs.
    Comment: Some commenters urged HHS to allow States performing plan 
management functions to conduct their network adequacy reviews if they 
have an approach that is ``comparable to'' Federal network adequacy 
standards, rather than ``as stringent as'' Federal standards.
    Response: HHS believes it is important for States performing plan 
management functions to conduct network adequacy reviews that are at 
least as stringent as Federal reviews for two main reasons. First, HHS 
seeks to ensure QHP enrollees in all FFEs have a minimum standard of 
consumer protections regarding reasonable access to providers. We 
believe the Federal standards set a strong floor from which States 
performing plan management functions can implement even more robust 
standards if desired. If HHS were to allow States performing plan 
management to conduct network adequacy reviews that are comparable to 
Federal reviews, rather than as stringent, this could lead to reviews 
of a smaller provider specialty list or reviews that have less 
stringent parameters, for example. Second, whether a network adequacy 
review is ``comparable'' is a less concrete determination than whether 
it is ``as stringent.''
    HHS is defining ``as stringent as'' to mean that the reviews 
include assessing compliance with time and distance standards and 
appointment wait time standards using the same specialty list and 
parameters. Time and distance reviews must be based on quantitative 
data collected from the issuer (not attestation) and supported by a 
justification requirement if an issuer does not meet one or more of the 
standards. We believe assessing quantitative data for time and distance 
reviews, rather than using qualitative measures, gives a fuller and 
more accurate picture of how a QHP assures reasonable access to 
providers. Assessing time and distance using quantitative data also 
allows us to make comparisons year-over-year and across issuers. We are 
codifying in Sec.  156.230 that time and distance reviews must be based 
on quantitative issuer-submitted data.
    Appointment wait time reviews, which will begin in PY 2024, must be 
based on methods as stringent as HHS' methods (as a minimum standard) 
and supported by a justification requirement if an issuer does not meet 
one or more of the standards. HHS will propose the method for assessing 
compliance with appointment wait time standards in future rulemaking. 
States can implement network adequacy standards and reviews that are 
more stringent than HHS' standards, described here. For example, we 
consider shorter time and distance or appointment wait time

[[Page 27324]]

standards to be more stringent than longer ones.
    We also acknowledge that State-specific challenges (for example, 
provider supply shortages, topographic barriers, etc.) may necessitate 
justification allowances, such as mitigating measures (for example, in-
network cost sharing for out-of-network providers) that ensure access 
to a provider specialty type that would otherwise be unavailable to 
enrollees, while the States partner with issuers and providers to reach 
a more permanent solution. We believe the justification process for 
network adequacy will sufficiently accommodate such challenges and 
allowances.
    Comment: Several commenters requested that HHS closely assess the 
network adequacy reviews of States performing plan management that 
elect to perform their reviews to ensure they review and enforce 
standards at least as stringent as HHS' standards.
    Response: We will closely partner with these States to ensure they 
understand HHS' standards, that the States have adequate State 
authority to conduct such reviews, and that their reviews will 
appropriately assess network adequacy for QHPs in their State before 
plan confirmation to support timely QHP certification.
    Comment: Some commenters expressed concern that the additional 
contracting required to achieve the new network adequacy standards 
could increase costs to consumers, while other commenters believe that 
the standards are unlikely to raise consumer costs.
    Response: We acknowledge that commenters shared mixed feedback 
about whether the new network adequacy standards would raise consumer 
costs. We do not anticipate that the updated network adequacy 
requirements will substantially raise costs to consumers. We 
acknowledge that there may be some additional burden for QHP issuers 
and States to comply with the new network adequacy requirements. We 
will work to minimize the burden to the extent feasible by increasing 
transparency of the network adequacy review process, offering technical 
assistance resources and consultations, and collaborating with issuers 
and States to address questions and issues that arise during the PY 
2023 network adequacy review process. We believe the benefits to 
consumer protection resulting from strengthened network adequacy 
standards strike a reasonable balance with the potential for increased 
issuer burden and cost, given the strategies described above that HHS 
will undertake to mitigate the burden.
    Comment: Some commenters expressed concern regarding the 
implementation timeline for network adequacy reviews and requested that 
reviews be delayed until PY 2024 due to the time needed by issuers and 
States to prepare for the reviews and given the continued impacts of 
the COVID-19 pandemic on the health care system.
    Response: We understand the desire expressed by some commenters to 
delay the implementation of network adequacy reviews given the time 
needed to collect information from providers on appointment wait times 
in the COVID-19 context. We acknowledge these concerns and, as 
discussed in the Appointment Wait Times section of this preamble, we 
will finalize the appointment wait time standards, but delay their 
implementation until PY 2024. We believe it is reasonable to implement 
the other finalized elements of the network adequacy proposal in PY 
2023 for reasons described in the Time and Distance and Telehealth 
sections of this preamble.
    Comment: Some commenters requested that HHS further align Federal 
network adequacy standards with the National Committee for Quality 
Assurance (NCQA) accreditation standards.
    Response: We have reviewed the NCQA standards regarding network 
adequacy. We believe it is appropriate to align with NCQA in its use of 
business days to measure appointment wait time standards, which will be 
finalized in the final PY 2023 Letter to Issuers. We will also finalize 
that the appointment wait time standard for the behavioral health 
category will align with NCQA's standards; NCQA does not have 
quantitative parameters for the other categories we are finalizing for 
appointment wait times. NCQA does not currently have quantitative 
standards for time and distance so we cannot consider alignment.
    Comment: One commenter requested HHS retain the provision in the 
network adequacy regulation text that clarifies that QHPs do not have 
to use provider networks.
    Response: HHS will retain this provision that clarifies that QHPs 
do not have to use provider networks. In the proposed rule, the 
deletion was an error, and we appreciate the commenter bringing it to 
our attention.
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 the 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 (77 FR 18309), 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 assure that all services will be 
accessible to enrollees without unreasonable delay. In the 2016 Payment 
Notice final rule (80 FR 10749), 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.
    In section c, parts ii, ii, and iv of this preamble, we proposed 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 proposed 
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 were 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 
to evaluate Medicare Advantage plans. 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 proposed reviewing additional specialties for time and 
distance,

[[Page 27325]]

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 populations. The additional specialties proposed 
are emergency medicine, outpatient clinical behavioral health, 
pediatric primary care, and urgent care.
    HHS proposed that time and distance standards be calculated at the 
county level and vary by county designation. We 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 14 and 15. To count towards meeting 
the time and distance standards, individual and facility providers 
listed in Tables 14 and 15 must be appropriately licensed, accredited, 
or certified to provide services in their State, as applicable, and 
must have in-person services available.
[GRAPHIC] [TIFF OMITTED] TR06MY22.013


[[Page 27326]]


[GRAPHIC] [TIFF OMITTED] TR06MY22.014

    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 proposed 
to 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 proposed to codify the network 
adequacy justification process in regulation at Sec.  
156.230(a)(2)(ii).
    HHS sought 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 sought comment on the parameters that should apply with 
respect to behavioral health providers to ensure adequate access to 
these services. HHS also sought 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.
    We are finalizing this policy as proposed.
    We summarize and respond to public comments received on this policy 
below.
    Comment: Many commenters, across a range of stakeholder types, 
supported the proposed quantitative time and distance standards. Key 
reasons for this support included appreciation for instituting a 
quantitative assessment of consumer access; concurrence with the 
inclusion of a variety of individual and facility provider types, 
including QHP-specific additions to the Medicare Advantage provider 
specialty list; and varying time and distance standards by county type 
since provider availability can be influenced by local population 
density.
    Response: HHS agrees that stringent quantitative time and distance 
standards for the expanded provider specialty lists that vary by county 
designation will help strengthen QHP enrollees' access to a variety of 
providers to meet their health care needs.
    Comment: There was mixed feedback on the inclusion of emergency 
medicine physicians: Some commenters stated that the addition would be 
duplicative of required facility types and No Surprises Act 
protections, while others agreed with HHS' contention that including 
emergency medicine physicians would provide proactive consumer 
protections and increase enrollee access to in-network providers.
    Response: HHS understands that some stakeholders have differing 
opinions about the inclusion of emergency medicine physicians on the 
provider specialty list for time and distance reviews. We believe that 
the anticipated benefits to consumer access and protections outweigh 
the concerns about duplication, and we will include emergency medicine 
physicians as proposed.
    Comment: Numerous commenters requested that HHS consider additional 
provider specialties (for example, anesthesiologists, audiologists, and 
providers offering gender-affirming care, among others) for inclusion 
in future time and distance standards.
    Many commenters specifically requested additions to or refinement 
of the Outpatient Clinical Behavioral Health category, such as separate 
categories for mental health and substance use disorder services, and 
delineating between pediatric and adult behavioral health providers. 
Some commenters requested refining certain provider specialty types, 
including allowing OB/GYNs to count as primary care providers; aligning 
OB/GYN parameters with the parameters for specialists rather than for 
primary care; considering how safety-net family planning and sexual 
health services are delivered by a range of non-OB/GYN providers; 
dividing requirements for oncology providers into separate categories 
for medical and surgical oncology; allowing mid-level practitioners to 
count as specialty care providers for time and distance standards; and 
allowing family medicine physicians to count towards pediatric primary 
care.
    Response: HHS is finalizing the individual and facility provider 
specialty lists for time and distance as proposed. We believe the 
current specialty list builds on and strengthens the specialty list 
that HHS used for assessing time and distance when we previously did so 
in PYs 2015-2017, which will help increase access to a variety of 
provider types and strengthen consumer protections. HHS appreciates the 
feedback suggesting additions to and refinement of the provider 
specialty list for time and distance standards. Prior to considering 
the adoption of these suggestions in future rulemaking, HHS will need 
to conduct further assessment and research as they may also have 
unintended consequences.
    We appreciate the suggestion from commenters that OB/GYNs count 
towards time and distance standards for primary care providers. We 
believe there could be potential unintended consequences if we were to 
allow OB/GYNs to count as primary care providers for time and distance 
standards. For example, since OB/GYNs most commonly care for female 
patients, including OB/GYNs as primary care providers for time and 
distance standards could hamper access to

[[Page 27327]]

primary care for male patients. We will further assess this suggestion 
and its potential implications and will consider this for future 
rulemaking.
    For PY 2023, while we will not have separate adult and pediatric 
standards for Outpatient Clinical Behavioral Health, we have unique 
specialty codes in the Essential Community Provider/Network Adequacy 
(ECP/NA) template that distinguish the two age categories (adult and 
pediatric) for some behavioral health specialty types, allowing for 
data collection and analysis, and consideration of further refinement 
in the future.
    Though we do not have a time and distance standard specifically for 
gender-affirming care and surgery providers, the provider specialty 
list does include many providers who offer services that may be useful 
for individuals seeking gender-affirming care, like endocrinologists, 
urologists, and behavioral health clinicians.
    Comment: Some commenters expressed concerns that Federal time and 
distance standards cannot adequately account for geographic variations, 
like provider supply and population density. One commenter expressed 
concerns that many issuers in their state might fail the new standards, 
that the network adequacy standards could disincentivize new issuers 
from entering the market, and that counties would be left without 
available Exchange health insurance options. Several commenters shared 
suggestions for less stringent time and distance reviews, like broader 
qualitative standards, or separate time and distance standards for 
rural areas, geographies with provider shortages, and narrower 
networks.
    Response: We understand that some stakeholders have concerns about 
HHS assessing QHPs for compliance with quantitative time and distance 
standards. We believe that quantitative time and distance standards, 
when varied by county type, provide a useful assessment of whether QHPs 
provide reasonable access to care, and when combined with appointment 
wait time standards, will offer a more comprehensive evaluation of the 
adequacy of QHPs' networks. HHS believes that less stringent time and 
distance standards (like qualitative standards or separate standards 
for rural areas, geographies with provider shortages, and narrower 
networks) would not sufficiently assure reasonable access to providers.
    Where QHPs cannot comply with these standards due to provider 
shortages and other factors that affect issuers of given service areas 
similarly (like topographic challenges, such as a lake in the middle of 
a county), issuers can include such explanations in their 
justifications. HHS will take such considerations into account in 
determining whether the justification is sufficient to satisfy this QHP 
certification standard.
    HHS is aware of the potential risks related to implementing time 
and distance standards, such as standards being too stringent, not 
accounting for geographic variations, and leading to fewer QHPs. We 
believe these risks can be managed with increased transparency, updates 
to network adequacy QHP application documents, and coordination and 
partnership with States and issuers. We have made several changes to 
increase transparency, which we anticipate will make it easier for 
issuers to understand and comply with network adequacy standards. The 
ECP/NA template will include the Taxonomy Codes tab that shows which 
taxonomy codes crosswalk into which individual provider and facility 
specialty types. The Instructions and FAQs will provide more detail on 
the network adequacy review process and what issuers need to submit to 
HHS to demonstrate satisfaction of network adequacy standards. The 
Network Adequacy Justification Form is a streamlined tool that will 
enable issuers to show HHS how they are making progress toward 
compliance with network adequacy standards. Coordination with States 
will allow for a two-way exchange of information so HHS can better 
understand local patterns of care and how they may relate to Federal 
network adequacy standards. This information helps us give issuers as 
much credit for their networks as possible.
    Comment: Other commenters expressed that due to the differences 
between QHPs and Medicare Advantage plans--in terms of consumers, 
provider reimbursements, and contracting dynamics--network adequacy 
standards applying to Medicare Advantage plans may not be appropriate 
to apply to QHPs.
    Response: HHS acknowledges that QHPs and Medicare Advantage plans 
serve different enrollee populations. HHS has tailored the provider 
specialty list accordingly to better align with the provider access 
needs of QHP enrollees. HHS has added the following provider 
specialties for time and distance: Emergency medicine, outpatient 
clinical behavioral health, pediatric primary care, and urgent care. 
Details on why each of these specialties was added are included in the 
proposed rule (87 FR 584, 681). When HHS conducted Federal network 
adequacy reviews during PYs 2015-2017, our time and distance standards 
for network adequacy were also foundationally based on Medicare 
Advantage standards. Based on that prior experience, our research on 
network adequacy standards, and the public comments received on this 
rule supporting this approach, we believe it is reasonable to resume 
using time and distance network adequacy standards that are based on 
Medicare Advantage standards.
    Comment: Some commenters expressed that time and distance metrics 
are not appropriate for SADPs and that a network breadth measure might 
be more appropriate. However, while some commenters noted that time and 
distance standards are not appropriate for SADPs, most commenters 
supported the inclusion of dental providers.
    Response: Based on prior rates of SADPs' compliance with time and 
distance standards and our assessment of the availability of dental 
providers against the time and distance parameters finalized in the 
2023 Letter to Issuers, HHS anticipates most SADPs and medical QHPs 
with embedded dental benefits will be able to meet the standards for 
dental providers. If a plan is still working to come into compliance 
with network adequacy standards, they will be able to use the 
justification process as needed. Consequently, as proposed, HHS will 
include dental as a specialty for which compliance with time and 
distance standards is assessed.
    Comment: Several commenters stated that facility-based providers, 
such as physical, occupational, speech, and behavioral health 
therapists, should not be included in the individual provider specialty 
list for time and distance since some issuers may contract at the 
facility level for those services.
    Response: For rehabilitation and behavioral health therapists, we 
understand that some issuers contract at the facility level rather than 
with individual providers. We have decided to include these providers 
on the individual provider list because many of these providers offer 
services in varied locations and may not be contracted with a single 
facility.
    Comment: Several commenters made requests related to the 
justification process for issuers that do not meet network adequacy 
standards, including requests for greater clarity on the process; 
requested that HHS adopt a justification process that mirrors Medicare 
Advantage's approach to justifications; and requested that HHS ensure 
that justifications are not used in

[[Page 27328]]

lieu of issuers contracting with additional providers.
    Response: Issuers with network adequacy deficiencies will receive a 
partially pre-populated Network Adequacy Justification Form via the 
Plan Management (PM) Community and will need to submit the completed 
form to the PM Community by the required deadline. The justification 
process will require issuers that do not yet meet network adequacy 
standards detail: The reasons that one or more standards were not met; 
the mitigating measures the issuer is taking to ensure enrollee access 
to respective provider specialty types; information regarding enrollee 
complaints regarding network adequacy; and the issuer's efforts to 
recruit additional providers. HHS will use any updated provider data 
submitted on its ECP/NA template and the completed Network Adequacy 
Justification Form submitted as part of the certification process to 
assess whether the issuer meets the regulatory requirement, prior to 
making the certification decision.
    HHS reviewed the Medicare Advantage exception process and made the 
QHP network adequacy justification process align where it made sense to 
do so. HHS has made some distinctions, like using a partially pre-
populated Excel form with information on all needed corrections, rather 
than issuers having to complete a separate justification request for 
each county/specialty/network combination for which deficiencies are 
required. The justification process for QHP network adequacy is 
designed to help an issuer demonstrate its progress toward greater 
compliance with the standards. HHS will partner with issuers and States 
to ensure that the justification process is not used in place of 
contracting with additional providers.
    Comment: Some commenters also requested that HHS clarify what 
provider and facility types count towards certain provider specialty 
categories, including dental providers and urgent care. Several 
commenters requested greater transparency regarding how compliance with 
time and distance standards would be calculated.
    Response: In response to requests for additional clarity, further 
details on which provider specialty types count towards each time and 
distance category; and how compliance with time and distance standards 
are calculated, such information will be made available through 
materials such as the QHP Application Instructions, the ECP/NA 
template, Frequently Asked Questions and the final PY 2023 Letter to 
Issuers.
    Comment: Several commenters expressed concern about county type 
designations. They requested that HHS develop parameters for updating 
county type designations; requested that HHS ensure that county type 
designations can accurately reflect counties with both rural and 
metropolitan areas; and encouraged HHS to monitor the functionality of 
county type designations across various types of States, to ensure 
meaningful provider availability.
    Some commenters shared other suggestions regarding potential 
additions to time and distance standards, including requiring issuers 
to contract with all ECPs in the service area when provider shortages 
prevent the issuer from meeting time and distance standards. A 
commenter also suggested HHS consider possible interventions like 
provider incentives or transportation programs to assist areas 
experiencing provider shortages. One commenter requested that HHS 
systematically test network adequacy data submission and require 
issuers to provide additional information, like out-of-network claims 
data, to enhance HHS' understanding of how consumers are experiencing 
QHP networks in practice.
    Response: HHS thanks commenters for their feedback regarding county 
type designations and possible additions to the time and distance 
requirements. HHS will need to further research these suggestions and 
their implications before considering them for future rulemaking.
    Comment: A commenter encouraged HHS to require issuers to make 
telehealth psychiatry services available when Advanced Practice 
Registered Nurses (APRNs) are counted towards the Outpatient Clinical 
Behavioral Health category regardless of whether they are psychiatric 
APRNs.
    Response: In the ECP/NA template, HHS will detail which taxonomy 
codes will crosswalk into each individual provider and facility 
specialty type. For Outpatient Clinical Behavioral Health, only 
psychiatric APRNs would count towards this provider type; other APRNs 
are not included.
iii. Appointment Wait Times
    For the certification cycle for PYs beginning in 2023, HHS proposed 
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 proposed 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.
    HHS proposed that 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 16 must be 
appropriately licensed, accredited, or certified to practice in their 
State, as applicable, and must have in-person services available.
[GRAPHIC] [TIFF OMITTED] TR06MY22.015


[[Page 27329]]


    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 proposed 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, 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 proposed 
to codify the network adequacy justification process in regulation at 
Sec.  156.230.
    HHS sought 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 sought 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.
    We are finalizing this policy as proposed and delaying the 
implementation of network adequacy reviews for appointment wait time 
standards until PY 2024.
    We summarize and respond to public comments received on this policy 
below.
    Comment: Many commenters from a variety of stakeholders supported 
the proposal to institute appointment wait time standards to assess the 
adequacy of provider networks. Other commenters suggested additions to 
and refinement of the list of categories for appointment wait time 
standards. Some commenters requested that the Primary Care (Routine) 
category apply to routine dental services, such as cleanings. Several 
commenters requested that HHS create separate appointment wait time 
standards for different levels of urgency, such as routine, urgent, and 
emergent, as well as discharge follow-up. One commenter requested that 
HHS apply appointment wait time standards to all individual providers 
and facility types. Other commenters suggested separate appointment 
wait time categories for substance use disorder treatment services, 
oncology specialties, urgent care, family planning providers, and 
sexual health care providers. One commenter encouraged HHS to partner 
with patient groups to further refine appointment wait time standards.
    Response: HHS agrees that implementing quantitative appointment 
wait time standards for network adequacy has multiple benefits, 
including helping ensure that QHP enrollees have timely access to care. 
We appreciate the feedback suggesting additions to and refinement of 
the list of categories for appointment wait time standards. HHS may 
pursue additional strategies to evaluate the appropriateness of 
appointment wait time standards for a variety of provider types. HHS 
also may engage with consumer groups on this topic as suggested in 
public comment for future policymaking. HHS will further assess these 
suggestions and consider them for future rulemaking.
    Comment: Many commenters encouraged HHS to conduct additional 
oversight of provider networks throughout the year (outside of QHP 
certification), using strategies such as direct testing and monitoring 
of appointment wait times, to ensure enrollees have reasonable access 
to providers. One commenter requested that HHS consider providing 
funding for one entity in each State to conduct ongoing monitoring of 
appointment wait times.
    Response: HHS is investigating approaches to monitor network 
adequacy outside of the QHP certification process. We appreciate 
commenters' suggestions on possible methods for additional oversight 
and will assess further prior to future rulemaking.
    Comment: Some commenters suggested that appointment wait time 
standards be calculated using business days instead of calendar days to 
align with NCQA standards, some State network adequacy standards, and 
common business practices.
    Response: Draft parameters for appointment wait time standards were 
detailed in the draft PY 2023 Letter to Issuers.\314\ HHS agrees that 
aligning appointment standards with NCQA and some State network 
adequacy standards by using business days instead of calendar days will 
help minimize the burden and is reasonable given that many providers 
operate using business days. This change will be finalized in the final 
PY 2023 Letter to Issuers.
---------------------------------------------------------------------------

    \314\ 2023 Letter to Issuers in the Federally-facilitated 
Exchanges. CMS. (2022, January 7). https://www.cms.gov/files/document/2023-draft-letter-issuers-508.pdf.
---------------------------------------------------------------------------

    Comment: Some commenters opposed the implementation of the proposed 
appointment wait time standards, stating that the standards may be too 
dynamic, non-standardized, and beyond the control of issuers (and 
sometimes providers, particularly given the context of the COVID-19 
pandemic). Some commenters expressed concern that the data collection 
required for the appointment wait time standards would be burdensome 
for issuers and providers, and they suggested possibly delaying the 
implementation of such standards to PY 2024 or beyond.
    Response: HHS acknowledges that some stakeholders have concerns 
about the appointment wait time standards and the timeline for their 
implementation, including that appointment wait time requirements are 
not standardized, can be challenging for issuers to improve, and that 
data collection would be too burdensome. In recognition of those 
concerns, we have made several accommodations to the implementation of 
this new provision to ease the transition to this new standard. As 
noted above, HHS is finalizing appointment wait time standards, but 
delaying their implementation until PY 2024. HHS will also align the 
appointment wait time standards with appointment wait time standards 
used by NCQA and some States by using business days instead of calendar 
days.
    Regarding concerns that appointment wait time requirements are not 
standardized, specific draft parameters for appointment wait times are 
described in the draft PY 2023 Letter to Issuers \315\ and will be 
finalized in the final PY 2023 Letter to Issuers. The ECP/NA template 
\316\ shows which provider types crosswalk into which appointment wait 
time categories. We believe that the appointment wait time parameters 
are reasonable based on

[[Page 27330]]

existing industry standards, such as those from NCQA and some States.
---------------------------------------------------------------------------

    \315\ 2023 Letter to Issuers in the Federally-facilitated 
Exchanges. CMS. (2022, January 7). https://www.cms.gov/files/document/2023-draft-letter-issuers-508.pdf.
    \316\ Draft ECP/NA template: Essential Community Providers and 
Network Adequacy. CMS. https://www.qhpcertification.cms.gov/s/ECP%20and%20Network%20Adequacy.
---------------------------------------------------------------------------

    Issuers that do not yet meet the appointment wait time standards, 
once implemented in PY 2024, can use the justification process to 
update HHS on the progress of their contracting efforts for the 
respective plan year. HHS will review such justifications to determine 
whether the variance(s) described 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. HHS understands that some issuers may not already 
collect appointment wait time data, which is one of the reasons we are 
delaying the implementation of this requirement until PY 2024. Issuers 
that are unable to meet the specified standards would be able to submit 
a justification to account for variances.
    Comment: Some commenters requested that SADPs either be exempt from 
compliance with appointment wait time standards or held to a lower 
compliance threshold than the threshold to which medical QHPs are held.
    Response: We appreciate the feedback suggesting that SADPs be 
exempt from appointment wait time standards or held to a lower 
compliance threshold. We do not agree that SADPs should be exempt from 
compliance with appointment wait time standards or have a lower 
threshold applied than for medical QHPs. HHS believes it is important 
that timely access to care is ensured, regardless of plan type. 
Additionally, medical QHPs that have embedded dental benefits will be 
held to the same appointment wait standards for dental providers as 
SADPs. The compliance threshold is detailed in the draft PY 2023 Letter 
to Issuers \317\ and will be finalized in the final PY 2023 Letter to 
Issuers.
---------------------------------------------------------------------------

    \317\ 2023 Letter to Issuers in the Federally-facilitated 
Exchanges. CMS. (2022, January 7). https://www.cms.gov/files/document/2023-draft-letter-issuers-508.pdf.
---------------------------------------------------------------------------

    Comment: One commenter requested that HHS consider removing the 
requirement that providers have in-person services available to count 
towards these standards since some behavioral health providers only 
offer services via telehealth.
    Response: We are aware that some providers only offer services via 
telehealth. We acknowledge the growing importance of telehealth, and we 
want to ensure that telehealth services do not displace the 
availability of in-person care. Consequently, we are finalizing that, 
to count towards the standards, providers must have in-person services 
available. Providers that do not have in-person services available will 
not be counted when assessing appointment wait times.
    Comment: A commenter requested that appointment wait time standards 
should be overridden by provider assessment of when it would be 
appropriate for the enrollee to access care.
    Response: We appreciate the suggestion that appointment wait time 
standards should be overridden by provider assessment of when it would 
be appropriate for the enrollee to access care. We will further assess 
this idea prior to considering it for future rulemaking.
    Comment: A commenter requested that HHS allow issuers the 
opportunity to conduct outreach to providers and reassess appointment 
wait time measurement when they are not meeting the appointment wait 
time standards before any enforcement action would occur.
    Response: We acknowledge the commenter's concern that issuers might 
be subject to enforcement action for not meeting appointment wait time 
standards without having the opportunity to come into compliance. HHS 
will work in partnership with issuers who are not yet meeting network 
adequacy standards and support their efforts to come into compliance as 
part of issuer compliance monitoring and workplans.
    Comment: Some commenters requested more clarity, such as what 
provider types are included in the behavioral health category for 
appointment wait time standards, and how appointment wait time 
standards apply to dental providers. Commenters also inquired as to 
whether the standards apply to appointments for existing patients, new 
patients, or both. Some commenters requested additional insight 
regarding methodological ambiguities related to the appointment wait 
time standards, including what period of time the standards will be 
based on, how the parameters of appointment wait time are defined, how 
to account for seasonality, and how to best validate this data.
    Response: The provider types that filter into the Behavioral Health 
category for appointment wait time standards will be detailed in the 
Taxonomy Codes tab of the ECP/NA template.\318\ For clarification on 
how appointment wait time standards apply to dental providers, all 
dental providers--general dentists and specialists--would be included 
in the Specialty Care category. Appointment wait time standards apply 
to both new and existing patients. In response to all other requests 
for additional clarity on the appointment wait time standards, 
including information on methodology, we will provide further 
information in the QHP Application Instructions, the ECP/NA template, 
Frequently Asked Questions, and the final PY 2023 Letter to Issuers.
---------------------------------------------------------------------------

    \318\ Draft ECP/NA template: Essential Community Providers and 
Network Adequacy. CMS. https://www.qhpcertification.cms.gov/s/ECP%20and%20Network%20Adequacy.
---------------------------------------------------------------------------

    In the proposed rule, HHS solicited comments on other ideas to 
strengthen network adequacy policy in future years and other aspects of 
QHP certification that impact health equity.
    Comment: Several commenters suggested other ideas to strengthen and 
expand network adequacy policy in future years. Many commenters shared 
requests related to access to providers with certain competencies, 
skills, or specializations. Several commenters requested HHS consider 
standards that ensure a network provides an adequate supply of 
culturally and linguistically competent providers, and they requested 
that HHS have QHPs collect and display languages spoken by providers 
and their staff. Some commenters requested that HHS require that QHPs 
ensure access to providers who serve enrollees with rare, complex, or 
chronic health conditions, and providers who are culturally competent 
to serve LGBTQ+ individuals.
    We received several comments requesting that we consider a 
requirement for QHPs to track the number of providers accepting new 
patients throughout the year, and one request to have QHPs collect 
information on provider hours of operation. Some commenters requested 
that HHS collect and share data on provider demographics and report 
provider accessibility by public transit.
    Some commenters suggested provider-enrollee ratios as an additional 
network adequacy standard to consider for future rulemaking. Several 
commenters were in favor of HHS developing unique standards for 
pediatric specialty providers and implementing enrollee ratios by 
specialty, geographic accessibility, and population density. Some 
commenters also requested that HHS define minimum appropriate provider 
standards to meet the needs of children with special health care needs 
as well as of diverse cultural, ethnic, and

[[Page 27331]]

linguistic backgrounds. One commenter suggested HHS consider requiring 
issuers to report on the number of psychiatric providers and outpatient 
clinical behavioral health providers who have billed for services 
within a certain timeframe. Other commenters requested HHS measure the 
availability of integrated behavioral health in primary care.
    Commenters encouraged the consideration of requiring issuers to 
report data by race and ethnicity on the population living in 
geographic areas that do not have access to providers within travel 
time and distance standards. Another commenter requested that HHS 
include auxiliary aids and services for people with disabilities, as 
well as data on the accessibility of all providers and facilities, in 
future network adequacy standards. One commenter requested that quality 
rating system measures be tied to network adequacy standards. Another 
commenter requested that provider non-discrimination policies be 
included in future rulemaking.
    Response: HHS appreciates the suggestions on potential ways to 
enhance and grow network adequacy standards in the future. We will 
further assess these ideas prior to considering them for future 
rulemaking.
    Comment: HHS also received numerous comments regarding suggestions 
for future rulemaking related to consumer protections. Many commenters 
requested further clarity on how QHPs can ensure enrollees can access 
care when not available in-network for their specific needs, which 
would include covering out-of-network providers at in-network cost 
sharing rates if a qualified provider is not available within the 
network or at the lowest cost-sharing tier. Some commenters also 
requested a clear complaint process for enrollees to report network 
adequacy issues. HHS received a comment requesting that QHP issuers be 
required to pay for interpretation services and auxiliary aids for 
contracted providers. Another commenter requested that HHS detail the 
actions that are taken when QHPs fail to meet network adequacy 
standards. Some comments received requested HHS consider the 
implications of MHPAEA on network adequacy standards.
    Response: HHS appreciates the suggestions on potential ways to 
strengthen consumer protection through enhanced network adequacy 
standards in the future. We will further assess these ideas prior to 
considering them for future rulemaking.
    Comment: HHS received some suggestions related to provider 
availability, such as requirements for issuers to provide reasonable 
notice of terminations of a provider's in-network status and allowing 
the ability for enrollees to change plans when provider availability in 
a network changes significantly.
    Response: We acknowledge the suggestions related to provider 
availability, such as requirements for the issuer to provide reasonable 
notice of provider terminations. These recommendations also implicate 
provisions enacted in sections 113 and 116 of the No Surprises 
Act.\319\ These provisions of No Surprises Act establish continuity of 
care protections \320\ in instances when terminations of certain 
contractual relationships result in changes in provider or facility 
network status and establish standards intended to protect 
participants, beneficiaries, and enrollees, such as a protocol for 
responding to requests about a provider's network participation status. 
HHS, along with the Departments of Labor and the Treasury, intends to 
issue future rulemaking or guidance to further implement those 
provisions, and will take these comments into account in developing 
such materials.
---------------------------------------------------------------------------

