[Federal Register Volume 89, Number 73 (Monday, April 15, 2024)]
[Rules and Regulations]
[Pages 26218-26426]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-07274]



[[Page 26217]]

Vol. 89

Monday,

No. 73

April 15, 2024

Part II





Department of the Treasury





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





31 CFR Part 33





Department of Health and Human Services





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





Centers for Medicare & Medicaid Services





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

42 CFR Part 600

45 CFR Parts 153, 155, and 156





Patient Protection and Affordable Care Act, HHS Notice of Benefit and 
Payment Parameters for 2025; Updating Section 1332 Waiver Public Notice 
Procedures; Medicaid; Consumer Operated and Oriented Plan (CO-OP) 
Program; and Basic Health Program; Final Rule

  Federal Register / Vol. 89, No. 73 / Monday, April 15, 2024 / Rules 
and Regulations  

[[Page 26218]]


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

DEPARTMENT OF THE TREASURY

31 CFR Part 33

DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

42 CFR Part 600

Office of the Secretary

45 CFR Parts 153, 155, and 156

[CMS-9895-F]
RIN 0938-AV22


Patient Protection and Affordable Care Act, HHS Notice of Benefit 
and Payment Parameters for 2025; Updating Section 1332 Waiver Public 
Notice Procedures; Medicaid; Consumer Operated and Oriented Plan (CO-
OP) Program; and Basic Health Program

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

ACTION: Final rule.

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

SUMMARY: This final rule includes payment parameters and provisions 
related to the HHS-operated risk adjustment program, as well as 2025 
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 the auto re-enrollment hierarchy; 
essential health benefits; failure to file Federal income taxes to 
reconcile advance payments of the premium tax credit (APTC); non-
standardized plan option limits in the FFEs and SBE-FPs and a related 
exceptions process; standardized plan options in the FFEs and SBE-FPs; 
special enrollment periods (SEPs); direct enrollment (DE) entities 
supporting Exchange applications and enrollments; the Insurance 
Affordability Program enrollment eligibility verification process; 
requirements for agents, brokers, web-brokers, and DE entities 
assisting Exchange consumers; network adequacy; public notice 
procedures for section 1332 waivers; prescription drug benefits; 
updates to the Consumer Operated and Oriented Plan (CO-OP) Program; and 
State flexibility on the effective date of coverage in the Basic Health 
Program (BHP).

DATES: These regulations are effective on June 4, 2024.

FOR FURTHER INFORMATION CONTACT: Jeff Wu, (301) 492-4305, Rogelyn 
McLean, (301) 492-4229, Grace Bristol, (410) 786-8437, for general 
information.
    Debbie Noymer, (301) 448-3755, and John Barfield, (301) 492-4433 
for matters related to HHS-operated risk adjustment.
    John Barfield, (301) 492-4433, or Aaron Franz, (410) 786-8027, for 
matters related to user fees.
    Brian Gubin, (410) 786-1659, for matters related to agent, broker, 
and web-broker guidelines.
    Marisa Beatley, (301) 492-4307, for matters related to the 
verification process related to eligibility for insurance affordability 
programs and current sources of income.
    Carolyn Kraemer, (301) 492-4197, for matters related to auto re-
enrollment in the Exchanges.
    Zarin Ahmed, (301) 492-4400, for matters related to enrollment of 
qualified individuals into QHPs and termination of Exchange enrollment 
or coverage for qualified individuals.
    Claire Curtin, (301) 492-4400, for matters related to the monthly 
150 percent Federal poverty level special enrollment period.
    Alexandra Gribbin, (667) 290-9977, for matters related to dental 
coverage.
    Nikolas Berkobien, (667) 290-9903, for matters related to 
standardized plan options and non-standardized plan option limits.
    LeAnn Brodhead, (667) 290-8805, for matters related to the 
essential health benefits prescription drug benefit.
    Carolyn Sabini, (667) 290-9750, for matters related to the 
essential health benefits benchmark plan policy.
    Ken Buerger, (410) 786-1190, for matters related to mandates in 
addition to the essential health benefits.
    Emily Martin, (301) 492-4423, Deborah Hunter, (443) 386-3651, or 
Emma Vasilak, (774) 551-6157, for matters related to establishment of 
Exchange network adequacy standards and ECPs.
    Shilpa Gogna, (301) 492-4257, or Jenny Chen, (301) 492-5156, for 
matters related to approval of a State Exchange and State Exchange 
Blueprint requirements.
    Joe Fitzpatrick, (410) 786-2761, for matters related to 
establishment of additional minimum standards for Exchange call center 
operations.
    John Allison, (828) 513-1323, for matters related to Exchange 
operation of a centralized eligibility and enrollment platform.
    Courtney De La Mater, (301) 492-4400, for matters related to the 
Failure to Reconcile process.
    Robert Yates, (301) 492-5151, for matters related to State Exchange 
annual open enrollment periods.
    Daniel Rosinsky-Larsson, (301) 492-4400, for matters related to SEP 
effective dates of coverage.
    Lina Rashid, (443) 902-2823, or Kimberly Koch (202) 381-6934, for 
matters related to section 1332 waivers.
    Jacquelyn Rudich, (301) 492-5211, for matters related to netting of 
payments.
    Kevin Kendrick, (301) 509-6612, for matters related to the CO-OP 
program.
    Carrie Grubert, (410) 786-8319, for matters related to the Basic 
Health Program (BHP) provision.
    Gene Coffey, (410) 786-2234, for matters related to Medicaid 
eligibility.
    Arshdeep Dhanoa, (301) 492-4400, for matters related to 
incarceration verification for QHP eligibility and periodic data 
matching for dual and deceased enrollees.

SUPPLEMENTARY INFORMATION:

Table of Contents

I. Executive Summary
II. Background
    A. Legislative and Regulatory Overview
    B. Summary of Major Provisions
III. Summary of the Provisions of the Proposed Regulations
    A. 31 CFR Part 33 and 45 CFR part 155--Section 1332 Waivers
    B. 42 CFR Parts 435 and 600--Medicaid Eligibility for the 
States, District of Columbia, the Northern Mariana Islands and 
American Samoa, and Administrative Practice and Procedure, Health 
Care, Health insurance, Intergovernmental Relations, Penalties, 
Reporting and Recordkeeping Requirements.
    C. 45 CFR Part 153--Standards Related to Reinsurance, Risk 
Corridors, and HHS Risk Adjustment
    D. 45 CFR Part 155--Exchange Establishment Standards and Other 
Related Standards under the Affordable Care Act
    E. 45 CFR Part 156--Health Insurance Issuer Standards Under the 
Affordable Care Act, Including Standards Related to Exchanges
IV. Collection of Information Requirements
    A. Wage Estimates
    B. ICRs Regarding Proposed Amendments to Normal Public Notice 
Requirements (31 CFR 33.112, 31 CFR 33.120 and 45 CFR part 155.1312, 
and 45 CFR 155.1320)
    C. ICRs Regarding Basic Health Program Regulations (42 CFR 
600.320)
    D. ICRs Regarding Election to Operate an Exchange After 2014 (45 
CFR 155.106)
    E. ICRs Regarding Adding and Amending Language To Ensure Web-
Brokers Operating in State Exchanges Meet Certain Requirements 
Applicable in the FFEs and SBE-FPs (45 CFR 155.220)

[[Page 26219]]

    F. ICRs Regarding Establishing Requirements for DE Entities 
Mandating HealthCare.gov Changes to Be Reflected on DE Entity Non-
Exchange Websites Within a Notice Period Set by HHS (45 CFR 
155.221(b)(6))
    G. ICRs Regarding Ensuing DE Entities Operating in State 
Exchanges Meet Certain Standards Applicable in the FFEs and SBE-FPs 
(45 CFR 155.221)
    H. ICRs Regarding Failure To File and Reconcile Process (45 CFR 
155.305(f)(4))
    I. ICRs Regarding Verification Process Related to Eligibility 
for Enrollment in a QHP Through the Exchange (45 CFR 155.315(e))
    J. ICRs Regarding Eligibility Redetermination During a Benefit 
Year (45 CFR 155.330(d))
    K. ICRs Regarding Establishment of Exchange Network Adequacy 
Standards (45 CFR 155.1050)
    L. ICRs Regarding the State Selection of EHB-Benchmark Plans for 
Plan Years Beginning on or After January 1, 2026 (45 CFR 156.111)
    M. ICRs Regarding Non-Standardized Plan Option Limits (45 CFR 
156.202)
    N. Summary of Annual Burden Estimates for Proposed Requirements
V. Response to Comments
VI. Regulatory Impact Analysis
    A. Statement of Need
    B. Overall Impact
    C. Impact Estimates of the Payment Notice Provisions and 
Accounting Table
    D. Regulatory Alternatives Considered
    E. Regulatory Flexibility Act (RFA)
    F. Unfunded Mandates Reform Act (UMRA)
    G. Federalism

I. Executive Summary

    We are finalizing changes to the provisions and parameters 
implemented through prior rulemaking to implement the Patient 
Protection and Affordable Care Act (ACA).\1\ These proposals are 
published under the authority granted to the Secretary by the ACA and 
the Public Health Service (PHS) Act.\2\ In this final rule, we are 
finalizing changes related to some of the ACA provisions and parameters 
we previously implemented and are implementing new provisions. Our goal 
with these requirements is to provide consumers access to quality, 
affordable coverage, while minimizing administrative burden and 
ensuring program integrity. The changes finalized in this rule are also 
intended to help increase transparency, advance health equity, and 
mitigate health disparities.
---------------------------------------------------------------------------

    \1\ The Patient Protection and Affordable Care Act (Pub. L. 111-
148) was enacted on March 23, 2010. The Health Care and Education 
Reconciliation Act of 2010 (Pub. L. 111-152), which amended and 
revised several provisions of the Patient Protection and Affordable 
Care Act, was enacted on March 30, 2010. In this rulemaking, the two 
statutes are referred to collectively as the ``Patient Protection 
and Affordable Care Act,'' ``Affordable Care Act,'' or ``ACA.''
    \2\ See sections 1311, 1312, 1313, 1321, 1332, and 1343 of the 
ACA and section 2792 of the PHS Act.
---------------------------------------------------------------------------

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 
(PHS) Act to establish various reforms to the group and individual 
health insurance markets.
    These provisions of the PHS Act were later augmented by other laws, 
including the ACA. Subtitles A and C of title I of the ACA reorganized, 
amended, and added to the provisions of part A of title XXVII of the 
PHS Act relating to group health plans and health insurance issuers in 
the group and individual markets. The term ``group health plan'' 
includes both insured and self-insured group health plans.
    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 1301(a)(1)(B) of the ACA directs all issuers of qualified 
health plans (QHPs) to cover the essential health benefit (EHB) package 
described in section 1302(a) of the ACA, including coverage of the 
services described in section 1302(b) of the ACA, adherence to the 
cost-sharing limits described in section 1302(c) of the ACA, and 
meeting the Actuarial Value (AV) levels established in section 1302(d) 
of the ACA. Section 2707(a) of the PHS Act, which is effective for plan 
or policy years beginning on or after January 1, 2014, extends the 
requirement to cover the EHB package to non-grandfathered individual 
and small group health insurance coverage, irrespective of whether such 
coverage is offered through an Exchange. In addition, section 2707(b) 
of the PHS Act directs non-grandfathered group health plans to ensure 
that cost sharing under the plan does not exceed the limitations 
described in section 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 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 establish 
that the Secretary must define EHB in a manner that: (1) reflects 
appropriate balance among the 10 categories; (2) is not designed in 
such a way as to discriminate based on age, disability, or expected 
length of life; (3) takes into account the health care needs of diverse 
segments of the population; and (4) does not allow denials of EHBs 
based on age, life expectancy, disability, degree of medical 
dependency, or quality of life.
    Section 1311(c) of the ACA provides the Secretary the authority to 
issue regulations to establish criteria for the certification of QHPs. 
Section 1311(c)(1)(B) of the ACA requires, among the criteria for 
certification that the Secretary must establish by regulation, that 
QHPs ensure a sufficient choice of providers. Section 1311(e)(1) of the 
ACA grants the Exchange the authority to certify a health plan as a QHP 
if the health plan meets the Secretary's requirements for certification 
issued under section 1311(c) of the ACA, and the Exchange determines 
that making the plan available through the Exchange is in the interests 
of qualified individuals and qualified employers in the State. Section 
1311(c)(6)(C) of the ACA directs the Secretary of HHS to require an 
Exchange to provide for special enrollment periods and section 
1311(c)(6)(D) of the ACA directs the Secretary of HHS to require an 
Exchange to provide for a monthly enrollment period for Indians, as 
defined by section 4 of the Indian Health Care Improvement Act.
    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

[[Page 26220]]

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 advance payments of the premium tax credit (APTC) and 
cost-sharing reductions (CSRs) for QHPs sold through an Exchange.
    Section 1312(f)(1)(B) of the ACA provides that an individual shall 
not be treated as a qualified individual for enrollment in a QHP if, at 
the time of enrollment, the individual is incarcerated, other than 
incarceration pending the disposition of charges.
    Sections 1313 and 1321 of the ACA provide the Secretary with the 
authority to oversee the financial integrity of State Exchanges, their 
compliance with HHS standards, and the efficient and non-discriminatory 
administration of State Exchange activities. Section 1313(a)(5)(A) of 
the ACA provides the Secretary with the authority to implement any 
measure or procedure that the Secretary determines is appropriate to 
reduce fraud and abuse in the administration of the Exchanges. Section 
1321 of the ACA provides for State flexibility in the operation and 
enforcement of Exchanges and related requirements.
    Section 1321(a) of the ACA provides broad authority for the 
Secretary to establish standards and regulations to implement the 
statutory requirements related to Exchanges, QHPs and other components 
of title I of the ACA, including such other requirements as the 
Secretary determines appropriate. When operating an FFE under section 
1321(c)(1) of the ACA, HHS has the authority under sections 1321(c)(1) 
and 1311(d)(5)(A) of the ACA to collect and spend user fees. Office of 
Management and Budget (OMB) Circular A-25 Revised establishes Federal 
policy regarding user fees and specifies that a user charge will be 
assessed against each identifiable recipient for special benefits 
derived from Federal activities beyond those received by the public.
    Section 1321(d) of the ACA provides that nothing in title I of the 
ACA must be construed to preempt any State law that does not prevent 
the application of title I of the ACA. Section 1311(k) of the ACA 
specifies that Exchanges may not establish rules that conflict with or 
prevent the application of regulations issued by the Secretary.
    Section 1322 of the ACA establishes the Consumer Operated and 
Oriented Plan (CO-OP) program, which is a loan program that funds the 
establishment of private, non-profit, consumer-operated, consumer-
oriented health plan issuers of QHPs. The ACA requires, among other 
requirements, that substantially all of a CO-OP's activities consist of 
issuing QHPs in the individual and small group markets, and that a CO-
OP be governed by a board of directors where a majority is elected by 
members covered by policies issued by the CO-OP.
    Section 1331 of the ACA provides States with the option to operate 
a Basic Health Program (BHP).
    Section 1332 of the ACA provides the Secretary of HHS and the 
Secretary of the Treasury (collectively, the Secretaries) with the 
discretion to approve a State's proposal to waive specific provisions 
of the ACA, provided the State's section 1332 waiver plan meets certain 
requirements. Section 1332(a)(4)(B) of the ACA requires the Secretaries 
to issue regulations regarding procedures for the application and 
approval of section 1332 waivers.
    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 charges collected from those issuers that attract 
lower-than-average risk populations, thereby reducing incentives for 
issuers to avoid higher-risk enrollees. Section 1343(b) of the ACA 
provides that the Secretary, in consultation with States, shall 
establish criteria and methods to be used in carrying out the risk 
adjustment activities under this section. Consistent with section 
1321(c) of the ACA, the Secretary is responsible for operating the HHS 
risk adjustment program in any State that fails to do so.\3\
---------------------------------------------------------------------------

    \3\ In the 2014 through 2016 benefit years, HHS operated the 
risk adjustment program in every State and the District of Columbia, 
except Massachusetts. Beginning with the 2017 benefit year, HHS has 
operated the risk adjustment program in all 50 States and the 
District of Columbia.
---------------------------------------------------------------------------

    Section 1401(a) of the ACA added section 36B to the Internal 
Revenue Code (the Code), which, among other things, requires that a 
taxpayer reconcile APTC for a year of coverage with the amount of the 
premium tax credit (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) of the ACA does not prescribe a specific 
verification procedure, in such manner as the Secretary determines 
appropriate.
    Section 1411(f) of the ACA requires the Secretary, in consultation 
with the Secretary of the Treasury and the Secretary of Homeland 
Security, and the Commissioner of Social Security, to establish 
procedures for hearing and making decisions governing appeals of 
Exchange eligibility determinations. Section 1411(f)(1)(B) of the ACA 
requires the Secretary to establish procedures to redetermine 
eligibility on a periodic basis, in appropriate circumstances, 
including eligibility to purchase a QHP through the Exchange and for 
APTC and CSRs.
    Section 1411(g) of the ACA allows the use of applicant information 
only for the limited purpose of, and to the extent necessary for 
ensuring 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 1413 of the ACA directs the Secretary to establish, subject 
to minimum requirements, a streamlined enrollment process for 
enrollment in QHPs and all insurance affordability programs.
    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. Notwithstanding that reduction, certain exemptions are still 
relevant to determine whether individuals aged 30 and above qualify to 
enroll in catastrophic coverage under Sec. Sec.  155.305(h) and 
156.155(a)(5).
    Section 1902(r)(2)(A) of the Social Security Act (the Act), which 
permits

[[Page 26221]]

States to apply less restrictive methodologies than cash assistance 
program methodologies in determining eligibility for certain 
eligibility groups.
1. Premium Stabilization Programs
    The premium stabilization programs refer to the HHS risk 
adjustment, risk corridors, and reinsurance programs established by the 
ACA.\4\ For past rulemaking, we refer readers to the following rules:
---------------------------------------------------------------------------

    \4\ See ACA section 1341 (transitional reinsurance program), ACA 
section 1342 (risk corridors program), and ACA section 1343 (HHS 
risk adjustment program).
---------------------------------------------------------------------------

     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 risk adjustment 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 to address 
how an enrollee's age for the risk score calculation would be 
determined under the HHS 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 
establish 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 HHS-operated 
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 establish 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 
establish 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 External Data Gathering Environment (EDGE) 
data.
     In the April 17, 2018 Federal Register (83 FR 16930) (2019 
Payment Notice), we finalized the benefit and payment parameters for 
the 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 error rate methodology 
for HHS-RADV adjustments to transfers.
     In the May 11, 2018 Federal Register (83 FR 21925), we 
published a correction to the 2019 HHS risk adjustment coefficients in 
the 2019 Payment Notice.
     On July 27, 2018, consistent with 45 CFR 153.320(b)(1)(i), 
we updated the 2019 benefit year final HHS risk adjustment model 
coefficients to reflect an additional recalibration related to an 
update to the 2016 enrollee-level EDGE data set.\5\
---------------------------------------------------------------------------

    \5\ CMS. (2018, July 27). Updated 2019 Benefit Year Final HHS 
Risk Adjustment Model Coefficients. https://www.cms.gov/CCIIO/Resources/Regulations-and-Guidance/Downloads/2019-Updtd-Final-HHS-RA-Model-Coefficients.pdf.
---------------------------------------------------------------------------

     In the July 30, 2018 Federal Register (83 FR 36456), we 
adopted the 2017 benefit year HHS risk adjustment methodology as 
established in the final rules published in the March 23, 2012 (77 FR 
17220 through 17252) and March 8, 2016 (81 FR 12204 through 12352) 
editions of the Federal Register. The final rule set forth an 
additional explanation of the rationale supporting the use of Statewide 
average premium in the State payment transfer formula for the 2017 
benefit year, including the reasons why the program is operated by HHS 
in a budget-neutral manner. The final rule also permitted HHS to resume 
2017 benefit year HHS 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.
     In the December 10, 2018 Federal Register (83 FR 63419), 
we adopted the 2018 benefit year HHS 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 State 
payment transfer formula for the 2018 benefit year, including the 
reasons why the program is operated by HHS 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 
the 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 HHS 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 Sec.  153.320(b)(1)(i), 
we published the 2021 Benefit Year Final HHS Risk Adjustment Model 
Coefficients on the CCIIO website.\6\
---------------------------------------------------------------------------

    \6\ CMS. (2020, May 12). Final 2021 Benefit Year Final HHS Risk 
Adjustment Model Coefficients. https://www.cms.gov/CCIIO/Resources/Regulations-and-Guidance/Downloads/Final-2021-Benefit-Year-Final-HHS-Risk-Adjustment-Model-Coefficients.pdf.
---------------------------------------------------------------------------

     In the May 14, 2020 Federal Register (85 FR 29164) (2021 
Payment Notice), we finalized the benefit and payment parameters for 
the 2021 benefit year, as well as adopted updates to the HHS risk 
adjustment models' hierarchical condition categories (HCCs) to 
transition to ICD-10 codes, approved the request from Alabama to reduce 
HHS risk adjustment transfers by 50 percent in the 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

[[Page 26222]]

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 HHS 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) (part 2 
of the 2022 Payment Notice), we finalized a subset of proposals from 
the 2022 Payment Notice proposed rule, including policy and regulatory 
revisions related to the HHS-operated risk adjustment program, 
finalization of the benefit and payment parameters for the 2022 benefit 
year, and approval of the request from Alabama to reduce HHS 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 HHS risk adjustment adult model 
coefficients.\7\
---------------------------------------------------------------------------

    \7\ See CMS. (2021, July 19). 2022 Benefit Year Final HHS Risk 
Adjustment Model Coefficients. https://www.cms.gov/files/document/updated-2022-benefit-year-final-hhs-risk-adjustment-model-coefficients-clean-version-508.pdf.
---------------------------------------------------------------------------

     In the May 6, 2022 Federal Register (87 FR 27208) (2023 
Payment Notice), we finalized revisions related to the HHS-operated 
risk adjustment program, including the benefit and payment parameters 
for the 2023 benefit year, HHS risk adjustment model recalibration, and 
policies related to the collection and extraction of enrollee-level 
EDGE data. We also finalized the adoption of the interacted HCC count 
specification for the adult and child models, along with modified 
enrollment duration factors for the adult model models, beginning with 
the 2023 benefit year.\8\ We also repealed the ability for States, 
other than prior participants, to request a reduction in HHS risk 
adjustment State transfers starting with the 2024 benefit year. In 
addition, we approved a 25 percent reduction to 2023 benefit year HHS 
risk adjustment transfers in Alabama's individual market and a 10 
percent reduction to 2023 benefit year HHS risk adjustment transfers in 
Alabama's small group market. We also finalized further refinements to 
the HHS-RADV error rate calculation methodology beginning with the 2021 
benefit year.
---------------------------------------------------------------------------

    \8\ On May 6, 2022, we also published the 2023 Benefit Year 
Final HHS Risk Adjustment Model Coefficients at https://www.cms.gov/files/document/2023-benefit-year-final-hhs-risk-adjustment-model-coefficients.pdf.
---------------------------------------------------------------------------

     In the April 27, 2023 Federal Register (88 FR 25740) (2024 
Payment Notice), we finalized the benefit and payment parameters for 
the 2024 benefit year, amended the EDGE discrepancy materiality 
threshold and data collection requirements, and reduced the risk 
adjustment user fee. For the 2024 benefit year, we repealed the State 
flexibility policy, including for prior participant States, and 
approved 50 percent reductions to HHS risk adjustment transfers for 
Alabama's individual and small group markets. In addition, we finalized 
several refinements to HHS-RADV program requirements, such as 
shortening the window to confirm SVA findings or file a discrepancy 
report, changing the HHS-RADV materiality threshold for random and 
targeted sampling, and no longer exempting exiting issuers from 
adjustments to risk scores and HHS risk adjustment transfers when they 
are negative error rate outliers. We also announced the discontinuance 
of the Lifelong Permanent Condition List (LLPC) and Non-EDGE Claims 
(NEC) in HHS-RADV beginning with the 2022 benefit year.
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 final rule (2019 Program Integrity 
Rule) published in the December 27, 2019 Federal Register (84 FR 
71674).
    In the April 27, 2023 Federal Register (88 FR 25740) (2024 Payment 
Notice), we finalized a policy to implement improper payment pre-
testing and assessment (IPPTA) requirements for State Exchanges to 
ensure adherence to the Payment Integrity Information Act of 2019. In 
addition, we finalized allowing additional time for HHS to review 
evidence submitted by agents and brokers to rebut allegations 
pertaining to Exchange agreement suspensions or terminations. We also 
introduced consent and eligibility documentation requirements for 
agents and brokers.
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 April 17, 2018 Federal Register (83 FR 17058) (2019 
Payment Notice), we clarified that certain exceptions to the special 
enrollment periods only apply to 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, 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), which was published by HHS and the 
Department of the Treasury, we finalized additional amendments to the 
guaranteed availability regulations regarding special enrollment 
periods.
     In the May 6, 2022 Federal Register (87 FR 27208), we 
finalized a revision

[[Page 26223]]

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.
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 18310) (Exchange Establishment Rule), we 
implemented the Affordable Insurance Exchanges (Exchanges), consistent 
with title I of the ACA, to provide competitive marketplaces for 
individuals and small employers to directly compare available private 
health insurance options on the basis of price, quality, and other 
factors. This included implementation of components of the Exchanges 
and standards for eligibility for Exchanges, as well as network 
adequacy and essential community provider (ECP) certification 
standards.
    In the August 17, 2011, Federal Register (76 FR 51201) we published 
a proposed rule regarding eligibility determinations, including the 
regulatory requirement to verify incarceration status. In the March 27, 
2012, Federal Register (77 FR 18309) we finalized the regulatory 
requirement to verify incarceration attestation using an approved 
electronic data source that is current and accurate, and when 
attestations are not reasonably compatible with information in an 
approved data source, to resolve the inconsistency.
    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, published in the December 22, 2016 
Federal Register (81 FR 94058).
    In the Market Stabilization final rule, published in the April 18, 
2017 Federal Register (82 FR 18346), we amended standards relating to 
special enrollment periods and QHP certification. In the 2019 Payment 
Notice, 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 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) (part 1 of 
the 2022 Payment Notice), we 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. 
In the September 27, 2021 Federal Register (86 FR 53412) (part 3 of the 
2022 Payment Notice), in conjunction with the Department of the 
Treasury, we finalized amendments to certain policies in part 1 of the 
2022 Payment Notice.
    In the May 6, 2022 Federal Register (87 FR 27208), we finalized 
changes 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 for the 2023 benefit year. We also finalized 
various policies to address certain agent, broker, and web-broker 
practices and conduct. We also finalized updates to the requirement 
that all Exchanges conduct special enrollment period verifications.
    In the April 27, 2023 Federal Register (88 FR 25740) (2024 Payment 
Notice), we revised Exchange Blueprint approval timelines, lowered the 
user rate fee for QHPs in the FFEs and SBE-FPs, and amended re-
enrollment hierarchies for enrollees. We also finalized policies to 
update FFE and SBE-FP standardized plan options; further reduce the 
risk of plan choice overload on the FFEs and SBE-FPs by lowering the 
limit on non-standardized plan options that issuers may offer from four 
to two; introduce an exceptions process to the limitation on non-
standardized plan options in FFEs and SBE-FPs; and ensure correct QHP 
information. In addition, to prevent gaps in coverage, we amended 
coverage effective date rules, lengthened the special enrollment period 
from 60 to 90 days to those who lose Medicaid coverage, and prohibited 
QHPs on FFEs and SBE-FPs from terminating coverage mid-year for 
dependent children who reach the applicable maximum age. We also 
finalized policies on verifying consumer income and permitting door-to-
door assisters to solicit consumers. To ensure provider network 
adequacy, we finalized provider network and ECP policies for QHPs.
5. Essential Health Benefits
    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 12834) (EHB Rule). In the 2019 Payment Notice, 
published in the April 17, 2018 Federal Register (83 FR 16930), we 
added Sec.  156.111 to provide States with additional options from 
which to select an EHB-benchmark plan for plan year (PY) 2020 and 
subsequent plan years. In the 2023 Payment Notice, published in the May 
6, 2022 Federal Register (87 FR 27208), we revised Sec.  156.111 to 
require States to 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, otherwise the State's 
EHB-benchmark plan for the applicable plan year will be that State's 
EHB-benchmark plan applicable for the prior year. We displayed the 
Request for Information; Essential Health Benefits (EHB RFI), published 
in the December 2, 2022 Federal Register (87 FR 74097) to solicit 
public comment on a variety of topics related to the coverage of 
benefits in health plans subject to the EHB requirements of the ACA.
6. State Innovation Waivers
    In the March 14, 2011 Federal Register (76 FR 13553), HHS and the 
Department of the Treasury (collectively, the Departments) published 
the ``Application, Review, and Reporting Process for Waivers for State 
Innovation'' proposed rule to implement section 1332(a)(4)(B) of the 
ACA.
    In the February 27, 2012 Federal Register (77 FR 11700), the 
Departments published the ``Application, Review, and Reporting Process 
for Waivers for State Innovation'' final rule (2012 Final Rule).
    In the October 24, 2018 Federal Register (83 FR 53575), the 
Departments issued the 2018 Guidance, which superseded the previous 
guidance published in the December 16, 2015 Federal Register (80 FR 
78131) (2015 Guidance) and set forth requirements that States must meet 
for waivers,

[[Page 26224]]

application review procedures, pass-through funding determinations, 
certain analytical requirements, and operational considerations.
    In the November 6, 2020 Federal Register (85 FR 71142), the 
Departments issued an interim final rule (November 2020 IFC), which set 
forth flexibilities for waivers under section 1332 during the COVID-19 
Public Health Emergency.
    In the December 4, 2020 Federal Register (85 FR 78572), the 
Departments published the ``Patient Protection and Affordable Care Act; 
HHS Notice of Benefit and Payment Parameters for 2022 and Pharmacy 
Benefit Manager Standards; Updates to State Innovation Waiver (Section 
1332 Waiver) Implementing Regulations'' proposed rule (2022 Payment 
Notice proposed rule) which proposed to codify certain policies and 
interpretations of the 2018 Guidance.
    In the January 19, 2021 Federal Register (86 FR 6138), the 
Departments published the ``Patient Protection and Affordable Care Act; 
HHS Notice of Benefit and Payment Parameters for 2022; Updates to State 
Innovation Waiver (Section 1332 Waiver) Implementing Regulations'' 
final rule (part 1 of the 2022 Payment Notice) which codified many of 
the policies and interpretations of the 2018 Guidance.
    In the September 27, 2021 Federal Register (86 FR 53412), part 3 of 
the 2022 Payment Notice, the Departments published the ``Patient 
Protection and Affordable Care Act; Updating Payment Parameters, 
Section 1332 Waiver Implementing Regulations, and Improving Health 
Insurance Markets for 2022 and Beyond'' final rule (September 2021 
Final Rule), which superseded and rescinded the policies and 
interpretations outlined in the 2018 Guidance and repealed the previous 
codification of the interpretations of statutory guidelines in part 1 
of the 2022 Payment Notice. The Departments also finalized 
flexibilities in the public notice requirements and post-award public 
participation requirements for section 1332 waivers under certain 
emergent situations and processes and procedures for amendments and 
extensions for approved waiver plans.
7. Consumer Operated and Oriented Plans (CO-OPs)
    In the December 13, 2011 Federal Register (76 FR 77392), we 
published the ``Patient Protection and Affordable Care Act; 
Establishment of Consumer Operated and Oriented Plan (CO-OP) Program'' 
final rule (2011 CO-OP Rule), which established the rules governing the 
CO-OP program to make loans to capitalize eligible prospective CO-OPs. 
In the May 11, 2016 Federal Register (81 FR 29146), we amended several 
CO-OP standards related to governance requirements to provide greater 
flexibility, and to facilitate private market transactions that would 
assist efforts of CO-OPs to arrange access to new sources of needed 
capital.
8. Basic Health Program (BHP)
    In the March 12, 2014, Federal Register (79 FR 14111), we published 
a final rule entitled ``Basic Health Program: State Administration of 
Basic Health Programs; Eligibility and Enrollment in Standard Health 
Plans; Essential Health Benefits in Standard Health Plans; Performance 
Standards for Basic Health Programs; Premium and Cost Sharing for Basic 
Health Programs; Federal Funding Process; Trust Fund and Financial 
Integrity,'' implementing section 1331 of the ACA, which governs the 
establishment of BHPs.
9. State Flexibility in the Use of Income and Resource Disregards in 
Medicaid Eligibility
    In the January 19, 1993 Federal Register (58 FR 4929), we published 
a final rule with comment period entitled ``Medicaid Program; 
Eligibility and Coverage Requirements,'' in which we prescribed, at 42 
CFR 435.601, the financial methodologies State Medicaid agencies must 
apply in determining eligibility for Medicaid, with options to apply 
less restrictive income and resource methodologies for the eligibility 
groups specified in section 1902(r)(2) of the Act.
    In the August 22, 1994 Federal Register (59 FR 43052), we published 
a final rule entitled ``Medicaid Program; Eligibility and Coverage 
Requirements,'' in which we amended 42 CFR 435.601(f)(1) to delete 
cross-references to other regulatory provisions that had been removed 
from the CFR.
    In the November 30, 2016 Federal Register (81 FR 86456), we 
published a final rule entitled ``Medicaid and Children's Health 
Insurance Programs: Eligibility Notices, Fair Hearing and Appeal 
Processes for Medicaid and Other Provisions Related to Eligibility and 
Enrollment for Medicaid and CHIP,'' in which we amended 42 CFR 
435.601(b) to confirm that its provisions govern only individuals who 
are excepted from application of modified adjusted gross income 
financial methodologies (MAGI) in accordance with 42 CFR 435.603(j) 
(relating to ``Eligibility Groups for which MAGI-based methods do not 
apply''). We also established in 42 CFR 435.601(d)(1) the authority for 
States to apply less restrictive methodologies for medically needy 
individuals whose income eligibility is determined under 42 CFR 
435.831(b)(1) (including medically needy individuals whose eligibility 
is determined under MAGI-based methodologies that comply with certain 
rules relating to the financial responsibility of relatives and other 
individuals described in 42 CFR 435.602).