    \319\ The Consolidated Appropriations Act, 2021 (CAA) was 
enacted on December 27, 2020 and includes Title I (No Surprises Act) 
in Division BB.
    \320\ Section 9818 of the Code, section 718 of ERISA, and 
sections 2799A-3 and 2799B-8 of the PHS Act, as added by section 113 
of division BB of the Consolidated Appropriations Act, 2021 (CAA) 
establish continuity of care protections in instances when 
terminations of certain contractual relationships result in changes 
in provider or facility network status. The Departments of HHS, 
Labor and Treasury have announced that until rulemaking is completed 
to fully implement these provisions, plans, issuers, providers, and 
facilities are expected to implement the requirements using a good 
faith, reasonable interpretation of the statute. See FAQs about 
Affordable Care Act and Consolidated Appropriations Act, 2021 
Implementation Part 49, https://www.cms.gov/CCIIO/Resources/Fact-Sheets-and-FAQs/Downloads/FAQs-Part-49.pdf.
---------------------------------------------------------------------------

    Comment: Some commenters shared feedback regarding the network 
breadth pilot, including both concern and support. HHS received some 
comments expressing that the network breadth pilot should not be 
continued in its current State. One commenter shared that the network 
breadth pilot is made more useful to consumers by using the actual 
percent participation value, prohibiting issuers from marketing plans 
based on the breadth categories, and allowing issuers to submit network 
adequacy data on machine-readable files. Some comments suggested that 
the network breadth methodology and labels be clarified as they can be 
confusing to consumers. HHS received one comment asking that the 
methodology be modified so that providers are not excluded based on 
taxonomies in the National Plan & Provider Enumeration System (NPPES) 
and that special types of PCPs are more appropriately documented. Some 
comments expressed support for the continuation of the network breadth 
pilot with its current labels.
    Response: Although these comments were not within the scope of HHS' 
proposals on network adequacy presented in the proposed rule, HHS 
appreciates the comments received regarding the network breadth pilot. 
We will consider the above suggestions for future rulemaking after 
further assessment.
iv. Tiered Networks
    HHS proposed 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 the use of PPO network providers would 
result in higher cost-sharing obligations for the 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 proposed 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 sought 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.
    After considering commenter concerns that the policy could unduly 
restrict plan network designs and innovation, we have decided not to 
finalize this policy. While we continue to believe this proposal has 
potential consumer protection benefits and would promote greater cost-
sharing affordability, further research is warranted to evaluate the 
potential

[[Page 27332]]

benefits and drawbacks of requiring providers to be contracted within 
the network tier that results in the lowest cost-sharing obligation in 
order for those providers to be counted towards satisfaction of the 
network adequacy standards.
    We summarize and respond to public comments received on this policy 
below.
    Comment: HHS received numerous comments in support of the proposal 
that for plans that use tiered networks, to count towards network 
adequacy standards, providers must be contracted within the network 
tier that results in the lowest cost-sharing obligation. However, 
several commenters broadly opposed or cautioned against the lowest 
cost-sharing tier requirement, citing concerns that it would restrict 
the success of network innovation strategies, such as value-based 
steering and contracting arrangements, or encourage issuers to remove 
the lowest cost-sharing tier entirely.
    Response: We agree with commenters who supported the proposal as we 
concur that the proposal could help ensure that network adequacy 
standards provide reasonable access to care and help enhance health 
equity by enabling enrollees to access care at the lowest cost-sharing 
rate. Notwithstanding, we understand commenters' concerns that 
finalization of this policy could inadvertently restrict innovation and 
the issuers' ability to design and implement plan networks across all 
Exchange plans, which may result in decreased cost sharing for 
enrollees and decreases in overall health care costs. While we believe 
this proposal has potential benefits to consumer protection and 
affordability for cost sharing, we believe further research on the 
potential benefits and drawbacks is warranted prior to finalizing such 
a proposal.
    Comment: One commenter suggested that a lower-cost virtual primary 
care option should not be considered a ``lowest tier.''
    Response: While we are not finalizing this proposal regarding 
network tiering, we will consider this suggestion for future 
rulemaking.
    Comment: Another commenter expressed that the network tiering 
requirement would not be appropriate for SADPs as tiered networks are 
uncommon for this plan type.
    Response: We acknowledge that network tiers may be less common 
among SADPs. While we are not finalizing this proposal, we do not agree 
that any future network tiering requirements should not apply to 
SADPs--they simply would not be relevant for the particular QHPs 
(medical or SADPs) that do not use network tiers.
v. Telehealth Services
    HHS proposed 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 proposed 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 the 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.
    HHS sought comment on this proposal, including comments on how HHS 
might incorporate telehealth availability into network adequacy 
standards in future PYs. We specifically sought 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 for meeting time and distance standards.
    We are finalizing this policy as proposed.
    We summarize and respond to public comments received on this policy 
below.
    Comment: Commenters expressed widespread support regarding the 
proposal to require issuers to identify which of their in-network 
providers offer telehealth services. Commenters also suggested 
additional telehealth information to consider collecting, like the 
availability of tele-mental health services and audio-only services, as 
well as tracking prescription digital therapeutics.
    Response: HHS appreciates the comments received in support of the 
requirement for QHPs to report whether their in-network providers offer 
telehealth services. We agree that this data collection will be 
relevant to HHS' analysis of whether a QHP meets network adequacy 
standards and will help inform the future development of telehealth 
standards. We appreciate the suggestions regarding additional 
telehealth-related information that HHS could collect and will consider 
this for future rulemaking.
    Comment: Some commenters requested that HHS either not require 
issuers to report telehealth service availability or delay the 
implementation of this requirement. These commenters expressed concern 
that collecting and reporting telehealth capability would be overly 
burdensome for issuers and premature given the evolving nature of 
telehealth. One commenter suggested that telehealth data collection be 
delayed until a Federal database of provider telehealth availability is 
created. Several commenters requested that HHS minimize the burden 
related to telehealth data collection as much as possible, including 
one who suggested that State-level efforts might be able to be 
repurposed to gather this information. Some commenters stated that 
telehealth data collection and reporting is not appropriate for SADPs 
since telehealth is a newer modality for dental providers and the data 
collection and reporting may not lead to helpful insights at this time. 
One commenter suggested that HHS should incentivize QHPs to increase 
telehealth availability among their contracted providers as a benefit 
design rather than through network adequacy requirements.
    Response: We understand some commenters are concerned about the 
implementation of telehealth data collection, including the timeline, 
due to the increased burden for issuers and that telehealth services 
are still evolving. HHS acknowledges that some commenters believe 
telehealth data collection is not appropriate for SADPs at this time 
due to the newness of tele-dentistry. We recognize that some QHPs may 
not have data available on whether their contracted providers offer 
telehealth and that for those QHPs, this data collection may result in 
an increased burden. Simultaneously, we understand that some QHPs may 
already have this information available through sources like provider 
surveys or claims data. While telehealth services continue to evolve 
for many specialties, including dental providers, we believe that 
collecting telehealth availability data at this point in time will 
provide key insights that can influence future policy development, and 
that these benefits outweigh the associated potential burden for some 
QHPs. We will work to minimize the burden where possible, like by 
providing technical assistance to issuers and allowing issuers 
flexibility with what methods they use to collect telehealth data.
    Comment: Many commenters expressed that more research is needed to 
understand whether and how to count telehealth providers towards 
network adequacy standards. Numerous

[[Page 27333]]

commenters identified additional considerations for incorporating 
telehealth into network adequacy standards, such as inequities for 
rural and low-income providers, health plan location, broadband access, 
and variation in types and requirements of telehealth between providers 
and States. These commenters also emphasized that the appropriateness 
of telehealth should be a decision made between the patient and 
provider and that telehealth should not expand at the expense of 
available in-person care.
    Several commenters shared suggestions with HHS regarding possible 
additional requirements related to telehealth services. Some commenters 
requested that we consider offering a telehealth credit for network 
adequacy standards, similar to Medicare Advantage. Some commenters 
stated telehealth standards and policies should ensure access to 
culturally, linguistically competent providers who can serve consumers 
with disabilities and should also increase access in low-income and 
geographically remote regions. One commenter encouraged HHS to adopt a 
separate national network adequacy standard for telehealth providers. 
Some commenters requested that HHS ensure telehealth information is 
reported promptly and that telehealth information is included in 
provider directories. One commenter suggested that HHS consider 
requiring QHPs to contract with telehealth services in areas where 
there are shortages of in-person providers.
    Response: We concur with the recommendations from commenters that 
more research is needed before HHS could consider incorporating the 
availability of telehealth services into network adequacy policy for 
QHPs, such as a telehealth credit like Medicare Advantage. We also 
agree that telehealth services should be made available in addition to, 
rather than instead of, in-person care. HHS appreciates the suggestions 
received regarding additional requirements for telehealth services and 
other telehealth-related information that HHS could collect from QHPs. 
We will consider this information for future rulemaking. We thank 
commenters for their ideas about other ways to collect telehealth data, 
like a partnership with States, through a Federal database on 
telehealth or encouraging telehealth services through other means. We 
will consider these ideas for future rulemaking.
vi. Solicitation of Comments--Unintended Impacts of Stronger Network 
Adequacy Standards
    HHS is of the view that the network adequacy standards we included 
in the proposed 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.
    We sought comment 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.
    We summarize and respond to the comments received below.
    Comment: Numerous commenters expressed diverse viewpoints regarding 
potential unintended impacts of stronger network adequacy standards. 
Several commenters expressed their belief that stronger network 
adequacy standards would not impact contracting negotiations between 
issuers and providers. Two commenters shared concerns that the proposed 
network adequacy standards could disproportionately harm smaller QHP 
issuers and reduce market competition. A commenter expressed 
apprehension that appointment wait time standards could be codified in 
provider contracting agreements and particularly harm providers that 
are in highest demand. Another commenter stated that the stronger 
network adequacy standards could help mitigate declining provider 
reimbursement rates. One commenter encouraged consideration of a 
requirement for issuers to offer at least one QHP Statewide for each 
metal level at which they offer coverage to mitigate the risk of 
network adequacy standards disincentivizing QHP issuers from offering 
plans in rural counties. HHS received another comment asking us to 
consider potential cost implications of including specialized cancer 
providers in network adequacy requirements.
    Some commenters requested that HHS not enact prohibitions against 
all-or-nothing contract clauses or steerage prohibitions, sharing 
concerns that such policies could limit enrollee access to providers. 
Another commenter encouraged HHS to consider regulation to eliminate 
all-or-nothing contract clauses, while a separate commenter expressed 
that they did not anticipate prohibition of all-or-nothing contract 
clauses would sufficiently protect plans from unintended consequences 
of network adequacy standards. One commenter suggested that any future 
regulation regarding restrictions on contracting terms should only be 
applied to provider types that would benefit from the network adequacy 
standards. One commenter shared that they had experienced regional 
struggles with all-or-nothing contract clauses in the context of QHPs 
and offered a further discussion on what they learned.
    Response: HHS understands that stakeholders have a variety of 
opinions regarding the impact of stronger network adequacy standards, 
as well as all-or-nothing contracting clauses. We appreciate the 
feedback received and will consider it in future rulemaking.
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 was not 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 considered 
whether there is a need for greater alignment in FFE and State Exchange 
network adequacy standards.
    HHS sought comment on whether a more coordinated, national approach 
to network adequacy rules across all Exchanges that is suited to 
address contemporary conditions in the health care markets is needed. 
For example, we sought 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

[[Page 27334]]

network adequacy across the Exchanges. Moreover, we sought 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 sought 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.
    We summarize and respond to the comments received below.
    Comment: Commenters had mixed feedback on whether HHS should 
regulate network adequacy for all Exchanges, including setting 
standards and conducting reviews for QHPs in State Exchanges. Many 
commenters requested that regulators of State Exchanges be allowed to 
continue using their network adequacy standards and conducting their 
reviews. Some commenters suggested that HHS direct State network 
adequacy reviews, rather than conducting separate Federal reviews, to 
avoid duplication since some States have mandates to review network 
adequacy. Some commenters emphasized the importance of having only one 
applicable set of network adequacy standards per State. One commenter 
suggested that Federal network adequacy standards are not needed, as 
they stated was evidenced by high consumer satisfaction and consumer 
selection of narrow network plans. Many commenters requested that HHS 
extend Federal network adequacy standards to State Exchanges in future 
rulemaking. Several commenters suggested that State alignment with 
Federal standards would be ideal, and that Federal standards should 
offer a strong floor that all States must meet.
    Response: We appreciate the comments received and understand that 
there are diverse opinions regarding the appropriate regulator for 
network adequacy standards in State Exchanges. HHS will monitor 
existing network adequacy standards in State Exchanges relative to the 
Federal standards finalized in this rule and will consider whether 
application to State Exchanges in future PYs is warranted.
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 the inclusion of ECPs in QHP provider networks and provides an 
alternate standard for issuers that provide a majority of their covered 
professional 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 proposed 
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, of 
available ECPs in the plan's service area. HHS proposed 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, in addition to satisfying the contract offering requirements 
described in Sec.  156.235(a)(2)(ii) that require a plan to offer a 
contract to at least one ECP in each of the available ECP categories in 
each county in the plan's service area and offer a contract to all 
available Indian health care providers in the plan's service area. 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.
    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. 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 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 proposed 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 the 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 proposed to codify the network tiering 
requirement for satisfying the ECP standard in regulation at Sec.  
156.235.
    Additionally, for PY 2023 and beyond, HHS proposed that issuers 
could comply with the requirement at Sec.  156.235(a)(2)(ii)(B) to 
offer 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 also considered 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

[[Page 27335]]

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 solicited 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 sought 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 sought 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 sought comment on 
these proposals, including from ECPs and issuers serving low-income and 
medically underserved populations. HHS also sought comment on ideas for 
further strengthening ECP policy.
    After reviewing the public comments, we are finalizing all 
provisions as proposed. Additionally, in response to comments we 
solicited on whether and how to clarify the ``Other ECP Providers'' 
requirement, we have amended the regulatory text at Sec.  
156.235(a)(2)(ii)(B) to clearly define the ``Other ECP Providers'' 
category, as follows:
    At least one ECP in each of the six (6) ECP categories in each 
county in the service area, where an ECP in that category is available 
and provides medical or dental services that are covered by the issuer 
plan type. The ECP categories are Federally Qualified Health Centers, 
Ryan White Program Providers, Family Planning Providers, Indian Health 
Care Providers, Inpatient Hospitals, and Other ECP Providers. The Other 
ECP Providers category includes the following types of providers: 
Substance Use Disorder Treatment Centers, Community Mental Health 
Centers, Rural Health Clinics, Black Lung Clinics, Hemophilia Treatment 
Centers, Sexually Transmitted Disease Clinics, and Tuberculosis 
Clinics.
    We summarize and respond to public comments received on essential 
community providers (Sec.  156.235) below.
    Comment: The majority of commenters supported increasing the 
required ECP participation standard from 20 percent to 35 percent of 
available ECPs in the plan's service area that are included within the 
applicable plan year HHS ECP list, citing expanded access to health 
care for vulnerable populations and improved health equity. Several of 
these commenters indicated that HHS should require QHPs to demonstrate 
that they can meet the 35 percent participation threshold in all ECP 
categories, or in specific categories such as Substance Use Disorder 
Treatment Centers, Ryan White providers, hospitals, and each 
subcategory of ``Other ECP Providers''; while other commenters 
suggested that HHS implement an ``any willing provider'' standard.
    Response: We are finalizing the required ECP participation standard 
at 35 percent as proposed. Many commenters, including providers, 
provider associations, and consumer advocacy groups, supported the 
proposal to raise the ECP participation standard from 20 percent to 35 
percent. In response to suggestions that HHS require QHPs to contract 
with 35 percent of the ECPs as applied to each of the specific 
categories of ECPs, HHS continues to require QHPs to contract with at 
least one ECP within each of the six ECP categories in each county in 
the issuer's service area and believes the current approach better 
ensures geographic distribution of such ECPs in each of the six ECP 
categories across the issuer's service area than applying the 35 
percent threshold to each of the six ECP categories would achieve. 
Regarding commenters' recommendations that HHS apply a 35 percent 
threshold standard to each of the six ECP categories and/or implement 
an ``any willing provider'' standard, HHS recognizes that issuer 
network participation negotiations are a tool that issuers use to 
manage costs, which are generally reflected in lower premium rates. 
Reducing issuers' ability to limit the scope of their networks could 
eliminate that cost management tool and potentially cause premiums to 
increase substantially; therefore, we do not support these 
recommendations at this time.
    Comment: While agreeing with the proposed increase to 35 percent, 
numerous commenters cautioned against a one-size-fits-all approach to 
ensure there are enough ECPs in all networks. Some commenters stated 
that a fixed percentage for all QHPs may not be sufficient to achieve 
the desired goal due to geographic areas varying in demographic 
composition, including the difficulty of meeting the 35 percent 
participation standard in rural areas. Some commenters stated that this 
standard could deter issuers from entering service areas with few ECPs.
    Response: In response to concerns raised about potential 
difficulties meeting the increased standard in rural areas and other 
geographic areas that vary in demographic composition that can lead to 
the presence of few ECPs, section 1311(c)(1)(C) of the Affordable Care 
Act requires that a QHP's network include ECPs, where available, that 
serve predominantly low income and medically-underserved populations. 
We reflect this in our regulations by permitting issuers that cannot 
meet the contracting standards to satisfy the QHP certification 
standard by submitting a justification. Therefore, the standard does 
not penalize issuers that cannot meet the ECP standard because of a 
lack of certain types of ECPs within a service area.
    Comment: Several commenters opposed the increase of the required 
ECP provider participation standard from 20 percent to 35 percent of 
available ECPs in the plan's service area included within the 
applicable plan year HHS ECP list. These commenters expressed concern 
about the increased administrative burden and cost that the raised 
threshold would place on issuers and providers. A few commenters 
pointed out unintended negative consequences that could arise from the 
increased standard, including price increases for consumers. Some 
commenters recommended delaying any threshold increase until the 2024 
plan year or implementing a more moderate increase for the 2023 plan 
year, from 20 to 25 percent, to account for this increased burden.
    Response: Regarding commenters' concerns about the increase of the 
ECP threshold to 35 percent, we do not anticipate the majority of 
issuers having difficulty meeting the increased standard. For the plan 
year 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 contracting 
percentage across all FFE issuers was 55 percent and 54 percent, 
respectively. Given that during the 2015-2017 plan years, all issuers 
satisfied the 30 percent standard when permitted to supplement their 
QHP applications with ECP write-ins and justifications, CMS anticipates 
that any issuers falling shy of the 35 percent threshold for the 2023 
plan year could satisfy the standard by relying on these same methods 
of compliance. Given issuers' success with meeting the

[[Page 27336]]

30 percent standard in previous plan years, HHS believes that the 35 
percent standard will provide both issuers and providers with 
sufficient flexibility to negotiate contract terms that do not lead to 
increased prices for consumers. Accordingly, as we do not anticipate 
that compliance with this increased threshold will be too large a 
burden for issuers to meet for plan year 2023, we decline to delay 
implementation.
    Comment: The majority of commenters supported the proposal to 
require QHPs with tiered networks to meet the ECP threshold in the 
lowest cost-sharing tier. One commenter noted that plans' preferred 
tiers often have providers that agree to accept more favorable rates 
and provide additional services such as coordinating care. The 
commenter stated that such plans should not be placed at a disadvantage 
for placing ECPs on a second general tier with providers that do not 
offer additional services.
    Response: We are finalizing this provision as proposed. We intend 
to monitor consumer complaints regarding any potential disadvantages 
that could result from this requirement; however, we anticipate the 
benefit of the lowest cost-sharing tier requirement for low-income, 
medically underserved consumers, such as ensuring that these consumers 
can access an ECP provider offering essential health benefits through 
more affordable cost-sharing, to outweigh any disadvantages incurred by 
plans due to their choice of tiering structure.
    Comment: In response to HHS' solicitation for comments on 
clarifying which providers may fit the category of ``Other ECP 
Providers'' in the regulatory text, two commenters recommended that HHS 
define the ECP category of ``Other ECP Providers'' in the regulatory 
text. Numerous commenters supported the addition of ``Substance Use 
Disorder Treatment Centers'' to the ``Other ECP Providers'' ECP 
category, including provider associations and advocacy groups. One 
commenter opposed the addition of Substance Use Disorder Treatment 
Centers to the ``Other ECP Providers'' ECP category, citing variability 
in the quality, oversight and services provided at such centers; 
another commenter noted HHS should explore how it will define 
``substance use treatment centers'' and allow stakeholders additional 
time to comment prior to adding to the ``Other ECP Providers'' ECP 
category.
    Response: In response to these comments recommending that we 
clarify the meaning of the ECP category of ``Other ECP Providers,'' we 
are amending Sec.  156.235(a)(2)(ii)(B), as referenced in the preamble. 
The provider types that we have included in the ECP category of ``Other 
ECP Providers'' reflect, for the most part, those that have been listed 
within this ECP category in the Letter to Issuers in previous years and 
with whom many issuers have already been including in their provider 
networks. The only new provider type that we are adding to this ECP 
category of ``Other ECP Providers'' is Substance Use Disorder Treatment 
Centers. We are adding Substance Use Disorder Treatment Centers to the 
ECP category of ``Other ECP Providers'' as proposed. HHS will rely on 
the Substance Use Treatment Locator (https://findtreatment.gov/) made 
available by the Substance Abuse and Mental Health Services 
Administration (SAMHSA) to identify such treatment centers providing 
quality care to the consumers that they serve. This addition of 
Substance Use Disorder Treatment Centers effectively gives issuers an 
additional provider type by which they can satisfy the contract 
offering requirement for the ECP category of ``Other ECP Providers'' in 
each county in their service area. In some counties or service areas, 
depending on which types of ECPs are available, HHS acknowledges that 
this addition could decrease the chance that an issuer would choose to 
contract with another provider type grouped under the ``Other ECP 
Providers'' ECP category, but it is our opinion that adding this new 
category outweighs that potential effect because it is critically 
important to ensure access to SUD treatment to all consumers who 
require such treatment. Additionally, we note that issuers may increase 
access to a variety of providers by contracting with more than one 
available ECP per ECP category, including ``Other ECP Providers,'' in 
each county in their service area if they choose to do so.
    Comment: Several commenters suggested that we disaggregate 
hemophilia treatment centers and behavioral health providers from the 
``Other ECP Providers'' category and create new ECP categories for 
freestanding birth centers and for providers that are essential to 
specialized cancers such as brain tumors.
    Response: In previous years, we have considered such 
recommendations to disaggregate provider types included in the ``Other 
ECP Providers'' ECP category and creating a separate ECP category for 
each, in addition to creating a separate ECP category for freestanding 
birth centers; however, because our analysis of the available ECPs in 
each of these ECP subcategories continues to indicate that there are 
too few ECPs within each of these provider types appearing on our ECP 
list to afford issuers sufficient flexibility in their contracting, we 
will not be disaggregating these subcategories of providers or creating 
new ECP categories at this time. While we may revisit this 
consideration in the future, we encourage QHP issuers to include in 
their networks these additional providers to best meet the needs of the 
populations they serve.
    Comment: Two commenters recommended that HHS should improve the 
overall accuracy of the HHS ECP List.
    Response: HHS has recently launched a monthly provider outreach 
initiative that automatically notifies providers on the HHS ECP List 
that they should revisit the online ECP petition to verify the accuracy 
of their data if they have not refreshed their provider data in over 12 
months. Additionally, HHS has recently programmed additional validation 
checks within its online ECP petition to better ensure that only 
qualified providers can petition for inclusion on the HHS ECP List. 
Furthermore, HHS, through its operating divisions HRSA, SAMHSA, and 
along with other entities, continues to verify the operating status and 
qualifications of providers for inclusion on the HHS ECP List to help 
ensure that the number and types of providers to which issuers are held 
to contracting to satisfy the ECP standard reflect an accurate universe 
of qualified ECPs that are available within the issuer's respective 
service area.
    Comment: One commenter suggested that HHS should require QHPs to 
comply with ECP standards throughout the coverage year and report any 
material change in their ECP contracts to ensure that at no time their 
network falls below the ECP participation standard. Several commenters 
suggested HRSA's HIV/AIDS Bureau monitor and enforce contracting 
requirements for Ryan White HIV/AIDS Program Providers.
    Response: We appreciate commenters' suggestions on how to better 
monitor issuers' compliance with the ECP standard throughout the plan 
year and will consider different methods of enforcing compliance with 
the ECP standard in future plan years.
    Comment: One commenter suggested that HHS include regulatory 
language specifying that good faith contract terms must include all of 
the services the plan covers and that the provider offers and include 
reimbursement at generally applicable payment rates; another suggested 
that HHS require QHPs to contract with ECPs at a reimbursement level no 
lower than the established rate

[[Page 27337]]

at which they are compensated under Medicaid or Medicare to ensure that 
ECPs have a financial incentive to participate. Another commenter 
requested that HHS include in guidance that health systems contract 
with ECPs separately.
    Response: Comments on good faith contract terms and reimbursement 
rates are out of the scope of this rule. However, we expect issuers to 
comply with existing regulatory provisions \321\ and sub-regulatory 
guidance \322\ that may apply to these topics.
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    \321\ 45 CFR 156.235(d) and (e).
    \322\ 2018 Letter to Issuers in the Federally-facilitated 
Marketplaces (2017, February 17). CMS. https://www.cms.gov/CCIIO/Resources/Regulations-and-Guidance/Downloads/Final-2018-Letter-to-Issuers-in-the-Federally-facilitated-marketplaces-and-February-17-Addendum.pdf.
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    Comment: One commenter recommended that HHS eliminate QHP issuers' 
option to submit a narrative justification that describes why they 
could not meet the standard but still have a network that is sufficient 
to meet the needs of low-income and underserved enrollees.
    Response: We appreciate the commenter's recommendation to eliminate 
the option for issuers to submit a narrative justification to satisfy 
the ECP standard. More information on changes to the ECP justification 
process for the plan year 2023, including the format of the 
justification and how and where it will be submitted, will be made 
available through forthcoming materials, including the QHP Application 
Instructions, the ECP/NA template, the ECP Tools, Frequently Asked 
Questions, and the Final Plan Year 2023 Letter to Issuers.
    Comment: Several commenters recommended that HHS should include 
information on which ECPs have telemedicine services available on the 
HHS ECP List. One State expressed support for ECPs offering telehealth 
services because consumers seeking care in their first language could 
benefit from telehealth services provided by ECPs. Several commenters 
urged that HHS monitor the use of telehealth services to ensure that 
they do not undermine access to care protections. Commenters cautioned 
that allowing issuers to meet the ECP participation standard with 
telehealth services in lieu of in-person care could improve health care 
access in some areas while jeopardizing care quality and exacerbating 
health inequities in other areas.
    Response: We appreciate commenters' recommendations for integrating 
telehealth services into the ECP list. We acknowledge concerns that 
telehealth should not be used as a substitute for in-person care. We 
will consider these recommendations for adding telehealth services 
information to the ECP list in future rulemaking.
13. Standards for Downstream and Delegated Entities (Sec.  156.340)
    In the HHS Notice of Benefit and Payment Parameters for 2023 
proposed rule (87 FR 584, 686), we proposed 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. We proposed 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. We refer readers to 
the proposed rule for a more detailed discussion of the proposal and 
its supporting rationale (87 FR 686 through 687).
    After reviewing the public comments, and based on the rationale 
provided in the proposed rule and in this rule, we are finalizing the 
amendments to Sec.  156.340, as proposed, to clarify and strengthen 
requirements holding 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 are also finalizing 
the proposal 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.''
    We summarize and respond to public comments received on standards 
for QHP issuer downstream and delegated entities (Sec.  156.340).
    Comment: The commenters expressed support for the proposed 
amendments to Sec.  156.340 and lauded its clarification and its 
strengthening of oversight standards for QHP issuers toward their 
downstream and delegated entities with regard to relevant Exchange 
regulations. One commenter stated that they supported the changes 
proposed because they clarify that QHP issuers and their downstream and 
delegated entities remain responsible for complying with all Federal 
requirements, including QHP certification standards, Exchange processes 
and procedures, the maintenance of records, and enrollment rules for 
agents, brokers, and web-brokers. Another commenter stated the 
increased requirements for QHP issuers to hold their downstream and 
delegated entities accountable, including the increased record-keeping 
requirements, are essential to hold QHP issuers accountable for meeting 
applicable federally-defined performance standards and without that 
accountability, issuers could evade those standards by delegating 
duties to other entities which could avoid accountability by ``neither 
maintaining records, nor reporting data showing compliance''.
    Response: We appreciate the support for the proposed amendments to 
Sec.  156.340 and the accompanying clarification of the standards 
applicable to QHP issuers and their downstream and delegated entities 
in all Exchange models. These comments articulate the reasons behind 
the decision to make the amendments and clarifications to the 156.340. 
Moreover, these supportive commenters describe the scenario the changes 
are intended to prevent or mitigate: Evasion by issuers of applicable 
Exchange requirements by the delegation of duties to entities otherwise 
capable of avoiding accountability. By codifying a regulatory 
requirement that holds QHP issuers in all Exchange models responsible 
for compliance with Exchange requirements by their downstream and 
delegated entities, the appropriate Exchange authority can ensure 
compliance with applicable requirements and hold issuers accountable 
for their actions and the actions of their downstream and delegated 
entities in situations of non-compliance.
    Comment: Several commenters were not supportive of the proposal and 
objected to the language as it pertains to the record retention 
requirement in the new paragraph (b)(5) as overly broad. These 
commenters expressed concern that the proposed new record retention 
requirement in Sec.  156.340(b)(5) appeared to give HHS access to 
``virtually all data and information,'' including consumer data 
maintained by the downstream and delegated entities, and that it would

[[Page 27338]]

enable HHS to go on a ``fishing expedition'' for information unrelated 
to Exchange activity. One commenter suggested the proposed requirement 
in new paragraph (b)(5) would place ``undue burden'' on downstream and 
delegated entities and also echoed the perception that it provides HHS 
with ``unyielding authority'' to request information from them, but did 
not otherwise quantify or further define these concerns. Some 
commenters also requested additional guidance about the types of 
information downstream and delegated entities would have to provide, 
and generally requested modification of the regulatory language in new 
paragraph (b)(5) to be more specific and limited in scope. Several 
commenters made general requests that the documents and systems to 
which the relevant authority may request access pursuant to the 
downstream and delegated entity's Exchange activities be limited 
without providing examples. One commenter requested an exception to 
permit downstream and delegated entities to challenge requests that 
would be ``commercially impracticable.'' The commenter also requested 
the language in paragraph (b)(5) be limited to requests and information 
that are of such vital importance to Exchange operations that the 
Exchange could not operate without the disclosure. The commenter did 
not include data or information to support these assertions, describe 
what constituted ``commercially impracticable'' requests, or provide 
examples of what would constitute an instance that might be of such 
vital importance to Exchange operations.
    Response: We respectfully disagree with the comments suggesting the 
language required in Exchange agreements between QHP issuers and 
downstream and delegated entities by new paragraph (b)(5) expands HHS' 
authority to demand information, making it unlimited in scope and 
imposing new risk and undue burden on both QHP issuers and their 
downstream and delegated entities. The amendments to Sec.  
156.340(b)(5) make clear and explicit in regulation downstream and 
delegated entity obligations to maintain Exchange-related records and 
comply with the relevant Exchange authority's demand to receive the 
entity's books, contracts, computers or other electronic systems 
relating to the QHP issuer's obligations in accordance with applicable 
Federal Exchange standards. Because the provision applies to all types 
of Exchange, including State Exchanges, HHS is not inclined to be 
overly prescriptive with regard to provision of more specific guidance. 
More descriptive details will be provided by the relevant Exchange 
authority. With regard to information that could be requested by HHS, 
as administrator of the FFE, more specificity is provided in Sec.  
156.715, which describes the records and information requested of FFE 
and SBE-FP issuers during compliance reviews. By way of a further 
illustrative example, documents that are typically requested as part of 
compliance reviews under Sec.  156.715 include, but are not limited to; 
issuers' contracts with all downstream and delegated entities for 
Exchange-specific language, records of agent and broker registration 
and training, and records of the handling of complaints concerning 
affiliated agents, brokers, and web-brokers. While we generally 
anticipate requesting similar information from downstream and delegated 
entities under Sec.  156.340(b)(5), we emphasize that the exact 
information, data, records, books, contracts, computers, and electronic 
systems that could be requested as part of a review under Sec.  
156.340(b)(5) will vary depending on the facts and circumstances at 
hand. We also affirm that, like the existing authority in Sec.  
156.340(b)(4), the authority captured in Sec.  156.340(b)(5) is 
specific to Exchange operations.
    We also disagree that the record retention requirement in new 
paragraph (b)(5) is overly broad or that it would allow HHS to request 
or access information unrelated to Exchange activity. This regulatory 
provision is narrowly drafted and codifies the relevant Exchange 
authority's--that is, the State Exchange, the FFE, or the SBE-FP--right 
to access records that are related to the QHP issuer's participation in 
the relevant Exchange to confirm compliance with applicable Federal 
Exchange standards. As such, under Sec.  156.340(b)(5), the relevant 
Exchange authority can demand and receive information on consumers 
enrolled in the Exchange from a downstream or delegated entity of a QHP 
issuer participating on its Exchange to ensure or otherwise confirm 
compliance with applicable Federal Exchange standards. Additionally, 
HHS has authority to access the records of downstream and delegated 
entities of QHP issuers participating in FFEs and Exchanges using the 
Federal platform under the existing requirements in Sec.  
156.340(b)(4).\323\ Affirming HHS' authority to access this 
information, as the relevant Exchange authority for FFEs, while 
codifying similar rights for State Exchanges when they are the relevant 
Exchange authority, in new paragraph (b)(5) does not represent an 
expansion of HHS authority or access to records. To that end, by 
affirming the relevant Exchange authority's right to access information 
for purposes of ensuring all entities participating in or supporting 
another entity's participation in the Exchange are compliant with 
applicable Federal Exchange standards, HHS declines to incorporate 
language in the regulation that would limit this authority to 
situations concerning issues of vital importance to the Exchange. We 
did not propose such a limitation and further note that the 
establishment of such a restriction would require further notice with 
comment rulemaking to define the phrase and identify parameters for 
what could constitute issuers of ``vital importance'' to the Exchange. 
The suggested limitation could also create unnecessary barriers to the 
relevant Exchange authority accessing information relevant to Exchange 
operations and compliance of regulated entities with applicable Federal 
Exchange standards. Finally, we note the adoption of a 10-year standard 
in Sec.  156.340(b)(5) aligns with other Exchange record retention 
requirements. Therefore, it too, does not represent an expansion of 
record retention obligations for QHP issuers participating in Exchanges 
or their downstream and delegated entities pertaining to Exchange 
related records, data, information, or systems. We also did not propose 
and decline to adopt in this rule an exception or carve-out. The 
adoption of these amendments is intended to make clear the obligations 
and responsibilities of all QHP issuers participating in all Exchanges 
models, and all of their downstream and delegated entities with no 
exceptions. However, as the relevant Exchange authority for the FFEs, 
we welcome an open dialogue with QHP issuers and their downstream and 
delegated entities about the burdens and time associated with complying 
with any particular request for records under Sec.  156.340(b)(5). We 
encourage State Exchanges to similarly be open to such conversations.
---------------------------------------------------------------------------

    \323\ As noted above, the existing text at Sec.  156.340(b)(4) 
requires downstream and delegated entities of QHP issuers 
participating in FFEs or SBE-FPs to provide HHS access to the 
entity's books, contracts, computers, or other electronic systems, 
including medical records and documentation, relating to the QHP 
issuer's obligations with applicable Exchange standards.
---------------------------------------------------------------------------

    Comment: Additionally, several commenters expressed concern about 
the impact the changes could have on agreements and contract 
negotiations

[[Page 27339]]

between issuers and potential and existing downstream or delegated 
entities. One commenter suggested the language required by new 
paragraph (b)(5) could bring contract negotiations to a ``stalemate'' 
or considerably slow them down, because it requires both downstream and 
delegated entities and QHP issuers submit to the Exchange's authority 
to ``request any information they desire under the pretext of Federal 
standards.'' The commenter did not provide further information or 
evidence to support the claim that the Federal standards have been used 
as a pretext to demand information unrelated to Exchange activity.\324\ 
Another commenter suggested the language in new paragraph (b)(5) would 
increase downstream and delegated entities' responsibility and risk, 
potentially causing them to raise their rates, but did not specify what 
additional responsibility or risk the downstream and delegated entities 
would assume. That commenter also recommended that responses to 
inquiries pursuant to paragraph (b)(4) and new paragraph (b)(5) from 
the relevant Exchange authority come directly from the downstream or 
delegated entity, when applicable, and not flow through the QHP issuer. 
The commenter did not provide the rationale for this recommendation.
---------------------------------------------------------------------------

    \324\ As noted above, we disagree with this assertion. Affirming 
HHS' authority to access this information, as the relevant Exchange 
authority for FFEs, in new paragraph (b)(5) while codifying similar 
rights for State Exchanges when they are the relevant Exchange 
authority does not represent an expansion of HHS authority or access 
to records or otherwise allow HHS to request or access information 
unrelated to Exchange activity.
---------------------------------------------------------------------------

    Two commenters also expressed concern with respect to the proposed 
applicability date and the timing for implementation of any necessary 
change(s) to contract language. They indicated contracts will have to 
be modified, and 60 days from rule publication is not sufficient to 
come into compliance with the requirement. Additionally, a commenter 
requested a burden estimate for modification of contracts, pursuant to 
the comment, summarized above, that the inclusion of the contract 
language constitutes a significant change that would impose an ``undue 
burden'' on QHP issuers and downstream and delegated entities. The 
commenters did not provide an explanation for why the contract 
modifications required more time, or describe the nature of the ``undue 
burden'' beyond the suggestion of HHS overreach due to language that it 
asserted was not sufficiently narrow or specific. No data or 
information beyond these general assertions was presented to 
substantiate the request for a new implementation date.
    One commenter indicated that while it agreed QHP issuers should 
retain full oversight over downstream and delegated entities, it 
objected to what it characterized as the imposition of required 
contract terms by new paragraph (b)(5), on the grounds that each 
organization should be free to contract in a manner governed by their 
own risk tolerance. The commenter offered several alternative options, 
including ``required written delegation agreements with performance 
report expectations for content and frequency'' and ``documented and 
recorded annual audits of each delegated entity's performance, which 
the issuer properly distributes for review and approval by the issuer's 
governing body.'' However, the commenter did not provide an explanation 
as to why these recommendations were preferable to inclusion of the 
issuer's oversight obligations in its agreements with downstream and 
delegated entities. A different commenter expressed support for 
clarifying that the general obligations and requirements regarding 
downstream and delegated entities of QHP issuers are applicable across 
all Exchanges types, but requested an explanation as to the reason for 
the clarification. The commenter noted that if the reason for requiring 
explicit contract language in agreements between QHP issuers and their 
downstream and delegated entities is to align with MA requirements, 
such alignment would be inappropriate, given the ``significant 
differences'' between the two programs. The commenter further explained 
that the Federal government has financial obligations to MA programs 
and assumes some of the enrollees' risk with regard to claims, whereas 
the QHP issuers on the Exchanges assume all risk with regard to 
enrollees' claims.
    Response: As explained above and in the proposed rule, the proposed 
amendments to Sec.  156.340 were drafted so QHP issuers on all Exchange 
types are subject to the same minimum downstream and delegated entity 
standards. HHS is finalizing these amendments as proposed to 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. HHS appreciates the comments about the burdens 
associated with implementation of the amendments; however, we are 
finalizing the implementation date and burden estimates as proposed and 
without changes, as we disagree that there is a significant or 
``undue'' burden associated with these amendments. No evidence has been 
provided substantiating any added burden is placed on the downstream 
and delegated entities or on the QHP issuers, and while HHS appreciates 
the entities' desire to contract with respect to their own risk 
tolerance, the requirement that issuers maintain oversight and 
accountability for their downstream and delegated entities' actions is 
not a new requirement. The alternative methods proposed by the 
commenter, such as required written delegation agreements with 
performance report expectations for content and frequency, would likely 
be more onerous and inflexible for both the issuer and its downstream 
or delegated entity than modification of existing contracts to include 
language describing risk the issuer has already assumed by engaging the 
downstream or delegated entity's assistance with Exchange related 
activities, because the suggested alternatives would also require 
drafting entirely new documents, follow-up, and evaluation of 
performance metrics. In addition, the commenters did not provide any 
evidence or information to support their general assertions about the 
``undue burden'' and additional time needed to modify contracts. As 
explained in the proposed rule, we anticipate the amendments to Sec.  
156.340 will impose minimal burden on QHP issuers and Exchange 
authorities. We recognize that some QHP issuers may need to make 
changes to existing record retention policies and their agreements with 
delegated and downstream entities. But since issuers participating in 
FFEs and SBE-FPs were already subject to the existing downstream and 
delegated entity standards in Sec.  156.340, and to HHS' existing 
authority to request records under Sec.  156.715, and commenters did 
not provide analysis or other information to substantiate the request 
for a new implementation date, that record requests should flow through 
the downstream or delegated entity and not the issuer, or support the 
claims of ``undue burden,'' HHS will finalize the amendments to Sec.  
156.340 as proposed.
    We recognize there are differences between the Medicare Advantage 
program and the Exchanges. For example, the populations served are 
different. Also, as noted in the comment

[[Page 27340]]

submitted, HHS subsidizes premiums for qualified individuals enrolled 
in Exchange coverage, but it is not responsible for or at risk for 
claims incurred by Exchange enrollee the way it does for Medicare 
Advantage coverage. Notwithstanding these differences, there are also 
similarities and the use of downstream and delegated entities by the 
regulated entity is one example of a similarity. As such, our intention 
is to learn from and leverage the experience from the Medicare 
Advantage program, where appropriate. As explained when we first 
established the QHP issuer downstream and delegated entity standards in 
Sec.  156.340, we believe the most legally effective way to ensure that 
a QHP issuer retains the necessary control and oversight over its 
downstream or delegated entities is to require that all agreements 
governing the relationships among a QHP issuer and its delegated and 
downstream entities contain provisions specifically describing each of 
the downstream and delegated entity's obligations.\325\ We looked to 
the existing standards for entities that contract with Medicare 
Advantage organizations at 42 CFR 422.504(i)(3)-(4) as a guide because 
it was a framework familiar to HHS, regulated entities, other 
stakeholders, as well as the general public. It also met the goals of 
protecting consumers from harm and holding QHP issuers and their 
downstream and delegated entities accountable for compliance with 
applicable Federal Exchange requirements.
---------------------------------------------------------------------------

    \325\ See 78 FR 37056. Also see 78 FR 54120.
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    In this final rule, we clarify and extend the requirements in Sec.  
156.340 to 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.
14. Payment for Cost-Sharing Reductions--Clarification of CSR Payment 
and Data Collection Processes (Sec.  156.430)
    In the HHS Notice of Benefit and Payment Parameters for 2023 
proposed rule (87 FR 584, 687 through 688), we proposed 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.\326\ As a result, CSR payments ceased as of October 12, 2017. 
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 proposed to amend Sec.  156.430 to state 
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.
---------------------------------------------------------------------------

    \326\ Payments to Issuers for Cost-Sharing Reductions (CSRs). 
(2017, October 12). HHS. https://www.hhs.gov/sites/default/files/csr-payment-memo.pdf.
---------------------------------------------------------------------------

    To do this, we proposed several modifications to Sec.  156.430. 
First, we proposed 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 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 proposed 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 
proposed 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 proposed 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 it would be 
voluntary for issuers that did not receive CSR 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 proposed 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 proposed 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 noted that, regardless of whether HHS makes CSR payments, 
issuers are required to provide CSRs to enrollees as specified at Sec.  
155.1030. We sought comment on these proposals.
    After reviewing the public comments, we are finalizing, as 
proposed, that CSR 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.
    We summarize and respond to public comments received on payment for 
cost-sharing reductions--clarification of CSR payment and data 
collection processes (Sec.  156.430) below.
    Comment: One commenter supported the proposals.
    Response: We appreciate the support and are finalizing, as 
proposed, that CSR data submission is mandatory for those issuers that 
receive CSR payments from

[[Page 27341]]

HHS for any part of the benefit year and voluntary for other issuers.
    Comment: Another commenter requested additional clarification on 
how the proposals would impact the existing CSR reconciliation data 
submission process and schedule before HHS implements any changes.
    Response: These amendments are not intended to change the existing 
CSR data submission process or schedule. In October 2017, the Attorney 
General declared that the government could not make CSR payments in the 
absence of an appropriation, and that because there was no 
appropriation, CSR payments must stop.\327\ HHS then announced that CSR 
payments would be discontinued until an appropriation exists.\328\ HHS 
has not made advance CSR payments for any period since October 2017 due 
to a lack of an appropriation. Also, in the absence of an 
appropriation, HHS cannot make CSR reconciliation payments for any past 
period. Because of this, since the 2018 benefit year, HHS has made the 
CSR data submission process optional. To this effect, HHS has 
periodically provided issuers an annual optional window to submit CSR 
data and restatements in light of ongoing litigation. Under the 
amendments finalized in this rule, the CSR data submission process 
would continue in the same manner as it has been operated since the 
2018 benefit year CSR data submission, and these amendments are merely 
aligning our regulations with existing operations. If HHS makes CSR 
payments to QHP issuers in the future, HHS will notify QHP issuers that 
a CSR data submission will be mandatory for any issuers receiving CSR 
payments for any part of the benefit year.
---------------------------------------------------------------------------

    \327\ Ibid.
    \328\ Ibid.
---------------------------------------------------------------------------

    Additionally, these amendments do not impact the CSR data 
submission schedule. Consistent with past benefit years, the timing of 
the CSR data submission process will continue to be announced annually 
in guidance.
15. 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 five health care topic areas identified 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 (80 FR 
10750), HHS established a phase-in approach for QIS implementation 
standards and reporting requirements to provide QHP issuers time to 
understand the populations enrolling in a QHP offered through the 
Exchange and to build quality performance data on their respective QHP 
enrollees.\329\ 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.\330\
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    \329\ 80 FR 10750, 10844 (2015, February 27).
    \330\ Ibid.
---------------------------------------------------------------------------

    In line with this approach and under the same authorities, in the 
HHS Notice of Benefit and Payment Parameters for 2023 proposed rule (87 
FR 584, 688), HHS proposed 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 proposed 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 proposed this expansion of 
the QIS standards, which aligns with health equity efforts across 
Federal government policies and programs; however, we did not propose 
amendments to the regulatory text outlined in Sec.  156.1130.
    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 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.331 332 333 334 335 336 337 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.\338\
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    \331\ Lindenauer, P.K., Lagu, T., Rothberg, M.B., Avrunin, J., 
Pekow, P.S., Wang, Y., Krumholz, H., & Hines, H. (2013). Income 
Inequality and 30-Day Outcomes After Acute Myocardial Infarction, 
Heart Failure, and Pneumonia: Retrospective Cohort Study. British 
Medical Journal.
    \332\ Trivedi, A.N., Nsa, W., Hausmann, L.R.M., Lee, J., Ma, A., 
Bratzler, D., Mor, M., Baus, K., Larbi, F., & Fine, M. (2014). 
Quality and Equity of Care in U.S. Hospitals. New England Journal of 
Medicine. 371(24):2298-2308.
    \333\ Polyakova, M., Udalova, V., Kocks, G., Genadek, K., 
Finlay, K., & Finkelstein, A.N. (2021). Racial Disparities In Excess 
All-Cause Mortality During The Early COVID-19 Pandemic Varied 
Substantially Across States. Health affairs (Project Hope), 40(2), 
307-316. https://doi.org/10.1377/hlthaff.2020.02142.
    \334\ Rural Communities: Age, Income, and Health Status. Rural 
Health Research Recap. (2018). Rural Health Research Gateway. 
https://www.ruralhealthresearch.org/recaps/5.
    \335\ 2020 Update on the Action Plan to Reduce Racial and Ethnic 
Health Disparities. (2020). HHS Office of Minority Health. https://www.minorityhealth.hhs.gov/assets/PDF/Update_HHS_Disparities_Dept-FY2020.pdf.
    \336\ Sexual Orientation Disparities in Risk Factors for Adverse 
COVID-19-Related Outcomes, by Race/Ethnicity. (2021, February 5). 
CDC. www.cdc.gov/mmwr/volumes/70/wr/mm7005a1.htm.
    \337\ Poteat, T.C., Reisner, S.L., Miller, M., & Wirtz, A.L. 
(2020). COVID-19 Vulnerability of Transgender Women With and Without 
HIV Infection in the Eastern and Southern U.S. medRxiv: The preprint 
server for health sciences, 2020.07.21.20159327. https://doi.org/10.1101/2020.07.21.20159327.
    \338\ Guth, M., Garfield, R., & Rudowitz, R. (2020). The Effects 
of Medicaid Expansion Under the ACA: Studies from January 2014 to 
January 2020. Kaiser Family Foundation. https://www.kff.org/medicaid/report/the-effects-of-medicaid-expansion-under-the-aca-updated-findings-from-a-literature-review/.
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    We are specifically committed to achieving equity in health care 
outcomes for QHP enrollees by supporting QHP issuer 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 final 
rule, we are using the definition of ``equity'' established in 
Executive Order 13985, issued on January 20, 2021, as

[[Page 27342]]

``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.'' \339\ 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, we are strengthening 
efforts across all programs to address disparities and advance health 
equity. In addition, this is a topic area that QHP issuers across the 
Exchanges have increasingly been focusing on in their QIS submissions.
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    \339\ 86 FR 7009 (2021, January 25).
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    A CMS evaluation of QHP issuer QIS submissions in the FFEs in PY 
2020 found that an estimated 60 percent of QIS submissions addressed 
health care disparities. Building on the phase-in approach established 
in the 2016 Payment Notice and our experiences evaluating QIS 
submissions over the years and during the COVID-19 PHE, we proposed to 
update the QIS standards. We proposed 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. However, we did not propose 
amendments to the regulatory text outlined in Sec.  156.1130. We sought 
comment on this proposal.
    We summarize and respond to public comments received on the quality 
improvement strategy (Sec.  156.1130) proposal. After reviewing 
commenter responses, we are finalizing as proposed.
    Comment: Many commenters supported the proposal to expand QIS 
standards to require issuers to address health and health care 
disparities in addition to one other topic area identified in section 
1311(g)(1) of the ACA as part of their QIS beginning in 2023. 
Specifically, commenters expressed strong support for the increased 
focus on health and health care disparities within the QIS standards 
and achieving equity in health outcomes for QHP enrollees, as well as 
driving accountability for advancing health equity.
    Response: We appreciate commenters' support to expand QIS standards 
to require QHP issuers address health and health care disparities which 
aligns with health equity efforts across Federal government policies 
and programs. QHP issuers in all Exchange model types will be required 
to address health and health care disparities in addition to one other 
topic area identified in section 1311(g)(1) of the ACA as part of their 
QIS beginning in 2023. This new guideline will apply for the first time 
to the QIS submissions QHP issuers provide to Exchanges in the 2023 
calendar year, which would describe the issuer's strategy for 
addressing health and health care disparities for the 2024 Plan Year, 
beginning on January 1, 2024.
    Comment: Several commenters stated that although the proposed QIS 
policy ties effective performance on reducing health and health care 
inequities to financial reward, the current proposal does not go far 
enough to advance health equity. Some commenters urged CMS to require 
more public transparency and accountability about the process of 
selecting, implementing, evaluating, and reporting the outcomes of QIS 
interventions to ensure QHPs prioritize health equity work. These 
commenters noted that currently there are no public reporting 
requirements for QIS activities (for example no list of QIS topics 
selected, no public report on progress or successful outcomes).
    Response: We appreciate the comments on the proposals to expand QIS 
standards to address health and health care disparities and clarify 
that the QIS statutory provisions do not tie performance within a QIS 
to a financial reward for issuers. Instead, section 1311(g)(1) of the 
ACA defines a QIS as a payment structure developed by issuers that 
provides increased reimbursement or other market-based incentives for 
improving health outcomes of plan enrollees (for example, through 
provider incentives such as increased reimbursement or bonus payments, 
or through enrollee financial incentives such as a monetary reduction 
of enrollee premiums and other out-of-pocket costs). Thus, consistent 
with the requirement in section 1311(c)(1)(E) of the ACA, QHP issuers 
must implement a QIS and they are required to incorporate market-based 
incentives within their respective QIS programs. We also acknowledge 
commenters' requests for greater public transparency and interest in 
greater accountability regarding the process QHP issuers undertake to 
select, implement, evaluate, and report the outcomes of disparity-
related QIS programs. Unlike other Exchange quality programs, section 
1311(c)(1)(E) and (g) of the ACA do not provide for the public 
reporting of data on QHP issuer QIS programs.\340\ Instead, the QIS 
requirements focus on collection of information by Exchanges from 
issuers within QIS forms to demonstrate compliance with the QHP 
certification requirements in section 1311(c)(1)(E) of the ACA. The 
collection of this information also facilitates the Exchange's 
understanding of its QHP issuers' payment structure frameworks that 
provide increased reimbursement or other market-based incentives for 
the implementation of activities related to the topics specified in 
section 1311(g) of the ACA. We recognize issuers use proprietary 
information in their QIS submissions they may not want published, and 
that their strategies may contain confidential information about their 
enrollee populations. Additionally, QIS requirements provide issuers 
flexibility in meeting this certification requirement by allowing 
diverse, qualitative, non-standardized information that would not be 
easily and clearly shared publicly.
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    \340\ Compare, for example, the statutory provisions that 
established the Quality Rating System and Enrollee Satisfaction 
Survey, which require Exchanges to publish information on their 
respective websites. See sections 1311(c)(3) and (c)(4) of the ACA. 
Also see 45 CFR 155.1400 and 155.1405.
---------------------------------------------------------------------------

    We further note that the policy adopted in this final rule seeks to 
align the QIS with other Federal quality standards related to data 
collection efforts and disclosure of information focused on quality 
improvement and advancing health equity, which includes balancing the 
desire to encourage transparency with the need to safeguard 
confidential and proprietary information. Some types of confidential 
and proprietary information include the tools, resources, and data sets 
issuers use in describing their quality improvement strategies within 
their QIS forms. For example, an issuer may have concerns disseminating 
a patient data collection tool they consider propriety that is 
described within their QIS to a wider audience. Furthermore, some 
issuers choose to report on their internal quality improvement progress 
using measures that are included within other performance programs, and 
that may not be fully validated at the time they submit their QIS 
during the applicable benefit year's QHP Application Period. Finally, 
some issuers use internally developed measures they consider 
proprietary that are not intended for public reporting. At the same 
time, however, we understand the interest in the public reporting of 
QIS information, and HHS will continue to consider if there are ways or 
subsets of QIS information could be publicly released.

[[Page 27343]]

    Comment: Several commenters noted that QHPs should have to seek 
input from underserved enrollees or stakeholders who represent 
underserved communities to guide their QIS activity selection.
    Response: We appreciate the feedback related to QHP issuers seeking 
input from underserved enrollees or stakeholders who represent 
underserved communities to guide their QIS activity selection and to 
shape which activities they prioritize when addressing health or health 
care equity. HHS agrees that such feedback would help guide issuer 
development of QIS programs that target the needs of their specific 
populations, including those in underserved communities. HHS will 
consider including language further encouraging these outreach 
activities in the 2024 Plan Year Technical Guidance, which will inform 
submissions in the 2023 calendar year. However, we did not propose and 
decline to adopt a requirement mandating such outreach in this final 
rule.
    Comment: A few commenters noted that QHP issuers may face barriers 
when collecting race, ethnicity, language and other data on certain 
sub-populations, including consumers in underserved communities. 
Commenters expressed that these barriers may be due to a lack of 
standardization across State and Federal data collection requirements. 
Commenters also recommended HHS consider approaches to standardize data 
collection that includes collection of information that may be used to 
develop tailored quality improvement strategies. Two commenters urged 
HHS to address data collection barriers and delay finalizing the QIS 
proposal until issuers have more robust data to identify disparities. 
The commenters noted that when race and ethnicity or social determinant 
of health (SDOH) data is collected, relatively few individuals 
voluntarily provide this information to their health plans due to 
concerns about how the data will be used, and that the data available 
to issuers to identify health care disparities is limited and may vary 
by issuer due to State laws limiting the data issuers can collect. One 
commenter recommended that, for QIS standards, HHS should define 
disparities more broadly, beyond race, ethnicity, and language, which 
may not apply to every health plan, and reiterated that HHS should use 
a broad definition that encompasses other factors such as LGBTQI+ 
status, location (rural/urban), and physical and mental disabilities.
    Response: We recognize QHP issuers may experience barriers or other 
challenges when collecting certain data and that State and Federal data 
collection requirements for race, ethnicity, language, and other data 
on certain populations are currently not standardized. There are many 
reasons why the data collection requirements may not be standardized, 
including different statutory authorities and mandated data elements. 
The proposals being finalized in this rule are limited and specific to 
the QIS requirements under section 1311(c)(1)(E) of the ACA applicable 
to QHP issuers participating in Exchanges. The QIS statutory provisions 
do not provide HHS authority to standardize State and Federal data 
collection requirements or remove barriers that may exist with respect 
to collection of race, ethnicity, language and other data on certain 
sub-populations, including consumers in underserved communities. 
However, the QIS statute and the HHS implementing regulations provide a 
mechanism to encourage QHP issuers participating in Exchanges to focus 
more efforts on addressing health and health disparities. Section 
1311(g)(1) of the ACA explicitly identifies the implementation of 
activities to reduce health and health care disparities, including 
through the use of language services, community outreach, and cultural 
competency trainings, as one of the topic areas for QHP issuer QIS 
programs. Issuers operating in States that have laws that limit the 
collection of certain data may have to rely on other data sources or 
indirect estimation (for example, geographic assignment, Bayesian 
indirect surname and geocoding) to incorporate activities to reduce 
health and health care disparities in their QIS programs. Similarly, 
issuers who do not have access to this type of data through existing 
data sources (for example, if enrollees decline to provide this 
information) will also have to identify other resources that can be 
used for this purpose. We are also aware of and intend to continue to 
monitor the development of industry standards, as well as State law 
activity, applicable to the collection and use of race and ethnicity 
data elements. As industry standards and state laws applicable to the 
collection and use of race and ethnicity data elements evolve, HHS will 
consider whether any changes to the QIS program requirements would be 
appropriate.
    Flexibility is one of the key foundational principles of the QIS, 
and we intend to continue to offer flexibility to encourage issuer 
innovation and to promote a culture of continuous quality improvement. 
This will include taking into consideration steps issuers take to 
expand their data collection efforts to support QIS activities that 
address health and health care disparities (along with the other QIS 
topics identified in section 1311(g)(1) of the ACA). With respect to 
the new QIS guideline finalized in this rule, as noted above, we 
anticipate that indirect estimation (for example, geographic 
assignment, Bayesian indirect surname and geocoding) may be used by 
issuers until such time in which issuers are able to directly collect 
data, such as race, ethnicity, and language, to analyze and address 
potential health and health care disparities. For example, NCQA 
introduced race and ethnicity stratifications for select Healthcare 
Effectiveness Data and Information Set (HEDIS[supreg]) measures,\341\ 
which allows an organization to report the stratification using their 
own directly collected member data as well as report directly collected 
data supplemented with indirect race and ethnicity data. QHP issuers 
would be permitted to take a similar approach for the development of 
their QIS programs and the incorporation of activities to reduce health 
and health care disparities. For this reason, we do not believe it is 
necessary to delay finalization of the QIS proposal until HHS has 
addressed data collection barriers or until issuers have more robust 
data to identify disparities.
---------------------------------------------------------------------------

    \341\ More information about NCQA's approach and timeline for 
stratification of select HEDIS measures can be found here: Data, 
Measurement and Equity. National Committee for Quality Assurance. 
https://www.ncqa.org/about-ncqa/health-equity/data-and-measurement/.
---------------------------------------------------------------------------

    Additionally, we emphasize that the requirement adopted in this 
final rule that requires QHP issuers to address health and health care 
disparities as a specific topic area within their QIS beginning in 2023 
is not limited to implementing strategies that solely focus on race and 
ethnicity health and health care disparities. Nor does it mandate the 
collection and submission of individual enrollee's race and ethnicity 
data to HHS. QHP issuers will have flexibility in how they elect to 
address and define health and health care disparities in their QIS. For 
example, QHP issuers could focus on enrollee populations that belong to 
a racial or ethnic minority group, live with a disability, identify as 
a member of the LGBTQI+ community, have limited English proficiency, 
live in a rural area, or earn near or below the poverty level, which 
they have identified may be associated with worse health outcomes. 
Additionally, we affirm that QIS initiatives to address health and 
health care disparities may