B. Summary of Major Provisions

    The regulations outlined in this final rule will be codified in 31 
CFR part 33, 42 CFR part 600, and 45 CFR parts 153, 155, and 156.
1. 31 CFR Part 33 and 45 CFR Part 155
    This final rule amends section 1332 Waivers for State Innovation 
(referred to throughout this final rule as section 1332 waivers) 
implementing regulations regarding State public notice and comment 
procedures. The Departments are finalizing changes in 31 CFR part 33 
and 45 CFR part 155 to allow States the flexibility to hold a State 
public hearing or post-award forum in a virtual format, or hybrid 
format, which would be considered as the equivalent of holding an in-
person meeting. Specifically, the Departments are finalizing changes to 
31 CFR 33.112(c) and 45 CFR 155.1312(c) and 31 CFR 33.120(c) and 45 CFR 
155.1320(c). These changes are effective immediately upon publication 
of this final rule.
2. 42 CFR Part 435
    We are not finalizing the proposed amendment to 42 CFR 435.601(d) 
to remove paragraph (d)(4) at this time. The removal of this paragraph 
would have provided States with greater flexibility to adopt income 
and/or resource disregards in determining Medicaid financial 
eligibility for individuals excepted from the application of financial 
methodologies based on MAGI (``non-MAGI'' methodologies). States are 
already permitted to expand eligibility for individuals who are subject 
to non-MAGI methodologies by disregarding income and resources that 
would otherwise be required to be considered in determining an 
individual's eligibility. However, under current rules, States must 
apply such income and resource disregards to all individuals within 
each Medicaid eligibility group. Removing paragraph (d)(4) would have 
allowed States, when considering expanding eligibility for non-MAGI 
individuals, to target disregards at discrete individuals within an 
eligibility group. As described more fully below, many commenters 
raised

[[Page 26225]]

concerns about this proposal and recommended that we impose 
``safeguards,'' ``guardrails,'' or ``no-harm'' requirements in 
expanding the States' disregard-related flexibility. These commenters 
asserted that such requirements are necessary to ensure that States do 
not use the flexibility to reduce eligibility or harm beneficiaries. We 
are not finalizing this proposal at this time to allow for further 
consideration of commenter concerns.
3. 42 CFR Part 600
    We are finalizing the amendment, with modifications, to 42 CFR 
600.320(c) to allow States a third option when choosing the effective 
date of eligibility for enrollment for BHP applicants. Under current 
rules, States have the option to choose between following: either the 
Medicaid rules at 42 CFR 435.915 or the Exchange rules at 45 CFR 
155.420(b)(1). We are finalizing to add an option to the effective date 
of coverage rules that would allow States to start coverage on the 
first day of the month following the date of application. In addition, 
we are adding another option under 42 CFR 600.320(c) that, subject to 
HHS approval, a State may establish its own effective date of 
eligibility for enrollment policy.
4. 45 CFR Part 153
    In accordance with the OMB Report to Congress on the Joint 
Committee Reductions for Fiscal Year 2024, the HHS-operated risk 
adjustment program is subject to the fiscal year 2024 sequestration.\9\ 
Therefore, the HHS-operated risk adjustment program will sequester 
payments made from fiscal year 2024 resources (that is, funds collected 
during the 2024 fiscal year) at a rate of 5.7 percent.
---------------------------------------------------------------------------

    \9\ OMB. (2023, March 13). OMB Report to the Congress on the 
BBEDCA 251A Sequestration for Fiscal Year 2024. https://www.whitehouse.gov/wp-content/uploads/2023/03/BBEDCA_Sequestration_Report_and_Letter_3-13-2024.pdf.
---------------------------------------------------------------------------

    We are finalizing the recalibration of the 2025 benefit year HHS 
risk adjustment models using the 2019, 2020, and 2021 benefit year 
enrollee-level EDGE data. For the 2025 benefit year, we are finalizing 
the continued application of a market pricing adjustment to the plan 
liability associated with Hepatitis C drugs in the HHS risk adjustment 
models (see, for example, 84 FR 17463 through 17466). We are finalizing 
a modification to the adjustment factors for the receipt of CSRs in the 
HHS risk adjustment models to improve predictive accuracy for the 
American Indian and Alaska Native (AI/AN) subpopulation who are 
enrolled in zero and limited cost-sharing plans and retaining the other 
CSR adjustment factors in HHS risk adjustment. We are also finalizing a 
risk adjustment user fee for the 2025 benefit year of $0.18 per member 
per month (PMPM). Additionally, we are finalizing that in certain 
cases, we may require a corrective action plan to address an 
observation identified in an HHS risk adjustment audit.
5. 45 CFR Part 155
    In part 155, we are finalizing the amendment to Sec.  155.105(b) to 
require that a State seeking to operate a State Exchange must first 
operate an SBE-FP for at least one plan year, including its open 
enrollment period. We believe this requirement will give States 
sufficient time to create, staff, and structure a State Exchange that 
could transition to operating its own platform and establish 
relationships with interested parties critical to a State Exchange's 
success in operating a Navigator and consumer outreach program, 
assuming plan management responsibilities, and communicating 
effectively with consumers to support enrollment and avoid health care 
coverage gaps.
    We are finalizing the revision to Sec.  155.106(a)(2) as it 
pertains to Exchange Blueprint requirements for States transitioning to 
a State Exchange. Specifically, we are finalizing the addition that we 
may require that a State submitting a Blueprint application seeking to 
operate a State Exchange provide, upon request, supplemental 
documentation to HHS detailing the State's implementation of its State 
Exchange functionality, including information regarding the State's 
ability to implement and comply with Federal requirements for operating 
an Exchange, as laid out in the State Exchange Blueprint. This could 
include a State submitting detailed plans regarding its State Exchange 
consumer assistance programs and activities, such as information on its 
direct outreach plans. Further, we are finalizing a requirement that a 
State applying to transition to a State Exchange must provide the 
public with a notice and copy of its State Exchange Blueprint 
application, as well as conduct periodic public engagements whereby 
interested parties can learn about the status of a State's transition 
to a State Exchange and provide input on that transition.
    We are finalizing the amendment to Sec.  155.170(a)(2) to codify 
that benefits covered in a State's EHB benchmark plan will not be 
considered in addition to EHB, even if they had been required by State 
action taking place after December 31, 2011, other than for purposes of 
compliance with Federal requirements. Under this policy, there would be 
no obligation for the State to defray the cost of a State mandate 
enacted after December 31, 2011, that requires coverage of a benefit if 
that benefit is included in the State's EHB-benchmark plan. Benefits 
that are covered in a State's EHB-benchmark plan will not be considered 
in addition to EHB and will remain subject to the various rules 
applicable to the EHB, including the prohibition on discrimination in 
accordance with Sec.  156.125, limitations on cost sharing in 
accordance with Sec.  156.130, and restrictions on annual or lifetime 
dollar limits in accordance with Sec.  147.126. We believe that this 
change would promote consumer protections and facilitate compliance 
with the defrayal requirement by making the identification of benefits 
in addition to EHB more intuitive.
    At Sec.  155.205(a), we are finalizing, with modifications, the 
establishment of additional minimum standards for Exchange call center 
operations. Specifically, we are finalizing the requirement that all 
Exchange call centers, other than those of SBE-FPs and Small Business 
Health Options Program (SHOP) Exchanges that do not provide for 
enrollment in SHOP coverage through an online SHOP enrollment platform, 
provide consumer access to a live call center representative during an 
Exchange's published hours of operation to assist with submitting their 
Exchange application. We believe speaking to a live representative will 
help troubleshoot consumer Exchange application issues, provide a real 
time opportunity for a live representative to explain Exchange 
application terminology to a consumer, ensure the consumer provides the 
most correct information for the Exchange application, alleviate 
unnecessary follow-up, and provide greater overall consumer 
satisfaction.
    We are finalizing the amendment to Sec.  155.205(b)(4) to require 
that an Exchange operate a centralized eligibility and enrollment 
platform on the Exchange's website (or, for an SBE-FP, the Federal 
eligibility and enrollment platform) such that the Exchange allows for 
the submission of the single, streamlined application for enrollment in 
a QHP and insurance affordability programs through the Exchange's 
website and performs eligibility determinations for all consumers based 
on submissions of the single, streamlined application. Further, we are 
finalizing the amendment to Sec.  155.302(a)(1) to clarify that the 
Exchange, through the centralized

[[Page 26226]]

eligibility and enrollment platform operated on the Exchange's website 
(or, for an SBE-FP, the Federal eligibility and enrollment platform), 
is the entity that is responsible for making all determinations 
regarding the eligibility for QHP coverage and insurance affordability 
programs regardless of whether an individual files an application for 
enrollment in a QHP on the Exchange's website (or, for SBE-FPs, on the 
Federal eligibility and enrollment platform), or on a website operated 
by a non-Exchange website allowed for under Sec.  155.220 or Sec.  
155.221. We are also clarifying that only entities that an Exchange 
elects to contract with to operate its centralized eligibility and 
enrollment platform can perform this function on behalf of an Exchange, 
such that Exchanges will not be able to solely rely on non-Exchange 
entities, including a web-broker (defined at Sec.  155.20) or other 
entities under Sec.  155.220 or Sec.  155.221, to make such eligibility 
determinations on behalf of the Exchanges.
    We are also finalizing the amendment to Sec.  155.205(b)(5) to 
require that an Exchange operate a centralized eligibility and 
enrollment platform on the Exchange's website (or, for an SBE-FP, the 
Federal eligibility and enrollment platform) so that the Exchange (or, 
for an SBE-FP, the Federal eligibility and enrollment platform) meets 
the requirement under Sec.  155.400(c) to maintain record of all 
effectuated enrollments in QHPs, including changes in effectuated QHP 
enrollments.
    We are finalizing the amendment to Sec.  155.220(h) specifying that 
the CMS Administrator, who is a principal officer, is the entity 
responsible for handling requests by agents, brokers, and web-brokers 
for reconsideration of HHS' decision to terminate their Exchange 
agreement(s) for cause. This amendment will improve transparency by 
specifying who would review reconsideration requests under Sec.  
155.220(h).
    We are finalizing changes to Sec. Sec.  155.220 and 155.221 to 
apply certain standards to web-brokers and Direct Enrollment (DE) 
entities assisting consumers and applicants across all Exchanges, 
including State Exchanges, for both the State Exchange's Individual 
Exchange and SHOP. We seek to ensure that certain current minimum HHS 
standards applicable in the FFEs and SBE-FPs, related to web-broker 
website display of standardized QHP comparative information, disclaimer 
language, information on eligibility for APTC/CSRs, operational 
readiness, and access by downstream agents and brokers, also apply to 
web-brokers in State Exchanges. Similarly, we are finalizing the 
extension of certain DE entity requirements applicable in the FFEs and 
SBE-FPs related to marketing and display of QHPs, providing consumers 
with correct information and refraining from certain conduct, marketing 
of non-QHPs, website disclaimer language, and operational readiness to 
DE entities across all Exchanges, to newly apply to DE entities in 
State Exchanges. These policies will help establish greater general 
uniformity with respect to these requirements for web-brokers and DE 
entities operating in the Exchanges and establish minimum Federal 
consumer protections in all States, regardless of the Exchange model.
    We are finalizing updates to Sec.  155.221(b) to require that 
HealthCare.gov changes be reflected and prominently displayed on DE 
entity non-Exchange websites assisting consumers in FFEs and SBE-FPs 
within a notice period \10\ set by HHS. We are also finalizing the 
requirement that DE entities make these display changes in a manner 
consistent with display changes made by HHS to HealthCare.gov by 
meeting standards communicated and defined by HHS within a time period 
set by HHS, unless HHS approves a deviation from those standards. This 
approach codifies our existing practice of communicating important 
changes to the HealthCare.gov display to EDE entities to ensure their 
EDE websites conform to those changes and provide the same vital 
information to consumers, expands our existing change request processes 
to permit entities to request deviations from the required display 
changes, and requires DE entities that do not participate in EDE to 
also comply with this practice. Additionally, this approach will also 
require that all display changes which affect the visual aspects of the 
website that users see and interact with must be prominently displayed 
on the non-Exchange websites. Finally, we are also finalizing the 
extension of this policy to require State Exchanges that choose to 
implement a DE program to require their DE entities to implement and 
prominently display website changes in a manner that is consistent with 
display changes made by State Exchanges to State Exchanges' websites on 
their non-Exchange websites, unless the State Exchange approves a 
deviation from those standards should the State Exchange elect to 
permit deviation requests.
---------------------------------------------------------------------------

    \10\ ``Notice period'' refers to the time period that DE 
entities have to reflect and prominently display HealthCare.gov 
changes communicated to them by HHS pursuant to this proposal.
---------------------------------------------------------------------------

    We are finalizing, in connection with the failure to file and 
reconcile process at Sec.  155.305(f)(4), that Exchanges be required to 
send notices to tax filers for the first year in which they have been 
determined to have failed to reconcile APTC as an initial warning to 
inform and educate tax filers that they need to file and reconcile, or 
risk being determined ineligible for APTC if they fail to file and 
reconcile for a second consecutive year. We clarify in the rule that an 
Exchange must either send a direct notice to a tax filer as described 
above or send a more general notice to an enrollee or their tax filer 
explaining that they are at risk of losing APTC. Currently, the 
regulation does not detail notification procedures for tax filers who 
have failed to reconcile for 1 year. We intend to provide 
implementation guidance and sample notices prior to the restart of FTR 
processes. We are finalizing the requirement that all Exchanges be 
required to send informative notices for the first year in which tax 
filers have been identified as failing to file and reconcile.
    We are finalizing the amendment to Sec.  155.315(e) to provide that 
all Exchanges can accept applicant incarceration status attestations 
without further verification, and Exchanges may verify applicant 
incarceration status using an HHS-approved verification data source. 
HHS would approve an alternative electronic data source for State 
Exchanges to use for incarceration verification if it provides data 
that are current and accurate, and if its use minimizes administrative 
costs and burdens.
    We are finalizing the proposal to reinterpret State Exchange and 
State Medicaid and Children's Health Insurance Program (CHIP) agency 
use of the Federal Data Services Hub to access and use the income data 
provided by the Verify Current Income (VCI) Hub service as a State 
Exchange or a State Medicaid and CHIP agency function because these 
State entities use this optional service to implement eligibility 
verification requirements applicable to them. More specifically, State 
Exchanges and State Medicaid and CHIP agencies have the option to use 
this information to verify a tax household's annual income attestation 
for Exchange QHP eligibility and the Medicaid applicant's current 
household income as required to make insurance affordability program 
eligibility determinations. We are also finalizing that these State 
agencies must pay for their use of the VCI Hub Service, and HHS will 
invoice

[[Page 26227]]

them monthly for the amount they must pay to reimburse HHS for the 
costs of their access and actual utilization of CSI income data from 
the prior month, including an administrative fee amount. In accordance 
with these policies, we are finalizing the amendment to Sec.  
155.320(c) to reflect this reinterpretation for the Exchanges but did 
not propose to amend the Medicaid regulations as the Medicaid 
regulations already address Medicaid agency verification requirements 
and are not typically used to delineate Medicaid agency operations in 
this manner.
    We are finalizing the revision to Sec.  155.330(d) to require 
Exchanges to conduct periodic checks for deceased enrollees twice 
yearly and subsequently end deceased enrollees' QHP coverage. 
Additionally, we are finalizing the revision to Sec.  155.330(d)(3) to 
grant the Secretary the authority to temporarily suspend the periodic 
data matching (PDM) requirement during certain situations or 
circumstances that lead to the limited availability of data needed to 
conduct PDM or of documentation needed for an enrollee to notify the 
Exchange that the result of PDM is inaccurate, as described in Sec.  
155.330(e)(2)(i)(C). These policies will align Sec.  155.330(d) with 
current Federal Exchange policy and operations, prevent overpayment of 
QHP premiums, and accurately capture household QHP eligibility based on 
household size.
    We are finalizing, as proposed, the amendment to Sec.  
155.335(j)(1) and (2) to require Exchanges to re-enroll individuals who 
are enrolled in catastrophic coverage, as defined in section 1302(e) of 
the ACA, into a new QHP for the coming plan year, except that we are 
amending the new language that we proposed at Sec.  155.335(j)(1)(v) 
and (j)(2)(iv) to incorporate the phrase, ``to the extent permitted by 
applicable State law.'' Incorporating these individuals enrolled in 
catastrophic coverage into the auto re-enrollment hierarchy rules at 
Sec.  155.335(j) will help ensure continuity of coverage in cases where 
the issuer does not continue to offer a catastrophic plan for the new 
plan year, or these individuals are no longer eligible for enrollment 
in a catastrophic plan for the new year, and these individuals do not 
actively select a different QHP. We are also finalizing the addition of 
a new paragraph (j)(5) to Sec.  155.335 to establish that an Exchange 
may not newly auto re-enroll into catastrophic coverage an enrollee who 
is currently enrolled in coverage of a metal level as defined in 
section 1302(d) of the ACA. This change reflects our current practice 
for Exchanges on the Federal platform.
    We are finalizing the amendment to Sec.  155.400(e)(2) to codify 
that the flexibility for issuers experiencing billing or enrollment 
problems due to high volume or technical errors is not limited to 
extensions of the binder payment.
    We are finalizing, with modifications, the amendment to Sec.  
155.410(e)(4)(ii) to revise parameters around the adoption of an 
alternative open enrollment period by a State Exchange. Specifically, 
we are finalizing that for benefit years beginning on or after January 
1, 2025, State Exchanges must adopt an open enrollment period that 
begins on November 1 of the calendar year preceding the benefit year 
and ends January 15 of the applicable benefit year or later. 
Additionally, as a modification, we are finalizing new paragraph 
(e)(4)(iii), which provides flexibility for any State Exchange that 
held an open enrollment period that began before November 1, 2023, and 
ended before January 15, 2024, for the 2024 benefit year to continue to 
begin open enrollment before November 1 for consecutive future benefit 
years, so long as the open enrollment period continues uninterrupted 
for at least 11 weeks. If the State Exchange changes the dates of the 
annual open enrollment period after the effective date of this rule, it 
must comply with paragraphs (e)(4)(i) and (ii) for all future annual 
open enrollment periods. Finally, we have also finalized a modification 
to amend Sec.  155.410(e)(4)(i) to reference new paragraph (e)(4)(iii). 
We believe these policies will give consumers ample time to enroll in 
coverage; provide Navigators, certified application counselors, and 
agents and brokers ample time to assist all interested applicants; 
balance consistency against providing State Exchanges with additional 
flexibility; reduce disruption to current Exchange operations; reduce 
consumer confusion; and improve access to health coverage.
    At Sec.  155.420(b), we are finalizing aligning the effective dates 
of coverage after selecting a plan during certain special enrollment 
periods across all Exchanges, including State Exchanges. We are 
requiring all State Exchanges to provide coverage that is effective on 
the first day of the month following plan selection, or an earlier 
date, if a consumer enrolls in a QHP during special enrollment periods 
that follow the regular effective dates of coverage in 45 CFR 
155.420(b). This policy will prevent coverage gaps, particularly for 
consumers transitioning between different Exchanges or from other 
insurance coverage.
    We are finalizing the amendment to paragraph Sec.  155.420(d)(16) 
to revise the parameters around the availability of a special 
enrollment period for APTC-eligible qualified individuals with a 
projected annual household income no greater than 150 percent of the 
Federal Poverty Level (FPL). Specifically, we are finalizing to remove 
the limitation that this special enrollment period is only available to 
a consumer whose applicable taxpayer's applicable percentage, which is 
used to determine the amount of the consumer's premium not covered by 
APTC, is 0 percent, and to give Exchanges the option to permanently 
provide this special enrollment period. We believe this policy will 
provide affordable coverage to more uninsured people and additional 
enrollment opportunities to low-income consumers.
    We are finalizing the addition of Sec.  155.430(b)(1)(iv)(D) to 
permit an enrollee to retroactively terminate the enrollee's enrollment 
in a QHP through an Exchange on the Federal platform when the enrollee 
enrolls in Medicare Parts A or B (including enrollment in Parts A and B 
through a Medicare Advantage plan). The effective date of the 
retroactive termination must be no earlier than the later of (1) the 
day before the first day of coverage under Medicare Parts A or B or a 
Medicare Advantage plan, and (2) the day is 6 months before retroactive 
termination of QHP coverage is requested. Enrollees must request 
retroactive termination of coverage within 60 days of the date they 
retroactively enroll in Medicare (the date the enrollment occurs, not 
the Medicare coverage effective date). We are also finalizing that 
retroactive terminations are not permitted for stand-alone dental plans 
(SADPs). This policy will allow consumers to avoid overlapping coverage 
and paying unnecessary premiums. HHS has the option to elect whether to 
implement this provision for Exchanges on the Federal platform, and 
State Exchanges will have the option of implementing this policy.
    Under Sec.  155.1050(a)(2)(i)(A), we are finalizing that for plans 
years beginning on or after January 1, 2026, State Exchanges and SBE-
FPs must establish and impose quantitative time and distance network 
adequacy standards for QHPs that are at least as stringent as standards 
for QHPs participating on the FFEs under Sec.  156.230(a)(2)(i)(A). 
Additionally, we are finalizing that, for plans years beginning on or 
after January 1, 2026, State Exchanges and SBE-FPs must conduct 
quantitative network adequacy reviews prior to certifying any plan as a 
QHP, consistent

[[Page 26228]]

with the reviews conducted by the FFEs under Sec.  156.230. 
Specifically, we are finalizing at Sec.  155.1050(a)(2)(i)(B) that, for 
plans years beginning on or after January 1, 2026, State Exchanges and 
SBE-FPs must conduct network adequacy reviews to evaluate a plan's 
compliance with network adequacy standards under Sec.  
156.230(a)(1)(ii), (a)(1)(iii), and (a)(2)(i)(A) prior to certifying 
any plan as a QHP, while providing QHP certification applicants the 
flexibilities described under Sec.  156.230(a)(2)(ii) and (a)(3) and 
(4). We are also finalizing Sec.  155.1050(a)(2)(ii) to provide that, 
for plan years beginning on or after January 1, 2026, HHS may grant an 
exception to the requirements described under Sec.  155.1050(a)(2)(i) 
to a State Exchange or SBE-FP that demonstrates with evidence-based 
data, in a form and manner specified by HHS, that (1) the Exchange 
applies and enforces alternate quantitative network adequacy standards 
that are reasonably calculated to ensure a level of access to providers 
that is as great as that ensured by the Federal network adequacy 
standards established for QHPs under Sec.  156.230(a)(1)(iii), 
(a)(2)(i)(A), and (a)(4); and (2) the Exchange evaluates whether plans 
comply with applicable network adequacy standards prior to certifying 
any plan as a QHP. Lastly, we are finalizing Sec.  155.1050(a)(2)(i)(C) 
to provide that, for plan years beginning on or after January 1, 2026, 
State Exchanges and SBE-FPs must require that all issuers seeking 
certification of a plan as a QHP submit information to the Exchange 
reporting whether or not network providers offer telehealth services.
6. 45 CFR Part 156
    In part 156, after reviewing the public comments and revising our 
projections based on newly available data that impacted our enrollment 
projections, we are finalizing an FFE user fee rate of 1.5 percent of 
total monthly premiums and an SBE-FP user fee rate of 1.2 percent of 
total monthly premiums. On November 15, 2023, we issued the 2025 
benefit year premium adjustment percentage index and related payment 
parameters in guidance, consistent with the policy finalized in part 2 
of the 2022 Payment Notice.\11\
---------------------------------------------------------------------------

    \11\ https://www.cms.gov/files/document/2025-papi-parameters-guidance-2023-11-15.pdf.
---------------------------------------------------------------------------

    For benefit years beginning on or after January 1, 2026, we are 
finalizing three revisions to the standards for State selection of EHB-
benchmark plans at Sec.  156.111. First, we are finalizing our proposal 
to consolidate the options for States to change EHB-benchmark plans at 
Sec.  156.111(a) to reduce the burden on States to decide between three 
functionally identical choices. Second, we are finalizing revisions to 
the typicality standard at Sec.  156.111(b)(2) so that, in 
demonstrating that a State's new EHB-benchmark plan provides a scope of 
benefits that is equal to the scope of benefits of a typical employer 
plan in the State, the scope of benefits of a typical employer plan in 
the State will be defined as any scope of benefits that is as or more 
generous than the scope of benefits in the State's least generous 
typical employer plan (supplemented by the State as necessary to 
provide coverage within each EHB category at Sec.  156.110(a)), and as 
or less generous than the scope of benefits in the State's most 
generous typical employer plan (supplemented by the State as necessary 
to provide coverage within each EHB category at Sec.  156.110(a)), 
among the typical employer plans currently defined at Sec.  
156.111(b)(2)(i)(A) and (B). We are also finalizing the removal of the 
generosity standard at Sec.  156.111(b)(2)(ii) and a technical revision 
to the language regarding supplementation at Sec.  156.111(b)(2)(i). 
Third, we are finalizing revisions to Sec.  156.111(e)(3) to require 
States to submit a formulary drug list as part of their application to 
change EHB-benchmark plans only if the State is seeking to change its 
prescription drug EHB.
    We are finalizing the removal of the regulatory prohibition at 
Sec.  156.115(d) on issuers from including routine non-pediatric dental 
services as an EHB beginning with PY 2027, which would provide States 
the option to add routine adult dental services as an EHB by updating 
their EHB-benchmark plans pursuant to Sec.  156.111.
    We are finalizing the amendment to Sec.  156.122 to codify that 
prescription drugs in excess of those covered by a State's EHB-
benchmark plan are considered EHB. As a result, they would be subject 
to requirements including the annual limitation on cost sharing and the 
restriction on annual and lifetime dollar limits, unless the coverage 
of the drug is mandated by State action and is in addition to EHB 
pursuant to Sec.  155.170, in which case the drug will not be 
considered EHB. In addition, for plan years beginning on or after 
January 1, 2026, we are finalizing the amendment to Sec.  156.122 to 
provide that the Pharmacy & Therapeutics (P&T) committee must include a 
patient representative. We also sought and received comments on a 
possible future policy proposal to replace the United States 
Pharmacopeia (USP) Medicare Model Guidelines (MMG) with the USP Drug 
Classification system (DC) to classify the prescription drugs required 
to be covered as EHB under Sec.  156.122(a)(1).
    For PY 2025, we are finalizing the proposal to follow the approach 
finalized in the 2024 Payment Notice concerning standardized plan 
option metal levels, and to otherwise maintain continuity with our 
approach to standardized plan options finalized in the 2023 and 2024 
Payment Notices.\12\ We are finalizing only minor updates to the plan 
designs for PY 2025 to ensure these plans have AVs within the 
permissible de minimis range for each metal level. Our updates to plan 
designs for PY 2025 are detailed in the discussion of Sec.  156.201 in 
the preamble of this final rule, specifically in Tables 12 and 13.
---------------------------------------------------------------------------

    \12\ This includes continuation of the differential display of 
standardized plan options on HealthCare.gov and enforcement of the 
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 (Classic DE) and Enhanced Direct 
Enrollment (EDE) Pathways.
---------------------------------------------------------------------------

    We are finalizing an exceptions process at Sec.  156.202 that will 
allow issuers in the FFEs and SBE-FPs to offer additional non-
standardized plan options per product network type, metal level, 
inclusion of dental and vision benefit coverage, and service area for 
PY 2025 and subsequent plan years, if the issuer can demonstrate that 
these additional non-standardized plans have specific design features 
that will substantially benefit consumers with chronic and high-cost 
conditions and meet other requirements.
    We are finalizing a new regulatory provision that would permit us 
to allow a CO-OP loan recipient to voluntarily terminate its loan 
agreement with us and cease to constitute a qualified non-profit health 
insurance issuer (QNHII), for the purpose of pursuing innovative 
business plans that are not otherwise consistent with the governance 
requirements and business standards applicable to a CO-OP borrower. 
Under the new regulatory provision, we will be able to consider a 
request by a CO-OP to voluntarily terminate its loan agreement for 
reasons other than financial viability, provided all outstanding CO-OP 
loans issued to the loan recipient are repaid in full prior to 
termination, and we believe granting the request would meaningfully 
enhance consumer access to quality, affordable, member-focused, non-
profit health care options in affected markets.
    We are finalizing conforming amendments to the payment and 
collections process set forth at

[[Page 26229]]

Sec.  156.1215 to align with the policies and regulations proposed in 
the Federal Independent Dispute Resolution Operations proposed rule (88 
FR 75744) and that are contingent on their finalization. This provision 
will provide that administrative fees for utilizing the No Surprises 
Act Federal independent dispute resolution (IDR) process for health 
insurance issuers that participate in financial programs under the ACA 
would be subject to netting as part of HHS' integrated monthly payment 
and collections cycle. Additionally, we are finalizing the amendment to 
Sec.  156.1215 to provide that any amount owed to the Federal 
Government by an issuer and its affiliates for unpaid administrative 
fees due to the Federal Government from these issuers and their 
affiliates for utilizing the Federal IDR process in accordance with 
Sec.  149.510(d)(2), after HHS nets amounts owed by the Federal 
Government under these programs, would be the basis for calculating a 
debt owed to the Federal Government.

III. Summary of the Provisions of the Proposed Regulations

A. 31 CFR Part 33 and 45 CFR Part 155--Section 1332 Waivers

1. Background
    Section 1332 of the ACA permits States to apply for a section 1332 
waiver to pursue innovative strategies for providing their residents 
with access to higher value, more affordable health insurance coverage. 
To allow for greater flexibility in communicating with the public, we 
are finalizing updates to the public hearing process requirements for 
section 1332 waivers.
    Under section 1332(b) of the ACA, the Secretary of HHS and the 
Secretary of the Treasury (collectively, the Secretaries) may exercise 
their discretion to approve a request for a section 1332 waiver only if 
the Secretaries determine that the proposal for the section 1332 waiver 
meets the following four requirements, referred to as the statutory 
guardrails: (1) the proposal provides coverage that is at least as 
comprehensive as coverage defined in section 1302(b) of the ACA and 
offered through Exchanges established under title I of the ACA, as 
certified by the Office of the Actuary of CMS, based on sufficient data 
from the State and from comparable States about their experience with 
programs created by the ACA and the provisions of the ACA that would be 
waived; (2) the proposal provides coverage and cost-sharing protections 
against excessive out-of-pocket spending that are at least as 
affordable for the State's residents as would be provided under title I 
of the ACA; (3) the proposal provides coverage to at least a comparable 
number of the State's residents as would be provided under title I of 
the ACA; and (4) the proposal does not increase the Federal deficit. 
The Secretaries retain their discretionary authority to deny requested 
section 1332 waivers when appropriate given consideration of the 
application, as a whole, even if a proposal for a section 1332 waiver 
meets the four statutory guardrails.
    The Departments are responsible for monitoring an approved section 
1332 waiver's compliance with the statutory guardrails and for 
conducting evaluations to determine the impact of the section 1332 
waiver. Specifically, section 1332(a)(4)(B)(v) of the ACA requires the 
Secretaries to promulgate regulations that provide for a process for 
the periodic evaluation of approved section 1332 waivers. The 
Secretaries must also promulgate regulations that provide for a process 
under which States with approved section 1332 waivers submit to the 
Secretaries periodic reports concerning the implementation of the 
State's waiver program.\13\
---------------------------------------------------------------------------

    \13\ See ACA section 1332(a)(4)(B)(iv).
---------------------------------------------------------------------------

2. Finalized Amendments to Normal Public Notice Requirements (31 CFR 
33.112, 31 CFR 33.120, 45 CFR 155.1312, and 45 CFR 155.1320)
    Sections 1332(a)(4)(B)(i) and (iii) of the ACA provide that the 
Secretaries shall promulgate regulations that provide for a process for 
public notice and comment at the State level, including public 
hearings, and a process for providing public notice and comment at the 
Federal level after the section 1332 waiver application is received by 
the Secretaries, respectively, that are both sufficient to ensure a 
meaningful level of public input. Current regulations at 31 CFR 33.112 
and 45 CFR 155.1312 specify State public notice and comment period and 
participation requirements for proposed section 1332 waiver requests, 
and 31 CFR 33.116(b) and 45 CFR 155.1316(b) specify the public notice 
and comment period and approval requirements under the accompanying 
Federal process.
    In the November 2020 IFC (85 FR 71142), the Departments revised 
regulations to set forth flexibilities in the public notice 
requirements and post-award public participation requirements for 
section 1332 waivers during the COVID-19 PHE. In the September 2021 
Final Rule (86 FR 53502), the Departments extended those changes beyond 
the COVID-19 PHE to allow similar flexibilities in the event of future 
natural disasters; PHEs; or other emergent situations that threaten 
consumers' access to health insurance coverage, consumers' access to 
health care, or human life. Currently, in such an event, States may 
submit a request to the Departments to modify, in part, the State 
public notice requirements specified in 31 CFR 33.112(a)(1), (b), (c), 
and (d) and 45 CFR 155.1312(a)(1), (b), (c), and (d), and the Federal 
public notice requirement specified in 31 CFR 33.116(b) and 45 CFR 
155.1316(b), pursuant to 31 CFR 33.118(a) and 45 CFR 155.1318(a).
    The criteria to request a modification from the normal public 
notice requirements during an emergent situation are set forth in 31 
CFR 33.118(b)(1) through (5) and 45 CFR 155.1318(b)(1) through (5). 
Pursuant to 31 CFR 33.118(b)(3) and 45 CFR 155.1318(b)(3), the State's 
request to modify normal public notice procedures is required to 
include: the justification for the requested modification from the 
State public notice procedures as it relates to the emergent situation 
and the alternative public notice procedures, including public 
hearings, that it proposes to implement at the State level and that are 
designed to provide the greatest opportunity for and level of 
meaningful public input from impacted interested parties that is 
practicable given the emergent circumstances motivating the State's 
request for a modification.
    Since the finalization of the flexibilities in 31 CFR 33.118(b)(1) 
through (5) and 45 CFR 155.1318(b)(1) through (5), almost all States 
with approved section 1332 waivers (``section 1332 waiver States'') 
submitted requests that were granted by the Departments to conduct 
their annual post-award forums virtually instead of in-person during 
the COVID-19 PHE to reduce the risk of transmission of COVID-19. 
Similarly, during the COVID-19 PHE, States submitting new section 1332 
waiver applications, waiver extension requests, or waiver amendment 
requests also requested to host their State public hearings virtually 
and these requests were also granted by the Departments. However, with 
the recent expiration of the Federal COVID-19 PHE \14\ (and many State 
COVID-19 PHEs) \15\ and in

[[Page 26230]]

line with the requirements of 31 CFR 33.120(c) and 45 CFR 155.1320(c) 
and 31 CFR 33.112(c) and 45 CFR 155.1312(c), the Departments have 
ceased granting States' requests to hold public hearings or post-award 
forums virtually instead of in-person on the basis of the Federal 
COVID-19 PHE.
---------------------------------------------------------------------------

    \14\ The Federal COVID-19 PHE ended on May 11, 2023. https://
www.hhs.gov/about/news/2023/05/09/fact-sheet-end-of-the-covid-19-
public-health-
emergency.html#:~:text=That%20means%20with%20the%20COVID,the%20expira
tion%20of%20the%20PHE.
    \15\ For example, in Alaska the State's PHE ended on July 1, 
2022 (https://health.alaska.gov/PHE/Pages/default.aspx); in Colorado 
the Disaster Recovery Order ended on April 27, 2023 (https://hcpf.colorado.gov/covid-19-phe-planning); in Georgia the State of 
Emergency ended on May 11, 2023 (https://dph.georgia.gov/press-releases/2023-05-11/dph-news-release-end-public-health-emergency-declaration); and in Rhode Island the State's COVID-19 Disaster 
Emergency ended on May 11, 2023 (https://governor.ri.gov/executive-orders/executive-order-23-05).
---------------------------------------------------------------------------