[[Page 27344]]

include a broad range of activities such as language services, 
community outreach, cultural competency trainings, social needs-
sensitive self-management recommendations, and increased collection and 
use of demographic and disparities-related data that will be used to 
develop QIS program activities designed to identify and reduce 
disparities.
    Comment: One commenter requested that CMS delay the implementation 
of the proposed expansion of the QIS standards until January 1, 2024, 
at the earliest, as this would align with the NCQA changes and the 
introduction of race and ethnicity stratification reporting 
requirements for certain select HEDIS[supreg] measures, which are 
lagging. The commenter stated that many health plans base their QIS on 
their HEDIS[supreg] measurements, and noted that aligning applicability 
of the QIS update with the NQCA change would ease administrative burden 
and ensure continuity for health plans. Another commenter noted that 
given the diversity of QIS requirements across Federal and State-based 
Exchanges, HHS should create a standardized approach to advancing 
equity and incorporating reducing health and health care disparities 
into existing QIS requirements by adding stratification by race/
ethnicity for any associated quality measures.
    Response: We clarify that we are finalizing the proposal to require 
QHP issuers to address health and health care disparities in addition 
to one other topic identified in section 1311(g)(1) of the ACA in the 
QIS submissions they provide to Exchanges beginning in the 2023 
calendar year, which would apply to the 2024 Plan Year. As such, 
issuers will be required to describe their strategy for addressing 
health and health care disparities beginning on January 1, 2024. This 
aligns with the NCQA introduction and implementation of race and 
ethnicity stratification for select HEDIS[supreg] measures for the 2022 
Measurement Year, that will be collected in the 2023 calendar year. We 
appreciate and share the commenter's commitment to advancing health 
equity by requiring QHP issuers to address potential disparities in 
their quality improvement strategies, but we also recognize the 
limitations issuers may face when collecting certain data in support of 
conducting their QIS activities. We further clarify and affirm that QHP 
issuers across all Exchange types must adhere to the same minimum QIS 
Federal standards established by HHS, but State Exchanges (both State 
Exchanges and SBE-FPs) have the flexibility to change certain details, 
such as the timeframe and format for submission of QIS information by 
their respective issuers, and they can establish standards that go 
beyond Federal QIS requirements.\342\ However, they cannot reduce a QHP 
issuer's QIS obligations below the minimum QIS Federal standards 
established by HHS.
---------------------------------------------------------------------------

    \342\ See 45 CFR 156.1130 and 80 FR 10844 through 10848. Also 
see, for example, Section 4.2, QIS Technical Guidance and User Guide 
for the 2022 Plan Year (2021) CMS. https://www.cms.gov/files/document/qis-technical-guidance-and-user-guide-2022-plan-year.pdf.
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    We understand the request from some commenters to create a 
standardized approach to advance health equity which includes 
stratification of race and ethnicity data in relation to QIS 
requirements. We generally support and strive for standardized and 
coordinated approaches across HHS to advance health equity. We also 
support flexibility to ensure that QHP issuers can develop various 
strategies across their populations and across their provider 
contracts. Although we have established Federal minimum standards for 
QHP issuers to follow and address in their quality improvement 
strategies, the QIS program is intended to provide QHP issuers with 
flexibility in the design and implementation of their respective QIS 
initiatives and activities. For example, QHP issuers have flexibility 
in how they elect to address health and health care disparities in 
their QIS, such that their data collection efforts do not need to be 
limited to race and ethnicity information. In addition, and based on 
public comment, HHS believes that imposing specific performance 
measures on QHP issuers would limit their ability to target their 
strategies to their specific populations and possibly limit innovation. 
We further recognize that State laws may impact the ability to collect 
certain data, which could limit the ability to develop standardized 
collection standards. Finally, as we noted previously, the QIS 
statutory provisions do not provide HHS authority to standardize State 
and Federal data collection requirements or remove barriers that may 
exist with respect to collection of race, ethnicity, language and other 
data on certain sub-populations, including consumers in underserved 
communities.
    Comment: One commenter encouraged HHS to revise its proposal and 
allow issuers to embed a health equity strategy into their selected QIS 
topics instead of requiring QHP issuers to establish a separate QIS 
focused on addressing disparities. The commenter also urged HHS to 
provide detailed criteria to help issuers develop meaningful projects 
that fulfill the intent of addressing the health care needs of 
underserved populations, while also allowing issuers flexibilities to 
establish goals and metrics for success that accommodate the more 
limited data and longer timeframes to successfully address disparities, 
and in particular, the limitations for collecting data related to race 
and ethnicity. The commenter also requested HHS evaluate potential 
requirements to address disparities for populations other than the 
underserved communities and work to create QIS requirements that align 
with a more global population health approach to addressing 
disparities.
    Response: We agree QHP issuers should advance equity as a 
foundational aspect of quality rather than consider equity as a siloed 
aspect of performance, and we encourage QHP issuers to incorporate 
health equity into each of their quality improvement strategies. We 
further clarify that under the QIS guideline, as proposed and as 
finalized, QHP issuers have flexibility in the design and 
implementation of their respective QIS initiatives and activities. This 
includes the flexibility to establish two separate QIS initiatives--one 
that focuses only on addressing health and health care disparities and 
a second one that focuses only on wellness and health promotion (or 
another topic identified in section 1311(g)(1) of the ACA)--or the 
flexibility to establish one QIS initiative that focuses on addressing 
health and health care disparities in addition to wellness and health 
promotion (or another topic identified in section 1311(g)(1) of the 
ACA). Both approaches would be complaint with the new QIS guideline 
finalized in this rule. In other words, QHP issuers will not need to 
develop de novo strategies or create and submit multiple QIS programs, 
but can address health and health care disparities within an existing 
QIS. If an issuer elects this approach, they should select ``reduce 
health and health care disparities'' as a topic area in addition to at 
least one other topic area when submitting its plan year 2024 QIS 
submission in the 2023 calendar year. We intend to address this, and 
other operational details related to this new guideline, as part of the 
Plan Year 2024 QIS Technical Guidance. We did not propose and generally 
decline to adopt detailed criteria to direct QHP issuer QIS programs 
that address health and health care disparities.
    As detailed above, QHP issuers have flexibility in how they elect 
to address health and health care disparities in their QIS, such that 
their data collection efforts do not need to be limited to race

[[Page 27345]]

and ethnicity information. For example, QHP issuers could focus on 
enrollee populations that belong to a racial or ethnic minority group, 
or those that live with a disability, identify as a member of the 
LGBTQI+ community, have limited English proficiency, live in a rural 
area, or earn near or below the poverty level, which may be associated 
with worse health outcomes. QHP issuers also have broad flexibility in 
terms of the goals they have identified, the activities they've 
employed to advance their QIS, and the measures they use. Within their 
QIS, issuers must report their initial baseline assessment results, and 
then must subsequently report their progress in relation to the 
baseline results they've provided. Since the QIS program promotes 
continuous quality improvement, issuers are asked to analyze their 
progress using their baseline data, but at this time they are not 
penalized for not meeting their progress targets or milestones. 
Additionally, QIS initiatives to address health and health care 
disparities may include a broad range of activities such as language 
services, community outreach, cultural competency trainings, social 
needs-sensitive self-management recommendations, and increased 
demographic and disparities-related data collection.
16. Disbursement of Recouped High-Cost Risk Pool Funds--Administrative 
Appeals of Issuers of Risk Adjustment Covered Plans (Sec.  156.1220)
    In the HHS Notice of Benefit and Payment Parameters for 2023 
proposed rule (87 FR 584, 689), we proposed 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 proposed 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).
    In the proposed rule, we also clarified 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 administrative appeal, 
issuers whose charge amounts are reduced would report the high-cost 
risk pool charges paid for that benefit year net of recouped funds as a 
result of an administrative appeal in the next MLR reporting cycle 
consistent with 45 CFR 153.710(h). This same framework would also apply 
to high-cost risk pool funds recouped as a result of audits under Sec.  
153.620(c)(5)(ii) and actionable discrepancies under Sec.  153.710(d).
    We sought comment on this proposal.
    After consideration of relevant comments, we are finalizing these 
policies, as proposed. We respond to the comments received on these 
policies.
    Comment: Several commenters expressed general support for these 
proposals.
    Response: After consideration of relevant comments, we are 
finalizing, as proposed, the policies related to disbursement of high-
cost risk pool funds recouped as a result of audits of risk adjustment 
covered plans under Sec.  153.620(c), actionable high-cost risk pool-
related discrepancies filed pursuant to Sec.  153.710(d), and 
successful high-cost risk pool administrative appeals filed pursuant to 
Sec.  156.1220.
17. Direct Enrollment With the QHP Issuer in a Manner Considered To Be 
Through the Exchange (Sec.  156.1230)
    In the HHS Notice of Benefit and Payment Parameters for 2023 
proposed rule (87 FR 584, 689), we proposed to amend Sec.  156.1230 
such that its nondiscrimination protections would explicitly prohibit 
discrimination based on sexual orientation and gender identity. As we 
explain in the Supplemental Information section earlier in the 
preamble, HHS will address this policy, as well as public comments 
submitted in response to the proposal, in a future rulemaking.
18. 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 build Exchanges that 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 that 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.\343\
---------------------------------------------------------------------------

    \343\ Taylor EA, Carman KG, Lopez A, Muchow AN, Roshan P, & 
Eibner C. (2016) Consumer Decision-making in the Health Care 
Marketplace. RAND Corporation. https://www.rand.org/pubs/research_reports/RR1567.html.
---------------------------------------------------------------------------

    Earlier in this section E of the preamble, we finalized the 
provision to require FFE and SBE-FP issuers to offer the standardized 
plan options finalized in this rule. Standardized plan options offer 
one solution to the problem of choice overload through standardizing 
cost-sharing structures and increasing plan comparability by allowing 
consumers to focus on plan premiums, provider networks, formularies, 
and quality ratings.\344\ In light of the proliferation of seemingly 
similar plans offered through the Exchanges over the last several 
years, HHS solicited comment regarding 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.
---------------------------------------------------------------------------

    \344\ Facilitating Consumer Choice: Standardized Plans in Health 
Insurance Marketplaces. (2021, December 28). Office of the Assistant 
Secretary for Planning and Evaluation. https://aspe.hhs.gov/sites/default/files/documents/222751d8ae7f56738f2f4128d819846b/Standardized-Plans-in-Health-Insurance-Marketplaces.pdf.
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    HHS' 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,

[[Page 27346]]

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 during the open enrollment period for PY 2022, 
there was 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, several rating areas have more than 
50 silver plans, excluding CSR variations, available to consumers--a 
number we believe makes 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 during the 
open enrollment period for PY 2022, consumers were 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 plan years 
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 remains 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.\345\ These conclusions are 
supported by the comments received during both this rulemaking and 
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.
---------------------------------------------------------------------------

    \345\ Zhou, C. & Zhang, Y. (2012). ``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: 2259-
2265.
---------------------------------------------------------------------------

    HHS' 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.'' \346\ 
Thus, in order to streamline and optimize the plan selection process 
for consumers on the Exchanges, HHS expressed interest in exploring 
possible methods of improving choice architecture and solicited 
comments on doing so. Several provisions finalized within this rule 
complement this goal, including the standardized plan options provision 
at Sec.  156.201 and the provisions that modify the applicable AV de 
minimis ranges at Sec. Sec.  156.140, 156.200, and 156.400.
---------------------------------------------------------------------------

    \346\ 80 FR 75488, 75542 (2015, December 2).
---------------------------------------------------------------------------

    Specifically, the standardized plan options provision at Sec.  
156.201 requires FFE and SBE-FP issuers to offer plans with 
standardized cost sharing parameters at every product network type, at 
every metal level, and throughout every service area that they offer 
non-standardized plan options. Though this provision does not limit the 
number of non-standardized plan options for PY 2023, HHS stated that it 
intends to consider and propose future rulemaking, as appropriate, to 
determine whether to limit the number of non-standardized plan options 
that FFE and SBE-FP issuers may offer through the Exchanges in PYs 
beginning on or after January 1, 2024.
    Additionally, the provisions at Sec. Sec.  156.140, 156.200, and 
156.400 finalized modifications to the applicable AV de minimis ranges. 
HHS modified 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 finalized a de 
minimis range of +5/-2. Under Sec.  156.200, HHS finalized, 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 
finalized under Sec.  156.400 to specify de minimis ranges of +1/0 
percentage points for income-based silver CSR plan variations. HHS 
explained that it anticipates that these provisions would have the 
effect of decreasing the number of plan offerings due to more 
restricted AV de minimis ranges.
    HHS also solicited comment on resuming the meaningful difference 
standard (previously codified at 45 CFR 156.298) and the best approach 
for doing so. 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 number of plans 
offered through the Exchanges has increased sharply over the last 
several years, HHS explained that it continues to believe 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 acknowledged 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 plan options exclusively, and exclude 
plans that have not demonstrated the administrative capability, prices, 
networks or product designs that improve consumer value. HHS explained 
that it 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 and solicited 
comments accordingly.
    Altogether, we sought 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 sought 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 sought comments on other evidence-based approaches to 
improve choice architecture within the Exchanges.
    We summarize public comments on these topics below, but note that 
comments related to standardized plan

[[Page 27347]]

options, changes to the AV de minimis ranges, and the meaningful 
difference standard are summarized and addressed in more detail earlier 
in their respective sections in the preamble: Sec. Sec.  156.201, 
156.140, 156.200, and 156.400. We also acknowledge and appreciate 
comments on improving choice architecture within the Exchanges and on 
the benefits and potential drawbacks of adopting an active purchaser 
model and will take these comments into account as part of future 
research and decision-making processes.
    Comment: In response to a comment solicitation regarding how HHS 
might address choice overload in the Exchanges, many commenters 
supported improving choice architecture on HealthCare.gov to enhance 
the consumer shopping experience, in addition to requiring issuers to 
offer standardized plan options. Many commenters suggested that HHS 
provide educational resources and accessibility support for consumers, 
such as interactive graphics and videos explaining relevant health care 
and insurance terminology. These commenters noted that modifying choice 
architecture on HealthCare.gov to make it more intuitive and 
educational could greatly benefit consumers with low health literacy.
    Similarly, some commenters stated that Exchanges should prioritize 
decision support tools that direct consumers to consider total out-of-
pocket costs instead of premiums. These commenters suggested using more 
plain language, utilizing hover text to define key terms and 
distinguishing features, improving accessibility for consumers with 
vision impairments, and developing tutorials. One commenter urged HHS 
to engage with issuers and stakeholders to identify tools and features 
that would be most meaningful for consumers. This commenter also 
suggested seeking consumer feedback to better identify, test, and 
launch changes to the HealthCare.gov shopping and plan selection user 
interface.
    Response: HHS shares commenters' position that it is extremely 
important to make plan information accessible and actionable for all 
consumers, including those with visual, auditory or speech 
disabilities, those for whom English is a second language, or those who 
otherwise may have challenges with incorporating important but complex 
health insurance plan benefit design information into their decision-
making process. HHS appreciates these comments and recommendations on 
additional educational resources to maximize consumers' ability to 
select the best plan for themselves and their families, and we note 
that we will take these recommendations into consideration as we 
continue to work towards this goal.
    Comment: Many commenters also advocated for improving choice 
architecture and decision-support tools as an alternative to requiring 
standardized plan options or limiting plan offerings. These choice 
architecture suggestions included mandating decision-support tools, 
having shoppers ``opt-out'' rather than ``opt-in'' to provide their 
expected health care service utilization, actively redirecting 
consumers to plans with higher AVs and lower total costs, displaying 
estimated out-of-pocket costs, and highlighting patient-friendly cost 
sharing parameters such as fixed-dollar copayments and pre-deductible 
services on plan cards.
    One commenter urged HHS to include pop-up alerts and to require 
consumers to click to confirm that they would like to enroll in plans 
with higher costs and lower actuarial values. These commenters also 
suggested improving the functionality of features such as filters and 
sort options by providers, facilities, formularies, quality ratings, 
and networks. One commenter encouraged HHS to collect consumer 
preferences and anticipated health care service utilization prior to 
displaying plans in order to ensure that plans are initially filtered 
and sorted for consumers. This commenter further recommended that HHS 
display the highest metal level plans first if the net premiums are $0 
for multiple metal levels within a product.
    Some commenters suggested that HHS employ choice architecture 
improvements to direct eligible shoppers to CSR plan variations so they 
can utilize the savings available to them. Specifically, these 
commenters suggested that an out-of-pocket cost sort option could help 
customers understand the concept of total costs and show CSR-eligible 
consumers that the most generous CSR plan variations are guaranteed to 
have lower total out-of-pocket costs than those of plans at higher 
metal levels. Similarly, some commenters recommended preferentially 
displaying silver cost-sharing reduction variants while continuing to 
display plans from low to high total cost.
    Finally, one commenter stated that HHS should reform the choice 
architecture on the Exchanges. This commenter explained that both 
Federal and State Exchanges should be required to implement decision-
support tools that direct consumers to contemplate total costs instead 
of just premiums. This commenter added that Exchanges should be 
required to actively redirect consumers to plans that provide the 
lowest cost for the highest actuarial value, such as a bronze to a 
silver plan with cost sharing reductions. This commenter cited several 
examples of State Exchanges that have implemented similar changes.
    Response: HHS appreciates the variety and detail of comments on 
methods of enhancing choice architecture to further streamline 
consumers' decision-making process and empower individuals to select 
the best plan for themselves and their families. We note that we will 
take these comments into consideration as we continue to explore 
advancements in choice architecture on HealthCare.gov.
    Comment: A few commenters supported HHS adopting an active 
purchaser model in future years. Several commenters supported it as 
part of a larger strategy that they stated should also include both 
standardized plan options and a meaningful difference standard. Some of 
these commenters also stated that the State of California's use of this 
approach illustrates the benefits of limiting the number of plan 
offerings, lowering costs for consumers, setting standards for plan 
quality, and fostering robust competition among plans seeking entry 
into the Exchange.
    However, multiple commenters opposed HHS adopting an active 
purchaser model for the Federal Exchanges, mainly due to concerns that 
doing so would put too much control over plan offerings in the hands of 
the Exchange, as opposed to allowing issuers the flexibility to design 
plans based on consumer preferences and needs. These commenters were 
also concerned that an active purchaser model could reduce the number 
of issuers willing to participate in Exchanges on the Federal platform 
by requiring issuers who are not selected for a given year to pause 
their individual market operations and later expend time and resources 
to apply in a future year.
    Response: As noted in the proposed rule, HHS acknowledges that a 
number of State Exchanges have successfully employed an active 
purchaser model and that we intend to consider whether such a model 
would be appropriate in future PYs to further streamline the plan 
selection process for consumers on the Exchanges. HHS appreciates 
comments considering the advantages and disadvantages of such a model, 
and we will take this feedback into consideration as part of future 
decision-making processes.

[[Page 27348]]

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

1. Reimbursement for Clinical Services Provided to Enrollees (Sec.  
158.140)
    In the HHS Notice of Benefit and Payment Parameters for 2023 
proposed rule (87 FR 584, 691), we proposed to amend Sec.  
158.140(b)(2)(iii) to clarify that only 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 are finalizing this proposal as 
proposed.
    Section 2718(a) of the PHS Act requires health insurance issuers 
offering group or individual health insurance coverage (including a 
grandfathered health plan) to separately report the percentage of total 
premium revenue (after certain adjustments) expended on reimbursement 
for clinical services provided to enrollees for activities that improve 
health care quality, as well as all other non-claim (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. Section 158.140 sets forth the 
MLR reporting requirements related to reimbursement for clinical 
services provided to enrollees, including a requirement in Sec.  
158.140(b)(2)(iii) that issuers must include the amount of incentive 
and bonus payments made to providers with incurred claims. Due to the 
lack of clarity and specificity in the regulations, some issuers 
include an overly broad variety of incentive and bonus payments made to 
providers. The inclusion of many types of provider incentives and 
bonuses in incurred claims is appropriate and consistent with the 
purpose of the statute, but only to the extent that such bonuses 
incentivize providers to deliver objectively measurable higher-quality 
care and value for enrollees.
    In the course of conducting MLR examinations pursuant to Sec. Sec.  
158.401 and 158.402, we 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. 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.
    We summarize and respond to public comments received on the 
proposal to clarify the inclusion of provider incentives and bonuses in 
incurred claims (Sec.  158.140) below.
    Comment: The overwhelming majority of commenters supported the 
proposed clarification and accompanying regulatory amendment. 
Commenters stated that this regulatory provision needs to be clarified 
and tightened to ensure the faithful execution of the MLR requirements. 
Commenters further stated that the proposed clarification is necessary 
to prevent issuers from evading compliance by inappropriately using the 
MLR standard itself to trigger ``incentive'' or ``bonus'' payments and 
to prevent issuers from inflating their MLRs by including any such 
payments that are not based on quality or performance metrics.
    Response: We appreciate the supportive comments and agree that it 
is important to look beyond the labels used (for example, provider 
``incentive'' or ``bonus'' payments) to confirm that the provider 
payments meet the applicable standards for inclusion in incurred claims 
for MLR reporting purposes. After considering public comments, we are 
finalizing the amendment to Sec.  158.140(b)(2)(iii), as proposed, to 
explicitly clarify in regulation that to be included in incurred claims 
``incentive'' or ``bonus'' payments to providers must be tied to 
clearly-defined, objectively measurable, and well-documented clinical 
or quality improvement standards that apply to providers. Any provider 
payment that is based on the financial condition or actions of the 
issuer may not be reported as incurred claims. For example, we 
generally believe that payment arrangements between issuers and 
providers that result in there being no scenario in which an MLR rebate 
would ever be paid to consumers or that are tied to the financial 
condition or actions of the issuer would violate both the letter and 
the spirit of the law. It is inappropriate to include such provider 
payments--even if labeled as ``incentive'' or ``bonus'' payments--as 
incurred claims in issuers' MLR calculations. This includes 
arrangements where the MLR standard itself is used as the threshold to 
determine whether such a payment is due, or because some other metric, 
such as issuer profit or surplus, is used, or if the arrangement is 
otherwise designed to substantially avoid compliance with the MLR 
rebate requirements.
    Comment: One commenter that supported the proposal recommended that 
HHS also clarify that provider incentives and bonuses are not required 
to be excluded from incurred claims solely because they incorporate 
shared savings elements or cost efficiency requirements in addition to 
clinical quality requirements. This commenter further recommended a 
safe harbor for provider incentives that do not exceed a specified cap 
(such as 20 percent), make the incentive contingent on meeting 
objective clinical measurements, and require disclosure to any 
beneficiary that requests it.
    Response: We confirm that under the proposal, the fact that a 
provider incentive or bonus program has a shared saving or other cost 
efficiency element does not disqualify the entire incentive or bonus 
from being classified as incurred claims, as long as the incentive or 
bonus is tied to clearly-defined, objectively measurable, and well-
documented clinical or quality improvement standards that apply to 
providers. We do not believe that a safe harbor proposed by the 
commenter is necessary and decline to adopt one at this time.
    Comment: Several commenters requested that HHS distinguish 
alternative payment models such as Accountable Care Organization (ACO) 
initiatives, arrangements where the issuer shares savings with 
providers, and value-based contracting (VBC) from the types of 
arrangements that were the cause for concern, and requested that HHS 
allow all bonuses and incentives paid under such alternative payment 
models to be reported as incurred claims. These commenters expressed 
concern that the proposal would inhibit issuers' ability to pursue such 
cost containment strategies and suggested that the proposal is 
inconsistent with HHS' support of value-based payment models. Some of 
these commenters asserted that purely financial savings that reduce the 
total cost of care are an appropriate basis for provider bonuses or 
incentives. Other commenters suggested that such alternative payment 
models reduce utilization needs and lead to better health outcomes, or 
at least lower costs while continuing to provide quality care.
    Response: HHS continues to support innovative alternative payment 
models that deliver efficient and high-quality care. We further note 
that the MLR statute and HHS implementing

[[Page 27349]]

regulations in 45 CFR part 158 do not prohibit issuers from adopting a 
wide range of value-based payment models, including ones that may not 
be tied to clinical or quality standards. The clarification and 
accompanying amendment to Sec.  158.140(b)(2)(iii), which we are 
finalizing as proposed, is instead limited in applicability to the 
treatment and reporting of these amounts for MLR purposes. As explained 
in the proposed rule (87 FR 691), in the course of conducting MLR 
audits, we uncovered several instances where provider payments labeled 
as ``incentive'' or ``bonus'' that were triggered based on the 
financial condition or actions of the issuer \347\ were included in the 
issuer's incurred claims. This violates the spirit of the statute by 
artificially inflating the issuer's MLR and depriving consumers of the 
rebates they would otherwise be owed under section 2718(b) of the PHS 
Act. It is also inconsistent with the requirements that dictate 
separate reporting and treatment of the percentage of total premium 
review (after certain adjustments) expended on reimbursement for 
clinical services and activities that improve health care quality, and 
on all other non-claims (administrative) costs.\348\ In order to 
increase compliance and improve program integrity, we are finalizing as 
proposed, the regulatory amendment to codify the agency's existing 
policy and interpretation of the statute regarding the treatment of 
provider ``incentives'' and ``bonuses'' that are not tied to clinical 
or quality standards for MLR reporting and rebate purposes. This will 
further ensure that consumers receive value for their premium payments 
and the rebates they are owed under the statute.
---------------------------------------------------------------------------

    \347\ This included arrangements under which payments were made 
to providers any time the issuer's MLR fell below a specified 
threshold, such as the applicable standard established in section 
2718(b)(1)(A)(i) and (ii) of the PHS Act. Other arrangements of this 
nature used a metric tied to when the issuer's profitability 
exceeded a specified threshold. Payments were sometimes made to 
clinical providers or hospitals and other times were made to non-
clinical parent holding companies.
    \348\ See section 2718(a) of the PHS Act and 45 CFR 158.110, et 
seq.
---------------------------------------------------------------------------

    We agree with the commenter who suggested that value-based payment 
models can reduce utilization and lead to better outcomes, or lower 
costs, without compromising the quality of care. Issuers employing such 
models or arrangements should be able to demonstrate this through the 
use and documentation of appropriate clinical or quality metrics and 
thus such incentive or bonus payments would be eligible for inclusion 
in incurred claims. Further, we are not aware of any CMS value-based 
payment initiatives (such as Medicare shared savings initiatives and 
alternative payment models) that do not include clinical or quality 
standard requirements and generally disagree the adoption of the 
amendment to Sec.  158.140(b)(2)(iii) is inconsistent HHS' support of 
innovative, value-based payment models.
    Comment: One commenter expressed concern that the proposed 
clarification could potentially place (unspecified) burdens on 
physicians to earn the incentive and bonus money.
    Response: While we acknowledge the comment, as the commenter did 
not provide any specifics regarding potential burdens, the substance of 
the commenter's concern is not clear. We note that this provision will 
not impact every provider incentive and bonus arrangement since, for 
example, it is unlikely to impact the majority of issuers that exceed 
MLR standards or existing arrangements, the majority of which are tied 
to clearly-defined, objectively measurable, and well-documented 
clinical or quality improvement standards applicable to providers. In 
addition, as discussed above, this provision does not prohibit issuers 
from adopting value-based payment models that may not be tied to 
clinical or quality standards. Nor does this provision require issuers 
to add clinical or quality documentation requirements on providers to 
existing value-based payment models.\349\ Rather, the amendment to 
Sec.  158.140(b)(2)(iii), which we are finalizing as proposed, is 
limited in applicability to the treatment and reporting of these 
amounts for MLR purposes. As explained above, the inclusion of provider 
incentives and bonuses in incurred claims when the incentives and 
bonuses fail to incorporate clinical or quality standards could create 
incentives to inappropriately reduce or even withhold medical care and 
would reduce the value consumers receive for their premium dollars.
---------------------------------------------------------------------------

    \349\ We further note that to the extent the issuer elects to 
impose documentation requirements on its providers under a value-
based payment model or other arrangements, those types of 
requirements would fall outside of the MLR calculation and rebate 
framework under section 2718 of the PHS Act and the implementing 
regulations at 45 CFR part 158.
---------------------------------------------------------------------------

    Comment: One commenter recommended that we adopt a narrow exception 
to the reporting requirement under Sec.  158.140(b)(2)(iii) for issuer 
payments to providers at risk of becoming insolvent due to 
extraordinary circumstances, such as the COVID pandemic, subject to 
prior approval of the applicable State regulator. According to this 
commenter, such payments in extraordinary circumstances may be 
necessary to enable providers to continue providing medical care and to 
ensure that issuers were able to comply with network adequacy 
requirements.
    Response: We understand and commend issuers that made cash payments 
to help prevent at-risk providers from becoming insolvent due to the 
COVID pandemic in order to ensure that consumers had access to medical 
care. However, we did not propose and are not finalizing the exception 
suggested by the commenter. We intend to further consider the treatment 
of such payments in extraordinary circumstances under the MLR framework 
codified in 45 CFR part 158, and would address any policies in this 
regard in future guidance or rulemaking, as applicable.
    Comment: One commenter urged HHS to exercise greater oversight of 
insurance companies that own or are owned by companies that also own 
networks of providers and other health care services. The commenter 
described a number of reporting or business practices made possible by 
vertical integration in health care that have the potential to erode 
the PHS Act MLR protections. According to the commenter, these include 
issuers channeling more health care dollars to their own provider 
groups, encouraging enrollment in an HDHP and contributing to an HSA 
offered by an affiliate, and reporting as QIA the expenses for 
utilization management programs that may not actually benefit enrollees 
or improve their health. Another commenter agreed that the examples of 
provider incentives described in the proposed rule are troubling but 
recommended that the more appropriate remedy is stronger enforcement 
rather than clarifying the regulations.
    Response: We understand the commenter's concern regarding issuers 
that are integrated with health care providers and agree with the 
suggestions and will continue to focus our oversight and enforcement on 
ensuring issuer compliance with MLR reporting requirements for all of 
the different types of provider arrangements or payment models issuers 
may employ. As part of this effort, we intend to consider the impact of 
vertical integration on the reporting and treatment of provider 
payments under the MLR framework codified in 45 CFR part 158, including 
the impact on rebates owed to consumers. However, we note that our 
ability to identify non-

[[Page 27350]]

compliant reporting of provider incentives and bonuses for targeted 
enforcement is limited as the MLR rules require issuers to aggregate by 
State and market the amounts they incurred for any such incentives and 
bonuses. Additionally, the MLR reporting requirements require issuers 
to report only the amounts incurred for provider incentives and bonuses 
and do not require them to describe or provide details about the 
incentive or bonus program itself. Thus, the level of detail that is 
available does not support easily identifying errant practices. In 
addition, we believe that clarification of the requirements in 
regulation is necessary and appropriate to increase awareness and 
ensure broad and uniform compliance. We also emphasize our intention to 
combine this regulatory clarification with heightened oversight and 
monitoring of compliance with MLR reporting and rebate requirements 
with respect to these types of arrangements to ensure consumers receive 
value for their premium payments, consistent with the statute.
    Comment: A few commenters requested that the clarification be 
prospective to give issuers sufficient time to come into compliance.
    Response: As explained above and in the proposed rule, the 
clarification and amendment to Sec.  158.140(b)(2)(iii), which we are 
finalizing as proposed, codifies the Department's existing policy and 
interpretation of the statute. Including provider ``incentive'' or 
``bonus'' payments that are not based on clearly defined, objectively 
measurable, and well-documented clinical or quality improvement 
standards in incurred claims artificially inflates the issuer's MLR and 
deprives consumers of the rebates they would otherwise be owed. This 
practice is also inconsistent with the statutory requirements that 
dictate separate reporting and treatment of the percentage of total 
premium review (after certain adjustments) expended on reimbursement 
for clinical services and activities that improve health care quality, 
and on all other non-claims (administrative) costs. We further note 
that the MLR requirements established under section 2718 of the PHS Act 
have generally been effective since 2011. Finally, as noted above, the 
adoption of this regulatory amendment does not require issuers to 
modify existing arrangements with providers. Instead, it is limited in 
applicability to the treatment and reporting of these amounts for MLR 
purposes. The next annual MLR report is not due until July 31, 
2022.\350\ For all of these reasons, we disagree that additional time 
is needed or should be provided for issuers to come into compliance.
---------------------------------------------------------------------------

    \350\ See 45 CFR 158.110(b).
---------------------------------------------------------------------------

    After consideration of the comments received on this proposal, we 
are finalizing the regulatory amendment to Sec.  158.140(b)(2)(iii) as 
proposed.
2. Activities That Improve Health Care Quality (Sec.  158.150)
    In the HHS Notice of Benefit and Payment Parameters for 2023 
proposed rule (87 FR 584, 691 through 692), we proposed 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. In order to 
ensure reporting consistency among issuers and ensure that QIA expenses 
included in the MLR numerator represent the actual value provided for 
consumers' premium dollars, consistent with the purpose of section 2718 
of the PHS Act, we are finalizing the proposal 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.
    As discussed in the proposed rule (87 FR 691 through 692), section 
2718(a) of the PHS Act requires health insurance issuers offering group 
or individual health insurance coverage (including a grandfathered 
health plan) to 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, as well as 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. For example, some 
issuers allocate to QIA fixed costs--such as office space or IT 
infrastructure--that would, for the most part, exist even if the issuer 
did not engage in any QIA. Some issuers include in QIA expenses amounts 
exceeding the cost of providing the actual QIA service. 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. 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 reporting or apportioning indirect expenses without 
adequate documentation or support.
    We sought comment on this proposal.
    We summarize and respond to public comments received on the 
activities that improve health care quality proposal (Sec.  158.150). 
We note that we received a few comments and suggestions that were 
outside the scope of the proposed rule, which are not addressed in this 
final rule.
    Comment: The majority of commenters supported the proposal 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. These commenters agreed that it is reasonable, appropriate, 
and necessary to prevent issuer MLRs from being inflated.
    Most commenters generally agreed that overhead costs should not be 
allowed to be reported as QIA. A few commenters requested that certain 
non-salary expenses associated with employees performing QIA functions 
be allowed in QIA expenses. These commenters noted that employee 
benefits are part of compensation, and that expenses related to office 
space, equipment, and IT infrastructure are necessary for such 
employees to perform QIA. Several of these commenters stated that 
issuers should be allowed to allocate a portion of indirect costs to 
QIA on a pro rata basis. Several commenters requested that we provide a 
specific list of examples of expenses that are or are not permitted as 
direct expenses. Another commenter suggested that HHS should convene 
stakeholders to discuss an appropriate methodology for allocating 
indirect costs to QIA expenses rather than adopting the proposed 
amendment to

[[Page 27351]]

Sec.  158.150(a) to specify that only expenditures directly related to 
activities that improve health care quality may be included in QIA 
expenses.
    Response: We appreciate the supportive comments on this proposal. 
We agree with commenters that non-salary benefits of employees 
performing QIA functions that are part of compensation packages are 
directly tied to QIA, and we clarify that we consider the cost of such 
employee benefits to be a direct QIA expense. Thus, the issuer's cost 
of health coverage, retirement contributions, life insurance, or 
similar benefits provided to employees actually performing QIA may be 
included in QIA expenses under Sec.  158.150(a), as amended. However, 
similar to salary costs, such costs may only be included up to the 
percentage that reflects the percentage of the employees' time actually 
spent on QIA. Issuers that report such costs as QIA should take care to 
both document and retain records supporting the amount(s) reported and 
the determination of what portion of these costs are a direct QIA 
expense.\351\
---------------------------------------------------------------------------

    \351\ See 45 CFR 158.502.
---------------------------------------------------------------------------

    However, as explained in the proposed rule, many of the other 
indirect expenses identified by these commenters \352\ would be 
incurred even if issuers did not engage in QIA. For example, it is 
unlikely that an issuer's cost of purchasing, renting, and maintaining 
an office building or equipment is meaningfully impacted by the 
engagement of some of its employees in QIA. Therefore, we disagree that 
expenses for items such as office space, equipment, and IT 
infrastructure are directly or in some cases even indirectly related to 
QIA, or that they are incurred in the furtherance of quality 
improvement. As such, for MLR reporting and rebate purposes, these 
expenses are classified as non-claims, administrative costs and should 
not be included in the MLR numerator. Allowing issuers to report these 
same expenses as expenditures on QIA is inappropriate. It would 
undermine the purpose and intent of section 2718 of the PHS Act and 
would allow issuers to inflate QIA costs (and the MLR numerator) by 
including fixed costs that would be incurred regardless of whether the 
issuer engages in QIA. We also do not believe that there is a 
compelling policy rationale to allow issuers to automatically shift a 
pro rata portion of such costs to consumers. For the same reasons, we 
do not believe that convening stakeholders to discuss an appropriate 
methodology for allocating such expenses is necessary.
---------------------------------------------------------------------------

    \352\ Examples of other indirect expenses identified by 
commenters include costs related to office space, equipment, and IT 
infrastructure.
---------------------------------------------------------------------------

    We provided multiple examples of the types of expenses that we 
consider to be indirect expense that should not be reported as QIA in 
both the proposed rule and this rule. Examples include: Office space 
(including rent or depreciation, facility maintenance, janitorial, 
utilities, property taxes, insurance, wall art), human resources, 
salaries of counsel and executives, computer and telephone usage, 
travel and entertainment, company parties and retreats, IT systems, and 
marketing of issuers' products. This list, however, is not intended to 
be exhaustive or all-inclusive. As a general matter, expenses for items 
or services that have no direct or quantifiable relationship to health 
care quality cannot reported as QIA and will not be considered direct 
QIA expenses. Conversely, expenses for items or services that primarily 
or exclusively support QIA as opposed to regular business or other 
functions, when reasonable and quantifiable,\353\ are likely to 
constitute direct expenses that are properly included in QIA expenses. 
We intend to continue to monitor issuer QIA reporting and will issue 
further guidance, as may be necessary, and welcome stakeholder feedback 
on which other types of expenses they would like us to address in 
technical guidance on direct versus indirect expenses.
---------------------------------------------------------------------------

    \353\ Consistent with 45 CFR 158.502, issuers must maintain all 
documents and other evidence necessary to enable HHS to verify that 
the data reported complied with the applicable definitions and 
criteria.
---------------------------------------------------------------------------

    Comment: Two commenters expressed concern that, under the proposal, 
HHS appears to take the position that health information technology 
(HIT) expenses, which are specifically allowed by Sec. Sec.  158.150 
and 158.151, cannot be reported as QIA if they are determined to be 
indirect.
    Response: We do not believe that the amendment to Sec.  158.150(a) 
to specify that only direct expenses related to activities that improve 
health care quality can be included in QIA expenses for MLR reporting 
and rebate purposes conflicts with the definition of HIT at Sec.  
158.151. Section 158.151 defines HIT as specifically being ``designed 
for use by health plans, health care providers, or enrollees for the 
electronic creation, maintenance, access, or exchange of health 
information, as well as those consistent with Medicare and/or Medicaid 
meaningful use requirements.'' This definition recognizes that some 
information technology is HIT; while also recognizing that not all 
information technology is HIT. We affirm and clarify that HIT expenses 
that meet the applicable requirements in Sec. Sec.  158.150 and 158.151 
are permissible costs that can be included as QIA expenses. For 
example, the cost of software designed and used primarily for QIA 
purposes, such as HEDIS reporting, constitutes a direct expense related 
to activities that improve health care quality and can be included in 
QIA expenses for MLR reporting and rebate purposes. In contrast, as 
explained above and in the proposed rule, the costs of IT 
infrastructure that primarily supports regular business functions such 
as billing, enrollment, claims processing, financial analysis, and cost 
containment, even when the same IT infrastructure also happens to 
support QIA activities in addition to regular business functions, do 
not constitute a direct expense related to activities that improve 
health care quality and cannot be included in QIA expenses for MLR 
reporting and rebate purposes. As a simple example, the cost of the 
computer software license for an employee that works part of the time 
on QIA should not be allocated to QIA expenses for MLR reporting 
purposes. The fact that the employee uses this software to write QIA 
documents in addition to other documents does not convert this 
otherwise general non-claims, administrative cost into one of the types 
of expenses eligible to be included in the MLR numerator as QIA 
expenses.
    Comment: A few commenters that opposed the proposal disagreed with 
the classification of the administrative expenses and profits of 
issuers' QIA vendors as indirect expenses. These commenters stated that 
this approach will disincentivize issuers from engaging vendors with 
appropriate expertise. Some commenters stated that vendors' 
administrative expenses and profits should be treated in the same 
manner regardless of whether vendors perform clinical services or QIA.
    Response: We disagree that clinical providers' administrative costs 
and profits are analogous to non-clinical providers' administrative 
costs and profits. Clinical services are a provider function. QIA, on 
the other hand, is an issuer function. Where an issuer performs its own 
QIA without engaging a vendor, any ``profit'' that it makes on such QIA 
cannot be included in the MLR calculation. Accordingly, where an issuer 
chooses to outsource its QIA to a third party, rather than developing 
the necessary skills in-house, as it does for other issuer functions 
such as claims

[[Page 27352]]

processing, network development, clinical policies, and case and 
utilization management, for example, for MLR reporting and rebate 
purposes that vendor stands in the shoes of the issuer. Consequently, 
the vendor's indirect costs, as well as any profit, cannot be reported 
as a QIA expense that is included in the MLR calculation.\354\ We also 
disagree with the assertion that disallowing issuers to include QIA 
vendor administrative expenses and profits in QIA will disincentivize 
issuers from engaging with vendors with the appropriate expertise 
because, as noted, if the issuer were to perform the QIA itself, those 
same administrative expenses and profits would still not be a 
permissible inclusion in QIA. Further, many issuers have not been 
dissuaded from outsourcing claims processing, network development, 
clinical policies, and case and utilization management (UM) to vendors 
who have the respective, requisite expertise even though they cannot 
include the vendor's administrative expenses and profits in their MLR 
calculations.
---------------------------------------------------------------------------

    \354\ See 45 CFR 158.140(3)(ii) and CCIIO Technical Guidance 
(CCIIO 2011-002): Questions and Answer Regarding the Medical Loss 
Ratio Interim Final Rule, May 13, 2011, Q&As 10-14, at https://wayback.archive-it.org/2744/20200125161941/https://www.cms.gov/CCIIO/Resources/Files/Downloads/mlr-guidance-20110513.pdf.
---------------------------------------------------------------------------

    Comment: A commenter urged us to review how insurers are 
categorizing their UM expenses and set clear guardrails around when, if 
ever, such activities can be categorized as QIA.
    Response: We agree with the commenter that certain UM activities 
are designed to target cost-containment rather than quality 
improvement. To that end, under current regulations at Sec.  
158.150(c), issuers cannot include in QIA any prospective or concurrent 
UM costs or any retrospective UM costs that do not meet the definition 
of a QIA. Additionally, in the course of performing MLR examinations, 
HHS routinely reviews the UM program expenses that issuers report as 
QIA to ensure they comply with the regulatory requirements. We believe 
the current regulations provide sufficient guardrails on the reporting 
of UM expenses and therefore did not propose, and are not finalizing, 
any such changes at this time.
    Comment: One commenter requested that we allow health equity 
accreditation costs in QIA.
    Response: Issuers are currently permitted by Sec.  
158.150(b)(2)(i)(A)(5) to include in QIA expenses the costs associated 
with accreditation fees that are directly related to the quality of 
care activities. Therefore, to the extent, a health equity activity 
requiring accreditation meets the definition of a QIA at Sec.  158.150, 
such accreditation fees can be reported as QIA expenses.
    Comment: One commenter requested that the definition of QIA be 
revised to explicitly include issuer payments to providers for quality 
or clinical improvements directed at people with disabilities, such as 
the purchase of accessible medical and examination equipment.
    Response: We did not propose and are not finalizing regulatory 
changes to address issuer payments to providers for quality or clinical 
improvements directed at people with disabilities. As such, modifying 
the regulation to specifically allow issuers to include expenses such 
as payments to clinical providers to purchase accessible medical office 
equipment for people with disabilities is out of the scope of this 
rulemaking. However, we note that to the extent such equipment 
purchases meet the requirements of Sec.  158.150, Sec.  158.151, or 
Sec.  158.162(c), they may be included as QIA expenses in issuers' MLR 
calculations.
    Comment: A few commenters requested that we clarify in which MLR 
reporting year the clarification is effective and requested that the 
effective date be prospective, suggesting that it should be effective 
beginning with the 2023 MLR reporting year to allow for contract 
renegotiation.
    Response: We note that in the course of conducting MLR 
examinations, we have consistently disallowed some of the more 
egregious types of indirect expenses that issuers have reported and 
which we believe are unambiguously inconsistent with the spirit and 
intent of the law. Therefore, we are clarifying that this change is 
effective beginning with the 2021 MLR reporting year (reports due July 
31, 2022). However, to allow issuers additional time to revise their 
reporting processes or undergo contract negotiations (and 
renegotiations), we intend to maintain the existing enforcement posture 
with respect to the MLR reports filed for the 2021 MLR reporting year, 
and will otherwise exercise enforcement discretion to not penalize 
issuers who make good faith efforts to comply and report QIA consistent 
with the clarifications in this rule until the 2022 MLR reporting year 
(reports due July 31, 2023). Issuers should not interpret this 
enforcement approach to justify reporting any and all indirect QIA 
expenses on their 2021 Annual MLR Reporting Forms; instead it is 
intended to provide a transition in the limited situations, such as 
those identified by the commenter, that present barriers to adjusting 
the issuer's reporting practices for the 2021 MLR reporting year.
    After consideration of the comments received on this proposal, we 
are finalizing the amendment to Sec.  158.150(a) to specify that only 
expenditures directly related to activities that improve health care 
quality may be included in QIA expenses, as proposed.
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.\355\ 
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 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 the 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 proposed to make a technical 
amendment to Sec.  158.170(b) to correct this oversight and remove the 
reference to the percentage

[[Page 27353]]

of premium QIA reporting option described in Sec.  158.221(b)(8).
---------------------------------------------------------------------------

    \355\ 86 FR 24140.
---------------------------------------------------------------------------

    We summarize and respond to public comments received on the 
allocation of expenses proposed technical amendment (Sec.  158.170).
    Comment: No commenters commented on this technical correction, but 
a commenter requested we reconsider and permit the previous allowance 
for plans to report 0.8 percent of earned premium as QIA in the MLR 
numerator to reduce the effort required of issuers to identify, track, 
and report QIA.
    Response: While we appreciate the comment, as stated above, this 
change aligns Sec.  158.170(b) with the vacatur of Sec.  158.221(b)(8) 
by the United States District Court for the District of Maryland in 
City of Columbus. We are therefore finalizing this technical correction 
as proposed.

G. Solicitation of Comments on Health Equity, Climate Health, and 
Qualified Health Plans

    To further HHS' 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, HHS is considering other ways to 
incorporate health equity standards through HHS' authority to enhance 
criteria for the certification of QHPs or by leveraging existing QHP 
requirements such as the Network Adequacy Standards at Sec.  156.230 
and Accreditation of QHP Issuers at Sec.  156.275. We also sought 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.
    We also sought comment on ways HHS might improve its understanding 
of the existing landscape of issuer collection of health equity data, 
including demographic information, as well as comment on how HHS might 
assess data sources that focus on population-level factors made 
available by governments, quasi-governmental entities, data vendors and 
other organizations. Specifically, we sought input on, among other 
things, health equity assessment tools, the challenges QHP issuers 
could face implementing a new accreditation product on health equity; 
\356\ and information on the demographic or SDOH data QHP issuers 
currently collect from enrollees. We summarize and respond to public 
comments received on HHS' solicitation of comments on health equity and 
climate health.
---------------------------------------------------------------------------

    \356\ Health Equity. National Committee for Quality Assurance. 
https://store.ncqa.org/accreditation/health-equity-he.html.
---------------------------------------------------------------------------

    Comment: Commenters supported CMS' suggestion for QHP issuers to 
obtain a health equity accreditation, and some specified support for 
the National Committee for Quality Assurance (NCQA) Health Equity 
Accreditation to encourage issuers to take meaningful steps to advance 
health equity. Some commenters expressed concerns that the scope of the 
NCQA's Heath Equity Accreditation was too narrow, noting that the NCQA 
does not explicitly discuss disability status in their accreditation 
language and that the accreditation is still new while other commenters 
found the NCQA's Health Equity Accreditation requirements too broad. In 
addition, commenters noted that NCQA may have not collaborated with the 
historically marginalized groups that are disproportionately impacted 
by health disparities when they developed the parameters of the 
accreditation. Furthermore, some commenters expressed concern with CMS 
sourcing a health equity accreditation from one accrediting body, 
suggesting that other organizations' accreditations may also provide 
useful parameters and requirements. A few commenters expressed that 
requiring any additional QHP accreditations would create significant 
cost and burdens for issuers.
    Response: We appreciate commenters' input on potentially requiring 
issuers to obtain a health equity accreditation and the challenges QHP 
issuers could face implementing a new accreditation product. We will 
consider the feedback as we continue to explore options for advancing 
health equity in the Exchanges.
    Comment: Commenters supported the idea of collecting demographic or 
SDOH data, including information on enrollees' race, ethnicity, gender, 
sexual orientation, primary language, and disabilities, while also 
acknowledging the challenges of collecting data.
    Commenters encouraged HHS to set standards for how issuers and 
other stakeholders should collect demographic data and suggested that 
recommendations from the Institute of Medicine, the Williams Institute 
at the University of California, Los Angeles, and forthcoming 
recommendations from the National Academies of Sciences, Engineering, 
and Medicine could offer foundational guidance. Commenters also 
suggested that HHS set an example for improving data collection.
    While noting the importance of collecting accurate demographic 
data, some commenters identified data sharing and use agreements, 
Federal privacy and data protection laws, State laws, and a lack of 
formal standards for collecting data as barriers that may impede 
issuers' abilities to meaningfully collect and use SDOH and demographic 
data.
    Response: We appreciate the commenters' insight into the current 
landscape of demographic data and SDOH. We will take these comments 
into consideration when considering ways to advance health equity 
through QHPs.
    Comment: Commenters provided examples of datasets related to 
population factors that CMS could leverage to analyze whether QHP 
networks are providing adequate access to health care services for 
members within specific geographic areas, such as social vulnerability 
index scores, provider and consumer data, Provider Master Index/Shared 
Provider Profile (PMI/SPP), and census data.
    Response: We will consider the use of these data sources to analyze 
and evaluate QHPs' performance related to providing equitable access to 
health care services.
    Comment: Some commenters commented on the ability of QHP issuers to 
tailor provider networks based on the health needs of enrollees in 
specific geographic areas. Commenters were supportive of tailored 
provider networks, noting that issuers could contract with and develop 
networks based on the health needs of their enrollees, which issuers 
could identify through improved data collection. Commenters suggested 
QHP issuers could conduct this work in concert with CMS' ECP 
requirements.
    Response: We appreciate the input and will consider the feedback as 
we continue to explore ways to promote health equity.
    Comment: Commenters discussed health conditions and outcomes 
variables for which analysis and measurement may help CMS promote 
health equity. While many of these commenters encouraged CMS to use 
appropriate variables to promote health equity without providing 
specific feedback, some commenters identified populations that were 
vulnerable and may require target interventions to improve health 
outcomes. Some examples of the populations identified

[[Page 27354]]

were minority mothers, individuals with diagnosed opioid use disorder 
or substance use disorders, individuals with special immigrant juvenile 
status, and individuals with behavioral health conditions.
    Some commenters also suggested options that CMS could consider to 
effectively use outcome variables for analysis and measurement, which 
included relying on network adequacy standards to ensure that adequate 
health care services are available and provided, adding Value-Based 
Insurance Designs into the Exchanges, increasing the ratio of required 
Essential Community Provider contracts, and educating providers on the 
use of ICD-10 z-codes.
    Response: We appreciate the suggestions for the use of health 
conditions and outcomes variables for which analysis and measurement 
may help CMS promote health equity. HHS understands the importance of 
addressing vulnerable populations as it continues to explore ways to 
promote health equity.
    Comment: Several commenters offered feedback on ways in which CMS 
could encourage QHP issuers to be accountable for improving health 
outcomes across all populations equitably. Commenters suggested that 
CMS encourage QHP issuers to engage with local organizations and become 
more integrated with providers and other community partners. Commenters 
also suggested that CMS could hold QHP issuers financially accountable 
for integrating with the communities they serve or for a small number 
of clinical measures.
    Response: We will consider these suggestions as ways to advance 
health equity through QHPs.
    Comment: Some commenters suggested that CMS could incentivize QHP 
issuers to advance health equity outside of the QHP certification 
requirement by considering activities that promote health equity as a 
QIA within MLR calculations or tie equity to plans' quality ratings. 
Several commenters recommended that we define QIA to explicitly include 
expenses related to coverage of SDOH and interventions that address 
social barriers to care or other health disparities. One commenter 
requested that we specify what types of SDOH expenses qualify as QIA.
    Response: We appreciate these comments and supports issuers' 
efforts to design plans that improve health equity and address SDOH and 
will consider these suggestions as ways to promote health equity. While 
modifying the MLR regulation and framework to explicitly allow issuers 
to include investments in SDOH is outside the scope of this rulemaking, 
we will consider these comments for future rulemaking or guidance. We 
note that under the current MLR regulation at Sec.  158.140, issuers 
can include SDOH costs in incurred claims if the SDOH expenses are for 
a covered policy benefit. Issuers can also include SDOH expenses that 
do not relate to covered benefits in QIA if the underlying activity 
meets the definition and applicable criteria for QIA at Sec.  158.150. 
Additionally, issuers exempt from Federal income tax or not subject to 
State premium taxes can, pursuant to Sec. Sec.  158.162(b)(1)(vii) or 
158.162(b)(1)(viii), respectively, deduct the expense from earned 
premium to the extent their SDOH expenses meet the regulatory 
definition of Community Benefit Expenditures under Sec.  158.162(c).
    Comment: Commenters discussed challenges that QHP issuers face in 
promoting and advancing health equity, but did not specify strategies 
that could overcome these challenges. Challenges included lack of 
Federal guidance and standardization for data collection.
    Response: We appreciate the feedback and will consider these 
suggestions as we explore ways to promote health equity.
    Comment: Commenters suggested several health equity tools that may 
help CMS address health disparities within QHPs, for example, Area 
Deprivation Index, Population Health Assessment, Consumer Assessment of 
Healthcare Providers and Systems (CAHPS) Survey, additional NCQA 
resources, and updated HEDIS health equity measures. In addition, 
commenters noted the Institute of Medicine, the Williams Institute at 
UCLA, and the National Academies on race, ethnicity, and language (REL) 
could offer models for health equity tools that CMS may want to 
consider.
    Response: We will consider these health equity tools as a way to 
advance health equity through QHPs.
    HHS also sought comment on how Exchanges and related health care 
system organizations can more readily prepare for the impacts of 
climate change. HHS believes that it is critical to study and prepare 
for these impacts given mounting evidence linking climate change to 
catastrophic natural events and chronic disease disproportionately 
harming at-risk populations including groups already suffering serious 
health disparities.
    Comment: Of the 52 total comments received by HHS, all commenters 
acknowledged the threats climate change presents to human health and 
supported health care stakeholders considering the impact of climate 
change on their enrollees, providers, and employees. Twenty-five 
commenters supported the collection and public reporting of greenhouse 
gas emissions data by providers and, in fewer cases, issuers. Thirteen 
commenters noted the importance of preparing health care systems for 
climate health threats by identifying at-risk enrollees prior to 
climate change events to better assist them with access to cooling and 
clean air resources. Twelve commenters suggested tying health care 
system and provider reimbursement to action on climate change and 
emissions reduction. Some commenters suggested incentives tied to 
action, and others suggested fines due to lack of commitment. Twelve 
commenters discussed the relationship between climate change and social 
determinants of health, noting the importance of anticipating and 
managing climate change's impact on the health of certain marginalized 
and high-risk populations. Nine commenters suggested that issuers or 
health care systems should further educate providers and enrollees 
about the health effects of climate change. Three commenters noted the 
importance of creating or updating measures sensitive to climate health 
impacts. Two commenters noted the strong connection between climate 
change and respiratory health problems. Additional commenters noted the 
impact of climate change on maternal and child health; women's health; 
skin cancers; and maintaining care quality. Commenters also mentioned 
the need to develop better forecasting tools to anticipate climate 
disasters and threats; maintaining care quality, and consider supply 
chain contributions to overall health care sector emissions.
    Specific insight was shared on possible actions health care systems 
and issuers could take to better support preparedness for climate 
disasters and related impacts, especially for at-risk populations, and 
the opportunity for issuers to provide education and technical 
assistance on climate resilience and emissions reduction to providers 
and enrollees.
    Response: These comments will inform HHS in determining how best to 
support the health care system and benefit delivery changes in response 
to climate change. These comments also will inform HHS through its 
Office of Climate Change and Health Equity, as well as other Federal 
agencies pursuing policies on climate change.

[[Page 27355]]

    We will consider these comments as we consider ways QHPs can be 
more effective in addressing climate health.

IV. Collection of Information Requirements

    Under the Paperwork Reduction Act of 1995 (PRA), we are required to 
provide 30-day notice in the Federal Register and solicit public 
comment before a collection of information requirement is submitted to 
OMB for review and approval. This final 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 Tables 18 and 19. 
To fairly evaluate whether an information collection should be approved 
by OMB, section 3506(c)(2)(A) of the PRA requires that we solicit 
comment on the following issues:
     The need for the information collection and its usefulness 
in carrying out the proper functions of our agency.
     The accuracy of our estimate of the information collection 
burden.
     The quality, utility, and clarity of the information to be 
collected.
     Recommendations to minimize the information collection 
burden on the affected public, including automated collection 
techniques.
    We solicited public comment on each of the required issues under 
section 3506(c)(2)(A) of the PRA for the following information 
collection requirements.
    We summarize general comments on the Collection of Information 
Requirements (ICR) below:
    Comment: A few commenters provided general comments regarding the 
ICR section of the proposed rule. These commenters urged HHS to 
consider the impact of the various data collection requirements on 
impacted entities. One commenter noted that the burden estimates 
contained in the ICR compound, and urged HHS to consider their total 
impact on the affected entities. Another commenter requested that HHS 
suspend new data collection on the proposed policies during the COVID-
19 PHE to relieve the operational burden on impacted entities.
    Response: We have carefully considered the burden of the 
information collection requirements associated with the proposed 
policies, including their combined impact, which is quantified in the 
Final Annual Recordkeeping and Reporting Requirements Tables, and the 
Accounting Table. While we appreciate the burden placed on all systems 
during the COVID-19 PHE, we believe that the new information 
collections for the finalized policies are necessary to carry out the 
proper functions of the agency.

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.\357\ Table 17 in this final 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.
---------------------------------------------------------------------------

    \357\ May 2021 National Occupational Employment and Wage 
Estimates. Available at Occupational Employment Statistics. (2022, 
March 31). Bureau of Labor Statistics. https://www.bls.gov/oes/current/oes_stru.htm.
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    [GRAPHIC] [TIFF OMITTED] TR06MY22.016
    
B. ICRs Regarding State Flexibility for Risk Adjustment (Sec.  153.320)

    We are finalizing the proposal to repeal the risk adjustment State 
flexibility to request reductions to risk adjustment State transfer 
payments for the 2024 benefit year and beyond, as proposed. We are also 
finalizing, as proposed, to provide an exception for the States that 
previously submitted State flexibility requests under Sec.  153.320(d) 
to allow those States to continue to request this flexibility in the 
2024 benefit year and beyond. As part of this policy, we are also 
finalizing, as proposed, the removal of the option for States applying 
under this exception in the 2024 benefit year and beyond 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 
market risk pool as a justification for the State's request and the 
criteria for HHS

[[Page 27356]]

approval. This retains the de minimis standard as the only option for 
prior participants to justify the reduction and for HHS to approve a 
request and is designed to 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. Further, we are finalizing 
this policy as proposed with the intention to propose in future 
rulemaking to repeal the exception for prior participants beginning 
with the 2025 benefit year to provide impacted stakeholders additional 
time to prepare for this proposed change and the potential elimination 
of this flexibility. Consistent with these policies, we finalized 
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 of prior participants, and to remove one of the 
criteria for State justification and HHS approval beginning with the 
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. Since publishing the proposed rule, we have 
updated the burden associated with this requirement based on the most 
recent available national occupational employment and wage estimates 
statistics. We estimate that submitting the request and supporting 
evidence and analysis will take a business operations specialist 40 
hours (at a rate of $76.20 per hour) to prepare the request and 20 
hours for a senior operations manager (at a rate of $110.82 per hour) 
to review the request and transmit it electronically to HHS. We 
estimated that each State seeking a reduction will incur a burden of 60 
hours at a cost of approximately $5,264.40 per State to comply with 
this reporting requirement (40 hours for the insurance operations 
analyst and 20 hours for the senior manager). We have updated the 
estimated burden related to the submission of these requests because 
only one State, will continue to have this ability to make this request 
on the policy being finalized in this rule. In the 2019 Payment 
Notice,\358\ we estimated that 25 States would submit requests and 
provided a total burden of approximately 1,500 hours across all States, 
which would total $131,610 based on current wage estimates. Since we 
estimate that only one State will continue to request reductions, we 
estimate that this burden will be reduced by $126,345.60 to a total 
annual cost of $5,264.40, reflecting the burden associated with one 
State's submission. We are finalizing this proposal to account for the 
burden associated with this revision, HHS submitted a reinstatement 
request to OMB for approval of the previously expired information 
collection request (OMB control number 0938-1155/CMS-10401). As noted 
in previous sections of this rule, HHS intends to propose in future 
rulemaking to fully repeal the State flexibility framework and 
eliminate the ability of prior participants to request reductions in 
risk adjustment transfers starting with the 2025 benefit year.
---------------------------------------------------------------------------

    \358\ 82 FR 51118.
---------------------------------------------------------------------------

    We did not receive any comments in response to the information 
collection requirements related to the proposed policy.