    Upon review and consideration of the lessons learned during the 
COVID-19 PHE, the Departments have determined that some current 
provisions regarding normal State public notice procedures are outdated 
given the increased accessibility that technology has provided for 
virtual and telephonic meetings. States have shared that their 
residents benefitted from the States' opportunity to host public 
hearings and post-award forums virtually, and that they would like to 
continue doing so to facilitate attendance. States have also reported 
to the Departments that hosting meetings virtually during the COVID-19 
PHE did not decrease the amount or quality of meaningful input 
received. States' experiences during this time demonstrated that 
interested parties were able to virtually attend meetings and submit 
public comments verbally or in-writing, and States did not report any 
significant issues relating to virtual platforms that impeded public 
attendance or participation. States continued to share with the 
Departments summaries of their post-award forums, as well as all public 
comments received and actions taken in response to concerns or 
comments, in accordance with section 1332 waiver annual reporting 
requirements. In States' new waiver applications, waiver extension 
requests, and waiver amendment requests, States also shared with the 
Departments summaries of virtually conducted hearings from their State 
public comment periods and addressed public comments or concerns 
received.
    Beyond mitigating the spread of COVID-19, information shared by 
section 1332 waiver States has demonstrated that the opportunity to 
host post-award forums and public hearings on virtual platforms 
facilitated comparable or higher levels of public attendance when 
compared to previously held in-person meetings. For example, at 
Maryland's annual post-award forums held in 2019 (in-person) and 2020-
2022 (virtual), the State saw comparable participation across the years 
from interested parties. Minnesota also reported comparable attendance 
at its post-award forums across the years: 4 attendees in 2018 (in-
person), 1 in 2019 (in-person), 4 in 2020 (virtual), 9 in 2021 
(virtual),\16\ and 2 in 2022 (virtual). Likewise, Wisconsin had 6 
attendees at its post-award forum in 2019 (in-person), 24 in 2020 
(virtual),\17\ 11 in 2021 (virtual), and 7 in 2022 (virtual). Wisconsin 
noted that using a virtual format has allowed individuals who would 
otherwise not be able to attend in-person to view the State's 
presentation and that this has proven to be a convenient means for 
individuals to attend the forum.
---------------------------------------------------------------------------

    \16\ Note that this post-award hearing was also a hearing for 
the State's waiver extension application, which likely increased 
attendance.
    \17\ Note that attendance was relatively higher in 2020 likely 
due to the forum following the State's first full year of 
implementing its reinsurance program.
---------------------------------------------------------------------------

    States that began waiver implementation after the start of the 
COVID-19 PHE have also reported successfully hosting virtual post-award 
forums. For example, Colorado conducted its first post-award forum 
entirely virtually in 2020 and reported 79 attendees.\18\ Pennsylvania 
had 2 attendees at its first post-award forum in 2021 (virtual) and 4 
in 2022 (virtual). Pennsylvania noted that due to the expansiveness of 
the State's geography, there has historically been low in-person 
attendance, as observed at its in-person public hearings in 2019 for 
its waiver application, where no members of the public attended the 
first meeting, and two members of the public attended the second 
meeting.
---------------------------------------------------------------------------

    \18\ Note that this post-award forum was also a hearing for the 
State's waiver extension application, which likely increased 
attendance.
---------------------------------------------------------------------------

    States submitting new waiver applications, waiver extension 
requests, or waiver amendment requests during the COVID-19 PHE also 
reported successfully conducting their public hearings on virtual 
platforms. For example, in January 2022, Alaska held a combined post-
award forum and State public hearing for its waiver extension 
application both in-person and with a telephonic option, which 3 
members of the public attended either in-person or virtually. In April 
2022, Washington held two State public hearings virtually, in which 9 
representatives from organizations attended and shared public comments.
    There are other Federal programs and agencies that permitted a 
virtual option in place of in-person public hearings prior to the 
COVID-19 PHE or that have more recently amended their policies for 
public input to continue virtual and telephonic options that were first 
implemented during the COVID-19 PHE. For example, States that are 
applying for Medicaid section 1115 demonstrations are permitted to use 
telephonic and web-based conference capabilities for public meetings. 
In fact, per 42 CFR 431.408(a)(3), a State must use telephonic and/or 
web conference capabilities for at least one of the two required public 
hearings to ensure Statewide accessibility to the public hearing, 
unless it can document it has afforded the public throughout the State 
the opportunity to provide comment, such as holding the two public 
hearings in geographically distinct areas of the State.
    As another example, during the COVID-19 PHE, the Internal Revenue 
Service (IRS) began holding public hearings on notices of proposed 
rulemaking telephonically instead of in-person. Following the end of 
the Federal COVID-19 PHE, the IRS recently announced that, for proposed 
regulations published in the Federal Register after May 11, 2023,\19\ 
public hearings would be conducted in-person but that a telephonic 
option would remain available for those who prefer to attend or testify 
by telephone.
---------------------------------------------------------------------------

    \19\ Internal Revenue Service, Public Hearings on Proposed 
Regulations to Be Conducted in Person with Telephone Options 
Available, Announcement 2023-16. Accessed at https://www.irs.gov/pub/irs-drop/a-23-16.pdf.
---------------------------------------------------------------------------

    The Departments considered whether to propose requiring States to 
hold at least one of the required public hearings for waiver 
applications in-person. However, as explained above, States have 
successfully hosted post-award forums and public hearings for section 
1332 waiver applications virtually to allow for meaningful public input 
over the last several years. Furthermore, by allowing States the 
ability to hold all of their meetings virtually, States may better 
allow for input across different geographies, communities, and 
populations. We also considered proposing the standard under section 
1115 demonstrations where one hearing is required to be done virtually. 
However, given the successful hosting of virtual meetings with public 
participation by States for section 1332 waivers, it does not seem 
necessary to continue to require in-person meetings to solicit public 
input on section 1332 waivers.
    The Departments believe that by allowing States the opportunity to 
hold post-award forums and public hearings virtually and through 
digital platforms, States would be able to continue

[[Page 26231]]

facilitating attendance and participation from interested parties and 
the public to provide meaningful input. As such, the Departments are of 
the view that updating the State public notice procedures would enhance 
public participation in the section 1332 waiver review and monitoring 
process. This approach would help remove barriers to participation and 
increase opportunities for engagement in policymaking for communities 
and local partners who may face barriers to in-person participation 
(for example, those in rural areas). This approach is also consistent 
with Executive Order 14094, Executive Order on Modernizing Regulatory 
Review, as it would affirm States' abilities to be inclusive in seeking 
public input from interested or affected parties, including members of 
underserved communities, and promote best practices for information 
accessibility and engagement with interested or affected parties 
through the use of alternative platforms and media for engaging the 
public.\20\ Further, this approach may improve States' abilities to 
understand and eliminate barriers experienced by underserved or under-
represented communities, and identify opportunities to advance health 
equity, while diminishing administrative burden related to the 
integration of in-person and virtual formats.
---------------------------------------------------------------------------

    \20\ 88 FR 21879. https://www.govinfo.gov/content/pkg/FR-2023-04-11/pdf/2023-07760.pdf.
---------------------------------------------------------------------------

    Therefore, in this final rule, the Departments are finalizing as 
proposed that a virtual (that is, one that uses telephonic, digital, 
and/or web-based platforms) or hybrid (that is, one that provides for 
both in-person and virtual attendance) public hearing or forum be 
considered as the equivalent of holding an in-person meeting. In the 
2012 Final Rule (77 FR 11700), the Departments noted that as set forth 
in 31 CFR 33.112(c)(1) and (2) and 45 CFR 155.1312(c)(1) and (2), a 
State must hold at least two public hearings in distinct locations. 
Under this policy, States would still need to hold at least two public 
hearings in distinct locations. For example, the Departments clarify 
that under this final rule, a State would not be permitted to count a 
public hearing in which there is simultaneously an in-person location 
and virtual platform as two hearings (or two locations). Instead, one 
virtual or hybrid meeting would still count as one public hearing, and 
two virtual or hybrid meetings would count as two public hearings.
    In this final rule, we are finalizing as proposed in the 2025 
Payment Notice proposed rule (88 FR 82510, 82520), to amend 31 CFR 
33.112(c) and 45 CFR 155.1312(c) and 31 CFR 33.120(c) and 45 CFR 
155.1320(c). More specifically, the Departments are finalizing 
modifications to 31 CFR 33.112(c) and 45 CFR 155.1312(c) to permit 
States to conduct public hearings in a virtual or hybrid format in lieu 
of conducting an in-person meeting. The Departments also finalize as 
proposed amending 31 CFR 33.120(c) and 45 CFR 155.1320(c) to provide 
that for a State's annual post-award forum, the public forum shall be 
conducted in an in-person, virtual (that is, one that uses telephonic, 
digital, and/or web-based platforms), or hybrid (that is, one that 
provides for both in-person and virtual attendance) format. These 
changes will go into effect upon publication of this final rule.
    This policy is limited to allowing flexibility to host required 
meetings virtually. States would still be required to continue to abide 
by all other public notice requirements, including public notice 
procedural requirements for waiver applications, waiver extension and 
waiver amendment requests, and post-award forums. For example, States 
would still be required to have a process to consult and collaborate 
with Federally-recognized tribes,\21\ as applicable, as well as take 
reasonable steps to provide meaningful access for individuals with 
limited English proficiency (LEP) (for example, language assistance 
services that may include interpretation in non-English languages 
provided in-person or remotely by a qualified interpreter, translated 
written content in paper or electronic form into or from languages 
other than English, and written notice of availability of language 
assistance services), and appropriate steps to ensure effective access 
for and communication with individuals with disabilities (for example, 
accessibility of information and communication technology).\22\ States 
should recognize that virtual meetings may present additional 
accessibility challenges for people with communications and other 
disabilities, as well as to those who lack broadband access. Complying 
with the requirement to ensure effective communication may entail 
providing American Sign Language interpretation and real-time 
captioning, as well as ensuring that the virtual platform is 
interoperable with assistive technology for people with disabilities.
---------------------------------------------------------------------------

    \21\ See 31 CFR 33.112(a)(2) and 45 CFR 155.1312(a)(2).
    \22\ See Title VI of the Civil Rights Act of 1964 (42 U.S.C. 
2000d, 45 CFR part 80), Section 1557 of the ACA (42 U.S.C. 18116, 45 
CFR part 92), Section 504 of the Rehabilitation Act of 1973 (29 
U.S.C 794, 45 CFR part 84), and Title II of the Americans with 
Disabilities Act (42 U.S.C. 1213 et seq., 28 CFR part 35).
---------------------------------------------------------------------------

    Finally, the Departments clarify that under this final rule, States 
shall have a process by which members of the public can request in-
person meetings for the annual post-award forum or State public 
hearings on waiver applications, waiver extension requests, or waiver 
amendments requests, and that States shall accommodate those requests 
whenever possible. In addition, States with approved section 1332 
waivers and States seeking approval for proposed waivers would continue 
to have flexibility to submit requests to the Departments during 
emergent situations to modify certain public participation requirements 
as set forth in 31 CFR 33.118(b)(1) through (5) and 45 CFR 
155.1318(b)(1) through (5).
    The Departments sought comment on these proposals and received 29 
comments on the section 1332 waiver proposals from various interested 
parties, including States, health and disease advocacy organizations, 
general advocacy organizations, health care provider organizations, and 
research organizations. All comments generally expressed support for 
the proposed changes, though some raised additional considerations 
related to accessibility.
    After consideration of comments and for the reasons outlined in the 
proposed rule and our responses to comments, we are finalizing these 
provisions as proposed. We summarize and respond to public comments 
received on the proposed amendments to normal public notice 
requirements (31 CFR 33.112, 31 CFR 33.120, 45 CFR 155.1312, and 45 CFR 
155.1320) below.
    Comment: The Departments received comments supporting the 
additional flexibilities for States to conduct public hearings and 
post-award forums in a virtual or hybrid format. Commenters agreed that 
these updates would facilitate public participation on section 1332 
waivers by increasing access to meetings for people who would otherwise 
face barriers to attending in-person meetings (for example, due to 
geographic distance, transportation, childcare, limited mobility, 
chronic health conditions). Commenters also agreed with the 
Departments' clarification that one meeting held in a hybrid format 
does not meet the existing requirement that States hold at least two 
such events in separate locations, and that States would still need to 
hold at least two public hearings in distinct locations (for example, 
one virtual or hybrid meeting counts as one meeting, and two virtual or 
hybrid meetings count as two meetings).

[[Page 26232]]

    Several comments from States shared their own positive experiences 
with hosting public hearings and post-award forums virtually during the 
COVID-19 pandemic. They explained that public participation did not 
suffer because the meetings were held virtually. These States also 
noted that the ability to hold virtual public hearings and post-award 
forums without needing to request a modification from the normal public 
notice requirements due to an emergent situation (as they would have 
done under previous guidance) would reduce administrative hurdles. 
However, one State asserted that there is no benefit from requiring 
States to hold public forums in-person and that it is an inefficient 
use of State resources.
    Response: The Departments appreciate the support and have finalized 
the rule as proposed.
    Comment: We received several comments expressing concern that 
virtual or hybrid meetings may simultaneously pose additional 
challenges for States to comply with Federal civil rights protections 
and requirements for accessibility. These commenters voiced concern 
that people with disabilities, people with LEP, and people with limited 
broadband access may experience barriers to participation. These 
commenters encouraged the Departments to issue additional subregulatory 
guidance to States that clarify related Federal civil rights 
protections and requirements and to provide examples of compliance 
strategies to ensure that people with accessibility needs can 
meaningfully participate in the public comment process. Similarly, one 
commenter recommended that CMS include in the final rule accessibility 
standards for virtual and hybrid meetings, such as practices related to 
pre-event information, live captioning, assistive technology, and 
document and platform accessibility; and another commenter proposed 
that the Departments codify essential accessibility practices in the 
final rule, such as closed captioning, simultaneous interpretation, 
option to dial in to meetings, and ensuring that the technology used is 
compatible with assistive technologies used by people with 
disabilities. Finally, one commenter recommended that the Departments 
require States to include a virtual option when public hearings are 
held in-person, which would allow for participation from people who 
cannot safely attend in-person (for example, people who are 
immunocompromised). This commenter also requested that States posting 
public notice for these meetings should ensure the notices are easily 
accessible and prominently displayed on their websites.
    Response: The Departments agree with commenters that despite the 
additional flexibilities for States to host meetings in a virtual or 
hybrid format, it continues to be important for States to comply with 
applicable Federal civil rights law and ensure accessibility in the 
public notice and comment process. Regarding commenters' suggestion 
that the Departments issue additional subregulatory guidance and 
provide examples of compliance strategies, or to codify accessibility 
standards and practices into the final rule, we emphasize that the 
finalization of these provisions does not change requirements for 
States to ensure Federal civil rights protections and meet applicable 
accessibility needs. Indeed, in the 2021 Final Rule, the Departments 
reiterated that any public participation processes must comply with 
applicable Federal civil rights laws.\23\ The Departments expect that 
States will continue to take accessibility considerations into account 
to ensure a meaningful level of public input during State notice and 
comment periods and post-award forums. States may reference the HHS 
Office for Civil Rights for information on Federal civil rights laws 
and protections.\24\ Additionally, comments on issuing subregulatory 
guidance and codifying accessibility standards and practices are not 
directly in response to the proposed rule and are out-of-scope. As such 
we have finalized this rule as proposed.
---------------------------------------------------------------------------

    \23\ Patient Protection and Affordable Care Act; Updating 
Payment Parameters, Section 1332 Waiver Implementing Regulations, 
and Improving Health Insurance Markets for 2022 and Beyond (86 FR 
53412, 53457) https://www.govinfo.gov/content/pkg/FR-2021-09-27/pdf/2021-20509.pdf.
    \24\ https://www.hhs.gov/civil-rights/for-individuals/index.html.
---------------------------------------------------------------------------

    Finally, the Departments remind States that they must publish the 
date, time, and location of the public forum in a prominent location on 
the State's public website, at least 30 days prior to the date of the 
planned public forum. Consistent with Federal civil rights law, 
including section 1557 of the ACA, section 504 of the Rehabilitation 
Act of 1973, and Title II of the Americans with Disabilities Act, 
section 1332 waiver applications must be accessible to individuals with 
disabilities, including when such applications are posted online. To 
assist with ensuring website accessibility, States may look to national 
standards issued by the Architectural and Transportation Barriers 
Compliance Board (often referred to as ``section 508 standards''),\25\ 
or alternatively, to standards issued by the World Wide Web 
Consortium's (W3C).\26\
---------------------------------------------------------------------------

    \25\ For more information on section 508 standards, see https://www.section508.gov/develop/web-content/.
    \26\ For more information, see https://www.w3.org.
---------------------------------------------------------------------------

    Comment: One commenter who supported the proposed provisions also 
encouraged the Departments to consider the benefits of in-person 
meetings by gathering feedback from States to provide guidance on best 
practices, as in-person meetings may offer a greater level of 
participant engagement compared to virtual meetings (for example, in-
person public testimonies during the State legislative process can have 
more meaningful impact than virtual testimonies).
    Response: As noted in the proposed rule, the Departments considered 
whether to propose requiring States to hold at least one of the 
required public hearings for waiver applications in-person. Some States 
had previously expressed to the Departments and in public comments on 
this proposed rule that they appreciated the flexibility to virtually 
conduct public hearings and forums. As demonstrated over the last 
several years, States have successfully hosted post-award forums and 
public hearings for section 1332 waiver applications virtually to allow 
for meaningful public input. Furthermore, States continue to have the 
option to conduct all public hearings or post-award forums in-person. 
We encourage States to consider where other opportunities for consumer 
involvement exist. We believe that the proposed State and Federal 
public notice and comment processes, along with the post-award public 
forum provision, ensure meaningful opportunities for participation.
    Comment: One commenter suggested that the Departments provide 
flexibility on whether or not to conduct post-award forums due to what 
the commenter asserts is a lack of statutory authority, a history of 
low attendance at post-award forums, the belief that this input could 
be gathered at a much lower cost with written comments, and the view 
that the forums are duplicative of other State evaluation processes.
    Response: The Departments require post-award forums under their 
authority under section 1332 (a)(4)(B)(iv) and (v), 31 CFR 33.120, and 
45 CFR 155.1320 to require States to submit periodic reports and 
conduct periodic evaluations to monitor States' compliance with Federal 
and regulatory requirements for section 1332 waivers. Further, we 
believe that the public should have an opportunity

[[Page 26233]]

to comment at a post-award public forum as reflected in 31 CFR 
33.120(c) and 45 CFR 155.1320(c) and note that the requirement for a 
post-award forum is part of the periodic monitoring and evaluation of 
waivers. This comment is outside the scope of this rulemaking.

B. 42 CFR Parts 435 and 600

1. Increase State Flexibility in the Use of Income and Resource 
Disregards for Non-MAGI Populations (42 CFR 435.601)
    In the proposed rule, we proposed to provide States with greater 
flexibility to adopt income and/or resource disregards in determining 
financial eligibility under section 1902(r)(2) of the Act for 
individuals excepted from application of modified adjusted gross income 
financial methodologies (``MAGI-based methodologies'').
    Specifically, we proposed to remove the current 42 CFR 
435.601(d)(4), which was first adopted in 1993. As explained in the 
preamble to the proposed rule, the current rule describes the 
eligibility groups to which States may apply less restrictive 
methodologies and requires that any less restrictive methodologies 
elected by a State be ``comparable for all persons within each category 
of assistance within an eligibility group.'' As further explained in 42 
CFR 435.601(d)(4), for example, if the agency chooses to apply a less 
restrictive income or resource methodology to an eligibility group of 
aged individuals, it must apply that methodology to all aged 
individuals within the selected group.
    In the preamble to the proposed rule, we noted that, upon further 
review, we recognize that section 1902(r)(2)(A) of the Act does not 
expressly impose a comparability mandate, and that we did not identify 
a specific legal rationale for the mandate when we originally proposed 
and finalized 42 CFR 435.601(d)(4), 54 FR 39421, 39433 (September 26, 
1989); 58 FR 4908, 4919 (January 19, 1993). We thus concluded that the 
inclusion of the mandate was a policy choice. We further considered 
that section (3)(b) of the Sustaining Excellence in Medicaid Act of 
2019, Public Law 116-39, permits States to target income and/or 
resource disregards to people who need home and community-based 
services (HCBS).\27\ In light of this analysis, and given that States 
over the years have expressed interest in targeting income and/or 
resource disregards to subpopulations within eligibility groups, we 
proposed to eliminate paragraph (4) from 42 CFR 435.601(d).
---------------------------------------------------------------------------

    \27\ For further information, see CMS State Medicaid Director 
Letter 21-004, ``State Flexibilities to Determine Financial 
Eligibility for Individuals in Need of Home and Community-Based 
Services.'' https://www.medicaid.gov/sites/default/files/2021-12/smd21004_0.pdf.
---------------------------------------------------------------------------

    We explained that we believed that eliminating this provision 
would: increase State flexibility; provide States more options to 
extend eligibility to specific populations based on a State's 
circumstances; and enable States to achieve targeted expansions of 
coverage that best meet their needs, in contrast to the all-or-nothing 
approach for income and resource disregards that is effectively 
required by 42 CFR 435.601(d)(4). We acknowledged, however, that it was 
possible that eliminating the comparability requirement from 42 CFR 
435.601(d)(4) might enable a State to narrow an existing disregard that 
is broadly available to an eligibility group at present to discrete 
members of the group instead. We indicated that we had not received 
inquiries from States on the permissibility of such an approach, and 
that we believed States would utilize the elimination of 42 CFR 
435.601(d)(4) to expand eligibility. We invited comment on our 
proposal.
    Comment: We received many comments on our proposal. A majority of 
the commenters expressed either conditional or outright support for the 
proposal. Commenters agreed that the proposal would increase State 
flexibility and facilitate targeted expansions of Medicaid coverage. 
Commenters also indicated that the proposal would foster State 
development of innovative pathways to Medicaid eligibility and help 
low-income and vulnerable populations. Many commenters also agreed that 
States would most likely use the flexibility to increase Medicaid 
eligibility.
    However, many commenters who expressed support for the proposal 
(and some who opposed it) emphasized that, as the proposal leaves open 
the possibility that States could use the offered flexibility to narrow 
existing disregards, CMS should impose ``safeguards,'' ``guardrails,'' 
or ``no-harm'' requirements that would effectively prohibit the States' 
use of the flexibility in this manner. Some of these commenters noted 
that the proposal should not be finalized without these requirements. A 
number of commenters suggested that States' exercise of the flexibility 
be closely monitored, with one recommending that the proposal, if 
finalized, should be reexamined if States use it in a manner that 
adversely affects beneficiaries. A few commenters suggested that we 
were underestimating the likelihood of States using the additional 
flexibility to reduce eligibility, and that, as an example, such a 
course of action might be attractive for States facing budget pressure.
    Response: We appreciate the support we received for the general 
concept of providing States with additional flexibility in this area. 
However, given the significant concerns and comments that we received, 
we have decided that we should consider this proposal further and any 
necessary beneficiary protections, and we are not finalizing it at this 
time. As we indicated in the preamble to the proposed rule, we believe 
the proposal would provide States more options to extend eligibility. 
It is not our intent, however, to offer methods by which States may be 
likely to reduce it in practice or otherwise harm beneficiaries. We 
therefore intend to further evaluate the comments regarding the 
additional flexibility we proposed for States. We will consider the 
commenters' recommendations regarding the use of ``guardrails,'' or 
other beneficiary protections as well as the need for other 
modifications to our proposal that would address these commenters' 
concerns regarding adequate beneficiary protections in a proposal in 
the future.
    Comment: Many commenters who supported the proposal specifically 
noted its potential to benefit ``at-risk'' or ``vulnerable'' 
populations, people 65 years old and older, people with blindness or 
disabilities, ``dually eligible'' individuals, and prospective 
medically needy individuals. Commenters also indicated that the 
proposal could: allow States to develop innovative pathways to Medicaid 
eligibility; potentially ease the application process for applicants 
and thereby allow access to coverage more quickly; stabilize coverage 
for individuals who may experience minor changes in income and/or 
resources that might otherwise render them ineligible; and possibly 
produce important information about current eligibility barriers that 
could lead to broader reforms. One commenter suggested that the 
flexibility offered by the proposal would be a ``commonsense change'' 
that would allow States both to improve care for non-MAGI populations 
and address ``nonsensical, unintended situations that have resulted 
from different eligibility groups having different income and resource 
limits.''
    Response: We agree that the proposal could benefit the various 
populations described in these comments. We also agree that the 
proposal could facilitate State innovation in expanding Medicaid 
eligibility pathways and support more seamless transitions between 
eligibility groups. As explained above, however,

[[Page 26234]]

we are continuing to consider the comments we received and are not 
finalizing the proposal at this time.
    Comment: We received many comments that raised concerns with States 
using the additional flexibility offered by the proposal to reduce 
existing disregards. Nearly all commenters who raised these concerns 
recommended that, if we finalized the proposal, we should prohibit 
States from reducing or narrowing existing disregards for portions of 
eligibility groups. Some commenters also suggested that the regulatory 
text, if the proposal is finalized, should require that any targeting 
criteria be both grounded on a sound rationale and not discriminate 
based on race, gender, sexual orientation, disability, age, or health 
condition. A few other commenters recommended that, at the very least, 
we should include in the regulation a requirement that individuals who 
may lose eligibility due to a State reducing or narrowing existing 
disregards be offered a ``transitional period'' so that they are not 
immediately terminated and instead have time to potentially conform to 
new eligibility rules. A few commenters questioned the legal basis for 
our proposed change.
    Response: We appreciate this input. As we noted in the preamble to 
the proposed rule, State inquiries on the scope of the comparability 
rule in 42 CFR 435.601(d)(4) have generally centered on ideas on how to 
expand eligibility instead of reducing it. However, as we explained 
above, we are not finalizing our proposal at this time in order to 
further consider our proposal in light of these comments.
    Comment: A few commenters raised operational concerns about 
implementation of our proposal. A few others expressed concern that we 
should obtain additional input from interested parties before moving 
forward with our proposal. We also received comments not directly 
related to the proposal, such as comments asserting a need for periodic 
adjustments in resource standards and for working with States to 
identify the most appropriate resource standards for different Medicaid 
populations.
    Response: We appreciate this input. As explained above, we are not 
finalizing our proposal at this time to further consider our proposal 
considering the comments received on the proposal.
2. Changes to the Basic Health Program Regulations (42 CFR 600.320)
    Section 1331 of the Patient Protection and Affordable Care Act, as 
amended by the Health Care and Education Reconciliation Act of 2010 
(Pub. L. 111-152, enacted March 30, 2010), provides States with the 
option to operate a Basic Health Program (BHP). In the States that 
elect to operate a BHP, the State's BHP makes affordable health 
benefits coverage available for lawfully present individuals under age 
65 with household incomes between 133 and 200 percent of the Federal 
poverty level (FPL) (or in the case of a lawfully present non-citizen, 
ineligible for Medicaid or the Children's Health Insurance Program 
(CHIP) due to immigration status, with household incomes between zero 
and 200 percent of the FPL) who are not eligible for Medicaid, CHIP, or 
other minimum essential coverage. As of the date of this final rule, 
only Minnesota is implementing a BHP. Oregon has submitted a Blueprint 
with a proposed BHP implementation date of July 1, 2024.
    Under current 42 CFR 600.320(c), States must establish a uniform 
method of determining the effective date of eligibility for enrollment 
in a standard health plan followingeitherthe Medicaid process at42 CFR 
435.915exclusive of42 CFR 435.915(a) or the Exchange standards at45 CFR 
155.420(b)(1).
    Although the current BHP regulation provides States with some 
flexibility in establishing an effective eligibility date for 
enrollment, it does not permit a State to select an effective date of 
coverage standard for eligible individuals as of the first day of the 
month following the month of application or eligibility determination 
regardless of when they apply or are found eligible to enroll in a 
standard health plan in the BHP. We believe eligible individuals should 
have access to coverage as soon as feasible.
    While the Medicaid process at 42 CFR 435.915,exclusive of paragraph 
(a), allows for a State operating a BHP to have the earliest possible 
effective date for its enrollees, we understand that some States may 
have operational or regulatory constraints that do not allow them to 
follow the Medicaid process, but may be able to implement an effective 
date for all eligible applicants the first day of the month after the 
month in which the eligibility determination is made, regardless of 
which day of the month such determination occurs.
    We are finalizing the proposed rule to revise Sec.  600.320(c) to 
add a third option at paragraph (c)(3) that would allow a State 
operating a BHP to establish an effective date of eligibility for 
enrollment for all enrollees on the first day of the month following 
the month in which BHP eligibility is determined. Under Sec.  
600.320(c)(1), States would continue to have the option to follow the 
Exchange standards at 45 CFR 155.420(b)(1), and under 42 CFR 
600.320(c)(2), a State may follow Medicaid standards at 42 CFR 435.915 
exclusive of paragraph (a).
    We sought comment on the proposed additional option for determining 
the effective date of eligibility for enrollment in a standard health 
plan as well as an alternative option of allowing a State to establish 
its own uniform effective date policy.
    After consideration of comments and for the reasons outlined in the 
proposed rule and our responses to comments, we are finalizing this 
provision with the following modifications: we are adding Sec.  
600.320(c)(4) to specify that subject to HHS approval, a State may 
establish its own effective date of eligibility for enrollment policy 
as long as it is (1) no later than the first day of the second month 
following the date that an individual has been determined BHP-eligible; 
and (2) no more restrictive than Sec.  600.320(c)(1) through (3). We 
summarize and respond to public comments received on the proposed BHP 
effective date policy below.
    Comment: Many comments supported the additional flexibility for 
States operating a BHP to follow an effective date of eligibility for 
enrollment on the first day of the month following the month in which 
BHP eligibility is determined.
    Response: We appreciate the comments supporting our proposal, and 
for reasons discussed below, we are finalizing the regulation changes 
as proposed with only minor modifications.
    Comment: A few commenters supported an option to allow a State to 
establish its own effective date of eligibility policy, which we had 
sought comment on.
    Response: We appreciate the comments and agree that individual 
States' needs should be taken into account. Therefore, we are adding an 
option that allows a State to establish its own effective date of 
eligibility for enrollment policy. We have added Sec.  600.320(c)(4), 
which specifies that subject to HHS approval, a State may establish its 
own effective date of eligibility policy. We specify that a State-
developed effective date must be no later than the first date of the 
second month following the date that an individual has been determined 
BHP-eligible. In addition, the effective date of eligibility for 
enrollment must be no more restrictive than Sec.  600.320(c)(1) through 
(3). This effective date policy should provide greater flexibility for 
a State to meet its own population's needs

[[Page 26235]]

and not cause delays in coverage. We expect this request to be 
submitted via a Blueprint revision.
    Comment: One commenter questioned our discussion of the 
intersection of premium payments and enrollment in a BHP. The commenter 
was concerned that we were suggesting that the proposed option at Sec.  
600.320(c)(3) would require enrollment after an eligibility 
determination was made, regardless of whether a premium payment was 
received.
    Response: This regulation sets out the allowable effective dates of 
coverage but does not describe all of the processes surrounding 
enrollment of an individual into coverage. The lack of mention of 
premium payment was not intended to preclude a State from requiring 
premium payments prior to enrollment. States may require payment of 
premiums prior to enrolling an individual into BHP. A State that wishes 
to be particularly clear about its enrollment policies may adopt the 
option under Sec.  600.320(c)(4) and specify in the BHP Blueprint that 
it is providing additional time to account for a BHP-individual to pay 
a premium.