C. ICRs Regarding Distributed Data and Risk Adjustment Data Submission 
Requirements (Sec. Sec.  153.610, 153.700, and 153.710)

    We are finalizing the proposal to collect and extract five new data 
elements from issuers' EDGE servers: ZIP Code, race, ethnicity, ICHRA 
indicator, and subsidy indicator beginning with the 2023 benefit year. 
Specifically, we are finalizing that starting with the 2023 benefit 
year, issuers will be required to populate the ZIP Code data field, 
using the five-digit level based on the enrollee's mailing address, and 
the subsidy indicator data field, which is intended to indicate whether 
a particular enrollee is (or is not) receiving APTC. For the 2023 and 
2024 benefit years, we are adopting a transitional period during which 
issuers are required to populate the fields for race and ethnicity 
using only data they already collect or have accessible regarding their 
enrollees.\359\ For example, for the 2023 and 2024 benefit years, for 
race and ethnicity data, issuers will be deemed in compliance if they 
submit these data elements using data they already have or collect 
through existing means, including, for example, through enrollee data 
captured and reported to the issuer by the FFE, SBE-FPs, and State 
Exchanges at the time of enrollment. Then, beginning with the 2025 
benefit year, the transitional approach will end, and issuers will be 
required to populate the fields using available sources and, in the 
absence of such an existing source for particular enrollees, to make a 
good faith effort to ensure collection and submission of the race and 
ethnicity data for these enrollees.
---------------------------------------------------------------------------

    \359\ HHS will collect these data elements in a format that is 
consistent with the 2011 HHS Data Standards. We also will provide a 
value for the race or ethnicity data elements that allows issuers to 
indicate that race or ethnicity are not known for a specific 
enrollee in recognition of situations where the enrollee declines to 
provide the information and situations where the issuer does not 
have an available data source to populate the fields.
---------------------------------------------------------------------------

    We are also finalizing, with slight modification, collection of the 
ICHRA indicator. For the 2023 and 2024 benefit year, similar to the 
transitional approach for race and ethnicity data, issuers are required 
to populate the field for the ICHRA indicator using only data they 
already collect or have accessible regarding their enrollees. Then, 
beginning with the 2025 benefit year, the transitional approach will 
end, and issuers will be required to populate the field using available 
sources (for example, information from Exchanges and small employers, 
and requesting information directly from enrollees) and, in the absence 
of an existing source for particular enrollees, to make a good faith 
effort to ensure collection and submission of the ICHRA indicator for 
these enrollees. HHS will provide additional details on what 
constitutes a good faith effort to ensure collection and submission of 
the race, ethnicity, and ICHRA indicator data elements beginning with 
2025 benefit year data submissions in the future.\360\
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    \360\ After the transitional approach ends (beginning in the 
2025 benefit year), the option to select the value to indicate race 
or ethnicity are not known for a specific enrollee will be available 
to issuers who comply with the good faith standard but are unable to 
populate the race or ethnicity EDGE data field for one or more 
enrollees.
---------------------------------------------------------------------------

    In addition, as detailed earlier, we are finalizing the extraction 
of the three data elements that issuers already make accessible to HHS 
as part of the required risk adjustment data--plan ID, rating area, and 
subscriber indicator--but will extract plan ID and rating area 
beginning with the 2021 benefit year, and the subscriber indicator 
beginning with the 2022 benefit year. We concluded the proposals to 
extract these data elements will not pose an 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 did not 
propose to change the existing burden for the proposal to extract plan 
ID, rating area, and subscriber indicator.
    For the five new data elements we proposed to collect beginning 
with the 2023 benefit year, we estimated that approximately 600 issuers 
would be subject to this new data collection. We proposed to collect 
these new data elements via issuers' ESES files and risk adjustment 
recalibration enrollment files. In the proposed rule (87 FR 584 and 
695), we estimated a cost of

[[Page 27357]]

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 was $225,168 for 600 issuers 
(2,400 total hours per year for all issuers). We explained the 
proposals to extract these data elements would not pose an additional 
operational burden to issuers, since the creation and storage of the 
extract are mainly handled by HHS. We are finalizing the proposed 
collection and extraction of ZIP Code, race, ethnicity, the ICHRA 
indicator, and the subsidy indicator. HHS submitted a reinstatement 
request to OMB for approval of the previously expired information 
collection request (OMB control number 0938-1155/CMS-10401). Once 
reinstated, HHS will revise the information collection request to 
account for the burden associated with this policy, and will provide 
the applicable comment periods.
    After a review of the comments received, and after incorporating 
the most recently updated wage estimate data, we are updating the 
burden estimates for this policy as described below.
    We summarize and respond to public comments received on ICRs 
related to Distributed Data and Risk Adjustment Data Submission 
Requirements (Sec. Sec.  153.610, 153.700, and 153.710) below.
    Comment: One commenter disagreed with the estimated 4 hours of work 
per issuer to collect and submit additional data elements estimated in 
this section of the proposed rule and reflected in the regulatory 
impact analysis of the proposed rule. The commenter stated that the 
cost associated with these collection and extraction proposals would be 
500 hours of work per issuer. The commenter did not provide further 
detail regarding the methodology used to calculate its burden estimate 
of 500 hours.
    Response: We are finalizing the proposal to require issuers of risk 
adjustment covered plans to submit and make accessible five new data 
elements (ZIP Code, race, ethnicity, the ICHRA indicator, and the 
subsidy indicator) as part of the enrollee-level EDGE data to HHS in 
States where HHS operates the risk adjustment program beginning with 
the 2023 benefit year. We are also finalizing the accompanying proposal 
for HHS to extract these data elements once available. To better 
reflect the most current agency estimates, we have modified the 
estimates from our proposed rule. Currently, all issuers that submit 
data to their EDGE servers \361\ have automated the creation of data 
files that are submitted to their EDGE servers. For successful EDGE 
server data submission, each issuer will need to update their file 
creation process to include the five new data elements, which will 
require a one-time administrative cost. After incorporating the most 
recently updated wage estimate data, we estimate this cost at $2,899.80 
(reflecting 30 hours of work by a management analyst at an average 
hourly rate of $96.66 per hour). In addition, rather than 4 hours of 
work, we now estimate, based on the most current agency estimates, that 
the new data collection will require 5 hours of work by a management 
analyst (one hour of work per new data element collected), at an 
average hourly rate of $96.66 per hour. We have limited this estimate 
to the incremental information collection associated with the 
requirements of the new data collection. As such, although the new data 
collection requires that issuers transform and submit additional data 
elements, it does not require changes to the process or distributed 
data collection approach currently used by an issuer to submit and make 
risk adjustment data accessible to HHS, which is via issuers' ESES 
files and risk adjustment recalibration enrollment files on their EDGE 
servers. We also estimate that approximately 650 issuers, rather than 
600 issuers as initially estimated, will be subject to this new data 
collection. Based on these modifications, we estimate approximately 
$483.30 in total labor costs per year for each issuer. In addition, the 
cumulative one-time cost to update issuers' file creation process is 
$1,884,870 for 650 issuers (19,500 total hours for all issuers). The 
cumulative additional annual cost estimate as a result of this proposal 
is $314,145 for 650 issuers (3,250 total hours per year for all 
issuers).
---------------------------------------------------------------------------

    \361\ Issuers that elect a risk adjustment default charge are 
not required to submit EDGE data. See 45 CFR 153.740(b) and 81 FR at 
12237-12238. Also see, for example, Summary Report on Permanent Risk 
Adjustment Transfers for the 2020 Benefit Year (2021, June 30). CMS. 
https://www.cms.gov/CCIIO/Programs-and-Initiatives/Premium-Stabilization-Programs/Downloads/RA-Report-BY2020.pdf.
---------------------------------------------------------------------------

    In addition, we are finalizing the proposed extraction of the three 
data elements that issuers already make accessible to HHS as part of 
the required risk adjustment data--plan ID, rating area, and subscriber 
indicator--but will extract plan ID and rating area beginning with the 
2021 benefit year, and the subscriber indicator beginning with the 2022 
benefit year. As explained previously in this rule and in the proposed 
rule, extracting these data elements will not pose an additional 
operational burden to issuers since the creation and storage of the 
extract are not received by issuers and is primarily handled by HHS. 
Therefore, there is no additional issuer burden associated with 
extracting any of the new data elements that will be collected (ZIP 
Code, race, ethnicity, the ICHRA indicator, and the subsidy indicator), 
or with extracting the data elements that are already being collected 
(plan ID, rating area, and subscriber indicator).

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)

    In this final rule, we are finalizing the proposal to revise Sec.  
155.220(c)(3)(i)(A) to include at proposed new Sec. Sec.  
155.220(c)(3)(i)(A)(1) through (6) \362\ a list of the QHP comparative 
information web-broker non-Exchange websites are required to display 
consistent with Sec.  155.205(b)(1). We are also finalizing the 
proposal 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. We are finalizing as proposed.
---------------------------------------------------------------------------

    \362\ While the preamble in the proposed rule referred to 
amendments to add new Sec.  155.220(c)(3)(i)(A)(1) through 
(c)(3)(i)(A)(5), the discussion of the proposal and the proposed 
regulations made clear that the proposal would add new Sec.  
155.220(c)(3)(i)(A)(1) through (c)(3)(i)(A)(6). See, for example, 87 
FR 641 through 642 and 721 through 722.
---------------------------------------------------------------------------

    The revised disclaimer policy should result in a very limited new 
burden for web-brokers. The new standardized disclaimer requires 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 will be displaying a disclaimer much like the 
plan detail disclaimer that they have historically been required to 
display.
    We estimated the revised disclaimer policy 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

[[Page 27358]]

web-brokers. Given the minor modifications necessary to implement the 
revised disclaimer, we estimated 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 policy is 
$8,220 for 20 web-brokers in the 2022 benefit year. We have updated 
these estimates based on the most recent available national 
occupational employment and wage estimates. We estimate a cost of $459 
in total labor costs for each web-broker, which reflects 5 hours of 
work by Web and Digital Interface Designers (15-1255) per web-broker 
(100 hours across all web-brokers annually) at an average hourly rate 
of $91.80. The cumulative additional cost estimate as a result of the 
revised disclaimer policy is $9,180 for 20 web-brokers in the 2022 
benefit year. We are finalizing this proposal and will revise the 
information collection under OMB control number 0938-1349 accordingly 
and provide the applicable comment periods.
    We are also finalizing the proposal to amend Sec.  155.220 to add a 
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 the plan name, 
from lowest to highest premium, etc.). We are finalizing as proposed.
    This policy should result in very limited new costs for web-
brokers, since the information it requires they display on their 
websites is limited to text-based changes that are relatively easy to 
implement. Some web-brokers are already providing the information, and 
therefore, will not have to make any website updates. Other web-broker 
websites do not explicitly recommend QHPs, and therefore, the impact is 
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. Furthermore, the extent of those textual 
updates should be relatively minor in most cases. We expect 
explanations to be short and easy for consumers to understand. 
Generally, we believe that a single phrase or a few sentences will 
suffice.
    We estimated this policy 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 estimated 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 policy is $8,220 for 20 web-brokers in the 2022 benefit 
year. We have updated these estimates based on the most recently 
available national occupational employment and wage estimates. We 
estimate a cost of $459 in total labor costs for each web-broker, which 
reflects 5 hours of work by Web and Digital Interface Designers (15-
1255) per web-broker (100 hours across all web-brokers annually) at an 
average hourly rate of $91.80. The cumulative additional cost estimate 
as a result of this policy is $9,180 for 20 web-brokers in the 2022 
benefit year. We are finalizing this proposal and will 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 proposed to amend Sec.  155.420 to add a 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 the burden on 
consumers applying for special enrollment period types that no longer 
require pre-enrollment verification. We expected 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 compared to a 
total of 970,000 individuals in 2019. We estimated 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. We have updated these estimates to reflect the most recent 
wage estimates based on the most recent national occupational 
employment and wage estimates. We anticipate that it will take an 
Eligibility Interviewer approximately 12 minutes (at an hourly cost of 
$46.70) 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 130,000 hours at a cost of $5,306,600.\363\ 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 the annual burden for 
the Federal Government of 38,800 hours at a cost of $1,811,960. It 
would also result in a decrease in the annual burden for consumers 
attesting to special enrollment period types that no longer require 
document verification of 194,000 hours.
---------------------------------------------------------------------------

    \363\ 82 FR 18346.
---------------------------------------------------------------------------

    We are finalizing this requirement 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).\364\
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    \364\ 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).

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[[Page 27359]]

    We did not receive any comments in response to the information 
collection requirements related to the proposed policy.

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

1. Programmatic Audit Requirement (Sec.  155.1200(c))
    We proposed 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 proposed under part 
155, subpart P. We estimated that there would be a burden reduction for 
State Exchanges related to the programmatic audit requirement under 
Sec.  155.1200(c). Based on industry estimates of the average cost of 
contracting an auditor to conduct an independent external programmatic 
audit, HHS estimated 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 the SMART. 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 estimated 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 expected 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.
    We requested comment on the reduction in burden proposed, and 
specifically sought feedback from State Exchanges regarding the annual 
cost of the programmatic audit process.
    We did not receive any comments in response to the information 
collection requirements related to the proposed policy. We are not 
finalizing this provision at this time. Since we are not finalizing 
this provision, we have not provided updated burden estimates based on 
the most recently published wage estimate date. We provide further 
details in the preamble section of this final rule.
2. Reporting on APTC Calculation Methodology (Sec.  155.1200(b)(2))
    We are finalizing to codify the proposed APTC proration methodology 
to be used by the Exchanges on the Federal platform, but we are not 
finalizing the requirement to prorate premium or APTC amounts for State 
Exchanges. Rather, beginning in PY 2024 we will require State Exchanges 
to implement a methodology to ensure that the total monthly APTC amount 
does not exceed an enrollee's monthly PTC eligibility to maintain 
compliance with HHS and IRS regulations. We are also finalizing the 
requirement that State Exchanges must prospectively report to HHS 
through existing State Exchange oversight mechanisms described at Sec.  
155.1200(b)(2) the methodology the State Exchange plans to use in PY 
2024. The requirement to report this methodology to HHS will be 
fulfilled through the SMART and will impose minimal burden on State 
Exchanges, who already report on eligibility and enrollment and 
compliance with other Exchange program requirements through this tool. 
This information collection is currently approved under OMB control 
number: 0938-1244 (Expiration date July 31, 2022/CMS-10507).

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

1. Data Collection (Sec.  155.1510)
    As described in the preamble to Sec.  155.1510, we explain the 
sampling process for each SEIPM review cycle. In Sec.  155.1510(a)(1), 
we proposed 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 
proposed 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 the 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 expected 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 did not expect reporting costs to vary considerably 
based on sample size. We sought comment on these assumptions.
    We estimated 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 State Exchange into the burden estimates.
    HHS estimated 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.

[[Page 27360]]

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 believed 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 proposed 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 estimated that it would take each selected State Exchange up 
to 1,000 hours to develop a CAP. We estimated 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 estimated 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.
    After reviewing the public comments received for the SEIPM program 
proposal, we will not finalize this provision at this time. We have not 
provided updated burden estimates for any of the elements associated 
with the SEIPM program policy to reflect the most recent wage estimate 
data, as we are not finalizing this provision and the final estimated 
burden will not be included in the Accounting Table (Table 20). We 
summarize and respond to public comments received on ICRs Regarding 
State Exchange Improper Payment Measurement program (Sec. Sec.  
155.1500 through 155.1540) below.
    Comment: One commenter stated their State Exchange currently 
expends approximately $280,000 annually on other audit requirements. 
The commenter noted the SEIPM program will require significant changes 
to their reporting systems, as well as providing access to certain 
data. The commenter noted that CMS' estimated annual cost of the SEIPM 
program at $3 million is over 10 times what their State Exchange spends 
on all of its current audits. Other commenters did not estimate the 
dollar amount of the burden cost to their State Exchanges but expressed 
concern about duplicative data collection and needed IT investments.
    Response: After considering the public comments received, we will 
not finalize the SEIPM program proposal at this time. We will solicit 
public comments on the SEIPM program in future rulemaking.

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

    We proposed 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.\365\
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    \365\ See 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,\366\ repealing the annual reporting requirement will 
also remove the associated ICRs and the anticipated burden on States 
submitting such reports. Thus, as we are finalizing 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).
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    \366\ 86 FR 24140.
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    After reviewing the public comments, we are finalizing the repeal 
of the annual reporting policy at Sec.  156.111(d) and (f), including 
revising the section heading to Sec.  156.111 to instead read, ``State 
selection of EHB-benchmark plan for PYs beginning on or after January 
1, 2020.''

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

    As detailed above, we are resuming enforcement of the standardized 
plan option 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, beginning with the PY 2023 open enrollment period.
    We estimated that a total of 110 web-brokers and QHP issuers 
participating in the FFEs and SBE-FPs would be

[[Page 27361]]

required to comply with these requirements. We estimated 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. Therefore, we estimated a total annual burden of 220 hours at a 
cost of $18,804 for all applicable web-brokers and QHP issuers. Since 
the proposed rule, we have updated these estimates to reflect the most 
recently available national occupational employment and wage data. We 
estimated that it would take a web digital interface designer (OES 
occupational code 15-1255) 2 hours annually, at an average hourly cost 
of $91.80 per hour, to implement these changes, at a total annual cost 
of $183.60 per entity. Therefore, we estimated a total annual burden of 
220 hours at a cost of $20,196 for all applicable web-brokers and QHP 
issuers.
    Consistent with the approach finalized in the 2018 Payment 
Notice,\367\ we continue to recognize that system constraints may 
prevent web-broker and QHP issuers from mirroring the HealthCare.gov 
display. We therefore will 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 
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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    \367\ 81 FR 94118.
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    We estimated that 55 of the above web-brokers and QHP issuers would 
submit a request to deviate from the manner in which standardized plan 
options are differentially displayed on HealthCare.gov. We estimated 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. Therefore, we estimated 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. Since the proposed rule, we 
have updated these estimates to reflect the most recently available 
national occupational employment and wage estimates. We estimate it 
would take a compliance officer (OES occupational code 13-1041) 
approximately 1 hour annually, at a rate of $72.90 per hour, to 
complete the request to deviate from the display on HealthCare.gov, as 
well as the justification for the request. Therefore, we estimated a 
total annual burden for all web-brokers and issuers subject to the 
differential display requirements submitting a request to deviate of 
approximately $4009.50 beginning in 2023.
    To account for the burden associated with this ICR, (Non-Exchange 
Entities--OMB control number 0938-1329 (CMS-10666)) HHS submitted a 
reinstatement request to OMB for approval to restore the previously 
discontinued request.
    We did not receive any comments in response to the information 
collection requirements related to the proposed policies.

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

    We are finalizing amendments to Sec.  156.230, including the 
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 finalized raising the ECP provider 
participation standard 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. Reviews of appointment wait time standards will begin in 
the QHP certification cycle for PY 2024. Lastly, an issuer must report 
the offering of telehealth services for each provider to help inform 
the future development of telehealth standards. We provided the 
definition of telehealth in the draft PY 2023 Letter to Issuers. 
Issuers will be required 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 can 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 final 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 the 
geographic location of ECPs in an issuer's provider network. Since we 
are finalizing raising 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.\368\ 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 increase in the ECP threshold would 
somewhat increase the 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.
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    \368\ The ECP/NA template requires QHP issuers to report only 
that number of providers sufficient to demonstrate compliance with 
relevant requirements.
---------------------------------------------------------------------------

    The 20-hour burden estimate for the ECP/NA template also includes 
the 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 finalized a broader provider specialty list for time and distance 
standards than was evaluated for PYs 2015-2017. We also added 
appointment wait time standards and will begin implementing network 
adequacy reviews of appointment wait time standards in PY 2024. HHS 
estimates that the burden

[[Page 27362]]

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 
4 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 estimated that the total annual burden associated with 
completing the additional requirements proposed within the ECP/NA 
template for medical QHPs for up to 215 issuers would be up to 4,300 
hours. Assuming the compliance officer's average hourly rate of $36.35 
per hour, plus a 100% fringe benefit rate of $36.45, we estimated 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 
estimated that the total annual burden associated with this requirement 
for SADPs for up to 270 issuers would be up to 1,080 hours. Assuming 
the compliance officer's average hourly rate of $36.35 per hour, plus a 
100 percent fringe benefit rate of $36.35, we estimated 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.
    Since publishing the proposed rule, we have updated these estimates 
to reflect the most recently available national occupational employment 
and wage estimates. We currently estimate that the total annual burden 
associated with completing the additional requirements proposed within 
the ECP/NA template for medical QHPs for up to 215 issuers would be up 
to 4,300 hours. Assuming the compliance officer's average adjusted 
hourly rate of $72.90 per hour, we estimate that the cost of completing 
the ECP/NA template for an individual medical QHP could be up to $1,458 
and for all 215 issuers, up to $313,470. We estimate that the total 
annual burden associated with this requirement for SADPs for up to 270 
issuers would be up to 1,080 hours. Assuming the compliance officer's 
average adjusted hourly rate of $72.90 per hour, we estimate that the 
cost of completing the ECP/NA template for an individual SADP could be 
up to $291.60, and for all 270 issuers, up to $78,732. The total 
estimated cost for the annual burden associated with completing the 
ECP/NA template across both medical QHP and SADP issuers is $392,202.
    HHS submitted the Essential Community Provider-Network Adequacy 
(ECP/NA) Data Collection to Support QHP Certification information 
collection request (OMB control number 0938-NEW/CMS-10803) to OMB to 
request approval for data collections related to essential community 
provider and network adequacy requirements, which includes the changes 
finalized in this final rule. The existing information collection for 
QHP certification (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 in this rule.
    We summarize and respond to public comments received on ICR 
regarding network adequacy and essential community providers 
(Sec. Sec.  156.230 and 156.235) below.
    Comment: Commenters submitted two remarks regarding the burden 
estimates associated with the addition of telehealth data collection 
reporting for SADPs. Commenters expressed concern that the burden was 
underestimated for SADPs and should be reassessed. The commenters 
shared that they believe the burden is underestimated because: SADPs do 
not currently collect data on telehealth; the estimate does not include 
costs for a second reviewer; and the hourly rate and total estimated 
hours are too low.
    Response: We appreciate the feedback received on the burden 
estimates for SADPs. HHS is aware that the actual burden will vary for 
each QHP based on a variety of factors. We acknowledge that telehealth 
data collection may increase the burden for some QHPs, including SADPs. 
We are also aware that some QHPs already have telehealth data 
available, from sources like claims data or provider surveys. We have 
reflected the telehealth data collection requirement in our burden 
estimates and believe these estimates are reasonable. For issuers that 
have not yet received responses from providers regarding telehealth 
availability and do not have that information available from other 
sources, like claims data, they can select the response on the template 
that they are awaiting a response from that provider.
    For QHP certification data collection and reporting, we use the 
mean hourly wages for a compliance officer to estimate costs. This data 
was retrieved from the Bureau of Labor Statistics website.\369\ HHS 
believes that this job title and associated hourly wage provide a 
reasonable basis for our estimates. We understand that multiple staff 
at different levels may be involved and the total number of anticipated 
hours reflects that. It is up to each issuer to determine their process 
for collecting and reporting ECP/NA data and how many staff are 
involved. We will collect user experience data regarding the 
information collection requirements related to network adequacy and 
will reassess burden estimates for future years as needed.
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    \369\ Occupational Employment and Wages, May 2021. (2022, March 
31). Bureau of Labor Statistics. https://www.bls.gov/oes/current/oes131041.htm.
---------------------------------------------------------------------------

    Comment: Two commenters expressed concern that the burden estimate 
was too low.
    Response: HHS believes the burden estimates accurately reflect the 
time it takes for an issuer to complete the activities described in 
this package and bases its estimates on extrapolation from experience 
in prior plan years.
    Comment: One commenter stated that updates made to ECP/NA data 
collection are necessary and should be approved.
    Response: HHS agrees that the ECP/NA data collection is necessary 
to

[[Page 27363]]

support the ECP/NA portions of the QHP certification review process.
    Comment: Some commenters recommended that HHS defer to States that 
have similar network adequacy standards as the Federal network adequacy 
standards, and coordinate with States and NAIC where possible.
    Response: As described in the preamble of this rule, HHS will defer 
to States performing plan management that elect to perform their own 
reviews during QHP certification, provided that the State applies and 
enforces network adequacy standards that are at least as stringent as 
the Federal standards. HHS will continue to coordinate with States and 
NAIC.
    Comment: A commenter encouraged HHS to identify plans that use very 
narrow networks as a discriminatory enrollment selection process rather 
than to control costs.
    Response: HHS appreciates this suggestion and will consider the 
possibility of identifying plans that use narrow networks as a method 
to deter consumers with greater health needs from enrollment.
    Comment: Some commenters recommended that HHS align network 
adequacy standards with NCQA and Utilization Review Accreditation 
Commission (URAC) standards.
    Response: HHS reviewed the NCQA and URAC standards regarding 
network adequacy. We believe it is appropriate to align with NCQA in 
its use of business days to measure appointment wait time standards, 
which will be finalized in the final PY 2023 Letter to Issuers. We will 
also finalize that the appointment wait time standard for the 
behavioral health category will align with NCQA's standards. NCQA and 
URAC do not have quantitative parameters for the other categories we 
are finalizing for appointment wait times nor do they have quantitative 
standards for time and distance.
    Comment: One commenter requested HHS allow providers from multiple 
network tiers to be considered when assessing network adequacy.
    Response: HHS is not finalizing the network tiering policy for 
network adequacy.
    Comment: Some commenters requested that HHS defer network adequacy 
standards until PY 2024 and defer appointment wait time standards until 
COVID-related provider staffing issues are addressed.
    Response: HHS is finalizing appointment wait time standards and 
delaying implementation until PY 2024.
    Comment: Some commenters shared concerns that plans will not have 
enough time to implement changes required by the proposed network 
adequacy policies and that plans do not have sufficient details on the 
implementation plans for these policies. Some commenters offered 
feedback on specific provider types and requested more detail on how 
provider types are defined. One commenter requested clarification about 
aspects of the ECP/NA template, such as telehealth data collection, 
provider specialty codes, and time and distance parameters.
    Response: HHS included details on the implementation of network 
adequacy policies in the draft 2023 Letter to Issuers and believes 
issuers will have sufficient time to comply with time and distance 
standards for PY 2023 and appointment wait time standards beginning in 
PY 2024. Further information, including detail on definitions of 
provider types and clarification requested regarding aspects of the 
ECP/NA template, will be included in the ECP/NA template, FAQs, QHP 
Application Instructions, and other related documents.
    Comment: One commenter requested deferral of telehealth data 
collection.
    Response: HHS will collect data from issuers on which providers 
offer telehealth as many issuers already have this information, can 
gather it during the required timeframe, or can select that they have 
requested information from the provider and are awaiting their 
response.
    Comment: Two commenters recommended a clear network adequacy 
justification process.
    Response: HHS has developed streamlined justification processes for 
network adequacy and ECP that are described in the preamble.
    Comment: Some commenters requested that HHS use a phased-in 
approach to increasing the ECP threshold or that HHS defer raising the 
ECP threshold until PY 2024.
    Response: HHS is finalizing the ECP threshold for PY 2023 as 
proposed as we anticipate the majority of issuers will be able to meet 
the standard and the justification process can be used by issuers that 
are working to come into compliance with the ECP standards.
    Comment: One commenter requested HHS consider a different approach 
to assess network adequacy in rural areas.
    Response: HHS believes the time and distance standards for rural 
areas are reasonable based on our review of industry standards. We will 
assess time and distance standards at the county level. Rural counties 
and counties with extreme access considerations will have time and 
distance parameters that are longer than more metropolitan areas.
    Comment: A commenter asked HHS to exclude SADPs from appointment 
wait time standards requirement.
    Response: HHS does not agree that SADPs should be exempt from 
compliance with appointment wait time standards. HHS believes it is 
important that timely access to care is ensured, regardless of plan 
type. HHS will evaluate all plans seeking QHP certification, including 
SADPs, for compliance with appointment wait times beginning in PY 2024.
    Comment: One commenter recommended that HHS provide additional 
opportunities for stakeholder feedback on the implementation of network 
adequacy policies.
    Response: HHS will continue seeking stakeholder feedback on network 
adequacy policies on an ongoing basis.
    HHS received one out-of-scope comment to which we have not 
responded in this final rule.

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

    We proposed 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.\370\ We expected 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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    \370\ OMB control number 0938-1266 (Cost-Sharing Reduction 
Reconciliation (CMS-10526)/Expiration date: July 31, 2024).
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    We did not receive any comments in response to the information 
collection requirements related to the proposed policy.

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

    We did not propose and are not finalizing any amendments to the

[[Page 27364]]

regulatory text in 45 CFR 156.1130, which outlines QIS data collection 
and submission framework established in the 2016 Payment Notice.\371\ 
The information collections associated with QIS data collection and 
submission requirements are currently 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 rule, we 
are finalizing, as proposed, that beginning with QIS submissions in 
calendar year 2023 (for the PY 2024 coverage), a QHP issuer would be 
required to address reducing health and health care disparities as one 
of the 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 did not estimate additional burden to be accounted for since 
the current QIS submission form already encompasses the estimated 
burden and costs associated with a QIS submission that may include 
several QIS topic areas.
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    \371\ 80 FR 10750, 10844 through 10848.
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    We did not receive any comments in response to the information 
collection requirements related to the proposed policy.

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

    We are finalizing the proposed amendments to Sec.  158.140 to 
codify in regulation 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 are also finalizing amendments to 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 are also 
finalizing the proposed 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.\372\ We 
anticipate that implementing these provisions will require minor 
changes to the MLR Annual Reporting Form Instructions but will 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.
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    \372\ 86 FR 24261.
---------------------------------------------------------------------------

    We did not receive any comments in response to the information 
collection requirements related to the proposed policies.

N. Summary of Annual Burden Estimates for Proposed Requirements
[GRAPHIC] [TIFF OMITTED] TR06MY22.017


[[Page 27365]]


[GRAPHIC] [TIFF OMITTED] TR06MY22.018

    This final rule includes several policies with information 
collection requirements for which we use this rulemaking as the Federal 
Register notice through which to receive comment on their proposed 
revisions to or submissions of ICRs. These proposals include 
Verification of Eligibility for Special Enrollment Periods (Sec.  
155.420), 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 Plan Options (Sec. Sec.  155.220) 
and 156.265).
    The following policies with associated information collection 
requests that require revision to align with policies in this rule, 
including State Flexibility for Risk Adjustment (Sec.  153.320), Risk 
Adjustment Distributed Data and Risk Adjustment Data Submission 
Requirements (Sec. Sec.  153.610, 153.700 and 153.710), and the 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) will be submitted for OMB approval 
outside of this rulemaking, through a separate Federal Register notice.
    The policies for Quality Improvement Strategy (Sec.  156.1130), 
Medical Loss Ratio (Sec. Sec.  158.140, 158.150, 158.170), Payment for 
Cost-Sharing Reductions (Sec.  156.430), and Reporting APTC Calculation 
Methodology (Sec.  155.1200(b)(2)) contain information collections 
which are currently approved by OMB that do not require revision. One 
policy, the State Selection of EHB-Benchmark Plan for Plan Years 
Beginning on or After January 1, 2020 (Sec.  156.111), as finalized, 
will discontinue the associated information collections and remove them 
from the ICRs, and the information collected in the Determination of 
Error Findings Decision and Appeal Redetermination (Sec. Sec.  155.1525 
and 155.1530) policy is exempt from the PRA.
    We have submitted a copy of this final rule to OMB for its review 
of the rule's information collection requirements. These requirements 
are not effective until they have been approved by OMB.

V. Regulatory Impact Analysis

A. Statement of Need

    This rule finalizes 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 
finalizes 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 finalizes to remove the annual reporting 
requirement on States to report State-required benefits to HHS. The 
rule also finalizes refinements to the EHB nondiscrimination framework 
by including examples of presumptively discriminatory benefit designs. 
The rule also finalizes the requirement that issuers in FFEs and SBE-
FPs offer standardized plan options. This rule finalizes to expand QIS 
standards and requires 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 
final 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), and the Congressional Review Act (5 U.S.C. 
804(2)).
    Executive Orders 12866 and 13563 direct agencies to assess all 
costs and benefits of available regulatory alternatives and, if 
regulation is necessary, to select regulatory approaches that maximize 
net benefits (including potential economic, environmental, public 
health, and safety effects, distributive impacts, and equity). 
Executive Order 13563 emphasizes the importance of quantifying both 
costs and benefits, reducing costs, 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

[[Page 27366]]

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, and hence also a major rule under Subtitle E of the 
Small Business Regulatory Enforcement Fairness Act of 1996 (also known 
as the Congressional Review Act). In accordance with the provisions of 
Executive Order 12866, this regulation was reviewed by the Office of 
Management and Budget.
    The provisions in this final 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 anticipated that the provisions of this final 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 believed 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 20 depicts an accounting 
statement summarizing HHS' assessment of the benefits, costs, and 
transfers associated with this regulatory action.
    This final rule implements standards for programs that will have 
numerous effects, including providing consumers with access to 
affordable health insurance coverage, reducing the impact of adverse 
selection, and stabilizing premiums in the individual and small group 
health insurance markets and in an Exchange. We are unable to quantify 
all benefits and costs of this final rule. The effects in Table 20 
reflect the qualitative assessment of impacts and estimated direct 
monetary costs and transfers resulting from the provisions of this 
final rule for health insurance issuers and consumers. The annual 
monetized transfers described in Table 20 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 
amendments to MLR requirements.
    We are finalizing 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 estimated to cost approximately $60 million in the 
benefit year 2023.\373\ 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 20.
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    \373\ As noted previously in this final 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.
---------------------------------------------------------------------------

    Additionally, for 2023, we are maintaining the FFE and the SBE-FP 
user fee rates at current levels, 2.75 and 2.25 percent of premiums, 
respectively.