C. 45 CFR Part 153--Standards Related to Reinsurance, Risk Corridors, 
and HHS Risk Adjustment

    In subparts A, B, D, G, and H of part 153, we established standards 
for the administration of the risk adjustment program. The risk 
adjustment program is a permanent program created by section 1343 of 
the ACA that transfers funds from lower-than-average risk, risk 
adjustment covered plans to higher-than-average risk, risk adjustment 
covered plans in the individual, small group markets, or merged 
markets, inside and outside the Exchanges. In accordance with Sec.  
153.310(a), a State that is approved or conditionally approved by the 
Secretary to operate an Exchange may establish a risk adjustment 
program or have HHS do so on its behalf.\28\ HHS did not receive any 
requests from States to establish and operate a risk adjustment program 
for the 2025 benefit year. Therefore, HHS will operate risk adjustment 
in every State and the District of Columbia for the 2025 benefit year.
---------------------------------------------------------------------------

    \28\ 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 2024, the HHS-operated risk 
adjustment program is subject to the fiscal year 2024 
sequestration.\29\ The Federal Government's 2024 fiscal year began on 
October 1, 2023. Therefore, the HHS-operated risk adjustment program 
will be sequestered at a rate of 5.7 percent for payments made from 
fiscal year 2024 resources (that is, funds collected during the 2024 
fiscal year).
---------------------------------------------------------------------------

    \29\ Office of Management and Budget. (2023, March 13). OMB 
Report to the Congress on the BBEDCA 251A Sequestration for Fiscal 
Year 2024. https://www.whitehouse.gov/wp-content/uploads/2023/03/BBEDCA_Sequestration_Report_and_Letter_3-13-2024.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,\30\ as amended, and the underlying authority for the HHS-operated 
risk adjustment program, the funds that are sequestered in fiscal year 
2024 from the HHS-operated risk adjustment program will become 
available for payment to issuers in fiscal year 2025 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.
---------------------------------------------------------------------------

    \30\ Public Law 99-177 (1985).
---------------------------------------------------------------------------

    Additionally, we note that the Infrastructure Investment and Jobs 
Act \31\ amended section 251A(6) of the Balanced Budget and Emergency 
Deficit Control Act of 1985 and extended sequestration for the HHS-
operated risk adjustment program through fiscal year 2031 at a rate of 
5.7 percent per fiscal year.\32\
---------------------------------------------------------------------------

    \31\ Public Law 117-58, 135 Stat. 429 (2021).
    \32\ 2 U.S.C. 901a.
---------------------------------------------------------------------------

    After consideration of the comment and for the reasons outlined in 
the proposed rule, the HHS-operated risk adjustment program will 
sequester payments made from fiscal year 2024 resources at a rate of 
5.7 percent. We summarize and respond to the public comment received on 
the fiscal year 2024 sequestration rate below.
    Comment: One commenter acknowledged the sequestration rate for the 
HHS-operated risk adjustment program.
    Response: The HHS-operated risk adjustment program will sequester 
payments made from fiscal year 2024 resources at a rate of 5.7 percent.
2. HHS Risk Adjustment (Sec.  153.320)
    The HHS risk adjustment models predict plan liability for an 
average enrollee based on that person's age, sex, and diagnoses (also 
referred to as hierarchical condition categories (HCCs)), producing a 
risk score. The HHS risk adjustment methodology utilizes separate 
models for adults, children, and infants to account for clinical and 
cost differences in each age group. In the adult and child models, the 
relative risk assigned to an individual's age, sex, and diagnoses are 
added together to produce an individual risk score. Additionally, to 
calculate enrollee risk scores in the adult models, we added enrollment 
duration factors beginning with the 2017 benefit year,\33\ and 
prescription drug categories (RXCs) beginning with the 2018 benefit 
year.\34\ Starting with the 2023 benefit year, we removed the severity 
illness factors in the adult models and added interacted HCC count 
factors (that is, additional factors that express the presence of a 
severity or transplant HCC in combination with a specified number of 
total payment HCCs or HCC groups on the enrollee's record) to the adult 
and child models \35\ applicable to certain severity and transplant 
HCCs.\36\
---------------------------------------------------------------------------

    \33\ For the 2017 through 2022 benefit years, there is a set of 
11 binary enrollment duration factors in the adult models that 
decrease monotonically from one to 11 months, reflecting the 
increased annualized costs associated with fewer months of 
enrollments. See, for example, 81 FR 94071 through 94074. These 
enrollment duration factors were replaced beginning with the 2023 
benefit year with HCC-contingent enrollment duration factors for up 
to 6 months in the adult models. See, for example, 87 FR 27228 
through 27230.
    \34\ 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 models. See, for example, 83 FR 16941.
    \35\ See Table 1 for a list of factors in the adult models, and 
Table 2 for a list of factors in the child models.
    \36\ See 87 FR 27224 through 27228.
---------------------------------------------------------------------------

    Infant risk scores are determined by inclusion in one of 25 
mutually exclusive groups, based on the infant's maturity and the 
severity of diagnoses. If applicable, the risk score for adults, 
children, or infants is multiplied by a cost sharing reduction (CSR) 
adjustment 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 (PLRS)) within a geographic rating 
area is one of the inputs into the State payment transfer formula,\37\ 
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 for a given benefit year. Thus, the HHS risk

[[Page 26236]]

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

    \37\ The State payment transfer formula refers to the part of 
the Federally certified risk adjustment methodology that applies in 
States where HHS is responsible for operating the program. The 
formula calculates payments and charges at the State market risk 
pool level (prior to the calculation of the high-cost risk pool 
payment and charge terms that apply beginning with the 2018 benefit 
year). See, for example, 81 FR 94080.
---------------------------------------------------------------------------

a. Data for HHS Risk Adjustment Model Recalibration for the 2025 
Benefit Year
    In the HHS Notice of Benefit and Payment Parameters for 2025 
proposed rule (88 FR 82510, 82527), we proposed to recalibrate the 2025 
benefit year HHS risk adjustment models with the 2019, 2020, and 2021 
enrollee-level EDGE data. In the proposed rule, we explained the 
history of recalibrating the risk adjustment models with enrollee-level 
EDGE data and why we use three years of blended data for 
recalibration.\38\ Given this history and reasoning, we proposed to 
determine coefficients for the 2025 benefit year based on a blend of 
separately solved coefficients from the 2019, 2020, and 2021 benefit 
years' enrollee-level EDGE data, with the costs of services identified 
from the data trended between the relevant year of data and the 2025 
benefit year.\39\ The coefficients listed in Tables 1 through 6 reflect 
the use of trended 2019, 2020, and 2021 benefit year enrollee-level 
EDGE data, as well as other HHS risk adjustment model updates finalized 
in this final rule (including, for example, the pricing adjustment for 
Hepatitis C drugs).
---------------------------------------------------------------------------

    \38\ 88 FR 82510 at 82527 through 82528.
    \39\ As described in the 2016 Risk Adjustment White Paper 
(https://www.cms.gov/cciio/resources/forms-reports-and-other-resources/downloads/ra-march-31-white-paper-032416.pdf) and the 2017 
Payment Notice (81 FR 12218), we subdivide expenditures into 
traditional drugs, specialty drugs, medical services, and preventive 
services and determine trend factors separately for each category of 
expenditure. In determining these trend factors, we consult our 
actuarial experts, review relevant Unified Rate Review Template 
(URRT) submission data, analyze multiple years of enrollee-level 
EDGE data, and consult National Health Expenditure Accounts (NHEA) 
data as well as external reports and documents published by third 
parties. In this process, we aim to determine trends that reflect 
changes in cost of care rather than gross growth in expenditures. As 
such, we believe the trend factors we used for each expenditure 
category for the 2025 benefit year are appropriate for the most 
recent changes in cost of care that we have seen in the market.
---------------------------------------------------------------------------

    We sought comment on the proposal to determine 2025 benefit year 
coefficients for the HHS risk adjustment models based on a blend of 
separately solved coefficients from the 2019, 2020, and 2021 enrollee-
level EDGE data.
    After consideration of comments and for the reasons outlined in the 
proposed rule and our responses to comments, we are finalizing this 
approach as proposed. We summarize and respond to public comments 
received on the proposed enrollee-level EDGE data to be used for HHS 
risk adjustment model recalibration for the 2025 benefit year below.
    Comment: A few commenters supported utilizing the 2019, 2020, and 
2021 enrollee-level EDGE data to recalibrate the risk adjustment models 
for the 2025 benefit year as proposed. Other commenters opposed using 
these years of enrollee-level EDGE data due to concerns about the 
impact of the COVID-19 PHE on 2020 and 2021 benefit year enrollee-level 
EDGE data.
    Response: We are finalizing the use of the 2019, 2020, and 2021 
enrollee-level EDGE data to recalibrate the 2025 risk adjustment models 
as proposed. As detailed further below, our analyses found the 2020 and 
2021 benefit year enrollee-level EDGE data is sufficiently similar to 
prior years of enrollee-level EDGE data such that exclusion of these 
data years from the risk adjustment model recalibration is not 
warranted.
    We recognize that if a benefit year of enrollee-level EDGE data has 
significant changes that differentially impact certain conditions or 
populations relative to others or is sufficiently anomalous relative to 
expected future patterns of care, we should carefully consider what 
impact that benefit year of data could have if it is used in the annual 
model recalibration for the HHS-operated risk adjustment program.\40\ 
This includes consideration of whether to exclude or adjust that 
benefit year of data to increase the models' predictive validity or 
otherwise limit the impact of anomalous trends. For this reason, we 
conducted extensive analysis on the 2020 benefit year enrollee-level 
EDGE data to consider its inclusion in the recalibration of the 2024 
benefit year risk adjustment models. In the 2024 Payment Notice 
proposed rule \41\ and final rule \42\ we discussed our analysis of the 
2020 benefit year data to identify possible impacts of the COVID-19 
PHE.\43\ Likewise, when we were developing the proposal for 
recalibration of the 2025 benefit year risk adjustment models, we 
conducted similar analyses on the 2021 benefit year enrollee-level EDGE 
data as we did to the 2020 benefit year enrollee-level EDGE data to 
examine the potential impact of the COVID-19 PHE. We did not find any 
notable anomalous trends, especially when considering that every year 
of data can be unique, and therefore, some level of deviation from year 
to year is expected. Specifically, our analysis found:
---------------------------------------------------------------------------

    \40\ Since the start of model calibration for the HHS risk 
adjustment models in benefit year 2014, the COVID-19 PHE has been 
the only such situation to date. Other events and policy changes 
have not risen to the same level of uniqueness or impact.
    \41\ 87 FR 78214 through 78218.
    \42\ 88 FR 25749 through 25754.
    \43\ This analysis included assessing how the 2020 benefit year 
enrollee-level EDGE recalibration data compares to 2019 benefit year 
enrollee-level EDGE recalibration data.
---------------------------------------------------------------------------

     The total sample size in the recalibration data set was 
similar between the 2019, 2020, and 2021 benefit years, with the 
individual market at the national level seeing an increase in 
enrollment in the 2021 benefit year and the small group market at the 
national level seeing a slight decrease in enrollment in the 2021 
benefit year.
     In the 2021 EDGE enrollee-level recalibration data set, 
PMPM spending increased substantially relative to the 2020 benefit 
year. The increased percentage was similar for institutional and 
professional services, preventive services, and drugs. While the year-
over-year increase was larger than usual, the 2-year increase in 
spending between 2019 and 2021 was more consistent with historical 
trends. For both 2020 and 2021, year-over-year spending changes were 
consistent across enrollee risk factors and thus did not skew the 
relative factors used in the HHS risk adjustment models.
     Across all data submitted through issuer's EDGE servers 
between 2019 to 2020 benefit years for enrollees in our recalibration 
sample, there was a 3,681 percent increase in claims with telehealth 
services, whereas between the 2020 and 2021 benefit years, we observed 
a 1.25 percent increase in claims with telehealth services. Thus, use 
of telehealth services remained much higher in the 2021 benefit year 
than in the 2019 benefit year. While it is likely the continued higher 
use of telehealth services in 2021 was in part a response to the 
ongoing COVID pandemic in 2021, it is also at least in part due to 
changes in patterns of care that can be expected to continue into 
future benefit years. We therefore expect that the use of telehealth 
services may continue at a level somewhere between the higher levels 
observed in the 2020 and 2021 benefit years and the lower 2019 benefit 
year levels in the 2025 benefit year, as would be appropriately 
reflected by including all three data years in the 2025 EDGE data 
recalibration.
     The percentage of enrollees with one or more HCCs was 
similar between the 2019 and 2020 benefit year enrollee-level EDGE 
recalibration data. The percentage of enrollees with one or more HCC 
increased slightly between the 2020 and 2021 benefit year enrollee-
level EDGE recalibration data sets in

[[Page 26237]]

both the recalibration and full data sets, as is the usual historical 
trend.
     Individual HCC frequencies and costs generally remained 
stable between the 2019, 2020, and 2021 benefit year enrollee-level 
EDGE recalibration data sets, even for the HCCs related to the severe 
manifestations of COVID-19. One exception was a notable increase in 
frequency for HCC 127 Cardio-Respiratory Failure and Shock, Including 
Respiratory Distress Syndromes, which was likely coded for cases in 
which acute respiratory distress syndrome (ARDS) was a manifestation of 
COVID-19, but relative allowed charges, and therefore, risk adjustment 
model coefficients, for HCC 127 (Cardio-Respiratory Failure and Shock, 
Including Respiratory Distress Syndromes) remained similar in 2021 
compared to 2019 and 2020. We expect that as least some severe 
manifestations of COVID-19 are likely to continue to occur through the 
2025 benefit year and those enrollees would continue to receive HCC 127 
(Cardio-Respiratory Failure and Shock, Including Respiratory Distress 
Syndromes).
     RXC frequencies and costs were generally stable between 
the 2019, 2020, and 2021 benefit year enrollee-level EDGE recalibration 
data sets, with the exception of RXC 10 Cystic Fibrosis Agents, for 
which a new drug was introduced that increased costs in the 2020 and 
2021 data compared to the 2019 data. We expect the continued use of 
this new drug to cause RXC 10 (Cystic Fibrosis Agents) costs to remain 
at the higher levels reflected in the 2020 and 2021 benefit years 
through the 2025 benefit year.
     The coefficients for the 2021 benefit year enrollee-level 
EDGE recalibration data are similar to the 2019 and 2020 benefit year's 
coefficients and are consistent with typical changes in coefficients 
for new years of data. A major benefit of blending separately solved 
models across three benefit years of data (that is, 2019, 2020, and 
2021) is that unique features specific to one benefit year are captured 
but not over-emphasized.
    Thus, after analyzing our results, we concluded there were no 
significant anomalies in the 2021 benefit year enrollee-level EDGE data 
to warrant precluding its inclusion from the 2025 benefit year HHS risk 
adjustment model recalibration. This is consistent with how we 
ultimately concluded there were no significant anomalies in the 2020 
benefit year enrollee-level EDGE data to warrant precluding its 
inclusion from risk adjustment model recalibration.\44\ In fact, the 
analysis we conducted confirmed that its inclusion was within the range 
of previous year-to-year coefficient changes, and that many of the 
changes observed are likely to persist through the 2025 benefit year, 
as intended when transitioning to more recent years of data in model 
recalibration. Further, the blending of the coefficients from the 
separately solved models for benefit years 2020 and 2021, with benefit 
year 2019, also helps promote stability and we believe would 
sufficiently account for any differences resulting from the COVID-19 
PHE.
---------------------------------------------------------------------------

    \44\ 87 FR 25749 through 25754.
---------------------------------------------------------------------------

    After consideration of comments and for the reasons outlined in the 
proposed rule and our responses to comments above, we are finalizing 
the approach for recalibrating the HHS risk adjustment models for the 
2025 benefit year as proposed. The model coefficients for the 2025 
benefit year listed in Tables 1 through 6 of this final rule are based 
on a blend of equally-weighted, separately solved coefficients from the 
2019, 2020, and 2021 benefit years of enrollee-level EDGE data for all 
coefficients.
b. Pricing Adjustment for the Hepatitis C Drugs
    For the 2025 benefit year, we proposed to continue applying a 
market pricing adjustment to the plan liability associated with 
Hepatitis C drugs in the HHS risk adjustment models.\45\ Since the 2020 
benefit year HHS risk adjustment models, we have been making a market 
pricing adjustment to the plan liability associated with Hepatitis C 
drugs to reflect future market pricing prior to solving for 
coefficients for the models.\46\ The purpose of this market pricing 
adjustment is to account for significant pricing changes between the 
data years used for recalibrating the models and the applicable benefit 
year of risk adjustment as a result of the introduction of new and 
generic Hepatitis C drugs.\47\
---------------------------------------------------------------------------

    \45\ See, for example, 84 FR 17463 through 17466.
    \46\ The Hepatitis C drugs market pricing adjustment to plan 
liability is applied for all enrollees taking drugs mapped to RXC 2: 
Anti-Hepatitis C (HCV) Agents, Direct Acting Agents in the data used 
for recalibration.
    \47\ Silseth, S., & Shaw, H. (2021). Analysis of prescription 
drugs for the treatment of hepatitis C in the United States. 
Milliman White Paper. https://www.milliman.com/-/media/milliman/pdfs/2021-articles/6-11-21-analysis-prescription-drugs-treatment-hepatitis-c-us.ashx.
---------------------------------------------------------------------------

    We sought comment on our proposal to apply a market pricing 
adjustment to the plan liability associated with Hepatitis C drugs for 
the 2025 benefit year.
    After consideration of comments and for the reasons outlined in the 
proposed rule and our responses to comments, we are finalizing this 
adjustment as proposed. We summarize and respond to public comments 
received on the proposed pricing adjustment for Hepatitis C drugs 
below.
    Comment: A few commenters supported the proposed Hepatitis C 
pricing adjustment in the risk adjustment models and noted that a 
pricing adjustment was still warranted for Hepatitis C drugs. Other 
commenters expressed concern about the Hepatitis C pricing adjustment 
and cautioned against reducing the Hepatitis C RXC coefficient more 
than the expected decrease in cost as reducing the coefficient in such 
a manner may incentivize issuers to reduce the availability of 
treatment.
    Response: We agree with commenters that continuing to apply the 
Hepatitis C pricing adjustment in the 2025 benefit year HHS risk 
adjustment models remains appropriate and are finalizing the Hepatitis 
C pricing adjustment as proposed. As discussed in the proposed rule, as 
part of the 2025 benefit year model recalibration analysis, we 
reassessed the cost trend for Hepatitis C drugs using available 
enrollee-level EDGE data (including 2021 benefit year data) to consider 
whether the adjustment was still needed and if it is still needed, 
whether it should be modified. Specifically, although generic Hepatitis 
C drugs became available on the market in 2019, and therefore were 
available for all 3 years of data (2019-2021) used for the 2025 benefit 
year model recalibration, our analysis of the data continued to observe 
that costs for Hepatitis C drugs are not increasing at the same rate as 
other drug costs between the recalibration data years and the 
applicable benefit year of risk adjustment, likely due to continued 
increases in the proportion of Hepatitis C drug prescriptions for 
generic versions of the drugs. As such, we do not believe that the 
trends used to reflect growth in the prescription drug costs due to 
inflation and related factors for recalibrating the models would 
appropriately reflect the average cost of Hepatitis C treatments 
expected in the 2025 benefit year. Therefore, we believe a market 
pricing adjustment specific to Hepatitis C drugs in the HHS risk 
adjustment models for the 2025 benefit year is necessary to account for 
the lack of growth in Hepatitis C drug prices relative to other 
prescription drugs in the market between the data years used for 
recalibrating the models and the

[[Page 26238]]

applicable benefit year of risk adjustment due to the introduction of 
new and generic Hepatitis C drugs in recent years. In making this 
determination, HHS consulted its actuarial experts and analyzed the 
most recent enrollee-level EDGE data available to further assess the 
changing costs associated with Hepatitis C enrollees. In developing the 
Hepatitis C RXC pricing adjustment for the 2025 benefit year, we 
considered that we had moved into the data years (2019-2021) under 
which the generic Hepatitis C drugs were available in the market for 
all of the data years used for model recalibration, and therefore, to 
avoid over-adjusting the Hepatitis C RXC, our pricing adjustment for 
the 2025 benefit year does not reduce the coefficient as much as prior 
benefit years. Instead, our pricing adjustment trends the Hepatitis C 
drugs at a lower rate than the other prescription drugs in the risk 
adjustment models to reflect the lack of cost increases observed in the 
Hepatitis C drugs in 2021.
    Thus, we believe that the Hepatitis C pricing adjustment we are 
finalizing accurately captures the anticipated costs of Hepatitis C 
drugs for the 2025 benefit year using the most recently available 
enrollee-level EDGE 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. 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 and plan to propose phasing out the 
market adjustment if and when appropriate.
c. List of Factors To Be Employed in the HHS Risk Adjustment Models 
(Sec.  153.320)
    The 2025 benefit year HHS risk adjustment model factors resulting 
from the equally weighted (averaged) blended factors from separately 
solved models using the 2019, 2020, and 2021 enrollee-level EDGE data 
are shown in Tables 1 through 6. The adult, child, and infant models 
have been adjusted to account for the high-cost risk pool payment 
parameters by removing 60 percent of costs above the $1 million 
threshold.\48\ Table 1 contains factors for each adult model, including 
the age-sex, HCCs, RXCs, RXC-HCC interactions, interacted HCC counts, 
and enrollment duration coefficients. Table 2 contains the factors for 
each child model, including the age-sex, HCCs, and interacted HCC 
counts coefficients. Table 3 lists the HCCs selected for the interacted 
HCC counts factors that would apply to the adult and child models. 
Table 4 contains the factors for each infant model. Tables 5 and 6 
contain the HCCs included in the infant models' maturity and severity 
categories, respectively.
---------------------------------------------------------------------------

    \48\ We did not propose any changes to the high-cost risk pool 
parameters for the 2025 benefit year. Therefore, we are maintaining 
the $1 million attachment point and 60 percent coinsurance rate for 
the 2025 benefit year.

                                       Table 1--Adult HHS Risk Adjustment Model Factors for the 2025 Benefit Year
--------------------------------------------------------------------------------------------------------------------------------------------------------
        HCC or RXC No.                           Factor                      Platinum          Gold           Silver          Bronze       Catastrophic
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                   Demographic Factors
--------------------------------------------------------------------------------------------------------------------------------------------------------
                               Age 21-24, Male..........................           0.189           0.128           0.086           0.057           0.056
                               Age 25-29, Male..........................           0.197           0.133           0.088           0.056           0.055
                               Age 30-34, Male..........................           0.230           0.160           0.110           0.073           0.072
                               Age 35-39, Male..........................           0.249           0.174           0.119           0.077           0.076
                               Age 40-44, Male..........................           0.282           0.203           0.143           0.095           0.094
                               Age 45-49, Male..........................           0.312           0.228           0.164           0.112           0.111
                               Age 50-54, Male..........................           0.381           0.290           0.218           0.161           0.160
                               Age 55-59, Male..........................           0.428           0.330           0.254           0.191           0.189
                               Age 60-64, Male..........................           0.472           0.365           0.282           0.212           0.210
                               Age 21-24, Female........................           0.285           0.196           0.127           0.078           0.076
                               Age 25-29, Female........................           0.308           0.212           0.137           0.082           0.081
                               Age 30-34, Female........................           0.370           0.268           0.188           0.126           0.125
                               Age 35-39, Female........................           0.428           0.323           0.239           0.174           0.172
                               Age 40-44, Female........................           0.482           0.372           0.284           0.211           0.209
                               Age 45-49, Female........................           0.481           0.369           0.277           0.200           0.198
                               Age 50-54, Female........................           0.519           0.404           0.307           0.226           0.224
                               Age 55-59, Female........................           0.482           0.368           0.271           0.191           0.189
                               Age 60-64, Female........................           0.475           0.358           0.261           0.179           0.176
HCC001.......................  HIV/AIDS.................................           0.342           0.265           0.234           0.197           0.196
HCC002.......................  Septicemia, Sepsis, Systemic Inflammatory           9.075           8.875           8.830           8.740           8.739
                                Response Syndrome/Shock.
HCC003.......................  Central Nervous System Infections, Except           8.379           8.276           8.229           8.151           8.149
                                Viral Meningitis.
HCC004.......................  Viral or Unspecified Meningitis..........           8.328           8.217           8.161           8.071           8.068
HCC006.......................  Opportunistic Infections.................           8.532           8.478           8.419           8.333           8.330
HCC008.......................  Metastatic Cancer........................          23.002          22.629          22.616          22.506          22.506
HCC009.......................  Lung, Brain, and Other Severe Cancers,             12.575          12.312          12.271          12.156          12.155
                                Including Pediatric Acute Lymphoid
                                Leukemia.
HCC010.......................  Non-Hodgkin Lymphomas and Other Cancers             5.705           5.535           5.473           5.362           5.360
                                and Tumors.
HCC011.......................  Colorectal, Breast (Age < 50), Kidney,              3.651           3.476           3.405           3.283           3.280
                                and Other Cancers.
HCC012.......................  Breast (Age 50+) and Prostate Cancer,               2.424           2.295           2.230           2.129           2.127
                                Benign/Uncertain Brain Tumors, and Other
                                Cancers and Tumors.
HCC013.......................  Thyroid Cancer, Melanoma,                           0.967           0.875           0.785           0.677           0.674
                                Neurofibromatosis, and Other Cancers and
                                Tumors.
HCC018.......................  Pancreas Transplant Status...............           6.320           6.253           6.239           6.228           6.219
HCC019.......................  Diabetes with Acute Complications........           0.259           0.214           0.172           0.130           0.128
HCC020.......................  Diabetes with Chronic Complications......           0.259           0.214           0.172           0.130           0.128
HCC021.......................  Diabetes without Complication............           0.259           0.214           0.172           0.130           0.128
HCC022.......................  Type 1 Diabetes Mellitus, add-on to                 0.311           0.282           0.244           0.180           0.178
                                Diabetes HCCs 19-21.
HCC023.......................  Protein-Calorie Malnutrition.............          11.342          11.221          11.179          11.105          11.104
HCC026.......................  Mucopolysaccharidosis....................          23.821          23.642          23.619          23.556          23.556
HCC027.......................  Lipidoses and Glycogenosis...............          23.821          23.642          23.619          23.556          23.556
HCC029.......................  Amyloidosis, Porphyria, and Other                   6.512           6.413           6.373           6.305           6.303
                                Metabolic Disorders.

[[Page 26239]]

 
HCC030.......................  Adrenal, Pituitary, and Other Significant           1.314           1.237           1.184           1.108           1.104
                                Endocrine Disorders.
HCC034.......................  Liver Transplant Status/Complications....           6.014           6.070           6.119           6.189           6.189
HCC035_1 \a\.................  Acute Liver Failure/Disease, Including              7.464           7.288           7.254           7.181           7.184
                                Neonatal Hepatitis.
HCC035_2.....................  Chronic Liver Failure/End-Stage Liver               2.319           2.160           2.125           2.042           2.041
                                Disorders.
HCC036.......................  Cirrhosis of Liver.......................           0.613           0.534           0.490           0.417           0.416
HCC037_1.....................  Chronic Viral Hepatitis C................           0.514           0.454           0.403           0.348           0.347
HCC037_2.....................  Chronic Hepatitis, Except Chronic Viral             0.514           0.454           0.403           0.348           0.347
                                Hepatitis C.
HCC041.......................  Intestine Transplant Status/Complications           6.014           6.070           6.119           6.189           6.189
HCC042.......................  Peritonitis/Gastrointestinal Perforation/          11.053          10.907          10.903          10.857          10.857
                                Necrotizing Enterocolitis.
HCC045.......................  Intestinal Obstruction...................           5.038           4.837           4.783           4.669           4.668
HCC046.......................  Chronic Pancreatitis.....................           2.467           2.298           2.253           2.167           2.166
HCC047.......................  Acute Pancreatitis.......................           2.467           2.298           2.251           2.147           2.146
HCC048.......................  Inflammatory Bowel Disease...............           1.108           1.023           0.944           0.820           0.816
HCC054.......................  Necrotizing Fasciitis....................           8.617           8.468           8.446           8.388           8.388
HCC055.......................  Bone/Joint/Muscle Infections/Necrosis....           4.567           4.401           4.381           4.321           4.322
HCC056.......................  Rheumatoid Arthritis and Specified                  1.082           0.993           0.930           0.845           0.843
                                Autoimmune Disorders.
HCC057.......................  Systemic Lupus Erythematosus and Other              0.399           0.329           0.249           0.146           0.142
                                Autoimmune Disorders.
HCC061.......................  Osteogenesis Imperfecta and Other                   1.924           1.801           1.740           1.639           1.637
                                Osteodystrophies.
HCC062.......................  Congenital/Developmental Skeletal and               1.924           1.801           1.740           1.639           1.637
                                Connective Tissue Disorders.
HCC063.......................  Cleft Lip/Cleft Palate...................           0.922           0.819           0.759           0.678           0.676
HCC066.......................  Hemophilia...............................          72.761          72.491          72.466          72.379          72.380
HCC067.......................  Myelodysplastic Syndromes and                      11.237          11.118          11.090          11.024          11.020
                                Myelofibrosis.
HCC068.......................  Aplastic Anemia..........................          11.237          11.118          11.090          11.024          11.020
HCC069.......................  Acquired Hemolytic Anemia, Including               11.237          11.118          11.090          11.024          11.020
                                Hemolytic Disease of Newborn.
HCC070 \b\...................  Sickle Cell Anemia (Hb-SS) and                      1.690           1.607           1.553           1.479           1.477
                                Thalassemia Beta Zero.
HCC071 \b\...................  Sickle-Cell Disorders, Except Sickle-Cell           1.690           1.607           1.553           1.479           1.477
                                Anemia (Hb-SS) and Thalassemia Beta
                                Zero; Beta Thalassemia Major.
HCC073.......................  Combined and Other Severe                           4.065           3.975           3.947           3.887           3.885
                                Immunodeficiencies.
HCC074.......................  Disorders of the Immune Mechanism........           4.065           3.975           3.947           3.887           3.885
HCC075.......................  Coagulation Defects and Other Specified             2.148           2.068           2.020           1.947           1.946
                                Hematological Disorders.
HCC081.......................  Drug Use with Psychotic Complications....           1.602           1.472           1.377           1.233           1.229
HCC082.......................  Drug Use Disorder, Moderate/Severe, or              1.602           1.472           1.377           1.233           1.229
                                Drug Use with Non-Psychotic
                                Complications.
HCC083.......................  Alcohol Use with Psychotic Complications.           0.902           0.788           0.716           0.612           0.610
HCC084.......................  Alcohol Use Disorder, Moderate/Severe, or           0.902           0.788           0.716           0.612           0.610
                                Alcohol Use with Specified Non-Psychotic
                                Complications.
HCC087_1.....................  Schizophrenia............................           2.227           2.063           1.986           1.864           1.862
HCC087_2.....................  Delusional and Other Specified Psychotic            2.190           2.030           1.951           1.820           1.818
                                Disorders, Unspecified Psychosis.
HCC088.......................  Major Depressive Disorder, Severe, and              0.969           0.871           0.786           0.672           0.669
                                Bipolar Disorders.
HCC090.......................  Personality Disorders....................           0.663           0.586           0.492           0.379           0.376
HCC094.......................  Anorexia/Bulimia Nervosa.................           2.000           1.894           1.827           1.722           1.719
HCC096.......................  Prader-Willi, Patau, Edwards, and                   8.590           8.557           8.527           8.484           8.481
                                Autosomal Deletion Syndromes.
HCC097.......................  Down Syndrome, Fragile X, Other                     0.938           0.875           0.826           0.764           0.763
                                Chromosomal Anomalies, and Congenital
                                Malformation Syndromes.
HCC102.......................  Autistic Disorder........................           0.718           0.641           0.553           0.455           0.452
HCC103.......................  Pervasive Developmental Disorders, Except           0.663           0.586           0.492           0.379           0.376
                                Autistic Disorder.
HCC106.......................  Traumatic Complete Lesion Cervical Spinal           9.112           8.957           8.905           8.806           8.805
                                Cord.
HCC107.......................  Quadriplegia.............................           9.112           8.957           8.905           8.806           8.805
HCC108.......................  Traumatic Complete Lesion Dorsal Spinal             6.380           6.241           6.187           6.089           6.087
                                Cord.
HCC109.......................  Paraplegia...............................           6.380           6.241           6.187           6.089           6.087
HCC110.......................  Spinal Cord Disorders/Injuries...........           5.153           4.975           4.928           4.826           4.824
HCC111.......................  Amyotrophic Lateral Sclerosis and Other             5.090           4.946           4.876           4.755           4.753
                                Anterior Horn Cell Disease.
HCC112.......................  Quadriplegic Cerebral Palsy..............           0.730           0.629           0.565           0.467           0.465
HCC113.......................  Cerebral Palsy, Except Quadriplegic......           0.424           0.355           0.299           0.219           0.217
HCC114.......................  Spina Bifida and Other Brain/Spinal/                1.205           1.120           1.063           0.972           0.969
                                Nervous System Congenital Anomalies.
HCC115.......................  Myasthenia Gravis/Myoneural Disorders and           5.216           5.134           5.117           5.076           5.076
                                Guillain-Barre Syndrome/Inflammatory and
                                Toxic Neuropathy.
HCC117.......................  Muscular Dystrophy.......................           1.393           1.304           1.236           1.136           1.134
HCC118.......................  Multiple Sclerosis.......................           2.218           2.101           2.042           1.944           1.941
HCC119.......................  Parkinson's, Huntington's, and                      1.393           1.304           1.236           1.136           1.134
                                Spinocerebellar Disease, and Other
                                Neurodegenerative Disorders.
HCC120.......................  Seizure Disorders and Convulsions........           1.040           0.948           0.884           0.792           0.789
HCC121.......................  Hydrocephalus............................           9.585           9.491           9.440           9.362           9.360
HCC122 \c\...................  Nontraumatic Coma, Except Diabetic,                10.181          10.044           9.986           9.886           9.884
                                Hepatic, or Hypoglycemic; Nontraumatic
                                Brain Compression/Anoxic Damage.
HCC123.......................  Narcolepsy and Cataplexy.................           4.533           4.405           4.340           4.237           4.235
HCC125.......................  Respirator Dependence/Tracheostomy Status          21.869          21.665          21.623          21.532          21.534
HCC126.......................  Respiratory Arrest.......................           8.558           8.341           8.300           8.210           8.209
HCC127.......................  Cardio-Respiratory Failure and Shock,               8.558           8.341           8.300           8.210           8.209
                                Including Respiratory Distress Syndromes.
HCC128.......................  Heart Assistive Device/Artificial Heart..          17.404          17.301          17.262          17.214          17.224
HCC129.......................  Heart Transplant Status/Complications....          17.404          17.301          17.262          17.214          17.224

[[Page 26240]]

 
HCC130.......................  Heart Failure............................           1.896           1.809           1.773           1.707           1.705
HCC131.......................  Acute Myocardial Infarction..............           4.955           4.737           4.720           4.652           4.653
HCC132.......................  Unstable Angina and Other Acute Ischemic            3.690           3.489           3.452           3.355           3.355
                                Heart Disease.
HCC135.......................  Heart Infection/Inflammation, Except                8.848           8.756           8.695           8.602           8.599
                                Rheumatic.
HCC137.......................  Hypoplastic Left Heart Syndrome and Other           2.122           2.033           1.975           1.895           1.893
                                Severe Congenital Heart Disorders.
HCC138.......................  Major Congenital Heart/Circulatory                  2.122           2.033           1.975           1.895           1.893
                                Disorders.
HCC139.......................  Atrial and Ventricular Septal Defects,              2.122           2.033           1.975           1.895           1.893
                                Patent Ductus Arteriosus, and Other
                                Congenital Heart/Circulatory Disorders.
HCC142.......................  Specified Heart Arrhythmias..............           1.921           1.819           1.752           1.645           1.645
HCC145.......................  Intracranial Hemorrhage..................          10.648          10.490          10.444          10.356          10.355
HCC146.......................  Ischemic or Unspecified Stroke...........           1.428           1.314           1.282           1.212           1.212
HCC149.......................  Cerebral Aneurysm and Arteriovenous                 2.218           2.102           2.044           1.944           1.941
                                Malformation.
HCC150.......................  Hemiplegia/Hemiparesis...................           3.309           3.190           3.178           3.134           3.134
HCC151.......................  Monoplegia, Other Paralytic Syndromes....           2.494           2.386           2.342           2.264           2.262
HCC153.......................  Atherosclerosis of the Extremities with             7.988           7.837           7.849           7.827           7.828
                                Ulceration or Gangrene.
HCC154.......................  Vascular Disease with Complications......           5.128           4.989           4.949           4.869           4.868
HCC156.......................  Pulmonary Embolism and Deep Vein                    7.621           7.535           7.461           7.345           7.341
                                Thrombosis.
HCC158.......................  Lung Transplant Status/Complications.....          11.099          10.994          10.963          10.924          10.930
HCC159.......................  Cystic Fibrosis..........................           4.156           4.021           3.969           3.883           3.881
HCC160.......................  Chronic Obstructive Pulmonary Disease,              0.643           0.567           0.491           0.395           0.392
                                Including Bronchiectasis.
HCC161_1.....................  Severe Asthma............................           0.643           0.567           0.491           0.395           0.392
HCC161_2.....................  Asthma, Except Severe....................           0.643           0.567           0.491           0.395           0.392
HCC162.......................  Fibrosis of Lung and Other Lung Disorders           1.615           1.529           1.476           1.391           1.388
HCC163.......................  Aspiration and Specified Bacterial                  7.187           7.124           7.105           7.067           7.067
                                Pneumonias and Other Severe Lung
                                Infections.
HCC174.......................  Exudative Macular Degeneration...........           1.224           1.097           1.010           0.878           0.874
HCC183.......................  Kidney Transplant Status/Complications...           6.320           6.253           6.239           6.228           6.219
HCC184.......................  End Stage Renal Disease..................          20.669          20.237          20.330          20.158          20.046
HCC187.......................  Chronic Kidney Disease, Stage 5..........           0.773           0.689           0.685           0.645           0.633
HCC188.......................  Chronic Kidney Disease, Severe (Stage 4).           0.773           0.689           0.685           0.645           0.633
HCC203.......................  Ectopic and Molar Pregnancy..............           1.850           1.673           1.534           1.319           1.314
HCC204.......................  Miscarriage with Complications...........           0.646           0.565           0.439           0.260           0.254
HCC205.......................  Miscarriage with No or Minor                        0.646           0.565           0.439           0.260           0.254
                                Complications.
HCC207.......................  Pregnancy with Delivery with Major                  3.756           3.470           3.289           2.991           2.985
                                Complications.
HCC208.......................  Pregnancy with Delivery with                        3.756           3.470           3.289           2.991           2.985
                                Complications.
HCC209.......................  Pregnancy with Delivery with No or Minor            2.769           2.554           2.335           1.972           1.962
                                Complications.
HCC210.......................  (Ongoing) Pregnancy without Delivery with           0.815           0.714           0.561           0.370           0.363
                                Major Complications.
HCC211.......................  (Ongoing) Pregnancy without Delivery with           0.530           0.454           0.318           0.170           0.166
                                Complications.
HCC212.......................  (Ongoing) Pregnancy without Delivery with           0.018           0.005           0.000           0.000           0.000
                                No or Minor Complications.
HCC217.......................  Chronic Ulcer of Skin, Except Pressure...           1.557           1.464           1.433           1.375           1.374
HCC218.......................  Extensive Third-Degree Burns.............          23.714          23.524          23.474          23.384          23.383
HCC219.......................  Major Skin Burn or Condition.............           2.604           2.484           2.428           2.345           2.344
HCC223.......................  Severe Head Injury.......................          18.201          18.057          17.990          17.882          17.879
HCC226.......................  Hip and Pelvic Fractures.................           8.018           7.783           7.765           7.688           7.688
HCC228.......................  Vertebral Fractures without Spinal Cord             4.277           4.116           4.047           3.925           3.922
                                Injury.
HCC234.......................  Traumatic Amputations and Amputation                4.861           4.706           4.682           4.619           4.618
                                Complications.
HCC251.......................  Stem Cell, Including Bone Marrow,                  18.571          18.584          18.547          18.531          18.535
                                Transplant Status/Complications.
HCC253.......................  Artificial Openings for Feeding or                  5.697           5.584           5.563           5.511           5.511
                                Elimination.
HCC254.......................  Amputation Status, Upper Limb or Lower              0.936           0.835           0.799           0.738           0.736
                                Limb.
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                              Interacted HCC Counts Factors
--------------------------------------------------------------------------------------------------------------------------------------------------------
                               Severe illness, 1 payment HCC............          -6.014          -6.070          -6.119          -6.189          -6.189
                               Severe illness, 2 payment HCCs...........          -5.733          -5.806          -5.833          -5.886          -5.886
                               Severe illness, 3 payment HCCs...........          -4.904          -4.952          -4.891          -4.846          -4.844
                               Severe illness, 4 payment HCCs...........          -4.190          -4.178          -4.033          -3.871          -3.865
                               Severe illness, 5 payment HCCs...........          -3.522          -3.432          -3.216          -2.954          -2.945
                               Severe illness, 6 payment HCCs...........          -3.024          -2.835          -2.557          -2.202          -2.192
                               Severe illness, 7 payment HCCs...........          -2.432          -2.116          -1.780          -1.330          -1.318
                               Severe illness, 8 payment HCCs...........          -2.179          -1.784          -1.416          -0.910          -0.896
                               Severe illness, 9 payment HCCs...........          -0.287           0.253           0.676           1.279           1.294
                               Severe illness, 10 or more payment HCCs..           7.398           8.299           8.836           9.657           9.679
                               Transplant severe illness, 4 payment HCCs           3.792           3.704           3.651           3.531           3.516
                               Transplant severe illness, 5 payment HCCs           7.054           6.949           6.906           6.792           6.775
                               Transplant severe illness, 6 payment HCCs          12.584          12.463          12.431          12.324          12.304
                               Transplant severe illness, 7 payment HCCs          15.636          15.506          15.473          15.364          15.346
                               Transplant severe illness, 8 or more               31.955          31.916          31.908          31.845          31.825
                                payment HCCs.
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                               Enrollment Duration Factors
--------------------------------------------------------------------------------------------------------------------------------------------------------
                               Enrolled for 1 month, at least one                 11.208           9.742           8.808           7.844           7.818
                                payment HCC.
                               Enrolled for 2 months, at least one                 5.197           4.458           3.958           3.479           3.466
                                payment HCC.
                               Enrolled for 3 months, at least one                 3.378           2.898           2.549           2.224           2.216
                                payment HCC.
                               Enrolled for 4 months, at least one                 2.129           1.799           1.545           1.313           1.307
                                payment HCC.
                               Enrolled for 5 months, at least one                 1.586           1.340           1.143           0.959           0.955
                                payment HCC.
                               Enrolled for 6 months, at least one                 1.039           0.857           0.705           0.560           0.556
                                payment HCC.
--------------------------------------------------------------------------------------------------------------------------------------------------------

[[Page 26241]]

 
                                                                Prescription Drug Factors
--------------------------------------------------------------------------------------------------------------------------------------------------------
RXC 01.......................  Anti-HIV Agents..........................           5.097           4.612           4.345           3.920           3.908
RXC 02.......................  Anti-Hepatitis C (HCV) Agents, Direct               8.273           7.809           7.812           7.711           7.714
                                Acting Agents.
RXC 03 \d\...................  Antiarrhythmics..........................           0.080           0.072           0.064           0.051           0.036
RXC 04.......................  Phosphate Binders........................           0.901           1.115           1.007           1.206           1.390
RXC 05.......................  Inflammatory Bowel Disease Agents........           1.324           1.227           1.105           0.941           0.936
RXC 06.......................  Insulin..................................           1.366           1.193           1.018           0.844           0.838
RXC 07.......................  Anti-Diabetic Agents, Except Insulin and            0.800           0.702           0.582           0.409           0.403
                                Metformin Only.
RXC 08.......................  Multiple Sclerosis Agents................          15.175          14.409          14.206          13.774          13.767
RXC 09 \e\...................  Immune Suppressants and Immunomodulators.          12.005          11.495          11.478          11.335          11.337
RXC 10.......................  Cystic Fibrosis Agents...................          17.441          17.041          17.022          16.903          16.902
RXC 01 x HCC001..............  Additional effect for enrollees with RXC            2.467           2.521           2.790           3.101           3.115
                                01 and HCC 001.
RXC 02 x HCC037_1, 036,        Additional effect for enrollees with RXC           -0.514          -0.454          -0.403          -0.348          -0.347
 035_2, 035_1, 034.             02 and (HCC 037_1 or 036 or 035_2 or
                                035_1 or 034).
RXC 03 x HCC142..............  Additional effect for enrollees with RXC            0.000           0.000           0.000           0.000           0.000
                                03 and HCC 142.
RXC 04 x HCC184, 183, 187,     Additional effect for enrollees with RXC            0.000           0.000           0.000           0.000           0.000
 188.                           04 and (HCC 184 or 183 or 187 or 188).
RXC 05 x HCC048, 041.........  Additional effect for enrollees with RXC           -0.688          -0.631          -0.570          -0.471          -0.468
                                05 and (HCC 048 or 041).
RXC 06 x HCC018, 019, 020,     Additional effect for enrollees with RXC            0.402           0.444           0.532           0.544           0.546
 021.                           06 and (HCC 018 or 019 or 020 or 021).
RXC 07 x HCC018, 019, 020,     Additional effect for enrollees with RXC           -0.258          -0.213          -0.172          -0.130          -0.128
 021.                           07 and (HCC 018 or 019 or 020 or 021).
RXC 08 x HCC118..............  Additional effect for enrollees with RXC           -0.132           0.227           0.497           0.902           0.914
                                08 and HCC 118.
RXC 09 x HCC056 or 057 and     Additional effect for enrollees with RXC            0.343           0.396           0.433           0.492           0.494
 048 or 041.                    09 and (HCC 048 or 041) and (HCC 056 or
                                057).
RXC 09 x HCC056..............  Additional effect for enrollees with RXC           -1.082          -0.993          -0.930          -0.845          -0.843
                                09 and HCC 056.
RXC 09 x HCC057..............  Additional effect for enrollees with RXC           -0.399          -0.329          -0.249          -0.146          -0.142
                                09 and HCC 057.
RXC 09 x HCC048, 041.........  Additional effect for enrollees with RXC            1.315           1.406           1.499           1.634           1.638
                                09 and (HCC 048 or 041).
RXC 10 x HCC159, 158.........  Additional effect for enrollees with RXC           42.562          42.609          42.695          42.807          42.812
                                10 and (HCC 159 or 158).
--------------------------------------------------------------------------------------------------------------------------------------------------------
\a\ HCC numbers that appear with an underscore in this document will appear without the underscore in the ``Do It Yourself (DIY)'' software. For
  example, HCC 35_1 in this table will appear as HCC 351 in the DIY software.
\b\ For the 2025 benefit year HHS risk adjustment models, we made the following changes to improve the prediction of sickle cell disease costs: (1)
  updated mappings for sickle cell disease so that additional diagnosis codes are included in the model (within HCC 71); (2) ungrouped HCCs 70 and 71 in
  the adult and child models; and (3) reassigned HCC 70 and 71 to a higher severity in the infant models. To reflect these changes, we also relabeled
  HCC 70 and HCC 71. These updated mapping and HCC label changes parallel the reclassified Medicare Part C V28 CMS-HCCs. See, for example, the Advance
  Notice of Methodological Changes for Calendar Year (CY) 2024 for Medicare Advantage (MA) Capitation Rates and Part C and Part D Payment Policies
  (February 1, 2023). https://www.cms.gov/files/document/2024-advance-notice-pdf.pdf.
\c\ Consistent with fiscal year 2024 updates to ICD-10 codes (effective October 1, 2023; see https://www.cms.gov/medicare/coding-billing/icd-10-codes/2024-icd-10-cm), we updated the label for HCC 122 from ``Coma, Brain Compression/Anoxic Damage'' to ``Nontraumatic Coma, Except Diabetic, Hepatic, or
  Hypoglycemic; Nontraumatic Brain Compression/Anoxic Damage.'' The specific ICD-10 code update that prompted this label change was the addition of code
  R402A ``Nontraumatic coma due to underlying condition'', which we have mapped to HCC 122. HCC 122 is only assigned to enrollees who do not also have a
  head injury code, because HCC 223 (Severe Head Injury) captures codes for head injury with loss of consciousness and supersedes HCC 122 in a
  hierarchy. As such, the scope of HCC 122 is better reflected by the updated label. Because this ICD-10 update is effective October 1, 2023, future
  releases of benefit year 2023 and benefit year 2024 DIY software will also reflect the updated label and diagnosis-to-HCC mapping.
\d\ We constrain RXC 03 to be equal to average plan liability for RXC 03 drugs, RXC 04 to be equal to the average plan liability for RXC 04 drugs, and
  we constrain RXC 03 x HCC142 and RXC 04 x HCC184, 183, 187, 188 to be equal to 0. See March 2016 Risk Adjustment Methodology Discussion Paper (March
  24, 2016), available at: https://www.cms.gov/cciio/resources/forms-reports-and-other-resources/downloads/ra-march-31-white-paper-032416.pdf (where we
  previously discussed the use of constraints in the HHS risk adjustment models).
\e\ Similar to recalibration of the 2023 and 2024 benefit year HHS risk adjustment adult models and consistent with the policies adopted in the 2023 and
  2024 Payment Notices, the 2025 benefit year factors in this rule reflect the removal of the mapping of 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
  09x HCC048, 041) from the 2019 benefit year enrollee-level EDGE data sets for purposes of recalibrating the 2025 benefit year adult models. See 87 FR
  27232 through 27235. Additionally, the factors for the adult models reflect the use of the final, fourth quarter (Q4) RXC mapping document that was
  applicable for each benefit year of data included in the current year's model recalibration (except under extenuating circumstances that can result in
  targeted changes to RXC mappings). See 87 FR 27231 through 27232.


[[Page 26242]]


                                       Table 2--Child HHS Risk Adjustment Model Factors for the 2025 Benefit Year
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                 Factor                                      Platinum          Gold           Silver          Bronze       Catastrophic
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                   Demographic Factors
--------------------------------------------------------------------------------------------------------------------------------------------------------
Age 2-4, Male...........................................................           0.270           0.191           0.141           0.105           0.104
Age 5-9, Male...........................................................           0.204           0.135           0.096           0.071           0.071
Age 10-14, Male.........................................................           0.224           0.156           0.115           0.090           0.089
Age 15-20, Male.........................................................           0.260           0.187           0.137           0.102           0.101
Age 2-4, Female.........................................................           0.223           0.153           0.113           0.089           0.088
Age 5-9, Female.........................................................           0.149           0.086           0.053           0.034           0.034
Age 10-14, Female.......................................................           0.222           0.153           0.113           0.089           0.088
Age 15-20, Female.......................................................           0.300           0.212           0.145           0.097           0.095
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                    Diagnosis Factors
--------------------------------------------------------------------------------------------------------------------------------------------------------
HIV/AIDS................................................................           4.355           3.942           3.856           3.659           3.657
Septicemia, Sepsis, Systemic Inflammatory Response Syndrome/Shock.......          14.567          14.370          14.294          14.176          14.174
Central Nervous System Infections, Except Viral Meningitis..............          13.944          13.811          13.745          13.658          13.656
Viral or Unspecified Meningitis.........................................          12.972          12.833          12.741          12.617          12.614
Opportunistic Infections................................................          18.957          18.895          18.813          18.719          18.716
Metastatic Cancer.......................................................          30.530          30.304          30.243          30.137          30.136
Lung, Brain, and Other Severe Cancers, Including Pediatric Acute                   8.962           8.738           8.640           8.486           8.484
 Lymphoid Leukemia......................................................
Non-Hodgkin Lymphomas and Other Cancers and Tumors......................           7.708           7.523           7.421           7.266           7.263
Colorectal, Breast (Age <50), Kidney, and Other Cancers.................           4.194           4.057           3.972           3.844           3.841
Breast (Age 50+) and Prostate Cancer, Benign/Uncertain Brain Tumors, and           4.194           4.057           3.972           3.844           3.841
 Other Cancers and Tumors...............................................
Thyroid Cancer, Melanoma, Neurofibromatosis, and Other Cancers and                 1.265           1.155           1.058           0.937           0.933
 Tumors.................................................................
Pancreas Transplant Status..............................................          11.660          11.580          11.544          11.505          11.503
Diabetes with Acute Complications.......................................           2.364           2.121           1.914           1.622           1.615
Diabetes with Chronic Complications.....................................           2.364           2.121           1.914           1.622           1.615
Diabetes without Complication...........................................           2.364           2.121           1.914           1.622           1.615
Protein-Calorie Malnutrition............................................          19.614          19.505          19.457          19.397          19.396
Mucopolysaccharidosis...................................................          34.440          34.213          34.169          34.070          34.070
Lipidoses and Glycogenosis..............................................          34.440          34.213          34.169          34.070          34.070
Congenital Metabolic Disorders, Not Elsewhere Classified................           4.690           4.583           4.523           4.442           4.439
Amyloidosis, Porphyria, and Other Metabolic Disorders...................           4.690           4.583           4.523           4.442           4.439
Adrenal, Pituitary, and Other Significant Endocrine Disorders...........           5.289           5.072           5.007           4.902           4.901
Liver Transplant Status/Complications...................................          11.660          11.580          11.544          11.505          11.503
Acute Liver Failure/Disease, Including Neonatal Hepatitis...............           7.742           7.607           7.570           7.488           7.487
Chronic Liver Failure/End-Stage Liver Disorders.........................           7.742           7.607           7.570           7.488           7.487
Cirrhosis of Liver......................................................           3.999           3.881           3.835           3.764           3.763
Chronic Viral Hepatitis C...............................................           1.257           1.152           1.093           1.027           1.025
Chronic Hepatitis, Except Chronic Viral Hepatitis C.....................           0.294           0.249           0.198           0.140           0.138
Intestine Transplant Status/Complications...............................          13.387          13.303          13.228          13.137          13.135
Peritonitis/Gastrointestinal Perforation/Necrotizing Enterocolitis......          19.019          18.756          18.703          18.597          18.597
Intestinal Obstruction..................................................           4.601           4.431           4.343           4.208           4.205
Chronic Pancreatitis....................................................          10.235          10.115          10.085          10.007          10.007
Acute Pancreatitis......................................................           4.988           4.771           4.687           4.541           4.538
Inflammatory Bowel Disease..............................................           9.947           9.582           9.498           9.313           9.311
Necrotizing Fasciitis...................................................           4.144           3.957           3.872           3.746           3.745
Bone/Joint/Muscle Infections/Necrosis...................................           4.144           3.957           3.872           3.746           3.745
Rheumatoid Arthritis and Specified Autoimmune Disorders.................           4.632           4.397           4.315           4.181           4.179
Systemic Lupus Erythematosus and Other Autoimmune Disorders.............           0.878           0.777           0.679           0.559           0.555
Osteogenesis Imperfecta and Other Osteodystrophies......................           1.241           1.140           1.069           0.981           0.979
Congenital/Developmental Skeletal and Connective Tissue Disorders.......           1.241           1.140           1.069           0.981           0.979
Cleft Lip/Cleft Palate..................................................           0.972           0.841           0.742           0.616           0.613
Hemophilia..............................................................          64.093          63.672          63.604          63.429          63.427
Myelodysplastic Syndromes and Myelofibrosis.............................          12.305          12.163          12.117          12.039          12.038
Aplastic Anemia.........................................................          12.305          12.163          12.117          12.039          12.038
Acquired Hemolytic Anemia, Including Hemolytic Disease of Newborn.......          12.305          12.163          12.117          12.039          12.038
Sickle Cell Anemia (Hb-SS) and Thalassemia Beta Zero \a\................           3.564           3.400           3.303           3.173           3.170
Sickle-Cell Disorders, Except Sickle-Cell Anemia (Hb-SS) and Thalassemia           3.369           3.233           3.160           3.055           3.053
 Beta Zero; Beta Thalassemia Major \a\..................................
Combined and Other Severe Immunodeficiencies............................           5.105           4.975           4.918           4.826           4.824
Disorders of the Immune Mechanism.......................................           5.105           4.975           4.918           4.826           4.824
Coagulation Defects and Other Specified Hematological Disorders.........           4.043           3.938           3.869           3.779           3.777
Drug Use with Psychotic Complications...................................           2.350           2.204           2.111           1.972           1.969
Drug Use Disorder, Moderate/Severe, or Drug Use with Non-Psychotic                 2.350           2.204           2.111           1.972           1.969
 Complications..........................................................
Alcohol Use with Psychotic Complications................................           0.899           0.765           0.658           0.502           0.499
Alcohol Use Disorder, Moderate/Severe, or Alcohol Use with Specified Non-          0.899           0.765           0.658           0.502           0.499
 Psychotic Complications................................................
Schizophrenia...........................................................           3.545           3.304           3.188           3.007           3.004
Delusional and Other Specified Psychotic Disorders, Unspecified                    3.289           3.067           2.940           2.745           2.741
 Psychosis..............................................................
Major Depressive Disorder, Severe, and Bipolar Disorders................           2.506           2.319           2.191           2.017           2.013
Personality Disorders...................................................           0.348           0.263           0.159           0.043           0.040
Anorexia/Bulimia Nervosa................................................           2.207           2.070           1.977           1.846           1.843
Prader-Willi, Patau, Edwards, and Autosomal Deletion Syndromes..........          12.082          12.007          11.947          11.870          11.868
Down Syndrome, Fragile X, Other Chromosomal Anomalies, and Congenital              0.867           0.758           0.686           0.583           0.581
 Malformation Syndromes.................................................
Autistic Disorder.......................................................           2.506           2.319           2.191           2.017           2.013

[[Page 26243]]

 
Pervasive Developmental Disorders, Except Autistic Disorder.............           0.374           0.303           0.222           0.140           0.139
Traumatic Complete Lesion Cervical Spinal Cord..........................          10.147           9.959           9.908           9.810           9.809
Quadriplegia............................................................          10.147           9.959           9.908           9.810           9.809
Traumatic Complete Lesion Dorsal Spinal Cord............................           9.868           9.664           9.615           9.515           9.514
Paraplegia..............................................................           9.868           9.664           9.615           9.515           9.514
Spinal Cord Disorders/Injuries..........................................           4.750           4.568           4.457           4.285           4.280
Amyotrophic Lateral Sclerosis and Other Anterior Horn Cell Disease......          49.556          49.316          49.259          49.139          49.137
Quadriplegic Cerebral Palsy.............................................           0.638           0.454           0.383           0.266           0.265
Cerebral Palsy, Except Quadriplegic.....................................           0.254           0.134           0.073           0.029           0.028
Spina Bifida and Other Brain/Spinal/Nervous System Congenital Anomalies.           1.624           1.514           1.448           1.345           1.342
Myasthenia Gravis/Myoneural Disorders and Guillain-Barre Syndrome/                10.278          10.133          10.111          10.053          10.053
 Inflammatory and Toxic Neuropathy......................................
Muscular Dystrophy......................................................           5.546           5.399           5.326           5.206           5.203
Multiple Sclerosis......................................................           9.135           8.789           8.736           8.602           8.604
Parkinson's, Huntington's, and Spinocerebellar Disease, and Other                  5.546           5.399           5.326           5.206           5.203
 Neurodegenerative Disorders............................................
Seizure Disorders and Convulsions.......................................           1.556           1.429           1.316           1.169           1.165
Hydrocephalus...........................................................          11.666          11.630          11.604          11.580          11.579
Nontraumatic Coma, Except Diabetic, Hepatic, or Hypoglycemic;                     11.216          11.250          11.261          11.287          11.287
 Nontraumatic Brain Compression/Anoxic Damage \b\.......................
Narcolepsy and Cataplexy................................................           4.058           3.911           3.807           3.664           3.659
Respirator Dependence/Tracheostomy Status...............................          24.720          24.506          24.442          24.337          24.336
Respiratory Arrest......................................................          15.720          15.472          15.398          15.267          15.266
Cardio-Respiratory Failure and Shock, Including Respiratory Distress              15.720          15.472          15.398          15.267          15.266
 Syndromes..............................................................
Heart Assistive Device/Artificial Heart.................................          13.387          13.303          13.228          13.137          13.135
Heart Transplant Status/Complications...................................          13.387          13.303          13.228          13.137          13.135
Heart Failure...........................................................           4.067           3.968           3.914           3.830           3.828
Acute Myocardial Infarction.............................................           1.060           1.025           1.005           0.979           0.979
Unstable Angina and Other Acute Ischemic Heart Disease..................           1.060           1.025           1.005           0.979           0.979
Heart Infection/Inflammation, Except Rheumatic..........................          17.077          16.964          16.888          16.786          16.783
Hypoplastic Left Heart Syndrome and Other Severe Congenital Heart                  3.938           3.796           3.682           3.540           3.536
 Disorders..............................................................
Major Congenital Heart/Circulatory Disorders............................           0.986           0.896           0.790           0.685           0.682
Atrial and Ventricular Septal Defects, Patent Ductus Arteriosus, and               0.590           0.506           0.425           0.347           0.345
 Other Congenital Heart/Circulatory Disorders...........................
Specified Heart Arrhythmias.............................................           3.118           2.980           2.899           2.785           2.783
Intracranial Hemorrhage.................................................          12.686          12.611          12.565          12.497          12.495
Ischemic or Unspecified Stroke..........................................           1.470           1.362           1.304           1.210           1.208
Cerebral Aneurysm and Arteriovenous Malformation........................           1.049           0.952           0.899           0.807           0.804
Hemiplegia/Hemiparesis..................................................           5.471           5.353           5.295           5.207           5.205
Monoplegia, Other Paralytic Syndromes...................................           1.374           1.253           1.183           1.072           1.070
Atherosclerosis of the Extremities with Ulceration or Gangrene..........          11.860          11.625          11.557          11.424          11.422
Vascular Disease with Complications.....................................           8.127           7.988           7.947           7.872           7.871
Pulmonary Embolism and Deep Vein Thrombosis.............................          19.738          19.604          19.533          19.426          19.425
Lung Transplant Status/Complications....................................          13.387          13.303          13.228          13.137          13.135
Cystic Fibrosis.........................................................          48.718          48.241          48.201          48.054          48.055
Chronic Obstructive Pulmonary Disease, Including Bronchiectasis.........           1.658           1.507           1.403           1.267           1.264
Severe Asthma...........................................................           1.323           1.171           1.045           0.889           0.885
Asthma, Except Severe...................................................           0.320           0.250           0.170           0.102           0.100
Fibrosis of Lung and Other Lung Disorders...............................           1.490           1.361           1.249           1.115           1.111
Aspiration and Specified Bacterial Pneumonias and Other Severe Lung               11.216          11.250          11.261          11.287          11.287
 Infections.............................................................
Kidney Transplant Status/Complications..................................          11.660          11.580          11.544          11.505          11.503
End Stage Renal Disease.................................................          29.641          29.391          29.371          29.278          29.278
Chronic Kidney Disease, Stage 5.........................................           0.787           0.749           0.722           0.685           0.683
Chronic Kidney Disease, Severe (Stage 4)................................           0.787           0.749           0.722           0.685           0.683
Ectopic and Molar Pregnancy.............................................           0.864           0.731           0.565           0.411           0.406
Miscarriage with Complications..........................................           0.474           0.369           0.227           0.089           0.086
Miscarriage with No or Minor Complications..............................           0.474           0.369           0.227           0.089           0.086
Pregnancy with Delivery with Major Complications........................           3.166           2.876           2.634           2.231           2.219
Pregnancy with Delivery with Complications..............................           3.166           2.876           2.634           2.231           2.219
Pregnancy with Delivery with No or Minor Complications..................           2.399           2.179           1.914           1.475           1.460
(Ongoing) Pregnancy without Delivery with Major Complications...........           0.420           0.308           0.152           0.039           0.036
(Ongoing) Pregnancy without Delivery with Complications.................           0.420           0.308           0.152           0.039           0.036
(Ongoing) Pregnancy without Delivery with No or Minor Complications.....           0.276           0.187           0.079           0.037           0.036
Chronic Ulcer of Skin, Except Pressure..................................           1.877           1.782           1.712           1.634           1.632
Extensive Third-Degree Burns............................................          22.876          22.657          22.576          22.440          22.437
Major Skin Burn or Condition............................................           2.441           2.286           2.187           2.056           2.053
Severe Head Injury......................................................          22.876          22.657          22.576          22.440          22.437
Hip and Pelvic Fractures................................................           4.636           4.428           4.327           4.191           4.188
Vertebral Fractures without Spinal Cord Injury..........................           4.483           4.293           4.176           3.999           3.994
Traumatic Amputations and Amputation Complications......................           3.818           3.627           3.528           3.362           3.357
Stem Cell, Including Bone Marrow, Transplant Status/Complications.......          13.387          13.303          13.228          13.137          13.135
Artificial Openings for Feeding or Elimination..........................           5.711           5.551           5.525           5.451           5.450
Amputation Status, Upper Limb or Lower Limb.............................           3.818           3.627           3.528           3.362           3.357
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                              Interacted HCC Counts Factors
--------------------------------------------------------------------------------------------------------------------------------------------------------
Severe illness, 1 payment HCC...........................................         -11.216         -11.250         -11.261         -11.287         -11.287
Severe illness, 2 payment HCCs..........................................         -11.137         -11.200         -11.218         -11.265         -11.266

[[Page 26244]]

 
Severe illness, 3 payment HCCs..........................................          -9.692          -9.760          -9.689          -9.658          -9.655
Severe illness, 4 payment HCCs..........................................          -8.984          -8.987          -8.809          -8.652          -8.645
Severe illness, 5 payment HCCs..........................................          -6.593          -6.543          -6.303          -6.068          -6.059
Severe illness, 6 or 7 payment HCCs.....................................          -2.061          -1.828          -1.468          -1.064          -1.051
Severe illness, 8 or more payment HCCs..................................          17.868          18.550          19.132          19.858          19.877
Transplant severe illness, 4 or more payment HCCs.......................          14.488          14.558          14.580          14.612          14.613
--------------------------------------------------------------------------------------------------------------------------------------------------------
\a\ For the 2025 benefit year HHS risk adjustment models, we made the following changes to improve the prediction of sickle cell disease costs: (1)
  updated mappings for sickle cell disease so that additional diagnosis codes are included in the model (within HCC 71); (2) ungrouped HCCs 70 and 71 in
  the adult and child models; and (3) reassigned HCC 70 and 71 to a higher severity in the infant models. To reflect these changes, we also relabeled
  HCC 70 and HCC 71. These updated mapping and HCC label changes parallel the reclassified Medicare Part C V28 CMS-HCCs. See, for example, the Advance
  Notice of Methodological Changes for Calendar Year (CY) 2024 for Medicare Advantage (MA) Capitation Rates and Part C and Part D Payment Policies
  (February 1, 2023). https://www.cms.gov/files/document/2024-advance-notice-pdf.pdf.
\b\ Consistent with fiscal year 2024 updates to ICD-10 codes (effective October 1, 2023; see https://www.cms.gov/medicare/coding-billing/icd-10-codes/2024-icd-10-cm), we updated the label for HCC 122 from ``Coma, Brain Compression/Anoxic Damage'' to ``Nontraumatic Coma, Except Diabetic, Hepatic, or
  Hypoglycemic; Nontraumatic Brain Compression/Anoxic Damage.'' The specific ICD-10 code update that prompted this label change was the addition of code
  R402A ``Nontraumatic coma due to underlying condition'', which we have mapped to HCC 122. HCC 122 is only assigned to enrollees who do not also have a
  head injury code, because HCC 223 (Severe Head Injury) captures codes for head injury with loss of consciousness and supersedes HCC 122 in a
  hierarchy. As such, the scope of HCC 122 is better reflected by the updated label. Because this ICD-10 update is effective October 1, 2023, future
  releases of the benefit year 2023 and benefit year 2024 DIY software will also reflect the updated label and diagnosis-to-HCC mapping.