[[Page 27367]]

[GRAPHIC] [TIFF OMITTED] TR06MY22.019


[[Page 27368]]


[GRAPHIC] [TIFF OMITTED] TR06MY22.020

    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 21 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 final rule discussed in this 
RIA. We did not expect the provisions of this final rule to 
significantly alter CBO's estimates of the budget impact of the premium 
stabilization programs that are described in Table 21.
---------------------------------------------------------------------------

    \1\ Healthy People 2030 defines health equity as ``the 
attainment of the highest level of health for all people.'' Healthy 
People 2030 Questions & Answers. (2022, March 9). Office of Disease 
Prevention and Health Promotion. https://health.gov/our-work/national-health-initiatives/healthy-people/healthy-people-2030/questions-answers.

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[[Page 27369]]

    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 anticipated that, quantitatively, 
the effects of the provisions proposed in this rule are consistent with 
our previous estimates in the 2022 Payment Notice \375\ for the impacts 
associated with the APTC, the premium stabilization programs, and FFE 
(including SBE-FP) user fee requirements.
---------------------------------------------------------------------------

    \375\ 86 FR 6166 through 6173 and 24270 through 24282.
    \376\ Reinsurance collections ended in FY 2018 and outlays is 
subsequent years reflect remaining payments, refunds, and allowable 
activities.
[GRAPHIC] [TIFF OMITTED] TR06MY22.021

1. Guaranteed Availability of Coverage (Sec.  147.104(i))
    This rule finalizes amendments to Sec.  147.104(i), which reverse 
the current 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 the current 
policy, individuals may have had to pay up to 3 months of past-due 
premiums plus a binder payment before enrolling in coverage.\377\ HHS 
lacks information on the frequency with which consumers miss payments 
or the frequency with which binder payments are made, and sought data 
or information related to past-due premiums in the proposed rule (87 FR 
584 and 706). HHS was also interested in learning more about the 
population and characteristics of individuals with past-due premiums.
---------------------------------------------------------------------------

    \377\ 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 
2022 survey, 36 percent of insured adults reported being worried about 
being able to afford their monthly health insurance premium, with 12 
percent being ``very worried'' and 23 percent being ``somewhat 
worried.'' \378\ In a 2021 survey, 27 percent of insured adults 
reported having a difficult time covering the cost of health insurance 
each month.\379\ In 2019, 73.7 percent of uninsured adults pointed to 
the high cost of coverage as the reason for being uninsured.\380\
---------------------------------------------------------------------------

    \378\ Kirzinger, A., Kearney, A., Quasem, M., Stokes, M., Hamel, 
L., & Brodie, M. (2022). ``KFF Health Tracking Poll--March 2022: 
Economic Concerns and Health Policy, The ACA, and Views of Long-term 
Care Facilities.'' KFF, https://www.kff.org/health-costs/poll-finding/kff-health-tracking-poll-march-2022/.
    \379\ Data Note: Kearney, A., Hamel, L., Stokes, M., & Brodie, 
M. (2021). Americans' Challenges with Health Care Costs. KFF, 
https://www.kff.org/health-costs/issue-brief/data-note-americans-challenges-health-care-costs/.
    \380\ Tolbert, J., Orgera, K., & Damico, A. (2020). Key Facts 
about the Uninsured Population. KFF. https://www.kff.org/uninsured/issue-brief/key-facts-about-the-uninsured-population/.
---------------------------------------------------------------------------

    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.\381\ 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 
estimated 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.\382\ 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. \383\ That figure was 13.5 percent in 2018 and 13.2 
percent in 2017. Our analysis also suggested 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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    \381\ 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.
    \382\ As we reported in the April 18, 2017 Federal Register (82 
FR 18346), that figure was approximately 16 percent in 2016.
    \383\ 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.
---------------------------------------------------------------------------

    Due to data limitations, we are unable to directly attribute any 
changes in enrollment behavior in the Exchanges using the Federal 
platform to the

[[Page 27370]]

interpretation of the guaranteed availability requirement stated in the 
Market Stabilization final rule. However, this final rule will 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 may lead to 
better health outcomes, if these individuals are able to maintain 
coverage.\384\ This final rule will also increase the ability for 
enrollees to access coverage with the same issuer or another issuer in 
the same controlled group in the next year. This will be of particular 
benefit to those Exchange enrollees living in counties with only one or 
two participating issuers.\385\ It may also reduce the costs and burden 
to enrollees related to searching for a new plan from another issuer or 
an issuer in a different controlled group when seeking to enroll in 
health care coverage. Being able to enroll with the same issuer will 
support access to the same network of services and providers, which 
could improve continuity of care.
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    \384\ We requested comment on whether there would be any impact 
on premiums, affordability, and access for the individuals who 
reliably pay. We solicited 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.
    \385\ 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, D. & Cox, C. 
(2020). Insurer Participation on the ACA Marketplaces, 2014-2021. 
KFF. 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 current 
interpretation of the guaranteed availability requirement. Source: 
Ahn, S. & Volk, J. (2017). Relaxing the Affordable Care Act's 
Guaranteed Issue Protection: Issues for Consumers and State Options. 
CHIRblog. http://chirblog.org/relaxing-the-affordable-care-acts-guaranteed-issue-protection-issues-for-consumers-and-state-options/.
---------------------------------------------------------------------------

    This final rule may result in transfers from issuers who would have 
been able to recoup unpaid premiums from enrollees to those enrollees 
who will 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 will be 
minimal, as issuers generally are not permitted to waive past-due 
premiums and would be expected to pursue other means of collecting 
them.
    We sought comment on the potential costs, benefits, and transfers 
associated with this provision. We also sought data related to past-due 
premiums, missed binder payments, and information on the population and 
characteristics of individuals with past-due premiums.
    We summarize and respond to public comments received regarding the 
impact of the proposed change to the guaranteed availability of 
coverage (Sec.  147.104(i)) requirement below.
    Comment: Many commenters stated that this provision will increase 
access to health insurance coverage and care for individuals who stop 
paying premiums and are currently unable to enroll in coverage because 
they cannot afford to pay past-due premiums. Commenters provided a 
number of reasons why individuals stop paying premiums, such as 
financial hardship or affordability, not receiving a notice of past-due 
premiums, or mistakenly forgetting to cancel coverage when becoming 
eligible for other forms of coverage. Commenters also provided various 
reasons for financial hardship such as periodic unemployment, chronic 
conditions, serious illnesses, addiction, domestic violence, crime, 
environmental disaster, and medical emergencies. Commenters mentioned 
high rates of being uninsured among individuals in minority and 
underserved communities and women and children and the risks associated 
with being uninsured. One commenter cited studies that found a 
correlation between the lack of health insurance coverage and 
preventable deaths.
    Many commenters stated that the current policy creates a barrier to 
coverage for and has a negative impact on low- or middle-income 
individuals and individuals experiencing financial hardship. Several 
commenters also stated that the current policy has a disproportionate 
impact on underserved populations, such as immigrants, people of color, 
disabled women, and the LGBTQI+ community, that continue to face 
cultural and financial barriers to coverage and care.
    A few commenters also stated that if individuals are better able to 
maintain coverage because of this provision, it will improve continuity 
of care and lead to better health outcomes. One of these commenters 
noted in particular that enabling individuals to enroll with the same 
issuer the next plan year increases the likelihood that they will 
maintain relationships with their providers. Several commenters also 
highlighted the importance of continuous coverage during the COVID-19 
pandemic.
    Response: We agree with the commenters that this change improves 
health equity by removing a barrier to health insurance coverage and 
health care that disproportionately affects low-income, minority and 
underserved communities.
    Comment: A few commenters stated that this provision will have a 
negative impact on consumers. Some commenters suggested that the 
provision will lead to higher costs for issuers and result in higher 
premiums for consumers. One commenter speculated that the increase in 
premiums could range from 0.3 percent to more than 3 percent. A few 
commenters also stated that the proposed rule will reduce access to 
coverage if issuers exit the market. A few commenters stated that the 
proposed rule could negatively affect risk pools. A commenter also 
expressed concern about the potential financial impact on providers who 
may not receive payments when individuals fail to pay their premiums. 
One commenter also stated that it may negatively affect MLRs.
    On the other hand, some commenters suggested that the proposed rule 
could improve the stability of risk pools, for instance, by reducing 
adverse selection. One of these commenters noted that the current 
policy may have deterred enrollment among younger, healthier 
individuals. A few commenters stated that the current policy worsened 
the risk pool and led to higher premiums, since individuals with 
significant health care costs are more likely to pay past-due premiums. 
One commenter noted that restrictions on enrollment outside of open 
enrollment periods limit adverse selection. In addition, one commenter 
stated that few issuers chose to implement the current policy because 
the implementation costs outweighed the premium losses. A commenter 
also speculated that the change would lead to reduced administrative 
costs for issuers. Several commenters stated that the amount of past-
due premiums is minimal relative to issuers' profits. Several 
commenters also stated that issuers would be able to recoup past-due 
premiums by other means. One commenter noted that the financial risk to 
the individual from not having continuous coverage outweighs the cost 
to the risk pool from individuals not paying premiums (which could be 
recouped by issuers).
    Response: We disagree that this rule is likely to result in an 
increase in premiums, have a negative financial impact on issuers or 
providers, or cause issuers to exit the market. There is no evidence 
that suggests that premiums would noticeably change because of a shift 
in how the guaranteed availability requirement is interpreted. As one 
commentator stated, few issuers have implemented the current policy of

[[Page 27371]]

attributing payment made for new coverage to past-due premiums before 
effectuating new enrollment. In addition, as another commenter stated, 
issuers that did adopt the current policy are likely to experience a 
reduction in administrative costs due to this change. Issuers also have 
other means to recoup past-due premiums. We also agree with commenters 
that stated that this change may result in an improved risk pool by 
removing barriers to enrollment for young and relatively healthy 
individuals.
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)
    In the 2023 Payment Notice proposed rule, HHS proposed amendments 
to certain regulations prohibiting discrimination in health insurance 
coverage, including discrimination in the design and implementation of 
health plan designs, under Sec. Sec.  147.104(e), 155.120(c), 
155.220(j), 156.125(b), 156.200(e), 156.1230(b), and 156.125. HHS 
proposed to amend these regulations so that they explicitly identify 
and recognize sexual orientation and gender identity as prohibited 
forms of discrimination based on sex consistent with pre-2020 HHS 
discrimination policy. HHS also proposed refinements to its EHB 
nondiscrimination policy for health plan benefit designs through 
proposed amendments to Sec.  156.125 regulation text that would require 
that a nondiscriminatory health plan design that provides EHB to be 
clinically based, incorporate evidence-based guidelines into coverage 
and programmatic decisions, and rely on a current and relevant peer-
reviewed medical journal articles, practice guidelines, or 
recommendations from reputable governing bodies, or similar sources. We 
provided examples of presumptively discriminatory benefit designs to 
provide further clarity on our refined EHB nondiscrimination policy. 
HHS proposed that its refined EHB nondiscrimination policy under Sec.  
156.125, as reflected in the examples of presumptively discriminatory 
health plan designs, would be applicable starting on the earlier of PY 
2023 or upon renewal of any plan subject to the EHB requirements.
    We sought comment on the potential costs, benefits, and transfers 
associated with the proposals in these provisions.
    As explained in the Supplementary Information section earlier in 
this preamble, HHS will address in future rulemaking the proposed 
amendments to Sec. Sec.  147.104(e), 155.120(c), 155.220(j), 
156.125(b), 156.200(e), and 156.1230(b) that would have explicitly 
identified and recognized sexual orientation and gender identity as 
prohibited forms of sex discrimination.
    HHS is finalizing the proposed revisions to Sec.  156.125(a) to 
state that a nondiscriminatory benefit design that provides EHB is one 
that is clinically based. However, HHS does not finalize the proposed 
revisions to Sec.  156.125(a) that would have provided that a 
nondiscriminatory benefit design is one that incorporates evidence-
based guidelines into coverage and programmatic decisions and relies on 
a current and relevant peer-reviewed medical journal articles, practice 
guidelines, or recommendations from reputable governing bodies, or 
similar sources.
    HHS finalizes all but one of the examples of presumptively 
discriminatory benefit designs. Specifically, consistent with the 
explanation in the Supplementary Information section earlier in this 
preamble, HHS will address in future rulemaking the example related to 
gender-affirming care that illustrated a benefit design that 
presumptively discriminates against enrollees based on gender identity 
under Sec.  156.125.
    We summarize and respond to public comments received on the 
regulatory impact and burden analysis relevant to our proposals under 
Sec.  156.125 that we finalize in this final rule. Accordingly, we do 
not respond to comments that relate to the proposal to specifically 
identify sexual orientation and gender identity as prohibited forms of 
sex discrimination, nor do we respond to comments that relate to the 
gender-affirming care example in the 2023 Payment Notice proposed rule.
    Comment: One commenter questioned what the regulatory impact and 
burden would be on issuers and enrollees to declare a class of 
treatment based on ``presumptive nondiscrimination.'' Another commenter 
stated the policy refining the nondiscrimination standard would 
unintentionally impose costs that far exceed any benefits by limiting 
the ability of issuers to develop cost-effective formulary plan designs 
and by compelling plans to ignore the standard use of clinical evidence 
as a factor in determining the appropriate tier for drugs.
    A commenter also asserted that the lack of a cost-benefit analysis 
makes the rule arbitrary and capricious (noting CMS does not cite how 
many plans already cover the procedures, how many individuals will seek 
them, their cost, and increased costs to issuers and insured). Other 
commenters expressed concern that health plans may see increased 
utilization and higher costs due to an unintended adverse impact on 
issuers' ability to administer packages of benefits under the refined 
framework. Yet another commenter recommended that HHS should conduct 
and publish the results of a detailed cost study demonstrating premium 
impacts of refining the nondiscrimination standard for consumers prior 
to finalizing the proposal.
    Response: With regards to the EHB nondiscrimination policy we are 
finalizing at Sec.  156.125, we reiterate that the nondiscrimination 
requirements at Sec.  156.125 apply only to benefit designs or 
implementation of a benefit designs to the extent that those benefits 
are EHB. The policy at Sec.  156.125 does not apply to benefits that 
are not EHB. As mentioned in the proposed rule, the clarifications and 
changes we are finalizing to Sec.  156.125 will most likely affect the 
vast majority of State EHB-benchmark plans. Because some current EHB-
benchmark plans continue to be based on plan year 2014 plans, some of 
the EHB-benchmark plan designs may not comply with current Federal 
requirements such as nondiscrimination requirements at Sec.  156.125. 
Therefore, when designing plans that are substantially equal to the 
EHB-benchmark plan, issuers may need to further conform plan benefits 
covered as EHB, including coverage and limitations, to comply with 
current Federal requirements, such as the nondiscrimination requirement 
of Sec.  156.125.
    If a State EHB-benchmark plan has a discriminatory benefit design, 
the State may prohibit plans providing benefits that are substantially 
equal to the EHB-benchmark plan from replicating that discriminatory 
benefit design. However, we clarify that we will not consider State 
EHB-benchmark plan designs to be out of compliance with EHB-benchmark 
plan requirements at Sec.  156.110(d) or Sec.  156.111(b)(2)(v) if the 
State provides such guidance or otherwise directs issuers to comply 
with these refined nondiscrimination standards notwithstanding any 
aspects of the EHB-benchmark plan that are not otherwise consistent 
with these refined nondiscrimination standards. Therefore, under this 
approach, States are not required at this time to go through the formal 
process at Sec.  156.111 to update their EHB-benchmark plans solely for 
the purpose of removing any such discriminatory benefit designs on 
EHBs, but States that do elect to update their

[[Page 27372]]

EHB-benchmark plans at any point going forward will be expected to 
ensure their new EHB-benchmark plans are compliant.
    To the extent that States take actions necessary to come into 
compliance with the refined EHB nondiscrimination policy such actions 
may have a small impact on premiums. States making changes to their 
EHB-benchmark plans for plan years after 2020 have the flexibility to 
design their EHB-benchmark plans consistent with Sec.  156.111, which 
provides more options in plan designs. 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 the scope of benefits requirements, under Sec.  
156.111(b).\386\
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    \386\ Section 156.111(b). https://www.ecfr.gov/current/title-45/subtitle-A/subchapter-B/part-156.
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    Plans subject to the EHB requirement have always been required to 
comply with the nondiscrimination requirements in Sec.  156.125 
regardless of the presence of any noncompliant discriminatory language 
in the relevant EHB-benchmark plan. We therefore further recognize that 
issuers subject to Sec.  156.125 requirements may choose to carefully 
review the refined EHB nondiscrimination final rule to ensure 
compliance. We also recognize that such reviews may take time and that 
issuers may experience added burden to the extent that issuers make 
additional changes to their plans designs for benefits covered as EHB 
in response to those reviews. Although we expect that issuers are 
already compliant with current Sec.  156.125 requirements, we also 
believe that finalizing the refined EHB nondiscrimination policy at 
Sec.  156.125 to be applicable on the earlier of PY 2023 or upon 
renewal of any plan subject to the EHB requirements will lessen any 
burden on issuers to make any necessary conforming changes than if we 
had finalized a mid-year effect date as proposed.
    Further, we are declining to finalize that a nondiscriminatory 
benefit design that provides EHB must incorporate evidence-based 
guidelines into coverage and programmatic decisions, and rely on 
current and relevant peer-reviewed medical journal articles, practice 
guidelines, recommendations from reputable governing bodies, or similar 
sources. By instead finalizing only that plan designs providing EHB 
must be clinically based, we believe we are better balancing the need 
to protect consumers from discriminatory benefit designs without 
unreasonably limiting the sources that may be relied upon to assess 
whether a benefit design or its implementation are discriminatory. We 
will continually assess this policy to evaluate whether changes or 
further refinements are warranted.
3. Risk Adjustment (Sec. Sec.  153.320, 153.610, 153.620, 153.700, 
153.710, and 153.730)
    We are finalizing two of the three proposed model specifications. 
Beginning with the 2023 benefit year, we are finalizing, as proposed, 
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 to revise the enrollment duration factors for the 
adult models. However, we are not finalizing the proposed addition of a 
two-stage weighted model specification to the adult and child 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 an additional burden 
on State governments. The model specifications finalized in this rule 
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 HHS-operated risk 
adjustment program.\387\ To 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 the proposed changes using 2020 benefit year risk 
adjustment data.\388\
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    \387\ 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 
Supporting Statement A. (2017, December 22). OIRA. https://www.reginfo.gov/public/do/PRAViewDocument?ref_nbr=201712-0938-015.
    \388\ See the 2021 HHS-Operated Risk Adjustment Technical Paper 
on Possible Model Changes. (2021, October 26). CMS. 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. (2021, December 28). CMS. 
https://www.cms.gov/files/document/report-summary-results-transfer-simulations.pdf. Issuers that participated in the simulation also 
received detailed issuer-specific data, including risk score and 
transfer estimates for the simulated results.
---------------------------------------------------------------------------

    Additionally, we are finalizing, as proposed, the use of the 2017, 
2018, and 2019 enrollee-level EDGE data to recalibrate the HHS risk 
adjustment models for the 2023 benefit year. 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 are also finalizing, as proposed, 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 are finalizing, as proposed, 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 
will 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.\389\ For 
the 2024 benefit year and beyond, we will 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 (except under the extenuating circumstances that 
are described previously in this rule). We removed 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.\390\ For the 2023 benefit year, we are finalizing, as 
proposed, to maintain the CSR adjustment factors finalized in the

[[Page 27373]]

2019-2022 Payment Notices.\391\ Overall, we do not estimate that these 
policies will impact issuer burden beyond the current burden for the 
HHS-operated risk adjustment program.
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    \389\ See 81 FR 94075.
    \390\ 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.
    \391\ 83 FR 16953; 84 FR 17479; 85 FR 29190; and 86 FR 24181.
---------------------------------------------------------------------------

    For the 2023 benefit year, HHS will operate a risk adjustment 
program in every State and the District of Columbia. For the 2023 
benefit year, we are finalizing, as proposed, to use the same 
methodology that we finalized in the 2022 Payment Notice to estimate 
our administrative expenses to operate the program. 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 2023 risk adjustment user fee will 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 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 will also repeal, as proposed, 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 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 removed, as proposed, as 
a criterion for State justification and HHS review and 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. We will retain as the sole 
requirement for State justification and criterion for HHS review and 
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 changes to risk adjustment State flexibility 
request framework will 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 
policy, Alabama would be considered a prior participant and could 
continue to request such reductions. However, we note that we intend to 
propose in future rulemaking to repeal the exception for prior 
participants beginning with the 2025 benefit year to provide impacted 
stakeholders additional time to prepare for this proposed change and 
the potential elimination of this flexibility. We did not anticipate 
any new burden or costs as a result of this policy.
    We finalize the collection and extraction of five new data elements 
from issuers' EDGE servers through issuers' ESES files and risk 
adjustment recalibration enrollment files: ZIP Code, race, ethnicity, 
subsidy indicator, and ICHRA indicator beginning with the 2023 benefit 
year. Specifically, we are finalizing that starting with the 2023 
benefit year, issuers will be required to populate the ZIP Code data 
field, using the five-digit level based on the enrollee's mailing 
address, and the subsidy indicator data field, which is intended to 
indicate whether a particular enrollee is (or is not) receiving APTC. 
For the 2023 and 2024 benefit years, we are adopting a transitional 
period during which issuers are required to populate the fields for 
race and ethnicity using only data they already collect or have 
accessible regarding their enrollees.\392\ For example, for the 2023 
and 2024 benefit years, for race and ethnicity data, issuers will be 
deemed in compliance if they submit these data elements using data they 
already have or collect through existing means, including, for example, 
through enrollee data captured and reported to the issuer by the FFE, 
SBE-FPs, and State Exchanges at the time of enrollment. Then, beginning 
with the 2025 benefit year, the transitional approach will end, and 
issuers will be required to populate the fields using available sources 
and, in the absence of such an existing source for particular 
enrollees, to make a good faith effort to ensure collection and 
submission of the race and ethnicity data for these enrollees.
---------------------------------------------------------------------------

    \392\ HHS will collect these data elements in a format that is 
consistent with the 2011 HHS Data Standards. We also will provide a 
value for the race or ethnicity data elements that allows issuers to 
indicate that race or ethnicity are not known for a specific 
enrollee in recognition of situations where the enrollee declines to 
provide the information and situations where the issuer does not 
have an available data source to populate the fields.
---------------------------------------------------------------------------

    We are also finalizing, with slight modification, collection of the 
ICHRA indicator. For the 2023 and 2024 benefit year, similar to the 
transitional approach for race and ethnicity data, issuers are required 
to populate the field for the ICHRA indicator using only data they 
already collect or have accessible regarding their enrollees. Then, 
beginning with the 2025 benefit year, the transitional approach will 
end, and issuers will be required to populate the field using available 
sources (for example, information from Exchanges and small employers, 
and requesting information directly from enrollees) and, in the absence 
of an existing source for particular enrollees, to make a good faith 
effort to ensure collection and submission of the ICHRA indicator for 
these enrollees. HHS will provide additional details on what 
constitutes a good faith effort to ensure collection and submission of 
the race, ethnicity, and ICHRA indicator data elements beginning with 
2025 benefit year data submissions in the future.\393\
---------------------------------------------------------------------------

    \393\ After the transitional approach ends (beginning in the 
2025 benefit year), the option to select the value to indicate race 
or ethnicity are not known for a specific enrollee will be available 
to issuers who comply with the good faith standard but are unable to 
populate the race or ethnicity EDGE data field for one or more 
enrollees.
---------------------------------------------------------------------------

    In addition, we will 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. We will 
extract plan ID and rating area beginning with the 2021 benefit year, 
and the subscriber indicator beginning with the 2022 benefit year. The 
extraction of plan ID, rating area, and subscriber indicator will pose 
a minimal burden on issuers (only the burden associated with the 
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 estimated in 
the proposed rule that the cumulative additional cost estimate would be 
$225,168 for 600 issuers (87 FR 584, 695). However, to reflect the most 
current agency estimates, we have modified the estimates from the 
proposed rule to reflect new wage data, and estimate that the 
cumulative additional cost estimate will be $314,145 for 650 issuers, 
and that the addition of these five new data elements to the risk 
adjustment data submission requirements will be $483.30 per issuer. In 
addition, we estimate a cumulative one-time administrative cost 
estimate to update the issuer's file creation process of $1,884,870 for 
650 issuers, reflecting a one-time cost of $2,8992 per issuer, which is 
further explained in the Collection of Information section of this 
final rule. The extraction of these data elements will pose a minimal 
burden on issuers (only the burden associated with

[[Page 27374]]

the running of a command) since the creation and storage of the 
extract--which issuers do not receive--is mainly handled by HHS. We 
expected minimal costs to HHS as a result of these new collections and 
extractions.
    We are also finalizing, as proposed, 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 will not pose an 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 sought comment on estimated costs and transfers and potential 
benefits associated with these provisions.
    We received one comment related to the burden associated with the 
requirement that issuers of risk adjustment covered plans to submit and 
make accessible the five new data elements as part of the enrollee-
level EDGE data to HHS in States where HHS operates the risk adjustment 
program beginning with the 2023 benefit year, which we summarized and 
responded to in the Information Collection Requirements section of the 
rule.
4. Risk Adjustment Data Validation (Sec. Sec.  153.350 and 153.630)
    In this final rule, we finalize 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 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 
policies 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 sought comment on these burden estimates. We did not receive any 
comments in response to the burden estimates for the HHS-RADV policies 
in this rule.
5. Agents, Brokers, and Web-Brokers (Sec.  155.220)
a. Required QHP Comparative Information on Web-Broker Websites and 
Related Disclaimer
    In this final rule, we are finalizing the proposal 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)(6) a list of the QHP 
comparative information web-broker non-Exchange websites are required 
to display consistent with Sec.  155.205(b)(1). We are also finalizing 
the proposal 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. We are finalizing as proposed.
    This policy should result in very limited new burden for web-
brokers. As we explained in the proposed rule (87 FR 584, 709), given 
CMS' current enforcement policies relative to these requirements, the 
QHP comparative information we are requiring web-broker websites to 
display is consistent with previously established requirements. As a 
result, these requirements would not present a new burden to web-
brokers.
    The new disclaimer will 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 will be displaying a 
standardized disclaimer much like the plan detail disclaimer that they 
have historically been required to display.
    We estimated this policy will affect approximately 20 web-brokers. 
Given the minor modifications necessary to implement the revised 
disclaimer, we estimated 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 estimated as a result of this policy is 
$8,220 for 20 web-brokers in the 2022 benefit year. We have updated 
these estimates based on the most recently available national 
occupational employment and wage estimates. We estimate a cost of $459 
in total labor costs for each web-broker, which reflects 5 hours of 
work by Web and Digital Interface Designers (15-1255) per web-broker 
(100 hours across all web-brokers annually) at an average hourly rate 
of $91.80. The cumulative additional cost estimate as a result of this 
policy is $9,180 for 20 web-brokers in the 2022 benefit year.
    We sought comment on the estimated burden associated with these 
proposals.
    We did not receive any comments specific to the potential costs, 
benefits, and transfers associated with this provision.
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 are 
finalizing the proposal 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 are 
finalizing this proposal as proposed.
    This policy 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 must update their websites to remove those 
advertisements and will lose any advertising revenue associated with 
such placements. Since advertisements on websites are inherently 
subject to change, even for those web-brokers that are required to make 
updates to their websites, the costs may be very limited, although we 
acknowledge that there may be loss of advertising revenue. We also 
realized, 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

[[Page 27375]]

brokers using their websites or may pursue increased commissions from 
QHP issuers.
    We sought comment on the potential costs, benefits, and transfers 
associated with this proposal. We did not receive any comments specific 
to the potential costs, benefits, and transfers associated with this 
provision.
c. Explanation of Rationale for QHP Recommendations on Web-Broker 
Websites
    We are finalizing the proposal 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 are finalizing 
this proposal as proposed.
    This policy should result in very limited new costs for web-
brokers, since the information it requires they display on their 
websites is limited to text-based changes that are relatively easy to 
implement. Furthermore, the extent of those textual updates should be 
relatively minor in most cases. We expect explanations to be short and 
easy for consumers to understand. Generally, we believe that a single 
phrase or a few sentences will suffice. Some web-brokers are already 
providing the required information, and therefore, will not have to 
make any website updates. Other web-broker websites do not explicitly 
recommend QHPs, and therefore, the impact of this policy is 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 estimated this policy 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 estimated 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 policy is $8,220 for 20 web-brokers in the 2022 benefit 
year. We have updated these estimates based on the most recently 
available national occupational employment and wage estimates. We 
estimate a cost of $459 in total labor costs for each web-broker, which 
reflects 5 hours of work by Web and Digital Interface Designers (15-
1255) per web-broker (100 hours across all web-brokers annually) at an 
average hourly rate of $91.80. The cumulative additional cost estimate 
as a result of this policy is $9,180 for 20 web-brokers in the 2022 
benefit year.
    We sought comment on the potential costs and benefits associated 
with this proposal. We did not receive any comments specific to the 
potential costs, benefits, and transfers associated with this 
provision.
d. Providing Correct Information to the FFEs and Prohibited Business 
Practices
    The 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 believed 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 sought 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 sought comment on any potential costs or benefits associated 
with these proposals. We did not receive any comments specific to the 
potential costs, benefits, and transfers associated with this 
provision.
6. Verification Process Related to Eligibility for Insurance 
Affordability Programs (Sec.  155.320)
    We proposed 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 believed this proposal would benefit 
employers, employees, Exchanges using the Federal platform, and State 
Exchanges that operate their own eligibility and enrollment platform, 
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 (82 FR 51128), 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. 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).
    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 
estimated 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 estimated 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

[[Page 27376]]