 Table 3--HCCs Selected for the HCC Interacted Counts Variables for the
            Adult and Child Models for the 2025 Benefit Year
------------------------------------------------------------------------
                                                Severity
                 Payment HCC                     illness     Transplant
                                                indicator     indicator
------------------------------------------------------------------------
HCC 2 Septicemia, Sepsis, Systemic                      X
 Inflammatory Response Syndrome/Shock.......
HCC 3 Central Nervous System Infections,                X
 Except Viral Meningitis....................
HCC 4 Viral or Unspecified Meningitis.......            X
HCC 6 Opportunistic Infections..............            X
HCC 23 Protein-Calorie Malnutrition.........            X
HCC 34 Liver Transplant Status/Complications            X             X
HCC 41 Intestine Transplant Status/                     X             X
 Complications..............................
HCC 42 Peritonitis/Gastrointestinal                     X
 Perforation/Necrotizing Enterocolitis......
HCC 96 Prader-Willi, Patau, Edwards, and                X
 Autosomal Deletion Syndromes...............
HCC 121 Hydrocephalus.......................            X
HCC 122 Nontraumatic Coma, Except Diabetic,             X
 Hepatic, or Hypoglycemic; Nontraumatic
 Brain Compression/Anoxic Damage............
HCC 125 Respirator Dependence/Tracheostomy              X
 Status.....................................
HCC 135 Heart Infection/Inflammation, Except            X
 Rheumatic..................................
HCC 145 Intracranial Hemorrhage.............            X
HCC 156 Pulmonary Embolism and Deep Vein                X
 Thrombosis.................................
HCC 158 Lung Transplant Status/Complications            X             X
HCC 163 Aspiration and Specified Bacterial              X
 Pneumonias and Other Severe Lung Infections
HCC 218 Extensive Third-Degree Burns........            X
HCC 223 Severe Head Injury..................            X
HCC 251 Stem Cell, Including Bone Marrow,               X             X
 Transplant Status/Complications............
G13 (Includes HCC 126 Respiratory Arrest and            X
 HCC 127 Cardio-Respiratory Failure and
 Shock, Including Respiratory Distress
 Syndromes).................................
G14 (Includes HCC 128 Heart Assistive Device/           X             X
 Artificial Heart and HCC 129 Heart
 Transplant Status/Complications)...........
G24 (Includes HCC 18 Pancreas Transplant                X             X
 Status and HCC 183 Kidney Transplant Status/
 Complications).............................
------------------------------------------------------------------------


                   Table 4--Infant HHS Risk Adjustment Model Factors for the 2025 Benefit Year
----------------------------------------------------------------------------------------------------------------
              Group                  Platinum          Gold           Silver          Bronze       Catastrophic
----------------------------------------------------------------------------------------------------------------
Extremely Immature * Severity            204.040         202.652         202.406         201.915         201.913
 Level 5 (Highest)..............
Extremely Immature * Severity            149.999         148.437         148.051         147.377         147.372
 Level 4........................
Extremely Immature * Severity             32.887          31.619          31.251          30.693          30.687
 Level 3........................
Extremely Immature * Severity             32.887          31.619          31.251          30.693          30.687
 Level 2........................
Extremely Immature * Severity             32.887          31.619          31.251          30.693          30.687
 Level 1 (Lowest)...............
Immature * Severity Level 5              121.913         120.553         120.309         119.828         119.827
 (Highest)......................
Immature * Severity Level 4.....          71.026          69.564          69.264          68.692          68.689
Immature * Severity Level 3.....          32.887          31.619          31.251          30.693          30.687
Immature * Severity Level 2.....          30.558          29.332          28.960          28.403          28.398
Immature * Severity Level 1               25.110          23.887          23.485          22.871          22.863
 (Lowest).......................
Premature/Multiples * Severity           108.585         107.335         107.096         106.631         106.628
 Level 5 (Highest)..............
Premature/Multiples * Severity            29.666          28.404          28.060          27.490          27.486
 Level 4........................
Premature/Multiples * Severity            13.527          12.617          12.148          11.482          11.467
 Level 3........................
Premature/Multiples * Severity             8.071           7.368           6.849           6.149           6.131
 Level 2........................
Premature/Multiples * Severity             5.765           5.167           4.644           4.023           4.005
 Level 1 (Lowest)...............
Term * Severity Level 5                   81.884          80.752          80.438          79.915          79.909
 (Highest)......................
Term * Severity Level 4.........          16.190          15.254          14.803          14.170          14.158
Term * Severity Level 3.........           5.770           5.207           4.688           4.061           4.041
Term * Severity Level 2.........           3.712           3.231           2.707           2.109           2.092
Term * Severity Level 1 (Lowest)           1.968           1.597           1.135           0.784           0.776
Age 1 * Severity Level 5                  69.391          68.741          68.568          68.287          68.284
 (Highest)......................
Age 1 * Severity Level 4........          12.653          12.170          11.942          11.641          11.635
Age 1 * Severity Level 3........           2.829           2.569           2.374           2.179           2.174
Age 1 * Severity Level 2........           1.855           1.628           1.423           1.216           1.210

[[Page 26245]]

 
Age 1 * Severity Level 1                   0.581           0.487           0.431           0.394           0.393
 (Lowest).......................
Age 0 Male......................           0.604           0.566           0.539           0.475           0.473
Age 1 Male......................           0.090           0.076           0.060           0.042           0.041
----------------------------------------------------------------------------------------------------------------


     Table 5--HHS HCCs Included in Infant Model Maturity Categories
------------------------------------------------------------------------
      Maturity category                     HCC/description
------------------------------------------------------------------------
Extremely Immature...........  Extremely Immature Newborns, Birth weight
                                <500 Grams.
Extremely Immature...........  Extremely Immature Newborns, Including
                                Birth weight 500-749 Grams.
Extremely Immature...........  Extremely Immature Newborns, Including
                                Birth weight 750-999 Grams.
Immature.....................  Premature Newborns, Including Birth
                                weight 1000-1499 Grams.
Immature.....................  Premature Newborns, Including Birth
                                weight 1500-1999 Grams.
Premature/Multiples..........  Premature Newborns, Including Birth
                                weight 2000-2499 Grams.
Premature/Multiples..........  Other Premature, Low Birth weight,
                                Malnourished, or Multiple Birth
                                Newborns.
Term.........................  Term or Post-Term Singleton Newborn,
                                Normal or High Birth weight.
Age 1........................  All age 1 infants.
------------------------------------------------------------------------


     Table 6--HHS HCCs Included in Infant Model Severity Categories
------------------------------------------------------------------------
      Severity category                     HCC/description
------------------------------------------------------------------------
Severity Level 5 (Highest)...  Metastatic Cancer.
Severity Level 5.............  Pancreas Transplant Status.
Severity Level 5.............  Liver Transplant Status/Complications.
Severity Level 5.............  Intestine Transplant Status/
                                Complications.
Severity Level 5.............  Peritonitis/Gastrointestinal Perforation/
                                Necrotizing Enterocolitis.
Severity Level 5.............  Respirator Dependence/Tracheostomy
                                Status.
Severity Level 5.............  Heart Assistive Device/Artificial Heart.
Severity Level 5.............  Heart Transplant Status/Complications.
Severity Level 5.............  Heart Failure.
Severity Level 5.............  Hypoplastic Left Heart Syndrome and Other
                                Severe Congenital Heart Disorders.
Severity Level 5.............  Lung Transplant Status/Complications.
Severity Level 5.............  Kidney Transplant Status/Complications.
Severity Level 5.............  End Stage Renal Disease.
Severity Level 5.............  Stem Cell, Including Bone Marrow,
                                Transplant Status/Complications.
Severity Level 4.............  Septicemia, Sepsis, Systemic Inflammatory
                                Response Syndrome/Shock.
Severity Level 4.............  Lung, Brain, and Other Severe Cancers,
                                Including Pediatric Acute Lymphoid
                                Leukemia.
Severity Level 4.............  Mucopolysaccharidosis.
Severity Level 4.............  Adrenal, Pituitary, and Other Significant
                                Endocrine Disorders.
Severity Level 4.............  Acute Liver Failure/Disease, Including
                                Neonatal Hepatitis.
Severity Level 4.............  Chronic Liver Failure/End-Stage Liver
                                Disorders.
Severity Level 4.............  Major Congenital Anomalies of Diaphragm,
                                Abdominal Wall, and Esophagus, Age <2.
Severity Level 4.............  Myelodysplastic Syndromes and
                                Myelofibrosis.
Severity Level 4.............  Aplastic Anemia.
Severity Level 4.............  Combined and Other Severe
                                Immunodeficiencies.
Severity Level 4.............  Traumatic Complete Lesion Cervical Spinal
                                Cord.
Severity Level 4.............  Quadriplegia.
Severity Level 4.............  Amyotrophic Lateral Sclerosis and Other
                                Anterior Horn Cell Disease.
Severity Level 4.............  Quadriplegic Cerebral Palsy.
Severity Level 4.............  Myasthenia Gravis/Myoneural Disorders and
                                Guillain-Barre Syndrome/Inflammatory and
                                Toxic Neuropathy.
Severity Level 4.............  Nontraumatic Coma, Except Diabetic,
                                Hepatic, or Hypoglycemic; Nontraumatic
                                Brain Compression/Anoxic Damage.\a\
Severity Level 4.............  Respiratory Arrest.
Severity Level 4.............  Cardio-Respiratory Failure and Shock,
                                Including Respiratory Distress
                                Syndromes.
Severity Level 4.............  Acute Myocardial Infarction.
Severity Level 4.............  Heart Infection/Inflammation, Except
                                Rheumatic.
Severity Level 4.............  Major Congenital Heart/Circulatory
                                Disorders.
Severity Level 4.............  Intracranial Hemorrhage.
Severity Level 4.............  Ischemic or Unspecified Stroke.
Severity Level 4.............  Vascular Disease with Complications.
Severity Level 4.............  Pulmonary Embolism and Deep Vein
                                Thrombosis.
Severity Level 4.............  Aspiration and Specified Bacterial
                                Pneumonias and Other Severe Lung
                                Infections.
Severity Level 4.............  Chronic Kidney Disease, Stage 5.
Severity Level 4.............  Artificial Openings for Feeding or
                                Elimination.
Severity Level 3.............  HIV/AIDS.
Severity Level 3.............  Central Nervous System Infections, Except
                                Viral Meningitis.
Severity Level 3.............  Opportunistic Infections.
Severity Level 3.............  Non-Hodgkin Lymphomas and Other Cancers
                                and Tumors.
Severity Level 3.............  Colorectal, Breast (Age <50), Kidney and
                                Other Cancers.
Severity Level 3.............  Breast (Age 50+) and Prostate Cancer,
                                Benign/Uncertain Brain Tumors, and Other
                                Cancers and Tumors.

[[Page 26246]]

 
Severity Level 3.............  Lipidoses and Glycogenosis.
Severity Level 3.............  Intestinal Obstruction.
Severity Level 3.............  Necrotizing Fasciitis.
Severity Level 3.............  Bone/Joint/Muscle Infections/Necrosis.
Severity Level 3.............  Osteogenesis Imperfecta and Other
                                Osteodystrophies.
Severity Level 3.............  Cleft Lip/Cleft Palate.
Severity Level 3.............  Hemophilia.
Severity Level 3.............  Sickle Cell Anemia (Hb-SS) and
                                Thalassemia Beta Zero.\b\
Severity Level 3.............  Disorders of the Immune Mechanism.
Severity Level 3.............  Coagulation Defects and Other Specified
                                Hematological Disorders.
Severity Level 3.............  Drug Use with Psychotic Complications.
Severity Level 3.............  Drug Use Disorder, Moderate/Severe, or
                                Drug Use with Non-Psychotic
                                Complications.
Severity Level 3.............  Alcohol Use with Psychotic Complications.
Severity Level 3.............  Alcohol Use Disorder, Moderate/Severe, or
                                Alcohol Use with Specified Non-Psychotic
                                Complications.
Severity Level 3.............  Prader-Willi, Patau, Edwards, and
                                Autosomal Deletion Syndromes.
Severity Level 3.............  Traumatic Complete Lesion Dorsal Spinal
                                Cord.
Severity Level 3.............  Paraplegia.
Severity Level 3.............  Spinal Cord Disorders/Injuries.
Severity Level 3.............  Cerebral Palsy, Except Quadriplegic.
Severity Level 3.............  Spina Bifida and Other Brain/Spinal/
                                Nervous System Congenital Anomalies.
Severity Level 3.............  Muscular Dystrophy.
Severity Level 3.............  Parkinson's, Huntington's, and
                                Spinocerebellar Disease, and Other
                                Neurodegenerative Disorders.
Severity Level 3.............  Hydrocephalus.
Severity Level 3.............  Unstable Angina and Other Acute Ischemic
                                Heart Disease.
Severity Level 3.............  Atrial and Ventricular Septal Defects,
                                Patent Ductus Arteriosus, and Other
                                Congenital Heart/Circulatory Disorders.
Severity Level 3.............  Specified Heart Arrhythmias.
Severity Level 3.............  Cerebral Aneurysm and Arteriovenous
                                Malformation.
Severity Level 3.............  Hemiplegia/Hemiparesis.
Severity Level 3.............  Cystic Fibrosis.
Severity Level 3.............  Extensive Third-Degree Burns.
Severity Level 3.............  Severe Head Injury.
Severity Level 3.............  Hip and Pelvic Fractures.
Severity Level 3.............  Vertebral Fractures without Spinal Cord
                                Injury.
Severity Level 2.............  Viral or Unspecified Meningitis.
Severity Level 2.............  Thyroid Cancer, Melanoma,
                                Neurofibromatosis, and Other Cancers and
                                Tumors.
Severity Level 2.............  Diabetes with Acute Complications.
Severity Level 2.............  Diabetes with Chronic Complications.
Severity Level 2.............  Diabetes without Complication.
Severity Level 2.............  Protein-Calorie Malnutrition.
Severity Level 2.............  Congenital Metabolic Disorders, Not
                                Elsewhere Classified.
Severity Level 2.............  Amyloidosis, Porphyria, and Other
                                Metabolic Disorders.
Severity Level 2.............  Cirrhosis of Liver.
Severity Level 2.............  Chronic Pancreatitis.
Severity Level 2.............  Acute Pancreatitis.
Severity Level 2.............  Inflammatory Bowel Disease.
Severity Level 2.............  Rheumatoid Arthritis and Specified
                                Autoimmune Disorders.
Severity Level 2.............  Systemic Lupus Erythematosus and Other
                                Autoimmune Disorders.
Severity Level 2.............  Congenital/Developmental Skeletal and
                                Connective Tissue Disorders.
Severity Level 2.............  Acquired Hemolytic Anemia, Including
                                Hemolytic Disease of Newborn.
Severity Level 2.............  Sickle-Cell Disorders, Except Sickle-Cell
                                Anemia (Hb-SS) and Thalassemia Beta
                                Zero; Beta Thalassemia Major.\b\
Severity Level 2.............  Down Syndrome, Fragile X, Other
                                Chromosomal Anomalies, and Congenital
                                Malformation Syndromes.
Severity Level 2.............  Seizure Disorders and Convulsions.
Severity Level 2.............  Monoplegia, Other Paralytic Syndromes.
Severity Level 2.............  Atherosclerosis of the Extremities with
                                Ulceration or Gangrene.
Severity Level 2.............  Chronic Obstructive Pulmonary Disease,
                                Including Bronchiectasis.
Severity Level 2.............  Severe Asthma.
Severity Level 2.............  Fibrosis of Lung and Other Lung
                                Disorders.
Severity Level 2.............  Chronic Kidney Disease, Severe (Stage 4).
Severity Level 2.............  Chronic Ulcer of Skin, Except Pressure.
Severity Level 2.............  Major Skin Burn or Condition.
Severity Level 1 (Lowest)....  Chronic Viral Hepatitis C.
Severity Level 1.............  Chronic Hepatitis, Except Chronic Viral
                                Hepatitis C.
Severity Level 1.............  Autistic Disorder.
Severity Level 1.............  Pervasive Developmental Disorders, Except
                                Autistic Disorder.
Severity Level 1.............  Multiple Sclerosis.
Severity Level 1.............  Asthma, Except Severe.
Severity Level 1.............  Traumatic Amputations and Amputation
                                Complications.

[[Page 26247]]

 
Severity Level 1.............  Amputation Status, Upper Limb or Lower
                                Limb.
------------------------------------------------------------------------
\a\ Consistent with fiscal year 2024 updates to ICD-10 codes (effective
  October 1, 2023; see https://www.cms.gov/medicare/coding-billing/icd-10-codes/2024-icd-10-cm), we updated the label for HCC 122 from
  ``Coma, Brain Compression/Anoxic Damage'' to ``Nontraumatic Coma,
  Except Diabetic, Hepatic, or Hypoglycemic; Nontraumatic Brain
  Compression/Anoxic Damage.'' The specific ICD-10 code update that
  prompted this label change was the addition of code R402A
  ``Nontraumatic coma due to underlying condition'', which we have
  mapped to HCC 122. HCC 122 is only assigned to enrollees who do not
  also have a head injury code, because HCC 223 (Severe Head Injury)
  captures codes for head injury with loss of consciousness and
  supersedes HCC 122 in a hierarchy. As such, the scope of HCC 122 is
  better reflected by the updated label. Because this ICD-10 update is
  effective October 1, 2023, future releases of the benefit year 2023
  and benefit year 2024 DIY software will also reflect the updated label
  and diagnosis-to-HCC mapping.
\b\ For the 2025 benefit year HHS risk adjustment models, we made the
  following changes to improve the prediction of sickle cell disease
  costs: (1) updated mappings for sickle cell disease so that additional
  diagnosis codes are included in the model (within HCC 71); (2)
  ungrouped HCCs 70 and 71 in the adult and child models; and (3)
  reassigned HCC 70 and 71 to a higher severity in the infant models. To
  reflect these changes, we also relabeled HCC 70 and HCC 71. These
  updated mapping and HCC label changes parallel the reclassified
  Medicare Part C V28 CMS-HCCs. See, for example, the Advance Notice of
  Methodological Changes for Calendar Year (CY) 2024 for Medicare
  Advantage (MA) Capitation Rates and Part C and Part D Payment Policies
  (February 1, 2023). https://www.cms.gov/files/document/2024-advance-notice-pdf.pdf.

    After consideration of comments and for the reasons outlined in the 
proposed rule and our responses to comments, we are finalizing the 2025 
benefit year risk adjustment model factors as proposed. We summarize 
and respond to public comments received on the proposed 2025 benefit 
year risk adjustment model factors below.
    Comment: Many commenters were concerned about the treatment of 
high-cost prescription drugs, such as gene therapy drugs, in the risk 
adjustment model factors. One commenter was specifically concerned 
about the changes to the classification of Sickle Cell Disorders and 
the HCC mapping changes that align with the CMS-HCC model used for 
Medicare Advantage. This commenter recommended adding a new RXC for 
gene therapy for sickle-cell anemia and Beta Thalassemia in the adult 
models, stating that a gene therapy RXC would be a more reliable 
indicator of the presence of sickle cell disease or its severity. For 
similar reasons, this commenter also recommended continuing to group 
HCCs 70 (Sickle-Cell Anemia (Hb-SS) and Thalassemia Beta Zero) and 71 
(Sickle-Cell Disorders, Except Sickle Cell Anemia (Hb-SS) and 
Thalassemia Beta Zero; Beta Thalassemia Major) in both the adult and 
child models. The commenter further recommended that we avoid relying 
on coding specificity where the diagnostic severity relies on measures 
of pain, which is why they state a gene therapy RXC would be more 
reliable. The commenter also stated any changes to HCC 70 (Sickle-Cell 
Anemia (Hb-SS) and Thalassemia Beta Zero) and HCC 71 (Sickle-Cell 
Disorders, Except Sickle Cell Anemia (Hb-SS) and Thalassemia Beta Zero; 
Beta Thalassemia Major) should anticipate the impact of gene therapy 
treatments for sickle cell disease by having enrollees with a condition 
treatable by the same therapy grouped together.
    Another commenter recommended the creation of a new, separate RXC 
for pre-exposure prophylaxis (PrEP) and one commenter recommended 
mapping Tepezza (a new treatment for thyroid eye disease) to an RXC in 
the risk adjustment models due to its high costs. Several commenters 
also expressed concern about the decline in RXC 01 (Anti-HIV Agents) 
and RXC 01 x HCC001 (Additional Effects for enrollees with RXC 01 and 
HCC 01) coefficients since the 2023 benefit year HHS risk adjustment 
adult models were adopted in the 2023 Payment Notice. Another commenter 
suggested creating a new, separate high-cost reimbursement pool for 
ultra-high-cost drugs, including mostly cell and gene therapy drugs.
    Response: We did not propose to change the treatment of high-cost 
drugs, such as gene therapy drugs, in the 2025 benefit year risk 
adjustment models in the proposed rule and are not finalizing such 
updates in this rule. As we discussed in the 2022 Payment Notice (86 FR 
24163), we recognize that the data used to recalibrate the risk 
adjustment models lag by several benefit years behind the applicable 
benefit year for risk adjustment and therefore do not account for the 
costs of new, expensive drugs, such as gene therapy drugs, that are 
expected to be available in the market by the applicable benefit year 
of risk adjustment. Thus, we have continued to consider ways that we 
could better account for high-cost drugs in the risk adjustment models 
and, as part of this effort, analyze new data as they become available. 
For example, when we were analyzing the changes to the sickle cell 
disorder related HCCs in the 2025 benefit year risk adjustment models, 
we considered whether to add a RXC for existing high-cost sickle cell 
drugs and new gene therapy treatments, but we found that we need to 
continue to analyze the evolution and availability of drug treatments 
for sickle cell disease. Specifically, the new gene therapy drugs for 
sickle cell disease were not approved for the market when we were 
developing the proposed 2025 benefit year risk adjustment models and 
coefficients.\49\ Therefore, there were no data available on the use of 
the new gene therapy drugs for sickle cell disease when we were 
developing the 2025 benefit year proposals and with this final rule, 
there currently continues to be a general lack of data on the use of 
gene therapy drugs for sickle cell disease in the individual, small 
group, and merged markets. We are committed to continuing to analyze 
new data as they become available and, consistent with Sec.  
153.320(b)(1), we would propose the addition of any new RXCs to the 
risk adjustment models through notice and comment rulemaking. We also 
note that if an enrollee in an issuer's risk adjustment covered plan 
has claims for gene therapy, other high-cost drugs, or other expensive 
treatments, that enrollee would be eligible for the high-cost risk pool 
payments if claims for that enrollee are over $1 million.\50\
---------------------------------------------------------------------------

    \49\ We published the proposed 2025 benefit year coefficients in 
the 2025 Payment Notice proposed rule in November 2023. The first 
gene therapy treatment for sickle cell disease were not approved for 
use until December 2023. See https://www.fda.gov/news-events/press-announcements/fda-approves-first-gene-therapies-treat-patients-sickle-cell-disease.
    \50\ For example, the new sickle cell gene therapy treatments 
are expected to exceed the high-cost risk pool payment threshold. 
See, DeMartino P, Haag MB, Hersh AR, Caughey AB, Roth JA. A Budget 
Impact Analysis of Gene Therapy for Sickle Cell Disease: The 
Medicaid Perspective. JAMA Pediatr. 2021 Jun 1;175(6):617-623. doi: 
10.1001/jamapediatrics.2020.7140. Erratum in: JAMA Pediatr. 2021 Jun 
1;175(6):647. PMID: 33749717; PMCID: PMC7985816. Accessed at https://www.ncbi.nlm.nih.gov/pmc/articles/PMC7985816/.
---------------------------------------------------------------------------

    Considering the absence of adequate data at the time of development 
of the proposed 2025 benefit year risk adjustment models and 
coefficients for inclusion in the 2025 Payment Notice proposed rule, we 
did not propose and

[[Page 26248]]

are not finalizing a new RXC or other model adjustments for sickle cell 
gene therapy drugs for the 2025 benefit year. We intend to continue to 
assess sickle cell gene therapy drugs to consider whether model updates 
for future benefit years are warranted to address their anticipated 
costs. In response to the comment that HHS should continue to group 
HCCs 70 (Sickle-Cell Anemia (Hb-SS) and Thalassemia Beta Zero) and 71 
(Sickle-Cell Disorders, Except Sickle Cell Anemia (Hb-SS) and 
Thalassemia Beta Zero; Beta Thalassemia Major), we note that we removed 
the grouping of HCC 70 (Sickle-Cell Anemia (Hb-SS) and Thalassemia Beta 
Zero) and HCC 71 (Sickle-Cell Disorders, Except Sickle Cell Anemia (Hb-
SS) and Thalassemia Beta Zero; Beta Thalassemia Major) in the adult and 
child models in the 2025 benefit year risk adjustment model factors 
because we found in our analysis that HCC 70 (Sickle-Cell Anemia (Hb-
SS) and Thalassemia Beta Zero) and HCC 71(Sickle-Cell Disorders, Except 
Sickle Cell Anemia (Hb-SS) and Thalassemia Beta Zero; Beta Thalassemia 
Major) each pose sufficient independent risk characteristics to sever 
the grouping. Additionally, we kept the hierarchical relationship 
between the HCC 70 (Sickle-Cell Anemia (Hb-SS) and Thalassemia Beta 
Zero) and 71 (Sickle-Cell Disorders, Except Sickle Cell Anemia (Hb-SS) 
and Thalassemia Beta Zero; Beta Thalassemia Major), therefore, we do 
not allow the coefficient for HCC 71 (Sickle-Cell Disorders, Except 
Sickle Cell Anemia (Hb-SS) and Thalassemia Beta Zero; Beta Thalassemia 
Major) to be higher than HCC 70 (Sickle-Cell Anemia (Hb-SS) and 
Thalassemia Beta Zero). These updates to HCCs 70 (Sickle-Cell Anemia 
(Hb-SS) and Thalassemia Beta Zero) and 71 (Sickle-Cell Disorders, 
Except Sickle Cell Anemia (Hb-SS) and Thalassemia Beta Zero; Beta 
Thalassemia Major) were also informed by and align with the 
reclassified Medicare Part C V28 CMS-HCCs.\51\
---------------------------------------------------------------------------

    \51\ See, for example, the Advance Notice of Methodological 
Changes for Calendar Year (CY) 2024 for Medicare Advantage (MA) 
Capitation Rates and Part C and Part D Payment Policies (February 1, 
2023). https://www.cms.gov/files/document/2024-advance-notice-pdf.pdf.
---------------------------------------------------------------------------

    We also did not propose and are not finalizing the addition of PrEP 
as an RXC in the 2025 benefit year adult risk adjustment models. As 
explained in the 2021 Payment Notice (85 FR 29164, 29187), we have not 
incorporated 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. 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 (that RXCs are 
incorporated into HHS risk adjustment adult models to impute a missing 
diagnosis) to add it as an RXC at this time. However, like previous 
years, we reassessed the use and availability of the different types of 
PrEP in the market as we developed the 2025 benefit year risk 
adjustments models. Our most recent analysis affirmed our prior 
findings that the use of PrEP does not represent an active condition. 
In addition, as we have done in previous years, we incorporated 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 map to RXC 01 (HIV/
AIDS) will still receive credit for RXC 01 (HIV/AIDS) in the 2025 
benefit year of risk adjustment. We intend to continue to explore the 
treatment of PrEP in the risk adjustment models to consider whether 
changes are needed in future benefit years, as appropriate.
    We also did not propose and are not finalizing changes to add an 
RXC to the HHS risk adjustment model's treatment for Tepezza, which 
treats thyroid eye disease. Under the HHS risk adjustment models, 
thyroid eye disease (thyrotoxicosis) is currently captured within the 
non-payment HCC, HCC33 (Other Endocrine/Metabolic/Nutritional 
Disorders) and all RXCs in the HHS risk adjustment adult models are 
associated with a payment HCC. For this reason, HHS did not propose and 
is not finalizing any changes with respect to the treatment of Tepezza 
for thyroid eye disease in the 2025 benefit year risk adjustment 
models. However, HHS intends to continue analysis of thyrotoxicosis and 
the use of Tepezza as more data becomes available and consider its 
treatment in risk adjustment models for future benefit years.
    Lastly, the change identified by some commenters in the RXC 
coefficients relative to the 2023 benefit year is due to decisions we 
made starting in the 2024 benefit year regarding the trending costs for 
traditional and specialty drugs, which have been trended separately 
from medical expenditures since the 2017 benefit year.\52\ As stated in 
the 2024 Payment Notice,\53\ in our annual assessment of the trending 
factors for the 2024 HHS risk adjustment models, we determined that the 
trend factors used for specialty drugs were higher than the market data 
supported. Therefore, for the 2024 benefit year, we used trend factors 
for specialty drugs that aligned with the market data rather than 
continuing use of the historical, higher trend factors. In determining 
these trend factors, we consulted our actuarial experts, reviewed 
relevant URRT submission data, analyzed multiple years of enrollee-
level EDGE data, and consulted NHEA data as well as external reports 
and documents \54\ published by third parties. In this process, we also 
ensured that the trends we used reflected changes in cost of care 
rather than gross growth in expenditures.
---------------------------------------------------------------------------

    \52\ See 81 FR 12218.
    \53\ See 88 FR 25753.
    \54\ See, for example, ``How much is health spending expected to 
grow?'' by the Peterson-Kaiser Family Foundation, available at 
https://www.healthsystemtracker.org/chart-collection/how-much-is-health-spending-expected-to-grow/. See also ``Medical cost trend: 
Behind the numbers 2024'' by PwC Health Research Institute, 
available at https://www.pwc.com/us/en/industries/health-industries/library/assets/pwc-behind-the-numbers-2024.pdf. See also ``MBB 
Health Trends 2023'' by MercerMarsh Benefits, available at https://www.marsh.com/na/services/employee-health-benefits/insights/health-trends-report.html.
---------------------------------------------------------------------------

    In our annual recalibration of the 2025 risk adjustment models, we 
continued the approach used for the 2024 benefit year, again reflecting 
the lower market-supported trend factors for specialty drugs rather 
than the historical, higher trend factors we used in benefit years 
prior to 2024. While there was a change to RXC 01 (HIV/AIDS) between 
the 2023 benefit year and the 2024 benefit year, the decrease between 
the final 2024 risk adjustment models and the 2025 risk adjustment 
models was much smaller in magnitude (from 4.669 to 4.345 for silver 
plans; a 6.9 percent decrease) and is consistent with normal year-to-
year variation. For example, over the period between 2018 model 
recalibration (when RXCs were first introduced) and 2023 model 
recalibration (the last model recalibration before the change to the 
trending approach), the median year-to-year absolute change (that is, 
increase or decrease) across all silver RXC coefficients was 10.7 
percent. The 6.9 percent decrease seen in RXC 01 (HIV/AIDS) between the 
2024 and 2025 model recalibrations is therefore well within the range 
of changes that we normally see year-to-year.

[[Page 26249]]

    For these reasons, we believe the trend factors we currently use 
for specialty drugs are appropriate and reflect the most recent trends 
we have seen in the market, and that the prior model trend factors were 
too high relative to the actual state of the current market. We believe 
the RXC coefficient values that we finalize in this rule reflect the 
appropriate amount of growth between the data years used to fit the 
models and the 2025 benefit year. As part of our annual model 
recalibration activities, we intend to continue to reassess the trend 
factors used to update the HHS risk adjustment models, including those 
specific to specialty drugs, in future benefit years.
    Comment: Some commenters requested HHS not remove GLP-1 drugs from 
RXC 07 (Anti Diabetic Agents, Except Insulin and Metformin Only) and 
instead make market pricing adjustments to RXC 07 (Anti Diabetic 
Agents, Except Insulin and Metformin Only) due to the expanded use of 
GLP-1 drugs in the market. Commenters mentioned the significant pricing 
changes that occurred between the data years used to recalibrate the 
models and the applicable benefit year of risk adjustment as support 
for making market pricing adjustments or other updates to RXC 07 (Anti 
Diabetic Agents, Except Insulin and Metformin Only) to account for the 
costs and expanded use of GLP-1 drugs. These commenters stated they did 
not believe the current HHS risk adjustment models represent the 
increase in cost of diabetes treatment using GLP-1 drugs due to 
increased utilization since the 2021 benefit year. These commenters 
noted that cost and utilization trends for GLP-1 drugs are expected to 
continue to change, as GLP-1 drugs are relatively new treatment for 
chronic weight management. Another commenter expressed concerns about 
the off-label usage of GLP-1 drugs and preserving the integrity of RXC 
07 (Anti Diabetic Agents, Except Insulin and Metformin Only).
    Response: We did not change the inclusion of GLP-1 drugs in RXC 07 
(Anti Diabetic Agents, Except Insulin and Metformin Only), or propose 
to change our current approach to RXC inclusion in recalibrating 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.\55\ However, in developing the 
proposed 2025 benefit year risk adjustment models and coefficients, we 
considered our treatment of GLP-1 drugs using our previous established 
criteria on inclusion and exclusion of drugs in model recalibration. 
Specifically, as we explained in the 2023 Payment Notice (87 FR 27208, 
27231 through 27235), in extenuating circumstances where HHS believes 
there would be a significant impact from a change in an RxNorm Concept 
Unique Identifiers (RXCUI) to RXC mapping, we will consider whether 
changes to the RXCUI to RXC mapping from the applicable data year 
crosswalk are appropriate.
---------------------------------------------------------------------------

    \55\ 87 FR 27231 through 27235.
---------------------------------------------------------------------------

    As background, RXC 07 (Anti Diabetic Agents, Except Insulin and 
Metformin Only) is a pharmacotherapeutic class of drugs, which contains 
a broad array of anti-diabetic medications that vary in cost. RXC 07 
(Anti Diabetic Agents, Except Insulin and Metformin Only) does not 
include all GLP-1 drugs currently on the market; drugs that carry an 
FDA indication for chronic weight management are excluded from RXC 07 
(Anti Diabetic Agents, Except Insulin and Metformin Only). The RXC 07 
(Anti Diabetic Agents, Except Insulin and Metformin Only) coefficient 
in the HHS risk adjustment adult models is meant to reflect the average 
enrollee cost for individuals being treated by any of the drugs in this 
class. To assess the current mapping of certain GLP-1 drugs to RXC 07 
(Anti Diabetic Agents, Except Insulin and Metformin Only) and whether 
any changes were warranted, we considered the positive predictive value 
(PPV) of these drugs. The PPV is a conditional proportion of patients 
who are diagnosed with the HCC and prescribed a drug (``drug'' defined 
as a single RXCUI) \56\ to the total patients prescribed that drug. A 
PPV of 100 percent means that all enrollees taking a drug within a 
RXCUI had the associated HCC, and a PPV of 0 percent means that none of 
the enrollees taking a drug within a RXCUI had the associated HCC. In 
our analysis for the proposed rule, we found a marginal downward trend 
in the PPVs for the GLP-1 drugs mapping to RXC 07 (Anti Diabetic 
Agents, Except Insulin and Metformin Only) in the enrollee-level EDGE 
data years used to recalibrate the 2025 benefit year risk adjustment 
models. Based on comments received for the proposed rule, we reassessed 
PPVs for the GLP-1 mapping to RXC 07 (Anti Diabetic Agents, Except 
Insulin and Metformin Only) using the 2022 benefit year enrollee-level 
EDGE data, and we found that the GLP-1 drugs have high enough PPVs that 
they did not warrant exclusion under our criteria and that the 
enrollees' use of certain GLP-1 drugs in the market remains indicative 
of the condition, meaning we do not see PPVs indicative of a large 
enough change in clinical indications or practice patterns to warrant a 
change to the current mapping of GLP-1 drugs to RXC 07 (Anti Diabetic 
Agents, Except Insulin and Metformin Only). It is not clear how the 
trend in PPV of these drugs will continue, but we believe that further 
years of enrollee-level EDGE data are needed to evaluate this trend. 
For these reasons, at this time, we did not propose and are not making 
mapping changes for GLP-1 drugs to RXC 07 (Anti Diabetic Agents, Except 
Insulin and Metformin Only). As more enrollee-level EDGE data becomes 
available, HHS will continue to reassess the PPVs of GLP-1 drugs for 
potential future targeted changes as part of our ongoing efforts to 
continually improve the precision of the HHS risk adjustment models.
---------------------------------------------------------------------------

    \56\ Drugs that appear on claims data, either through National 
Drug Codes (NDCs) or Healthcare Common Procedural Coding System 
(HCPCS), are cross walked to RXCUIs. 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.
---------------------------------------------------------------------------

    In addition, HHS did not propose and is not finalizing the 
application of a pricing adjustment for GLP-1 drugs in the risk 
adjustment models. As discussed above, the only such adjustment that 
HHS currently applies is the market pricing adjustment to the plan 
liability associated with Hepatitis C drugs in the HHS risk adjustment 
models for the narrow purpose of accounting for significant pricing 
changes between the data years used for recalibrating the models and 
the applicable benefit year of risk adjustment as a result of the 
introduction of new and generic Hepatitis C drugs. We do not expect 
similar significant pricing changes of GLP-1 drugs between the data 
years used to recalibrate the models and the applicable benefit year of 
risk adjustment to justify applying a similar pricing adjustment to 
GLP-1 drugs under RXC 07 (Anti Diabetic Agents, Except Insulin and 
Metformin Only) at this time. We understand GLP-1 drug utilization 
patterns are changing and HHS will continue to assess any new drugs and 
any change in costs as more enrollee-level EDGE data become available 
for potential targeted refinements to the HHS risk adjustment models, 
as appropriate.
    Comment: A few commenters recommended assessing the behavioral HCC 
coefficients, such as HCC 102 (Autistic Disorder), to consider the 
impact of State benefit mandates in creating cost and utilization 
differentials

[[Page 26250]]

that reduce the ability of HCC coefficients to accurately reflect 
costs. These commenters suggested the State-to-State differences in 
plan liabilities for treating autistic disorder are likely the result 
of State coverage mandates for behavioral analysis. These commenters 
recommended HHS consider remedies that might be appropriate to mitigate 
coefficients that are too low to cover treatment costs in States with 
these benefit mandates. One commenter specifically noted that we should 
ensure that the HCC 102 (Autistic Disorder) coefficient fully reflects 
the cost of treating children with this diagnosis.
    Response: HHS did not propose and is not finalizing changes to the 
behavioral HCC factors. The HHS risk adjustment models are national 
models developed using nationwide data that apply in all States where 
the HHS-operated risk adjustment program exists, which for the 2025 
benefit year includes all States and the District of Columbia. Because 
these models are used nationally, they are intended to reflect the 
relative national average costs for HCCs and do not produce separate 
results based on State variations in plan liability, actuarial risk, or 
costs. Based on our experience in developing the HHS risk adjustment 
models, we have found that use of the nationwide dataset is often 
necessary to ensure that we have adequate sample size and stability in 
our risk adjustment models, including the models' factors and 
coefficients. We note that while the 2021 benefit year enrollee-level 
EDGE data has a field that allows the data to be aggregated by State, 
the 2019 and 2020 benefit years of enrollee-level EDGE data being used 
to recalibrate the risk adjustment models for the 2025 benefit year do 
not contain the State field.\57\ Therefore, our ability to analyze 
potential State variations and trends in the recalibration sample is 
currently limited. We intend to analyze additional years of enrollee-
level EDGE data, which will contain the State indicator in the future. 
We also note that HHS continuously performs analysis on model 
performance to ensure the current model coefficients are appropriate. 
For example, we conduct regular out-of-sample model evaluations that 
support continued model improvement efforts to evaluate how accurately 
the models predict plan liability for various groups of enrollees and 
health plans. Using out-of-sample 2021 data, we evaluated the final 
payment year 2024 blended factors (calibrated using 2018-2020 data) and 
the final payment year 2021 blended factors (calibrated using 2015-2017 
data). Outcomes of these evaluations were generally as expected and 
indicate that the national risk adjustment models are performing at a 
reasonable level.
---------------------------------------------------------------------------