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 estimated 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 
estimated 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 the 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 requested a comment on the estimated and potential costs and 
impacts of this proposal.
    We summarize and respond to public comments received on the 
verification process related to eligibility for insurance affordability 
programs (Sec.  155.320) below.
    HHS wishes to note that since the publication of the proposed rule, 
three States have transitioned from having State Exchanges using the 
Federal eligibility and enrollment platform to operating as State 
Exchanges that operate their own eligibility and enrollment platform, 
therefore, we are revising our previous estimated cost and saving 
estimates. We revise the 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 $81 million for the 18 State Exchanges that operate their own 
eligibility and enrollment platform (operating in 17 States and the 
District of Columbia). We are still 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 $63 
million. The total annual cost to conduct sampling has been revised to 
$126 million for the 18 State Exchanges. Therefore, the total annual 
cost for the Exchanges using the Federal platform and the 18 State 
Exchanges that operate their own eligibility and enrollment platform 
has been revised to $134 million in 2023 and onward. Finally, we 
revised the estimated cost to conduct research for Exchanges using the 
Federal platform to be approximately $295,000 and for the 18 State 
Exchanges that operate their own eligibility and enrollment platform to 
be approximately $5.3 million.
    Comment: While not directly related to the cost estimates, one 
commenter expressed concern with the proposed risk-based approach for 
designing and developing processes for employer sponsored coverage 
verification as it could lead to increased APTC/CSR improper payments. 
The commenter noted that the Congressional Budget Office estimated that 
approximately $83 billion will be spent on APTC/CSR in 2022. The 
commenter stated that based on HHS' own analysis that about two percent 
of consumers may have an incentive to enroll in Exchange coverage 
rather than coverage offered through an employer, this could result in 
about $1.7 billion in APTC/CSR payments, which is larger than HHS' 
estimates to operationalize the random sampling requirement.
    Response: HHS disagrees with the commenter's estimate because there 
are many other factors to take into consideration when estimating 
potential inappropriate payments of APTC/CSR, such as the average 
number of months an enrollee would have received APTC/CSR after HHS 
took action to end APTC/CSR. HHS believes using a flat estimate based 
on CBO projections, which doesn't take these factors into 
consideration, is misleading.
    After reviewing the public comments, we are finalizing as proposed.
7. Proration of Advance Premium Tax Credit and Premium (Sec. Sec.  
155.240(e), 155.305(f)(5), and 155.340)
    HHS proposed 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 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, using a 
specified methodology. This method of administering APTC would reduce 
instances of payments of APTC in excess of an applicable taxpayer's 
monthly PTC eligibility for a month in which an enrollee is enrolled in 
multiple policies within a month, each lasting less than the full 
calendar month, and thus would protect the applicable taxpayer from 
incurring income tax liability due to excess APTC.
    HHS noted that this would benefit both issuers and enrollees by 
reducing instances of APTC over-payment and eliminating wasted 
resources dedicated to resolving over-payment issues. While the FFEs 
and SBE-FPs already prorate APTC and premium amounts, some State 
Exchanges do not currently prorate consistently the amount of applied 
APTC administered to issuers in their applicable States.
    HHS acknowledged that those State Exchanges that do not currently 
prorate APTC or premium amounts would be financially impacted by the 
proposed requirement to implement this methodology, and this proposal 
would likely require operational systems

[[Page 27377]]

builds to support this new proration requirement.
    Based on historical cost data for State Exchanges 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 estimated 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 anticipated that each affected State 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 estimated that 8 State Exchanges currently prorate premium 
amounts but do not prorate APTC amounts. HHS anticipated that those 
State Exchanges which already prorate premium amounts would have the 
operational and systems capacity to calculate the prorated premium and 
APTC amounts as required in the proposed policy.
    Currently, State Exchanges vary in their approaches to implementing 
the proposed APTC and premium proration. In order to provide an upper 
bound estimate of this proposal's burden, HHS assumed that 10 State 
Exchanges, including State Exchanges that newly transitioned to being 
State Exchanges by the time of this rulemaking, would incur the highest 
level of implementation cost detailed earlier in this final 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 sought comment on the estimated costs and 
benefits described in this section.
    We summarize and respond to public comments received on the 
proration of APTC and premium (Sec. Sec.  155.240(e), 155.305(f)(5), 
and 155.340) below.
    Comment: We received several comments on the estimated costs for a 
State Exchange to implement the proposed APTC and premium proration 
methodology. A few commenters stated that the estimated one-time 
implementation cost of $1 million dollars per State Exchange was 
unreasonably burdensome, particularly considering competing 
programmatic demands and the ongoing COVID-19 PHE. Another commenter 
noted that HHS severely underestimated the implementation cost and 
estimated that it would cost approximately four times the burden 
estimate detailed in the proposed rule to implement the proposed 
proration methodology within their Exchange.
    Response: HHS appreciates the comments on the estimated burden 
associated with the proposed policy. The estimates in the proposed rule 
were made using the best available information that HHS could access, 
and the comments received helped to clarify the impact that the 
proposed policy could have State Exchanges. In an effort to be 
responsive to comments regarding implementation costs, HHS is 
finalizing this policy with modifications that will significantly 
reduce the burden on State Exchanges. We are not finalizing the 
requirement to prorate premium or APTC amounts for State Exchanges. 
Rather, we are finalizing a requirement that, beginning in PY 2024, 
State Exchanges must implement a methodology to ensure that APTC 
calculations do not cause an enrollee's total monthly APTC amount from 
exceeding their PTC, in compliance with HHS and IRS regulations. 
Further, State Exchanges must prospectively report to HHS through 
existing State Exchange oversight mechanisms the methodology the State 
intends to use in PY 2024.
    While many State Exchanges already have a methodology that meets 
the requirement of preventing an enrollee's monthly APTC amount from 
exceeding their monthly PTC eligibility, we note that some States will 
likely require operational IT systems changes to implement a compliant 
methodology. HHS estimates that 8 State Exchanges will require some 
form of operational investment to comply with this policy. The cost of 
a systems builds may vary among State Exchanges depending on their 
elected methodology, but we estimate $500,000 in one-time contact labor 
cost per State Exchange. This cost estimate is lower than that in the 
proposed rule to reflect that State Exchanges will have the flexibility 
to implement any methodology that ensures an enrollee's monthly APTC 
does not exceed their PTC eligibility. We estimate that the one-time 
financial impact of this requirement to be approximately $500,000 for 8 
State Exchanges, or $4 million in PY 2024.
    The burden to report this information to HHS will be negligible, as 
State Exchanges will use existing oversight mechanisms. This reporting 
requirement will be included within the reporting requirements 
described at Sec.  155.1200(b)(2) and the information collected will be 
addressed by the State Based Marketplace Annual Report Tool (SMART) PRA 
(OMB Control Number 0938-1244) which we explain earlier in the ICR 
section of this rule.
    After reviewing the public comments, we are finalizing with 
modifications.
10. Special Enrollment Periods--Special Enrollment Period Verification 
(Sec.  155.420)
    We proposed to amend Sec.  155.420 to add a 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 did 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 anticipated 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 (or 20 percent) 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

[[Page 27378]]

the Exchanges on the Federal platform, but State Exchanges will not be 
required to align with the Exchanges on the Federal platform.
    We did not anticipate that this would increase administrative costs 
on QHP issuers. Additionally, our data suggest 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 sought comment on the potential costs, benefits, and transfers 
associated with this proposal.
    We did not receive any comments specific to the potential costs, 
benefits, and transfers associated with this provision. Therefore, we 
are finalizing these provisions as proposed.
11. General Program Integrity and Oversight Requirements (Sec.  
155.1200)
    As explained earlier in this preamble, we are not finalizing this 
provision related to general program integrity and oversight 
requirements at this time. We estimated 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 anticipated 
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 the benefit year 2024. The total cost annual 
reduction across 18 State Exchanges would be approximately 
$1,631,243.16.
    We sought comment on the potential costs, benefits, and transfers 
associated with this provision.
    Comment: A few commenters expressed general concern regarding the 
estimated burden reduction associated with this proposal.
    Response: We address these comments in the General Program 
Integrity and Oversight 155.1200 preamble discussion earlier in this 
rule. Based on public comments received, we are not finalizing this 
provision at this time.
12. State Exchange Improper Payment Measurement Program (Sec. Sec.  
155.1500 Through 155.1540)
    As we explained earlier in section III. of the preamble, HHS is not 
finalizing the regulations we proposed to govern implementation of the 
SEIPM program could have the direct effect of reducing improper 
payments. We sought comment on the estimated costs and benefits and 
potential transfers associated with these provisions but did not 
receive any responsive comments.
13. FFE and SBE-FP User Fees (Sec.  156.50)
    We are finalizing an FFE user fee rate of 2.75 percent of monthly 
premiums charged by the FFE issuer 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.\394\ We are finalizing an SBE-FP user fee rate 
of 2.25 percent of monthly premiums charged by the SBE-FP issuer 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.\395\ 
Therefore, we do not believe that these user fee rates will have any 
additional impact on premiums compared to the 2022 benefit year. We 
also finalize an amendment to 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.\396\ We do not expect that it will have 
any additional regulatory impact
---------------------------------------------------------------------------

    \394\ 86 FR 53412, 53445.
    \395\ Ibid.
    \396\ Ibid.
---------------------------------------------------------------------------

    We sought comment on the potential costs, benefits, and transfers 
associated with this provision. We did not receive any comments 
specific to 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 proposed 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, any such burden experienced by States would be minimal.\397\ 
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 final rule.
---------------------------------------------------------------------------

    \397\ 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 noted 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 sought comment on the potential costs, benefits, and transfers 
associated with this provision.
    After reviewing the public comments, we are finalizing repeal of 
the annual reporting policy at Sec.  156.111(d) and (f), including 
revising the section heading to Sec.  156.111 to instead read, ``State 
selection of EHB-benchmark plan for PYs beginning on or after January 
1, 2020.''
    We summarize and respond to public comments received repealing the 
annual reporting of State-required benefits below.

[[Page 27379]]

    Comment: Many commenters supported the repeal of the annual 
reporting policy and noted that the policy is an unnecessary new 
administrative burden on States without adequate justification. One 
commenter explained that the reporting structure would have required 
State officials to either procure consultants or divert existing staff 
from other work to comply with an entirely new reporting process. 
Commenters stated that the elimination of this reporting requirement 
would remove a needless administrative burden while maintaining States' 
responsibility to comply with the defrayal rule.
    Other commenters objected to the repeal of the annual reporting 
policy and challenged the claims that the policy was overly burdensome. 
Such commenters noted that States should already have determined the 
status and cost of State-required benefits and that the reporting 
requirement should not place a burden on States of conducting new 
analyses. Commenters further noted that, after the initial reporting 
cycle, the administrative burden on States would be even more minimal.
    Response: We maintain that the annual reporting policy would have 
imposed a minimal burden on States as the information that States would 
have been required to report to HHS should already be readily 
accessible to States, as every State should already be identifying 
which State-required benefits are in addition to EHB and should be 
defraying any such costs. States should already have ready access to 
the information the annual reports would have required as States should 
already have in place a process for tracking and analyzing State-
required benefits. However, even if the State burden would have been 
minimal, we still believe that taking a more targeted approach of 
engaging with individual States on questions of compliance with the 
defrayal requirement will yield similar results to the annual reporting 
policy without requiring all States, including even compliant States, 
to expend additional time and resources submitting a report with this 
detailed information.
15. Levels of Coverage (Actuarial Value) (Sec.  156.140, 156.200, 
156.400)
    We proposed 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 proposed 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 proposed 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 (82 FR 18346), 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 long 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.
    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 an 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 an 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 22.
[GRAPHIC] [TIFF OMITTED] TR06MY22.022

    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.\398\ 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

[[Page 27380]]

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

    \398\ There are no enrollees in bronze plans below 58% AV.
---------------------------------------------------------------------------

    We estimated 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 stated that 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 stated that 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.\399\ 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 estimated silver plans with an AV 
below 70 percent will see premiums increase by approximately 2 percent 
on average due to more generous benefits. We stated that we do not 
believe this would have a significant impact on the number of employers 
willing to offer ICHRAs or whether an ICHRA is considered affordable to 
most employees, but we invited comments to refute or refine this 
understanding on these issues in particular.
---------------------------------------------------------------------------

    \399\ See section 4980H of the Code; 26 CFR 54.4980H-1-26 CFR 
54.4980H-6.
---------------------------------------------------------------------------

    We sought comment on the estimated costs, benefits, and transfers 
associated with this provision. However, we did not receive comments 
that specifically addressed the accuracy of the burden estimates 
included in the proposed rule; instead, the comments received addressed 
the merits of the proposal itself, which we have addressed in the 
preamble. Thus, we are finalizing these burden estimates as proposed.
16. Standardized Plan Options (Sec.  156.201)
    Section 156.201 finalizes the provision to require QHP issuers to 
offer standardized QHP options. Though these requirements necessitate 
the creation of new plans, HHS explained that it 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 a majority of plans that issuers 
currently offer and because HHS designed the cost-sharing parameters, 
MOOPs, and deductibles for these new plans. Additionally, HHS designed 
these standardized plan options to resemble the most popular QHPs in 
the individual market FFEs and SBE-FPs in PY 2021, making these 
standardized plan options comparable to plans that the majority of 
issuers already offer. Furthermore, since HHS is requiring QHP issuers 
to offer standardized plan options at every product network type, at 
every metal level, and throughout every service area 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 are not required to extend plan offerings 
beyond their existing service areas.
    Additionally, since HHS did not finalize any provision to limit the 
number of non-standardized QHP options that issuers can offer in PY 
2023, HHS explained that it believes the majority of enrollees will 
remain enrolled in their current non-standardized plan options. 
Moreover, since HHS did not finalize any provisions 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 explained that it does not expect the total 
number of plans that issuers are offering to change substantially 
subsequent to the imposition of the requirement. Thus, though these new 
plans will have to be submitted for approval, certification, and 
display, we expected 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 non-standardized offerings.
    As noted earlier in the preamble, HHS noted that it is resuming the 
differential display of standardized plan options per the existing 
authority at Sec.  155.205(b)(1). HHS is assuming burden for the 
differential display of standardized plan options on HealthCare.gov, 
meaning FFE and SBE-FP issuers are not subject to this burden.
    In addition, as noted in the preamble, HHS noted that it is 
resuming enforcement of the standardized plan option 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 explained 
that it 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 is 
allowing these entities to submit requests to deviate from the manner 
in which standardized plan options are differentially displayed on 
HealthCare.gov, the potential burden for these for these entities is 
further reduced. HHS also noted that it intends to provide access to 
information on standardized plan options to web-brokers through the 
Health Insurance Marketplace PUFs and QHP Landscape file to further 
minimize the 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 sought comment on the potential costs, benefits, and transfers 
associated with this provision. We did not receive any comments 
specific to the potential costs, benefits, and transfers associated 
with this provision. We are finalizing these burden estimates as 
proposed.

[[Page 27381]]

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 final rule, HHS is finalizing that for PY 2023 and 
future PYs that all QHPs or QHP candidates that use a provider network 
must comply with network adequacy standards.
    HHS finalized the proposal 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. HHS finalized 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 will be calculated at the county level using 
information from the ECP/NA template. HHS also proposed to adopt 
appointment wait time standards to assess whether FFE QHPs or QHP 
candidates fulfill network adequacy standards. HHS will begin 
implementation of reviews for appointment wait time standards in PY 
2024. 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 did not finalize the proposal 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.
    Finally, HHS finalized the proposal 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 the 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 sought comment on the potential costs, benefits, and transfers 
associated with this provision. We did not receive any comments 
specific to 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 noted 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 
believed 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 expected that administrative cost changes would likely be 
minimal for most issuers.
    HHS proposed 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 sought comment on the potential costs, benefits, and transfers 
associated with this provision. We did not receive any comments 
specific to the potential costs, benefits, and transfers associated 
with this provision.
19. Standards for Delegated and Downstream Entities (Sec.  156.340)
    In this final rule, we are finalizing the proposal to amend and add 
language to Sec.  156.340, to extend its applicability to QHP issuers 
on all Exchange models. We are finalizing changes to 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 is also finalizing the proposal 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 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 are also finalizing 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 anticipated these policies 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. 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

[[Page 27382]]

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 sought comment on the potential costs, benefits, and transfers 
associated with this provision.
    After reviewing the public comments and the general nature of the 
assertions that are unsupported by data, HHS will finalize our burden 
estimate and implementation date as proposed.
    We summarize and respond to public comments received for standards 
for delegated and downstream entities.
    Comment: A few commenters expressed concern that the addition of 
contract language proposed in paragraph (b)(5) would place a burden on 
downstream and delegated entities. Other commenters supported the 
benefits the proposed language in paragraph (b)(5) would confer by 
clarifying Sec.  156.340 and its applicability.
    Response: As acknowledged in our analysis, we anticipate this 
policy change will impose a minimal burden (that is, a limited 
additional burden). For example, some QHP issuers in State Exchanges 
may need to make changes to existing record retention policies and 
their agreements with delegated and downstream entities. Relatedly, 
some delegated and downstream entities may need to revise their record 
retention policies. However, we believe such changes will be relatively 
easy to make and implement (for example, changing a record retention 
policy and related agreements to retain records for 10 years instead of 
7 years). We note that none of the commenters provided any data or 
specificity concerning the actual burdens, costs, or transfers they 
expected the changes to impose. We believe our analysis accounts for 
all burden.
20. Payment for Cost-Sharing Reductions (Sec.  156.430)
    We are amending 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 
an appropriation to make CSR payments and voluntary for all other 
issuers. In the event HHS has not made CSR payments to issuers 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 did not expect any of these provisions to 
increase the burden on issuers, as this amendment would codify existing 
practices.
    We sought comment on any potential costs, benefits, and transfers 
associated with this provision. We did not receive any comments 
specific to the potential costs, benefits, and transfers associated 
with this provision.
21. Quality Improvement Strategy (Sec.  156.1130)
    We proposed 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 did not propose any changes to the regulatory text. We did not 
estimate additional costs or burdens as a result of this proposal.
    We sought comment on any potential costs, benefits, and transfers 
associated with this proposal. We did not receive any comments specific 
to the potential costs, benefits, and transfers associated with this 
provision.
22. Medical Loss Ratio (Sec. Sec.  158.140, 158.150, 158.170)
    We are finalizing the proposal 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 are also finalizing the proposal 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. The 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 estimated 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 2019, 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 are also finalizing the proposal 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,\400\ and thus deleted in part 2 of the 2022 Payment Notice 
final rule.\401\ We did not anticipate any impact on rebates or 
premiums as a result of this change.
---------------------------------------------------------------------------

    \400\ 523 F. Supp. 3d 731 (D. Md. 2021).
    \401\ 86 FR 24261.
---------------------------------------------------------------------------

    We sought comment on any potential costs, benefits, and transfers 
associated with this provision. We did not receive any comments 
specific to the potential costs, benefits, and transfers associated 
with this provision.

D. Regulatory Alternatives Considered

    In developing the policies contained in this final rule, we 
considered numerous alternatives to the presented proposals. Below we 
discuss the key regulatory alternatives that we considered.
    As described in prior rulemakings and the 2021 RA Technical Paper, 
we considered a variety of alternatives to

[[Page 27383]]

the proposed model specifications and updated enrollment duration 
factors for the HHS risk adjustment models.\402\ 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,\403\ 
we found that non-linear model specifications often failed to converge. 
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 aforementioned HCC 
counts terms approach posed gaming concerns, which would violate 
principle six of the HHS-operated risk adjustment program by rewarding 
coding proliferation.
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    \402\ 85 FR 78572 at 78583-78586; See the 2021 HHS-Operated Risk 
Adjustment Technical Paper on Possible Model Changes. (2021, October 
26). CMS. https://www.cms.gov/files/document/2021-ra-technical-paper.pdf.
    \403\ Ibid.
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    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 of the proposed rule (87 FR 584, 620) (shown in Table 1 of this 
rule). We chose the list of HCCs in Table 3 of the proposed rule (shown 
in Table 1 of this rule) 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 
overall predictive accuracy.
    For the enrollment duration factors in the adult models, we are 
finalizing the replacement of the enrollment duration factors with 
monthly duration factors of up to 6 months for enrollees with HCCs. The 
purpose for changing the enrollment duration factors was to 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.\404\ 
We chose the 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.\405\
---------------------------------------------------------------------------

    \404\ See, for example, 85 FR 78572 at 78585-78586 and Sections 
3.3.1 and 3.3.2, 2021 HHS-Operated Risk Adjustment Technical Paper 
on Possible Model Changes. (2021, October 26). CMS. https://www.cms.gov/files/document/2021-ra-technical-paper.pdf.
    \405\ As detailed above, these new factors, which we are 
finalizing as proposed, will only apply to partial-year adult 
enrollees with up to 6 months of enrollment and at least one payment 
HCC.
---------------------------------------------------------------------------

    With respect to the changes to the recalibration of the RXC 
mappings for the adult risk adjustment models, we considered using the 
latest RXC mapping document available at the time that we recalibrate 
the adult risk adjustment models and applying it to all three 
underlying EDGE data years used to recalibrate the models for the 
benefit year. We chose the approach of recalibrating the adult risk 
adjustment models using each final, Q4 RXC mapping document that was 
developed using the benefit year of data corresponding to that benefit 
year. We believe that the benefits of this approach, which include 
limiting the volatility of some coefficients from year-to-year, 
ensuring that we are capturing the utilization and costs observed for 
the underlying drugs in use during the data year, and improving 
issuers' ability to plan for downstream implications of changes to RXC 
mapping, outweigh the benefits of the alternative approach of using the 
latest RXC mapping available at the time of recalibration, which would 
more closely align costs between recalibration data and current benefit 
year data.
    With respect to the 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 \406\ 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. Therefore, we also 
considered whether to adopt a complete repeal of the flexibility to 
request reductions risk adjustment State transfers.
---------------------------------------------------------------------------

    \406\ Executive Order 14009; 86 FR 7793 (2021, February 2).
---------------------------------------------------------------------------

    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 believed 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 believed the 
proposed change would protect the integrity of the

[[Page 27384]]

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 
before which they may not be eligible, 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 final 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 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 plan options, we considered a range of 
options for the proposed policy approach at Sec.  156.201. On one end 
of this range, we considered resuming standardized plan options as 
reflected in the 2017 and 2018 Payment Notices. This approach would 
have allowed issuers to voluntarily offer standardized plan 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 plan options per 
issuer, product network type, metal level, and service area over the 
course of several PYs. We also considered preferentially displaying 
standardized plan options over non-standardized plan options. We also 
considered requiring issuers to offer exclusively standardized plan 
options in FFEs and SBE-FPs. We explained that we believe that the 
approach we have chosen for standardized plan options in which we 
finalized the provision to require issuers to offer standardized plan 
options but did not finalize any provision 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 plan options.
    For the 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.\407\ Under this alternative, HHS would assume 
responsibility for prorating the amount of APTC due to each State 
Exchange based on the methodology HHS proposed 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' Form 1095-

[[Page 27385]]

A. HHS expected 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 sought 
comment on the alternative proposals considered.
---------------------------------------------------------------------------

    \407\ 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 proposed 2024 benefit year 
implementation and request comments on the feasibility of 2023 benefit 
year implementation.
    We did not receive any comments in response to the proposals in our 
general discussion regarding regulatory alternatives.

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 final rule, we finalize 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 believed that insurance firms offering comprehensive health 
insurance policies generally exceed the size thresholds for ``small 
entities'' established by the SBA, we did not believe that an initial 
regulatory flexibility analysis is required for such firms.
    We believed 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.\408\ We believed 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.\409\ 
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 final rule in part 
158. Therefore, we do not expect the MLR provisions finalized in this 
rule to affect a substantial number of small entities.
---------------------------------------------------------------------------

    \408\ Table of Size Standards. (2019, August 19). U.S. Small 
Business Administration. https://www.sba.gov/document/support--
table-size-standards.
    \409\ Medical Loss Ratio Data and System Resources. (2020). CMS. 
https://www.cms.gov/CCIIO/Resources/Data-Resources/mlr.html.
---------------------------------------------------------------------------

    The proposals related to SEIPM at Sec. Sec.  155.1500-155.1540 were 
proposed to affect only State Exchanges, and HHS is not finalizing 
these proposals at this time.
    In addition, section 1102(b) of the Social Security 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 604 of the RFA. For purposes of section 1102(b) of the Act, we 
define a small rural hospital as a hospital that is located outside of 
a metropolitan statistical area and has fewer than 100 beds. While this 
rule is not subject to section 1102 of the Act, we have determined that 
this final rule will not affect small rural hospitals. Therefore, the 
Secretary has determined that this final rule will not have a 
significant impact on the operations of a substantial number of small 
rural hospitals.

F. Unfunded Mandates

    Section 202 of the Unfunded Mandates Reform Act of 1995 (UMRA) 
requires that agencies assess anticipated costs and benefits and take 
certain other actions before issuing a 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 2022, that threshold is approximately $165 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 an 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 were elected previously to operate an Exchange, those 
States had

[[Page 27386]]

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 final rule will not impose substantial 
direct requirement costs on State and local governments, this 
regulation has federalism implications due to potential direct effects 
on the distribution of power and responsibilities among the State and 
Federal Governments relating to determining standards relating to 
health insurance that is offered in the individual and small group 
markets. For example, the repeal of the risk adjustment State 
flexibility policy (with an exception for prior participants) 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 believed this regulation has federalism 
implications due to the 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 
are not being finalized. Accordingly, E.O. 13132 does not apply to this 
section of the final rule.

H. Congressional Review Act

    This final rule is subject to the Congressional Review Act 
provisions of the Small Business Regulatory Enforcement Fairness Act of 
1996 (5 U.S.C. 801, et seq.), which specifies that before a rule can 
take effect, the Federal agency promulgating the rule shall submit to 
each House of the Congress and to the Comptroller General a report 
containing a copy of the rule along with other specified information, 
and has been transmitted to the Congress and the Comptroller for 
review. This final rule is a ``major rule'' as that term is defined in, 
because it is likely to result in an annual effect on the economy of 
$100 million or more.
    Chiquita Brooks-LaSure, Administrator of the Centers for Medicare & 
Medicaid Services, approved this document on April 26, 2022.

List of Subjects

45 CFR Part 144

    Health care, Health insurance, Reporting and recordkeeping 
requirements.

45 CFR Part 147

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

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, Aged, Brokers, 
Citizenship and naturalization, Civil rights, Conflict of interests, 
Consumer protection, Grant programs-health, Grants administration, 
Health care, Health insurance, Health maintenance organizations (HMO), 
Health records, Hospitals, Indians, Individuals with disabilities, 
Intergovernmental relations, Loan programs-health, Medicaid, 
Organization and functions (Government agencies), Public assistance 
programs, Reporting and recordkeeping requirements, Sex discrimination, 
State and local governments, Taxes, Technical assistance, Women, 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 amends 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. Redesignating paragraph (i) as paragraph (j); and
0
b. Adding a new paragraph (i).
    The addition reads as follows:


Sec.  147.104  Guaranteed availability of coverage.

* * * * *
    (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.
* * * * *

[[Page 27387]]

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 market risk pool 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 market risk pool 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 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 
and risk adjustment data validation adjustments; 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 Corridors 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.

[[Page 27388]]

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.  155.206  [Amended]

0
10. 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
11. 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. Revising paragraph (j)(2)(ii);
0
d. In paragraph (j)(2)(iv), 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
e. 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 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) Entering only 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 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 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 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
    (2) The email address may not have domains that belong to the 
agent, broker, or web-broker or their business or agency.
    (B) Entering only 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 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) Entering only 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 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), entering only 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 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
12. Amend Sec.  155.305 by revising paragraphs (f)(1)(i) and (5) to 
read as follows:

[[Page 27389]]

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
* * * * *
    (5) Calculation of advance payments of the premium tax credit. The 
Exchange must calculate advance payments of the premium tax credit in 
accordance with 26 CFR 1.36B-3 and Sec.  155.340(i) of this subpart.
* * * * *

0
13. 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 newly redesignated paragraph (d)(4)(i)(E); 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 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. For purposes of this paragraph (d)(4), the Exchange 
reasonably expects to obtain sufficient verification data for the 
benefit year when 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) The Exchange must provide notice to the applicant 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;
* * * * *
    (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
14. 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 with 2024 and beyond, when an 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--
    (i) In an Exchange using the Federal eligibility and enrollment 
platform, the amount of the advance payment of the premium tax credit 
paid to the issuer of the policy must equal the product of--
    (A) 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
    (B) 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.
    (ii) [Reserved]
    (2) For plan years beginning with 2024 and beyond, a State Exchange 
operating its own platform will be required to calculate advance 
payments of the premium tax credit in accordance with a methodology 
that does not cause the amount of advance payments of the premium tax 
credit applied to an enrollee's monthly premium to exceed their 
expected monthly premium assistance credit amount when 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, and to prospectively report 
the methodology it intends to implement in the subsequent plan year to 
HHS under Sec.  155.1200(b)(2).

0
15. 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 
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 consistent with the non-discrimination 
requirements under Sec.  155.120(c). 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.

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

0
16. 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
17. 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

[[Page 27390]]

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 29 CFR 
2590.715-2713A(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
18. 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:


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 of the year 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 of the year 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 of the year that is 2 years before the effective date 
of the new EHB-benchmark plan. These must include:
* * * * *

0
19. 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
20. 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 benefit 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. Beginning on the earlier of January 1, 2023 (the 
start of the 2023 plan year) or upon renewal of any plan subject to 
this rule, a non-discriminatory benefit design that provides EHB is one 
that is clinically-based.
* * * * *

0
21. 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

[[Page 27391]]

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
22. Amend Sec.  156.200 by revising paragraph (b)(3) to 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
23. Add Sec.  156.201 to read as follows:


Sec.  156.201  Standardized plan options.

    For the 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 plan options under State action taking place on or before 
January 1, 2020, must offer in the individual market 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, at every 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
24. Amend Sec.  156.230 by revising paragraph (a) to read as follows:


Sec.  156.230  Network adequacy standards.

    (a) General requirement. (1) Each QHP issuer that uses a provider 
network must ensure that the provider network consisting of in-network 
providers, 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 use disorder 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. A QHP issuer on a Federally-facilitated Exchange 
must comply with the requirement in paragraph (a)(1)(ii) of this 
section by:
    (A) For plan years beginning on or after January 1, 2023, 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. 
Quantitative reviews of compliance with time and distance standards 
will be conducted using issuer-submitted data; and
    (B) For plan years beginning on or after January 1, 2024, 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 Exchanges 
does not satisfy the network adequacy standards described in paragraphs 
(a)(2)(i)(A) and (B) of this section, the issuer must include it 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 paragraphs (a)(2)(i)(A) and (B) 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
25. Amend Sec.  156.235 by revising paragraphs (a)(2)(i), 
(a)(2)(ii)(B), 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
    (ii) * * *
    (B) At least one ECP in each of the six (6) ECP categories in each 
county in the service area, where an ECP in that category is available 
and provides medical or dental services that are covered by the issuer 
plan type. The ECP categories are: Federally Qualified Health Centers, 
Ryan White Program Providers, Family Planning Providers, Indian Health 
Care Providers, Inpatient Hospitals, and Other ECP Providers. The Other 
ECP Providers category includes the following types of providers: 
Substance Use Disorder Treatment Centers, Community Mental Health 
Centers, Rural Health Clinics, Black Lung Clinics, Hemophilia Treatment 
Centers, Sexually Transmitted Disease Clinics, and Tuberculosis 
Clinics.
* * * * *
    (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

[[Page 27392]]

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
26. Revise the subpart D heading to read as set forth above.

0
27. 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 paragraphs (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 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 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 an 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 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
28. 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 and +1 percentage point allowable AV variation.
* * * * *

0
29. 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
* * * * *

[[Page 27393]]

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

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

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

0
31. 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
32. 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
33. 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: April 28, 2022.
Xavier Becerra,
Secretary, Department of Health and Human Services.
[FR Doc. 2022-09438 Filed 5-2-22; 4:15 pm]
BILLING CODE 4120-01-P