    \57\ 87 FR 27241 through 27244. In the 2024 Payment Notice at 88 
FR 25781, we finalized the proposal to extract plan ID and rating 
area data elements issuers have submitted to their EDGE servers from 
certain benefit years prior to 2021. However, at this time, HHS has 
not completed that the extraction and development of updated 
datasets for model recalibration using plan ID and rating area data 
from the benefit years prior to 2021.
---------------------------------------------------------------------------

    Comment: Several commenters stated that the 2025 benefit year risk 
adjustment models will undercompensate issuers for enrollees with 
serious chronic conditions where coefficients have declined, which they 
stated would incentivize issuers to avoid these enrollees. A few 
commenters recommended that we update the risk adjustment models so 
that the coefficients are additive rather than hierarchical for the 
HCCs for kidney failure and transplant hierarchy, including HCCs 183 
(Kidney Transplant Status/Complications), 184 (End Stage Renal 
Disease), 187 (Chronic Kidney Disease, Stage 5), and 188 (Chronic 
Kidney Disease, Severe (Stage 4)). One commenter stated that over the 
past several model recalibrations, they observed a steady decline in 
the proportion of aggregate issuer risk scores that are attributable to 
clinical factors and an increase in the proportion of risk scores 
attributable to demographic factors.
    Response: We understand commenters' concerns about ensuring the HHS 
risk adjustment models adequately compensate issuers of risk adjustment 
covered plans for enrollees with serious chronic conditions. Several 
factors may contribute to the trend commenters observed with respect to 
declining HCC coefficients. For example, such a decline is expected in 
HHS risk adjustment models as diagnostic coding trends toward being 
more thorough and complete which results in capturing more HCCs per 
enrollee over time.\58\ As a result of this improved coding, some 
enrollees would have more HCCs count towards their risk score with each 
HCC individually contributing a smaller amount towards the enrollee's 
overall risk score. Consequently, because enrollees are likely to have 
more HCCs, the lower coefficients do not necessarily result in lower 
risk scores for enrollees with multiple HCCs.
---------------------------------------------------------------------------

    \58\ See Figure 4. Summary Report on Permanent Risk Adjustment 
Transfer for the 2022 Benefit Year https://www.cms.gov/files/document/summary-report-permanent-risk-adjustment-transfers-2022-benefit-year.pdf.
---------------------------------------------------------------------------

    Additionally, the observed decreases in coefficients can also be 
attributed to the revised interacted HCC counts model specification 
that was introduced beginning with the 2023 benefit year HHS risk 
adjustment adult and child models because this model specification 
shifts some of the predicted risk score away from the individual HCC 
coefficients and towards the severe interacted counts for the sickest 
enrollees. Specifically, in the 2023 Payment Notice (87 FR 27208, 27221 
through 27230), HHS finalized major changes to add the interacted HCC 
counts model specifications to the adult and child models.\59\ As 
discussed in the 2021 HHS-Operated Risk Adjustment Technical Paper on 
Possible Model Changes,\60\ the purpose of the interacted HCC counts 
model specifications is to address the identified underprediction of 
plan liability in the adult and child models for the very highest-risk 
enrollees (that is, those in the top 0.1 percentile and those enrollees 
with the most HCCs) because while this highest-risk subpopulation 
represents a small number of enrollees, it represents a large portion 
of expenditures. However, the impact of the interacted HCC counts model 
specification is that risk scores for some severe HCCs and for 
enrollees with severe HCCs and fewer comorbidities decrease, while risk 
scores for enrollees with severe HCCs and more comorbidities increase. 
Therefore, overall coefficient changes due to trends in coding and 
model changes such as the interacted HCC counts model specification 
would lead to lower risk scores for some enrollees and higher risk 
scores for others.
---------------------------------------------------------------------------

    \59\ See also Chapter 4 on Improving Predictive Accuracy for the 
Very Highest-Risk Enrollees--Interacted HCC Counts in the HHS-
Operated Risk Adjustment Technical Paper on Possible Model Changes 
(2021, October 26) at: https://www.cms.gov/files/document/2021-ra-technical-paper.pdf.
    \60\ 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 our effort to strive for continual improvement of the 
precision of the HHS risk adjustment models, our intention is to 
monitor the impact of changes in the risk adjustment models over the 
years to consider whether additional changes or modifications are 
needed. To do this, we will continue to conduct analysis on the models 
and the models' predictions before considering whether changes are 
needed. Similarly, if we were to consider making changes to the models 
to restructure hierarchies (that would change whether certain HCCs 
could be additive) we would need to further assess the impact of those

[[Page 26251]]

changes before proposing those changes. As major risk adjustment model 
changes were finalized beginning with the 2023 benefit year, we seek to 
observe and analyze the outcome of those changes before considering 
other major changes to the HHS risk adjustment models and therefore, we 
are not considering changes to the kidney transplant HCCs at this time 
as the kidney transplant HCC is part of the interacted HCC counts model 
specification.
    Lastly, we note that beginning with the 2023 benefit year, we also 
made substantial model changes intended to address observed 
underprediction of healthy enrollees that included the inclusion of the 
interacted HCC counts model specification in the adult and child models 
and the HCC-contingent enrollment duration factor updates in the adult 
models. For example, since the 2023 benefit year risk adjustment 
models, all costs for partial year with no-HCC-or-RXC enrollees are 
recalibrated into the age-sex factors.\61\ Thus, as a result of these 
model specification changes, the age-sex factors increased in the 2023 
benefit year risk adjustment models. Since the 2023 benefit year, we 
have observed that on average, age-sex coefficient values have remained 
stable, suggesting that the total risk attributable to these factors 
for the average enrollee is unchanged. We do not yet have the data for 
risk adjustment benefit years 2024 or 2025, but any proportional 
changes in risk attributable to demographic factors would likely depend 
on changes in the population being enrolled and model changes.
---------------------------------------------------------------------------

    \61\ Prior to the adoption of the HCC-contingent enrollment 
duration factors, risk from partial year, no-HCC-or-RXC enrollees 
was split between the age-sex factors and the enrollment duration 
factors defined using the previous model structure.
---------------------------------------------------------------------------

    Comment: A few commenters requested additional transparency in the 
determination of coefficients for the HHS risk adjustment models by 
making the full details of the methodology used for recalibration of 
the risk adjustment models publicly available to increase 
predictability for plans and therefore reduce plan incentives for 
discriminatory behavior used to protect the plans from future changes 
and for interested parties to have a better understanding of the 
rationale behind the updates to the HHS risk adjustment models. These 
commenters stated that this enhanced transparency would increase public 
confidence in the coefficients.
    Response: We understand the importance of transparency, but do not 
believe it is necessary to release additional information on the risk 
adjustment model recalibration methodology at this time. Since the 
program's inception, we have released several risk adjustment technical 
papers 62 63 64 65 and rules that describe the key program 
goals that informed development of the HHS risk adjustment models, 
explain our HCC diagnostic classification, provide information on the 
data and methods used to develop the models for each age group (adult, 
child, and infant) and metal level (platinum, gold, silver, bronze, as 
well as catastrophic plans), and discuss updates to the models over the 
years. We share similar information as part of the discussion of the 
annual model recalibration proposals in the applicable benefit year's 
Payment Notice, and when we identify areas for targeted refinements to 
improve model prediction along with potential options to address the 
identified issues, including the rationale for those options. Whether 
engaging in the annual model recalibration activities or identifying 
potential refinements and options to address identified issues, we are 
mindful of the role risk adjustment can play in reducing plan 
incentives for discriminatory behavior. By way of example, the current 
HHS risk adjustment adult and child models aim to reduce plan 
incentives for discriminatory behavior through methods like the 
recently adopted interacted HCC counts model specification that seeks 
to more accurately reflect anticipated plan liability for the sickest 
enrollees. The current HHS risk adjustment adult models were also 
recently updated with new HCC-contingent enrollment duration factors 
that seek to improve the prediction of plan liability for partial year 
enrollees. We provided a technical paper on these changes \66\ and also 
addressed them in notice and comment rulemakings.\67\ Our intention is 
to continue to provide technical papers where appropriate, such as when 
considering major modeling changes and engage in rulemaking to share a 
complete description of the applicable benefit year's models and any 
applicable updates to increase predictability for plans where possible. 
We also remain committed to continuing to test the performance of the 
models as part of our ongoing efforts to identify potential areas for 
targeted refinements to improve the prediction of the HHS risk 
adjustment models. We also provide background in this rule on the data 
used for recalibrating the 2025 benefit year models, including the 
analyses of the 2021 benefit year enrollee-level EDGE data to examine 
the potential impact of the COVID-19 PHE. As noted, we did not find any 
notable anomalous trends, especially when considering that every year 
of data can be unique, and therefore, some level of deviation from year 
to year is expected. We also provided extensive background when making 
significant model updates in the 2021 Payment Notice,\68\ as well as in 
the technical paper released in 2019 that considered potential future 
HCC changes and our associated analyses of those changes.\69\
---------------------------------------------------------------------------

    \62\ 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.
    \63\ 2016 Risk Adjustment White Paper (2016, March 31). CMS. 
https://www.cms.gov/cciio/resources/forms-reports-and-other-resources/downloads/ra-march-31-white-paper-032416.pdf.
    \64\ Potential Updates to HHS-HCCs for the HHS-operated Risk 
Adjustment Program. (2019, June 18). CMS. https://www.cms.gov/cciio/resources/regulations-and-guidance/downloads/potential-updates-to-hhs-hccs-hhs-operated-risk-adjustment-program.pdf.
    \65\ Risk Adjustment Implementation Issues. (2011, September 
12). CMS. https://www.cms.gov/CCIIO/Resources/Files/Downloads/riskadjustment_whitepaper_web.pdf.
    \66\ 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.
    \67\ 86 FR 24155 through 24162 and 87 FR 27221 through 27231.
    \68\ 85 FR 29164 at 29173 through 29185.
    \69\ Potential Updates to HHS-HCCs for the HHS-operated Risk 
Adjustment Program. (2019, June 18). CMS. https://www.cms.gov/cciio/resources/regulations-and-guidance/downloads/potential-updates-to-hhs-hccs-hhs-operated-risk-adjustment-program.pdf.
---------------------------------------------------------------------------

    Comment: Several commenters supported the continued inclusion of 
HCC 23 (Protein-Calorie Malnutrition) as a payment HCC in the 2025 
benefit risk adjustment models due to the high-costs of malnutrition 
care, and malnutrition's negative effect on health care utilization and 
outcomes. These commenters also expressed concern about health equity 
related to malnutrition and the importance of prioritizing policies 
that identify and treat malnutrition.
    Response: We agree with the commenters and continue to believe HCC 
23 (Protein-Calorie Malnutrition) is appropriate for continued 
inclusion in the HHS risk adjustment models for the individual, small 
group, and merged markets as a predictor of costs. We recognize that 
the CMS-HCC risk adjustment models used for Medicare Advantage recently 
removed this HCC from its models; however, we did not propose any 
changes to the treatment of HCC 23 (Protein-Calorie Malnutrition) in 
the 2025 benefit year HHS risk

[[Page 26252]]

adjustment models, and therefore, HCC 23 (Protein-Calorie Malnutrition) 
will continue to be included as a payment HCC and 2025 benefit year 
model factor as proposed for the adult, child, and infant models for 
the HHS-operated risk adjustment program applicable to the individual, 
small group, and merged markets.
    Comment: One commenter recommended allowing capitated claims 
without diagnoses to be submitted to the EDGE server, stating that the 
claims costs associated with capitated claims without diagnoses 
represent a large portion of medical costs. This commenter stated that 
this exclusion of capitated claims without diagnoses exacerbates the 
HHS-operated risk adjustment program's underprediction of lower-cost 
enrollees.
    Response: A critical component of the HHS-operated risk adjustment 
program is mapping of diagnosis codes from the EDGE server to HCCs in 
the risk adjustment models and therefore, only claims with diagnosis 
codes \70\ are allowed to be submitted to an issuer's EDGE server as 
these diagnosis codes are a critical component to the HHS-operated risk 
adjustment program's determination of actuarial risk and consideration 
for risk adjustment transfers. Should a capitated claim have a 
diagnosis, issuers may submit the claim to their EDGE server. Should a 
capitated claim not have a diagnosis, issuers may obtain diagnosis 
code(s) for the claim as directed in HHS guidance published in the EDGE 
Server Business Rules (ESBR) \71\ Section 8 Supplemental Diagnosis Code 
File Processing, which includes specific guidelines regarding 
acceptable sources of diagnosis code(s) for claims data submissions to 
EDGE servers that accounts for unique health delivery models. Certain 
issuers who mainly submit capitated claims to their EDGE server should 
therefore ensure those claims have diagnosis codes and can use the ESBR 
to identify acceptable sources of diagnosis codes for claims data 
submitted to their respective EDGE servers.\72\ HHS encourages all 
issuers of risk adjustment covered plans, whether they submit capitated 
or non-capitated claims, to work with providers to ensure claims 
contain the relevant diagnosis code(s).
---------------------------------------------------------------------------

    \70\ The only exception to this use of diagnosis codes to 
determine actuarial risk is the High-Cost Risk Pool, which uses 
claims costs.
    \71\ Centers for Medicare & Medicaid Services, Center for 
Consumer Information and Insurance Oversight (CCIIO). (Dec. 2023). 
EDGE Server Business Rules (ESBR) Version 24.0. https://regtap.cms.gov/reg_librarye.php?i=3765 (Login Required).
    \72\ https://regtap.cms.gov/reg_library_openfile.php?id=2183&type=k&pid=3 (Login Required).
---------------------------------------------------------------------------

    We also note that while HHS currently excludes enrollees with 
capitated claims for purposes of the risk adjustment model 
recalibration activities,\73\ we plan to continue to evaluate this data 
and whether to include these enrollees in recalibrating the models in 
future benefit years.
---------------------------------------------------------------------------

    \73\ Enrollees with at least one capitated claim in EDGE are 
excluded from recalibration because we have some concerns that the 
methods for computing and reporting derived amounts from capitated 
claims could be inconsistent across issuers and would not provide 
reliable or comparable data.
---------------------------------------------------------------------------

d. Cost-Sharing Reduction Adjustments
    We proposed to recalibrate the CSR adjustment factors for AI/AN 
zero-cost sharing and limited cost sharing CSR plan variant enrollees 
for the 2025 benefit year, and to retain these proposed AI/AN CSR 
adjustment factors, if finalized, for all future benefit years unless 
changed through notice and comment rulemaking. We also proposed to 
maintain the current CSR adjustment factors for silver plan variant 
enrollees (70 percent, 73 percent, 87 percent, and 94 percent AV plan 
variants) \74\ for the 2025 benefit year, as well as proposed to retain 
the same factors for the 2026 benefit year and beyond, unless changed 
through notice and comment rulemaking. The proposed 2025 Payment Notice 
provided our reasoning for our proposals and the history of inclusion 
of the CSR adjustment factors in HHS-operated risk adjustment as well 
as our analysis of these factors' performance.\75\ In short, based on 
analysis of all CSR adjustment factors, HHS proposed to not make 
changes to the CSR adjustment factors, with the exception of the AI/AN 
CSR plan variant factors.\76\ As explained in the proposed rule, our 
continued study of CSR adjustment factors found that adjustments for 
AI/AN CSR plan variant enrollees were needed and would be appropriate 
\77\ because the AI/AN CSR plan variant enrollees experienced higher 
expenditures than non-CSR silver enrollees, which may reflect increased 
demand associated with enrollee receipt of the AI/AN zero cost sharing 
or limited cost sharing CSR plan variants or risk characteristics 
specific to the AI/AN population which are not specifically captured by 
HCCs or other model factors.\78\ To address concerns about this 
observed underprediction among AI/AN CSR plan variant enrollees, we 
proposed to update the CSR adjustment factors for AI/AN zero-cost 
sharing and limited cost sharing plan variants and use the proposed 
factors for these enrollees as shown in Table 7.
---------------------------------------------------------------------------

    \74\ See 83 FR 16930 at 16953; 84 FR 17478 through 17479; 85 FR 
29190; 86 FR 24181; 87 FR 27235 through 27236; and 88 FR 25772 
through 25774.
    \75\ 88 FR 82510 at 82545 through 82548.
    \76\ In the 2021 Risk Adjustment Technical Paper, we concluded 
that, in aggregate, most of the current CSR adjustment factors 
contribute to a reasonable prediction of what plans are paying for 
CSR enrollees, with the exception of CSR adjustment factors for AI/
AN enrollees. Our continued study of these issues, including the 
more recent analysis of 2021 benefit year data, affirmed these 
initial conclusions. Therefore, we proposed and are finalizing in 
this rulemaking updates to the CSR adjustment factors for AI/AN 
zero-cost sharing and limited cost sharing plan variants while 
maintaining the existing CSR adjustment factors for other enrollees. 
See 88 FR 82510 at 82545 through- 82548. Also 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.
    \77\ 88 FR 82510 at 82545 through 82548.
    \78\ 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.

  Table 7--CSR Adjustment Factors for the 2025 Benefit Year and Beyond
------------------------------------------------------------------------
                                         Current           Adjustment
                                        adjustment      factors for the
              Plan AV                factors for the   2025 benefit year
                                    2024 benefit year      and beyond
------------------------------------------------------------------------
  Silver Plan Variant Recipients (and Enrollees in State wrap-around or
       Medicaid-expansion plans of any metal level, as applicable)
------------------------------------------------------------------------
Plan Variation 94%................               1.12               1.12
Plan Variation 87%................               1.12               1.12
Plan Variation 73%................               1.00               1.00
Standard Plan 70%.................               1.00               1.00
------------------------------------------------------------------------

[[Page 26253]]

 
  Zero Cost Sharing Plan Variant Recipients (that is, AI/AN Recipients)
------------------------------------------------------------------------
Platinum (90%)....................               1.00               1.31
Gold (80%)........................               1.07               1.39
Silver (70%)......................               1.12               1.46
Bronze (60%)......................               1.15               1.51
------------------------------------------------------------------------
Limited Cost Sharing Plan Variant Recipients (that is, AI/AN Recipients)
------------------------------------------------------------------------
Platinum (90%)....................               1.00               1.04
Gold (80%)........................               1.07               1.10
Silver (70%)......................               1.12               1.15
Bronze (60%)......................               1.15               1.19
------------------------------------------------------------------------

    Lastly, separate from the policy pertaining to AI/AN CSR adjustment 
factors, we noted that for all plan liability risk score calculations 
under the State payment transfer formula, we use the CSR adjustment 
factor that aligns with the AV of the applicable plan for the enrollee. 
Thus, for unique State-specific plans, we apply the CSR adjustment 
factors that correspond to each plan's AV. However, this approach does 
not apply in the case of States whose State-specific plans take the 
form of Medicaid expansion plans offered on the Exchange (for example, 
Arkansas), because these plans are identical in all their parameters, 
including AV and degree of plan liability, to other plans offered on 
the Exchange in those States and are differentiated from their 
comparable plans only in eligibility criteria and sources of 
funding.\79\ As we identify unique State-specific plans that have 
higher plan liability than the standard plan variants, such as those in 
Massachusetts, we work with the relevant State Department of Insurance 
and other relevant State agencies to identify the applicable CSR 
adjustment factor that corresponds to the unique State-specific plan's 
AV.\80\ We explained that we will continue to follow this approach, 
working with the State to identify the applicable CSR adjustment factor 
that corresponds to that State's unique State-specific plan's AV, 
unless changed through notice and comment rulemaking.
---------------------------------------------------------------------------

    \79\ The structure of wrap-around plans in some States, such as 
Massachusetts, differs from the coverage in States who offer 
Medicaid expansion plans on the Exchange. For example, in 
Massachusetts, the higher cost sharing wrap-around plans are 
variations of lower cost sharing plans. As such, the Massachusetts 
wrap-around plans do not have the same AVs as their comparable 
plans. That is why we use a CSR adjustment factor of 1.12 for all 
Massachusetts wrap-around plans with AVs above 94 percent. In 
contrast, Arkansas' Medicaid expansion plans are identical to other 
94 percent and 100 percent AV CSR plan variants offered on the 
Exchange and are distinguished from these identical plans only in 
their sources of funding and eligibility criteria. As such, we 
presently direct issuers in Arkansas who provide Medicaid expansion 
plans with AVs of 94 percent and 100 percent to use specified plan 
variant codes for their Medicaid expansion plans only to 
differentiate the sources of funding and to differentiate between 
populations eligible for the Medicaid expansion plans from those who 
are eligible for standard 94 percent and 100 percent AV CSR plan 
variants. Because the Arkansas Medicaid expansion plans are 
identical to other 94 percent and 100 percent AV CSR plan variants 
available in Arkansas and therefore have the same AVs, we would use 
the proposed CSR adjustment factor of 1.12 for Arkansas 94 percent 
AV Medicaid-expansion plans and the proposed CSR adjustment factor 
that corresponds to the silver metal level zero cost sharing 
variants (that is, the proposed 1.46 CSR adjustment factor for zero 
cost sharing variants) for Arkansas 100 percent AV Medicaid-
expansion plans in the plan liability risk score calculation. See 
CMS approval of Arkansas's section 1115(a) demonstration, ``Arkansas 
Health and Opportunity for Me.'' https://www.medicaid.gov/sites/default/files/2021-12/ar-arhome-ca.pdf.
    \80\ For a list of the unique State-specific CSR levels that 
have higher plan liability than the standard plan variants, for 
which we utilize the corresponding CSR adjustment factor that maps 
to the plan's AV, refer to the applicable benefit year's DIY 
Software on the CMS website. See, for example, the 2023 Benefit Year 
DIY Software on the CMS website (January 9, 2024). https://www.cms.gov/files/zip/hhs-hcc-software-v0723141c3.zip.
---------------------------------------------------------------------------

    We sought comment on these proposals and policies. After 
consideration of comments and for the reasons outlined in the proposed 
rule and our responses to comments, we are finalizing these provisions 
and policies as proposed. We summarize and respond to public comments 
received on the proposed CSR adjustment factors and related policies 
below.
    Comment: Several commenters supported the proposed recalibration of 
the CSR adjustment factors for AI/AN zero-cost sharing and limited cost 
sharing plan variant enrollees for the 2025 benefit year and beyond 
because the recalibration would better capture increased utilization 
from zero-cost sharing and limited cost sharing enrollments and 
mitigate incentives that could discourage issuers from enrolling AI/AN 
populations. These commenters stated that the adjustments will have the 
effect of stabilizing premiums and incentivizing issuers to enroll the 
AI/AN population. Another commenter recommended HHS continue to monitor 
the predictive ratios of the CSR adjustment factors for the AI/AN 
population to ensure that they accurately estimate additional plan 
liabilities associated with these enrollments and to make further 
adjustments, as needed.
    One commenter, who did not oppose recalibrating the CSR adjustment 
factors for AI/AN zero-cost sharing and limited cost sharing plan 
variant enrollees, preferred to comprehensively reform how CSR variants 
are handled in HHS-operated risk adjustment program, such as creating 
CSR specific risk adjustment models and modifying the rating term \81\ 
to reflect issuer silver loading practices.
---------------------------------------------------------------------------

    \81\ The State payment transfer formula may be understood to be 
composed of two key higher-level terms, the risk term and the rating 
term. The risk term generally defines the revenue required by a plan 
(relative to the Statewide market average). It is determined by 
three component variables, the plan liability risk score (PLRS), 
which reflects the plan's AV as well as the plan's enrollee health 
status risk; the induced demand factors (IDF), which reflects the 
anticipated induced demand associated with the plan's cost-sharing 
(metal) level, and the geographic cost factor (GCF), which accounts 
for differences in premium due to allowable geographic rating 
variation. The rating term defines the revenue that a plan can be 
expected to generate given the allowable rating factors (relative to 
the Statewide market average). It is determined by four component 
variables: AV, which adjusts for relative differences between the 
plan actuarial value in a market; an Allowable Rating Factor (ARF), 
which accounts for the impact of allowable rating factors (age or 
family tier) based on State rating method; an IDF; and a GCF. For 
more information see section 1.2.3 of the in the HHS-Operated Risk 
Adjustment Technical Paper on Possible Model Changes (2021, October 
26) at: https://www.cms.gov/files/document/2021-ra-technical-paper.pdf.

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

[[Page 26254]]

    Response: We are finalizing as proposed the updates to the CSR 
adjustment factors for AI/AN zero-cost sharing and limited cost sharing 
CSR plan variant enrollees for the 2025 benefit year, and to retain 
these AI/AN CSR adjustment factors, along with the CSR adjustment 
factors for other enrollees, for future benefit years unless changed 
through notice and comment rulemaking. We agree with commenters that 
these targeted refinements to the AI/AN CSR adjustment factors would 
better capture increased utilization from zero-cost sharing and limited 
cost-sharing enrollments and help mitigate incentives that could 
discourage issuers from enrolling AI/AN populations. We also intend to 
continue to study the non-AI/AN CSR adjustment factors for potential 
updates in future benefit years, as may be appropriate.
    We did not propose and are not finalizing comprehensive changes to 
risk adjustment, such as changes to the rating term in the State 
payment transfer formula,\82\ to account for CSR plans and silver 
loading in this final rule. In Appendix A of the 2021 HHS-Operated Risk 
Adjustment Technical Paper on Possible Model Change,\83\ we outlined a 
variety of policy options, including a change to the rating term in the 
State payment transfer formula, that we have considered to improve the 
precision of the HHS risk adjustment models and better account for CSR 
plan variants and issuer silver loading practices. We continue to 
consider policy options and conduct additional analyses on potential 
changes in this area before considering whether to propose any 
comprehensive reform of how CSR plan variants are handled in the HHS-
operated risk adjustment program. If we were to pursue such 
comprehensive changes to the treatment of CSR plans in the HHS-operated 
risk adjustment program, we would propose and solicit comments on those 
types of changes in future notice and comment rulemaking.
---------------------------------------------------------------------------

    \82\ Id.
    \83\ See CMS. (2021, October 26). HHS-Operated Risk Adjustment 
Technical Paper on Possible Model Changes. Appendix A. https://www.cms.gov/files/document/2021-ra-technical-paper.pdf.
---------------------------------------------------------------------------

    Comment: One commenter recommended that HHS increase the 
Massachusetts wrap-around CSR adjustment factor from the current 1.12 
factor (which aligns with the CSR adjustment factor for plans with 
actuarial value (AV) of 94 percent) because Massachusetts wrap-around 
plans have higher AVs (99.7 percent and 96.1 percent AVs) than a 94 
percent AV plan. This commenter explained that Massachusetts used 
higher CSR adjustment factors between 2014 and 2016 benefit years when 
the State operated its own risk adjustment program, and those factors 
were lowered when Massachusetts transitioned into the HHS-operated risk 
adjustment program beginning with the 2017 benefit year.\84\ Another 
commenter appreciated that the HHS Federally certified risk adjustment 
methodology accounts for Massachusetts-specific market factors 
resulting from the design of the ConnectorCare program.
---------------------------------------------------------------------------

    \84\ This commenter also stated a recent study on AI/AN zero 
cost sharing plans' CSR adjustment factors suggests that higher CSR 
adjustment factors are needed for the three ConnectorCare plans, but 
the commenter did not cite the study; therefore, we were not able to 
verify the study's findings that the commenter was highlighting.
---------------------------------------------------------------------------

    Response: As we noted in the proposed rule, for all plan liability 
risk score calculations under the State payment transfer formula, we 
use the CSR adjustment factor that aligns with the AV of the applicable 
plan for the enrollee. Thus, for unique State-specific plans, we apply 
the CSR adjustment factors that correspond to each plan's AV. When we 
identify unique State-specific plans that have higher plan liability 
than the standard plan variants, we work with the relevant State 
Department of Insurance and other relevant State agencies to identify 
the applicable CSR adjustment factor that corresponds to the unique 
State-specific plan's AV.\85\ HHS worked with Massachusetts for the 
2014 through 2016 benefit years when the State established its CSR 
adjustment factors for use in its State-based risk adjustment program 
to account for its wraparound plans \86\ and when Massachusetts 
transitioned into the HHS-operated risk adjustment program beginning in 
the 2017 benefit year, we continued to work with Massachusetts to 
incorporate CSR adjustment factors into the HHS-operated risk 
adjustment program for Massachusetts' wraparound plans and set them as 
a 1.12 factor.\87\ As detailed in the 2014 Payment Notice,\88\ the CSR 
adjustment factors in the Federally certified risk adjustment 
methodology applicable in States where HHS operates the risk adjustment 
program (specifically calibrated for target AVs of 73 percent, 87 
percent and 94 percent) may not be adequate for Massachusetts. To 
overcome this limitation, Massachusetts fit a polynomial trend line to 
the HHS proposed CSR adjustment factors by metal level, which 
Massachusetts extended to 100 percent.
---------------------------------------------------------------------------

    \85\ For a list of the unique State-specific CSR levels that 
have higher plan liability than the standard plan variants, for 
which we utilize the corresponding CSR adjustment factor that maps 
to the plan's AV, refer to the applicable benefit year's DIY 
Software on the CMS website. See, for example, the 2023 Benefit Year 
DIY Software on the CMS website (January 9, 2024). https://www.cms.gov/files/zip/hhs-hcc-software-v0723141c3.zip.
    \86\ See 78 FR 15442.
    \87\ See 81 FR 12228-12229.
    \88\ 78 FR 15442.
---------------------------------------------------------------------------

    Since then, the Massachusetts Health Connector, Massachusetts' 
Exchange, has consistently supported continued use of the 1.12 factor 
for their wraparound plans \89\ and has not indicated that a change is 
needed. Therefore, we do not believe that it is necessary to make 
changes to Massachusetts wraparound CSR adjustment plan factor at this 
time and will continue to apply the 1.12 factor for the 2025 benefit 
year.
---------------------------------------------------------------------------

    \89\ For examples, see for Massachusetts Health Connector's 
comments on the proposed 2025 Payment Notice at: https://www.regulations.gov/comment/CMS-2023-0191-0081; also, see the 
Massachusetts Health Connector's comments on the proposed 2024 
Payment Notice at: https://www.regulations.gov/comment/CMS-2022-0192-0102.
---------------------------------------------------------------------------

e. Model Performance Statistics
    Each benefit year, to evaluate the HHS risk adjustment model 
performance, we examine each model's R-squared statistic and predictive 
ratios (PRs). The R-squared statistic measures the percentage of 
individual variation explained by the model. The PRs measure how 
accurate the model's predictions are for specific subpopulations. For a 
given population, the PR is defined as the ratio of the weighted mean 
predicted plan liability to the weighted mean actual plan liability.
    A subpopulation that is predicted perfectly would have a PR of 1.0. 
For each of the current and proposed HHS risk adjustment models, the R-
squared statistic and the PRs are in the range of published estimates 
for concurrent HHS risk adjustment models.\90\ Because we are 
finalizing a blend of the coefficients from separately solved models 
based on the 2019, 2020, and 2021 benefit years' enrollee-level EDGE 
data, we are publishing the R-squared statistic for each model 
separately to verify their statistical validity. The R-squared 
statistics for the final 2025 benefit year HHS risk adjustment models 
are shown in Table 8.
---------------------------------------------------------------------------

    \90\ Hileman, G., & Steele, S. (2016). Accuracy of Claims-Based 
Risk Scoring Models. Society of Actuaries. https://www.soa.org/4937b5/globalassets/assets/files/research/research-2016-accuracy-claims-based-risk-scoring-models.pdf.

[[Page 26255]]



                      Table 8--R-Squared Statistic for the 2025 HHS Risk Adjustment Models
----------------------------------------------------------------------------------------------------------------
                                                                  2019 Enrollee-  2020 Enrollee-  2021 Enrollee-
                             Models                                 level EDGE      level EDGE      level EDGE
                                                                       data            data            data
----------------------------------------------------------------------------------------------------------------
Platinum Adult..................................................          0.4448          0.4360          0.4174
Gold Adult......................................................          0.4394          0.4302          0.4118
Silver Adult....................................................          0.4371          0.4278          0.4094
Bronze Adult....................................................          0.4330          0.4236          0.4051
Catastrophic Adult..............................................          0.4329          0.4236          0.4051
Platinum Child..................................................          0.3569          0.3436          0.3539
Gold Child......................................................          0.3541          0.3404          0.3511
Silver Child....................................................          0.3522          0.3383          0.3491
Bronze Child....................................................          0.3491          0.3351          0.3459
Catastrophic Child..............................................          0.3490          0.3350          0.3458
Platinum Infant.................................................          0.3165          0.2913          0.3059
Gold Infant.....................................................          0.3133          0.2878          0.3025
Silver Infant...................................................          0.3122          0.2865          0.3012
Bronze Infant...................................................          0.3101          0.2842          0.2989
Catastrophic Infant.............................................          0.3101          0.2842          0.2989
----------------------------------------------------------------------------------------------------------------

3. Overview of the HHS Risk Adjustment Methodology (Sec.  153.320)
    In part 2 of the 2022 Payment Notice (86 FR 24183 through 24186), 
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. We 
explained that under this approach, we will no longer republish these 
formulas in future annual HHS notice of benefit and payment parameter 
rules unless changes are being proposed. We did not propose any changes 
to the formula in this rule, and therefore will continue to apply the 
formula as finalized in the 2021 Payment Notice (85 FR 29191 through 
29193 \91\) in the States where HHS operates the risk adjustment 
program in the 2025 benefit year. We also will not republish the 
formulas in this rule. Additionally, as finalized in the 2020 Payment 
Notice (84 FR 17466 through 17468), we will maintain the high-cost risk 
pool parameters for the 2020 benefit year and beyond, unless amended 
through notice and comment rulemaking. We did not propose any changes 
to the high-cost risk pool parameters for the 2025 benefit year; 
therefore, we are maintaining the $1 million attachment point and 60 
percent coinsurance rate.\92\
---------------------------------------------------------------------------

    \91\ Discussion provided an illustration and further details on 
the State payment transfer formula.
    \92\ See 81 FR 94081. See also 84 FR 17467.
---------------------------------------------------------------------------

    After consideration of comments and for the reasons outlined in the 
proposed rule and our responses to comments, we are finalizing the 2025 
benefit year risk adjustment methodology as proposed. We summarize and 
respond to public comments received on the State payment transfer 
formula below.
    Comment: One commenter recommended updating the State payment 
transfer formula to scale risk adjustment State transfers using State-
average claims multiplied by a ratio of claims to actuarial risk, 
relying on medical loss ratio (MLR) claims data rather than data 
issuers submit to their respective distributed data environments (EDGE 
servers). A few commenters expressed concern that overall risk 
adjustment transfers are too small. Several commenters expressed 
concern about the potential negative consequences risk adjustment can 
have on new or small health insurance issuers attempting to enter the 
market. These commenters referred to recent plan failures that affected 
other carriers who are owed risk adjustment payments.
    Response: We did not propose and are not finalizing changes to the 
use of the Statewide average premium as the scaling factor in the State 
payment transfer formula. We also did not propose and are not 
finalizing the use of MLR data instead of issuers' EDGE data to 
calculate risk adjustment transfers. As detailed in prior 
rulemakings,\93\ HHS chose to use Statewide average premium to convert 
required revenue and allowable premium State average factors in the 
State payment transfer formula from relative factors to dollar amounts 
so that the total calculated payment amounts equal total calculated 
charges in each State market risk pool. Thus, each plan in the State 
market risk pool receives a risk adjustment State transfer payment or 
charge that is scaled based on the determination of plan average risk 
within a State market risk pool, resulting in balanced, budget-neutral 
transfers. Furthermore, as detailed in the 2018 Payment Notice,\94\ we 
adopted a 14 percent reduction to the Statewide average premium to 
account for administrative costs that are unrelated to the claims risk 
of the enrollee population. To derive this parameter, we analyzed 
administrative and other non-claims expenses in the MLR Annual 
Reporting Form and estimated, by category, the extent to which the 
expenses varied with claims. We compared those expenses to the total 
costs that issuers finance through premiums, including claims, 
administrative expenses, and taxes, and determined that the mean 
administrative cost percentage in the individual, small group and 
merged markets is approximately 14 percent. We believe this amount 
represents a reasonable percentage of administrative costs on which 
risk adjustment should not be calculated. This approach supports the 
overall goal of the risk adjustment program to encourage issuers to 
rate for average risk and mitigates incentives for issuers to operate 
less efficiently, or to develop benefit designs or create marketing 
strategies to avoid high-risk enrollees. And, while we have not tested 
using Statewide average MLR claims data in the State payment transfer 
formula, we have concerns about whether we could operationally use MLR 
data for this purpose and the limitations of using the MLR data 
especially when compared to

[[Page 26256]]

the benefits of using data issuers submit to their EDGE server for this 
purpose. For example, it would not be feasible to use current MLR data 
as the timelines for reporting for a particular benefit year of MLR 
data by July 31 of the year following the applicable benefit year does 
not align with the regulatory timeline at Sec.  153.310(e) that 
requires States and HHS to notify issuers of risk adjustment payment 
due and charges owed by June 30 of the year following the applicable 
benefit year. Additionally, using the MLR data's usable claims fields 
for this purpose would need to be further investigated as the ``Claims 
Paid'' data field has several exclusions and deductions.\95\ More 
importantly, we have previously researched using Statewide average 
claims as a scaling factor in the State payment transfer formula and 
found that it was a volatile measure, both across States within a year 
and across years within a State and would be sensitive to unexpected 
claims experience. Furthermore, unexpected claims experience could 
particularly cause instability for smaller issuers, thereby reducing 
the predictability of risk adjustment transfers.\96\ For these reasons, 
we did not propose or otherwise consider proposing updates to use 
Statewide average claims or relying on MLR claims data for calculating 
transfers under the State payment transfer formula. We will continue to 
scale risk adjustment transfers based on Statewide average premiums, as 
they are less subject to the instability of Statewide average claims.
---------------------------------------------------------------------------

    \93\ See, for example, the Adoption of the Methodology for the 
HHS-operated Risk Adjustment Program under the Patient Protection 
and Affordable Care Act for the 2017 Benefit Year; Final Rule, 83 FR 
36456 (July 31, 2018); and the Adoption of the Methodology for the 
HHS-operated Risk Adjustment Program for the 2018 Benefit Year; 
Final Rule, 83 FR 63419 (December 10, 2018). Also see the HHS Notice 
of Benefit and Payment Parameters for 2020; Final Rule, 84 FR 17454 
at 17480 through 17484 (April 25, 2019).
    \94\ 83 FR 63419 at 63422 through 63427.
    \95\ See CMS MLR Annual Reporting Form Filing Instructions for 
2022 MLR Reporting Year at: https://www.cms.gov/files/document/2022-mlr-form-instructions.pdf.
    \96\ 84 FR 17454 at 17480 through 17482.
---------------------------------------------------------------------------

    We continue to believe that the State payment transfer formula is 
working as intended by more evenly spreading the financial risk carried 
by health insurance issuers that enroll higher-risk individuals in a 
particular State market risk pool, thereby protecting issuers against 
adverse selection and supporting them in offering products that serve 
all types of consumers.\97\ We also continue to find that risk 
adjustment transfers calculated under the State payment transfer 
formula as a percent of total premiums correlate with the amount of 
paid claims rather than issuer size,\98\ and that per-member-per-month 
risk adjustment transfer amounts tend to be similar for smaller and 
larger issuers. Although we do not agree that risk adjustment is biased 
against new and small issuers, we have implemented policies as part of 
the HHS-operated risk adjustment program to assist small issuers, such 
as allowing issuers with 500 or fewer billable member months Statewide 
to be assessed a lower, separate default risk adjustment charge if they 
fail to set up an EDGE server, fail to submit sufficient data for HHS 
to calculate transfers, or otherwise opt to accept the default risk 
adjustment charge for a particular benefit year of risk adjustment.\99\ 
We also do not agree with commenters that risk adjustment transfers are 
too small,\100\ and we note that risk adjustment transfers as a percent 
of premium have been increasing, which is indicative of risk adjustment 
transfers growing, as detailed in the Summary Report on Permanent Risk 
Adjustment Transfer for the 2022 Benefit Year: \101\
---------------------------------------------------------------------------

    \97\ See, for example, Summary Report on Permanent Risk 
Adjustment Transfer for the 2022 Benefit Year. (2023, June 30). CMS. 
https://www.cms.gov/files/document/summary-report-permanent-risk-adjustment-transfers-2022-benefit-year.pdf; Summary Report on 
Permanent Risk Adjustment Transfer for the 2021 Benefit Year 
(Revised). (2022, July 19). CMS. https://www.cms.gov/cciio/programs-and-initiatives/premium-stabilization-programs/downloads/ra-report-by2021.pdf; and Summary Report on Permanent Risk Adjustment Transfer 
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.
    \98\ We recently reconducted this analysis. Also, see the 
Summary Report on Permanent Risk Adjustment Transfer for the 2022 
Benefit Year at: https://www.cms.gov/files/document/summary-report-permanent-risk-adjustment-transfers-2022-benefit-year.pdf.
    \99\ Other examples of HHS policies to assist small issuers 
including exempting small issuers under 45 CFR 153.630(g)(1) and 45 
CFR 153.630(g)(2) from being required to participate in risk 
adjustment data validation under certain circumstances.
    \100\ We note that, prior to the 2018 benefit year, HHS used 100 
percent of Statewide average premium in the transfer formula but 
reduced it to 84 percent of Statewide average premium in order to 
account for administrative costs that do not vary with claims. See 
81 FR 94099 through 94101.
    \101\ Summary Report on Permanent Risk Adjustment Transfer for 
the 2022 Benefit Year. (2023, June 30). CMS. https://www.cms.gov/files/document/summary-report-permanent-risk-adjustment-transfers-2022-benefit-year.pdf.
---------------------------------------------------------------------------

     Nationwide, the absolute value of risk adjustment State 
transfers across all State market risk pools (excluding the high-cost 
risk pool) was about 10.4 percent of total premiums, as compared to the 
absolute value of 2021 benefit year State transfers, which was 8.7 
percent of total premiums.
     In the 2021 benefit year, the absolute value of risk 
adjustment State transfers as a percent of premiums averaged 11.7 
percent of premiums in the individual non-catastrophic risk pool, and 
4.4 percent of premiums in the small group risk pool.
     In the 2022 benefit year, the absolute value of risk 
adjustment State transfers increased to 14.2 percent of premiums in the 
individual non-catastrophic risk pool and 4.5 percent of premiums in 
the small group risk pool.
    We acknowledge that large risk adjustment charges can be 
unpredictable for small, new, or fast-growing issuers. We will continue 
to monitor risk adjustment implications and challenges for these 
issuers. HHS has regularly discussed with issuers and State regulators 
ways to encourage new participation in the health insurance markets and 
to mitigate any disruptive effects of substantial risk adjustment 
charges. We intend to continue these discussions and note that HHS 
remains committed to working with States and other interested parties 
to encourage new market participants, mitigate adverse selection, and 
promote stable insurance markets through strong risk adjustment 
programs. Finally, we note that to minimize the impact of issuers that 
fail to pay charges owed to the risk adjustment program, HHS will use 
all available debt collection tools to fully collect risk adjustment 
charges from issuers with plan failures that affected other issuers who 
are owed risk adjustment payments, which includes netting those charges 
against certain other payments owed to the issuer,\102\ where 
applicable.
---------------------------------------------------------------------------

    \102\ See 45 CFR 156.1215.
---------------------------------------------------------------------------

4. HHS Risk Adjustment User Fee for the 2025 Benefit Year
    In the 2025 Payment Notice proposed rule (88 FR 82510, 82549), HHS 
proposed a risk adjustment user fee for the 2025 benefit year of $0.20 
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. For the 2025 benefit year, HHS 
will operate risk adjustment in every State and the District of 
Columbia. As described in the 2014 Payment Notice (78 FR 15416 through 
15417), HHS' operation of risk adjustment on behalf of States is funded 
through a risk adjustment user fee. 45 CFR 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.
    OMB Circular No. A-25 established Federal policy regarding user 
fees, and specifies that a user charge will be assessed against each 
identifiable

[[Page 26257]]

recipient for special benefits derived from Federal activities beyond 
those received by the general public.\103\ The HHS-operated risk 
adjustment program provides special benefits as defined in section 
6(a)(1)(B) of OMB Circular No. A-25 to issuers of risk adjustment 
covered plans because it mitigates the financial instability associate 
with potential adverse risk selection.\104\ The HHS-operated risk 
adjustment program also contributes to consumer confidence in the 
health insurance industry by helping to stabilize premiums across the 
individual, merged, and small group markets.
---------------------------------------------------------------------------

    \103\ See Circular No. A-25 Revised. https://www.whitehouse.gov/wp-content/uploads/2017/11/Circular-025.pdf.
    \104\ Id.
---------------------------------------------------------------------------

    To calculate the HHS risk adjustment user fee, we divided HHS' 
projected total costs for administering the HHS risk adjustment program 
on behalf of States by the expected number of billable member months 
(BMM) in risk adjustment covered plans in States where the HHS-operated 
risk adjustment program will apply in the 2025 benefit year. We 
estimated that the total cost for HHS to operate the risk adjustment 
program on behalf of States for the 2025 benefit year will be 
approximately $66 million, which is more than the approximately $60 
million estimated for the 2024 benefit year. We projected increased 
costs due to increased contracting costs combined with increased labor 
costs.
    We also projected higher enrollment than our prior estimates in the 
2024 and 2025 benefit years based on the increased enrollment, as 
measured by BMM, between the 2021 and 2022 benefit years in the 
individual non-catastrophic market risk pool in most States, likely due 
to the increased PTC subsidies provided for in the American Rescue Plan 
Act of 2021 (ARP).105 106 In light of the passage of the 
Inflation Reduction Act of 2022 (IRA), in which section 12001 extended 
the enhanced PTC subsidies in section 9661 of the ARP through the 2025 
benefit year, we projected there will continue to be increased 
enrollment levels through the 2025 benefit year.\107\ Because we 
projected an increased budget to operate the HHS-operated risk 
adjustment program and estimated higher enrollment through the end of 
the 2025 benefit year, we proposed a HHS risk adjustment user fee of 
$0.20 PMPM for the 2025 benefit year.
---------------------------------------------------------------------------

    \105\ ARP. Public Law 117-2 (2021).
    \106\ CMS. (2023, June 30). Summary Report on Permanent Risk 
Adjustment Transfers for the 2022 Benefit Year. (p. 8). https://www.cms.gov/files/document/summary-report-permanent-risk-adjustment-transfers-2022-benefit-year.pdf.
    \107\ Inflation Reduction Act. Public Law 1217-169 (2022).
---------------------------------------------------------------------------

    We sought comment on the proposed HHS risk adjustment user fee for 
the 2025 benefit year.
    After reviewing public comments and revising our projections based 
on newly available data that impacted our enrollment projections, we 
are finalizing a risk adjustment user fee rate of $0.18 PMPM for the 
2025 benefit year. We summarize and respond to public comments received 
on the proposed 2025 benefit year risk adjustment user fee rate below.
    Comment: Some commenters supported lowering the risk adjustment 
user fee rate. Several commenters supported a risk adjustment user fee 
rate that adequately funds Federal programs.
    Response: We are finalizing a risk adjustment user fee rate for 
benefit year 2025 of $0.18 PMPM. The final 2025 benefit year risk 
adjustment user fee rate is lower than the proposed 2025 benefit year 
user fee rate because we revised our enrollment projections based on 
newly available data from the 2024 benefit year individual market Open 
Enrollment (OE) period, which occurred between November 2023 and 
January 2024. In particular, the 2024 OE cycle saw larger than 
projected plan selections, which resulted in us increasing our 
projected BMMs for the risk adjustment user fee for the 2025 benefit 
year,\108\ and with a projected budget of $66 million, it resulted in a 
lower risk adjustment user fee.
---------------------------------------------------------------------------

    \108\ For additional information, see https://www.cms.gov/newsroom/fact-sheets/marketplace-2024-open-enrollment-period-report-final-national-snapshot.
---------------------------------------------------------------------------

5. Audits and Compliance Reviews of Risk Adjustment Covered Plans 
(Sec.  153.620(c))
    We proposed amending Sec.  153.620(c)(4) to require issuers of risk 
adjustment covered plans to complete, implement, and provide to HHS 
written documentation of any corrective action plans when required by 
HHS if a high-cost risk pool audit results in the inclusion of certain 
observations \109\ in the final audit report. Currently, under Sec.  
153.620(c)(4), a corrective action plan is only required, at HHS' 
direction, if the audit results in the inclusion of a finding in the 
final audit report. Upon completion of the first benefit year of high-
cost risk pool audits (2018 benefit year audits), HHS found that some 
issuers of risk adjustment covered plans made data submission errors to 
their EDGE servers that constituted instances of noncompliance but did 
not result in a financial impact and were therefore recorded as 
observations in the final audit report. Under this proposal, HHS would 
communicate to the issuer, as part of the final audit report, which 
findings and observations require a corrective action plan.
---------------------------------------------------------------------------

    \109\ In the context of high-cost risk pool audits, an 
``observation'' results from the identification of areas for 
improvement when there is no evidence of actual non-compliance with 
applicable Federal requirements or when there may be evidence of 
non-compliance with applicable Federal requirements that does not 
require recoupment of these payments. Centers for Medicare & 
Medicaid Services, Center for Consumer Information and Insurance 
Oversight (CCIIO). (Dec. 2022). Best Practices Overview: Benefit 
Year (BY) 2018 HCRP Payment Audits and General EDGE Server 
Requirements. https://regtap.cms.gov/reg_library_openfile.php?id=4234&type=l (Login Required). This 
amendment and accompanying policies are limited to observations 
where there may be evidence of non-compliance with applicable 
Federal requirements.
---------------------------------------------------------------------------

    Under this policy, consistent with the existing framework in Sec.  
153.620(c)(4), HHS would require an issuer of a risk adjustment covered 
plan to provide, within 45 calendar days of the issuance of the final 
audit report, a written corrective action plan for any audit findings, 
as well as audit observations when there is evidence of non-compliance 
with applicable Federal requirements, to HHS for approval, implement 
that plan, and provide to HHS written documentation of the corrective 
actions taken to resolve the root cause of the non-compliance 
identified.\110\ We proposed to apply this change beginning with 2020 
benefit year high-cost risk pool audits, which we anticipate beginning 
in 2024.\111\
---------------------------------------------------------------------------

    \110\ See 45 CFR 153.620(c)(4). Also see 86 FR 24192 through 
24194.
    \111\ If 2020 benefit year high-cost risk pool audits begin in 
early 2024, we anticipate the final audit reports would be 
completed, with findings and observations identified, in early 2025.
---------------------------------------------------------------------------

    We sought comment on this proposal.
    After consideration of comments and for the reasons outlined in the 
proposed rule and our responses to comments, we are finalizing this 
amendment and the accompanying policies as proposed. We summarize and 
respond to public comments received on the proposed amendments to Sec.  
153.620(c)(4) to require a corrective action plan for audit 
observations under certain circumstances below.
    Comment: Several commenters supported the proposal. One commenter 
agreed that allowing instances of non-compliance to be unaddressed 
could impact EDGE data integrity and that a corrective action plan is 
an effective tool to address this concern. Other commenters generally 
supported the proposed policy, noting that it allows HHS to run 
sufficiently and efficiently, and provide oversight of, its risk

[[Page 26258]]

adjustment program, which aligns with professional industry 
organizations' goals to support continuous improvement in their 
members' compliance with local, State, and Federal requirements and 
their own policies and procedures.
    Other commenters opposed the proposal stating concerns that the 
changes to the audit would be applied retrospectively to observations 
that do not have monetary impacts. Other commenters were concerned 
about a perceived lack of rights and processes available for issuers to 
appeal audit findings or observations that require completion of 
corrective action plans. These commenters were concerned that there is 
not enough information regarding how HHS uses data collected during the 
audit processes. Commenters were also concerned that the use of 
corrective action plans in this manner would require issuers to provide 
data they do not readily have available in order to take the necessary 
corrective actions and that this access and use of data goes beyond 
what is necessary for the HHS-operated risk adjustment program. 
Commenters were also concerned that the timing of the amendments would 
not give issuers sufficient time to prepare and implement new 
processes. One commenter also raised concerns that the proposal lacked 
details on the audit process and asked that interested parties receive 
more information about the risk adjustment, specifically high-cost risk 
pool, audits.
    Response: We are finalizing the proposal to require issuers to 
complete corrective action for certain risk adjustment audit 
observations as proposed. We agree with commenters that requiring the 
implementation of corrective action plans if a risk adjustment audit 
results in the inclusion of observations in the final audit report when 
there is evidence of non-compliance with applicable Federal 
requirements would help to ensure that HHS is able to efficiently run 
and provide oversight of its risk adjustment program.
    As stated in the proposed rule, since enrollee-level data that HHS 
extracts from issuers' EDGE servers is also used for HHS risk 
adjustment model recalibration, updates to the AV methodology and 
calculator, and other analyses for the commercial individual and small 
group (including merged) market, and Federal HHS related programs (for 
example, Medicaid expansion, QHP population, and non-Federal 
governmental plans),\112\ it is important that issuers of risk 
adjustment covered plans also take corrective action to address 
instances of non-compliance, which may have material impacts to the 
enrollee-level data, even if they did not result in a financial impact 
and were therefore recorded as observations in the final audit report.
---------------------------------------------------------------------------

    \112\ See, for example, 84 FR 17488 and 87 FR 27243.
---------------------------------------------------------------------------

    We do not believe this change goes beyond the data uses and access 
necessary for the risk adjustment program, because the primary purpose 
of this policy is to strengthen the program integrity tools available 
to HHS when conducting risk adjustment audits to ensure the integrity 
of the data used for the HHS-operated risk adjustment program.\113\ A 
major goal of requiring corrective action plans for observations where 
there is evidence of non-compliance with applicable Federal 
requirements is to ensure data use and integrity issues identified via 
audits are corrected timely; otherwise, these issues may have material 
impact on the enrollee-level EDGE data or data submission for future 
benefit years if they persist. We also note that this policy is not 
being retrospectively or retroactively applied. We are finalizing, as 
proposed, that this change will apply beginning with 2020 benefit year 
high-cost risk pool audits, which we anticipate beginning in 2024 with 
audit findings and observations being communicated to issuers in early 
2025. Additionally, the requirements evaluated in the 2020 benefit year 
audits will reflect the standards that issuers were required to comply 
with at the time of the 2020 benefit year EDGE data submission deadline 
(April 30, 2021). Further, current audit processes use corrective 
action plans as a tool to provide evidence that an issuer has 
sufficiently remediated an error or instance of non-compliance 
identified through an audit finding. Amending the regulation to capture 
the ability for HHS to require a corrective action plan for certain 
audit observations where there is evidence of non-compliance with 
Federal requirements would help to enhance data and program integrity 
by ensuring that issuers remedy EDGE data submission issues identified 
through audit, including those that did not result in a financial 
impact, so identified issues do not persist and impact future data 
submission years. Consistent with current requirements for addressing 
late-filed discrepancies to address errors identified in EDGE data 
submission, if the issuer, after conducting an impact analysis of the 
data submission error that covers the period of non-compliance, 
identifies a potential overpayment resulting from the error, the issuer 
is required to report the overpayment to HHS as a prior benefit year 
discrepancy.\114\
---------------------------------------------------------------------------

    \113\ As previously noted, HHS uses data issuers submit to their 
EDGE servers to calculate transfers under the State payment transfer 
formula and the high-cost risk pool parameters, as well as for 
recalibration of the HHS risk adjustment models and for development 
of risk adjustment policies, among other permitted uses.
    \114\ See 86 FR 24195. Also see Distributed Data Collection 
(DDC) for Risk Adjustment (RA) Including High Cost Risk Pool (HCRP): 
EDGE Server Announcements webinar presentation slides from August 
18, 2020 on ``EDGE/RA Discrepancy Reporting: Prior Benefit Year 
Discrepancy Web Form,'' available at https://regtap.cms.gov/reg_librarye.php?prog=3&page=1&i=3357.
---------------------------------------------------------------------------

    We also do not believe that issuers would need to provide data that 
is not readily available. The audit process validates the accuracy of 
the data submitted by issuers of risk adjustment covered plans to their 
respective EDGE servers.\115\ With data coming from the EDGE servers, 
issuers should not have to provide additional data beyond what is 
required for the audit process, which are the same data necessary to 
administer the HHS-operated risk adjustment program.
---------------------------------------------------------------------------

    \115\ See CMS. (2023, September 06). 2018 Benefit Year (BY) 
High-Cost Risk Pool (HCRP) Audit Report. (p. 3). https://www.cms.gov/files/document/2018-hcrp-audit-summary-publish-508.pdf.
---------------------------------------------------------------------------

    We understand concerns regarding time to implement new processes to 
properly respond to corrective action plans. As stated in the proposed 
rule, we proposed to amend the established audit process to require 
corrective action plans for certain audit observations identified 
through HHS risk adjustment (including high-cost risk pool) audits (88 
FR 82510) and the process would align with the existing framework 
detailed in Sec.  155.620(c)(4).\116\ The only change to the existing 
framework is that HHS, at its discretion, may require a corrective 
action plan for certain audit observations identified through the risk 
adjustment audits where there is evidence of non-compliance with 
applicable Federal requirements. As previously stated, this amendment 
does not alter the requirements evaluated through the risk adjustment 
audit. For example, 2020 benefit year high-cost risk pool audits will 
evaluate issuer compliance with the 2020 benefit year data submission 
requirements for their respective 2020 benefit year EDGE data.\117\ The 
amendment to Sec.  155.620(c)(4) to also require corrective

[[Page 26259]]

action plans for certain audit observations aligns with previously 
established regulations requiring corrective action plans for audit 
findings for risk adjustment audits. Issuers can find more information 
about corrective action plans and the general high-cost risk pool audit 
process by reviewing past audit reports \118\ and high-cost risk pool 
audit summary reports.\119\ An issuer selected for a high-cost risk 
pool audit will also have the opportunity to ask questions during the 
entrance conference \120\ and throughout the audit process. 
Additionally, we will continue to communicate with issuers selected for 
audit throughout the audit process to ensure they understand the 
process and to respond to any questions if issuers are required to 
address findings or certain observations in final audit reports through 
a corrective action plan.
---------------------------------------------------------------------------

    \116\ See 45 CFR 153.620(c)(4).
    \117\ The deadline for issuers to submit 2020 benefit year data 
to their respective EDGE servers was April 30, 2021. See 45 CFR 
153.730.
    \118\ For additional information see CMS. (2023, December 2023). 
High-Cost Risk Pool (HCRP) Audits. https://www.cms.gov/CCIIO/Resources/Forms-Reports-and-Other-Resources/Exams_Audits_Reviews_Issuer_Resources-#high-costriskpool.
    \119\ For additional information see CMS. (2023, September 06). 
2018 Benefit Year (BY) High-Cost Risk Pool (HCRP) Audit Summary. 
https://www.cms.gov/files/document/2018-hcrp-audit-summary-publish-508.pdf.
    \120\ See 45 CFR 153.620(c)(1)(i).
---------------------------------------------------------------------------

    We understand concerns regarding rights to address or remedy issues 
during the audit process. Current audit procedures provide issuers with 
ample opportunities to raise issues or concerns with findings and 
observations to HHS before the issuance of the final audit report. For 
example, prior to issuing a final report, HHS shares its preliminary 
audit findings with issuers,\121\ and issuers have the opportunity to 
dispute any findings or observations.\122\ Additionally, if HHS and the 
issuer do not agree with the final audit report, both HHS's final audit 
report and the issuer's disagreement is publicly released. In short, 
the risk adjustment audits are collaborative and involve coordination 
with issuers to resolve data discrepancies and address any questions or 
concerns issuers may have throughout the audit process.\123\ Further, 
not every observation will require a corrective action plan. If, during 
the audit process, an issuer proactively takes steps that HHS evaluates 
as sufficient to address an audit observation or finding for which HHS 
would have otherwise required a corrective action plan, HHS may elect 
to not require additional action after the final audit report is 
issued.
---------------------------------------------------------------------------

    \121\ See 45 CFR 153.620(c)(3).
    \122\ See 45 CFR 153.620(c)(3)(i)-(ii).
    \123\ See 2018 Benefit Year (BY) High-Cost Risk Pool (HCRP) 
Audit Summary. (p. 3).
---------------------------------------------------------------------------

D. 45 CFR Part 155--Exchange Establishment Standards and Other Related 
Standards

1. Approval of a State Exchange (Sec.  155.105)
    In the HHS Notice of Benefit and Payment Parameters for 2025 
proposed rule (88 FR 82551), we proposed to amend Sec.  155.105(b) to 
require that, in addition to meeting all other approval standards under 
Sec.  155.105(b), a State seeking to operate a State Exchange must 
first operate a State-based Exchange using the Federal platform (SBE-
FP), meeting all requirements under Sec.  155.200(f), for at least one 
plan year, including an open enrollment period. This proposal was 
intended to give States sufficient time to create, staff, and structure 
a State Exchange that could transition to operating its own platform 
and establish relationships with interested parties critical to a State 
Exchange's success in operating an Exchange, including standing up and 
operating a Navigator and consumer outreach program, assuming plan 
management responsibilities, and communicating effectively with 
consumers to support enrollment and avoid health care coverage gaps.
    As stated in the proposed rule (88 FR 82511), over the past several 
years, we have observed the benefits of States first operating an SBE-
FP for at least one plan year prior to transitioning fully from an FFE 
to a State Exchange. Operating an SBE-FP for at least one plan year, 
including its open enrollment period, prior to transitioning to a State 
Exchange gives States an opportunity to focus on investing time and 
resources needed to implement key Exchange functions that involve the 
establishment of critical and necessary relationships with consumers, 
consumer assisters, partners in the coordination of eligibility 
functions, issuers, and other interested parties. Operating an SBE-FP 
for at least one plan year prior to transitioning to a State Exchange 
also affords States time to implement eligibility and enrollment 
functions which require information technology platforms, call centers, 
and coordination with partners, such as State Medicaid agencies. In 
addition, operating an SBE-FP for at least one plan year prior to 
transitioning to a State Exchange gives States more time to engage with 
partners and interested parties to develop various consumer-facing 
content and consumer outreach strategies, all while establishing and 
gaining experience operating a consumer assistance program. Further, 
when States operate an SBE-FP for at least one plan year before 
operating a State Exchange, they are more likely to have the time and 
resources needed to coordinate with the State's Department of Insurance 
to establish policies and procedures associated with carrying out plan 
management functions, engage with the issuer community, and develop QHP 
certification requirements and processes. Finally, operating an SBE-FP 
for at least one plan year before transitioning to a State Exchange 
allows States time to familiarize consumers, consumer assisters, 
partners in the coordination of eligibility functions, issuers, and 
other interested parties with operations of the new State Exchange 
organization ahead of engaging with that Exchange, and it mitigates the 
risks and disruption associated with a transition to a State Exchange 
and simultaneous replacement of HealthCare.gov as the eligibility and 
enrollment pathway for those parties.
    After consideration of comments and for the reasons outlined in the 
proposed rule and our responses to comments, we are finalizing this 
provision as proposed to require that a State seeking to operate a 
State Exchange must first operate an SBE-FP, meeting all requirements 
under Sec.  155.200(f), for at least one plan year. We summarize and 
respond to public comments received on the proposed policy below.
    Comment: A majority of the comments we received supported the 
proposal. Many commenters supported the policy, suggesting it would 
provide needed time to prepare and implement a successful Exchange, 
including establishing and testing technical operations, establishing 
relationships with QHP issuers and other government entities, and 
creating greater transparency and opportunities for public and 
interested party engagement with the process. Some commenters also 
suggested that the extended time for State Exchange establishment would 
protect consumers by ensuring network adequacy and that all functions 
for consumer support are in place before a State Exchange is launched, 
and that the additional time would help SBE-FPs refine their plans and 
processes before transitioning to a State Exchange model.
    Response: We agree that the extended time afforded by this policy 
will help to ensure the success of newly-established State Exchanges.
    Comment: A few commenters stated that several States have 
successfully implemented State Exchanges without these provisions. 
These commenters suggested that this may be an indication

[[Page 26260]]

that the proposed provisions are unnecessary, and that a State should 
be given flexibility to decide its path forward. They recommended that 
HHS only apply these new requirements to States that propose operating 
an Exchange in a way that differs significantly from the traditional 
model.
    Response: Over the past several years, all States that have 
transitioned to a State Exchange have first operated an SBE-FP. Our 
experience in overseeing these transitions has made evident the 
advantage a State has in operating an SBE-FP prior to transitioning to 
a State Exchange. Notably, operating an SBE-FP first provides States an 
opportunity to implement certain significant Exchange functions that 
are needed for State Exchange operations, such as operating the State's 
Navigator program and developing plan management capabilities. The 
interim period operating an SBE-FP will provide States with sufficient 
time to continue developing resources and establishing strong 
relationships with interested parties, which are both critical for 
implementing key State Exchange functions. We have particularly 
observed this in regard to developing eligibility and enrollment 
functions, including implementing and operating information technology 
platforms, call centers, and coordination with the State Medicaid 
agency and other partners.
    Furthermore, based on our work with SBE-FPs that have transitioned 
to State Exchanges over the past several years, we have learned the 
importance of having an established consumer assistance and outreach 
program as an SBE-FP prior to the implementation of a State Exchange. 
State Exchanges that previously operated an SBE-FP have stated that 
this experience, as well as an SBE-FP's developed communication line 
with consumers, helps mitigate potential disruption to consumer 
enrollment when HealthCare.gov is no longer the eligibility and 
enrollment pathway for the State Exchange's consumers, and in turn, the 
State Exchange takes on this role.
    Given these benefits, we believe that implementing a regulatory 
requirement that States must first operate an SBE-FP for at least one 
plan year prior to transitioning to a State Exchange will benefit both 
the State's implementation of a State Exchange, as well as the 
Exchange's long-term success.
    Comment: A few commenters stated that these new rules could 
introduce delays in the process for a State to establish a State 
Exchange. Some of these commenters expressed concern that these delays 
could prevent a State from transitioning to a State Exchange due to 
increased costs in meeting requirements. One commenter stated that a 
longer establishment period could impede a State from standing up its 
own Exchange because the initial implementation of an SBE-FP and then a 
subsequent State Exchange might occur over election periods, and there 
would be a risk that new State executive or legislative leadership 
might decide to no longer pursue the transition to a State Exchange 
during a State's SBE-FP status.
    Response: We recognize that a State's implementation of a State 
Exchange may depend on the State's specific needs and the decisions of 
its elected officials. We also understand that a State could decide for 
various reasons to stop pursuing or operating a State Exchange. 
However, we are of the view that requiring a State Exchange to first 
operate an SBE-FP is appropriate because a State's elected officials 
have always had the ability to change the State's plans to become or 
remain a State Exchange, and therefore that fact alone should not 
hinder adoption of the proposed policy that aims to ensure the success 
of State Exchanges.
    Comment: One commenter expressed concern that delays in 
transitioning to a State Exchange would result in the State receiving 
less user fee revenue, and that the need to pay or remit user fees to 
CMS as an SBE-FP could result in a State ultimately not being able to 
establish a State Exchange.
    Response: Our experience has shown that SBE-FPs that have 
transitioned to State Exchanges are able to fund these activities, at 
least in part, with additional user fees that a SBE-FP may charge 
issuers on top of the Federal Platform user fee. Section 1311(d)(5)(A) 
of the ACA permits an Exchange to charge user fees on participating 
health insurance issuers as a means of generating funding to support 
its operations.\124\ Under Sec.  156.50(c), a participating issuer 
offering a plan through a SBE-FP must remit a user fee to HHS each 
month that is equal to the product of the SBE-FP 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 the SBE-FP. SBE-FPs 
may also assess an additional State-level user fee, beyond the Federal 
Platform user fee, on issuers for the purposes of operating their SBE-
FP, which could theoretically amount to the total user fee a State 
would assess issuers as a State Exchange. In our experience, SBE-FPs 
have utilized additional State-level user fees assessed on issuers to 
support a State's eventual State Exchange implementation.
---------------------------------------------------------------------------

    \124\ 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.
---------------------------------------------------------------------------

    Comment: One commenter stated that because the ACA directs States 
to establish an Exchange, this proposal oversteps the authority granted 
to HHS by the ACA, as it could prevent a State that felt it was 
prepared to take on the responsibilities of operating a State Exchange 
from doing so.
    Response: We seek to support States in successfully implementing 
State Exchanges. Section 1321 of the ACA directs HHS to issue 
regulations setting standards for establishing and operating an 
Exchange, which it implemented at Sec.  155.105. States may 
subsequently elect to establish and operate Exchanges, as prescribed by 
HHS and per the requirements of Sec.  155.105, which requires HHS to 
approve a State Exchange only if it is able to meet other required 
functions of an Exchange. All States considering transitioning to a 
State Exchange must consider if they are able to meet these 
requirements. As we stated above, our experience is that first 
operating an SBE-FP is necessary for successfully implementing and 
operating a State Exchange. Therefore, HHS is using the authority 
granted to it in section 1321 of the ACA to include in Sec.  155.105 
the requirement for a State transitioning to operate a State Exchange 
to first operate an SBE-FP for one plan year.
    Comment: One commenter suggested that CMS modify this proposal so 
that States with demonstrated capabilities in technology planning and 
Exchange management could be granted the flexibility to transition 
directly to a State Exchange if they meet certain readiness criteria.
    Response: Regardless of a State's ability to meet any readiness 
criteria we might set from a technological perspective, there are other 
factors, including establishing relationships with other State agencies 
and programs, that make this technological readiness not sufficient on 
its own to bypass the 1-year-SBE-FP requirement. We agree that a key 
component of a State's readiness to implement and operate a State 
Exchange is being ready to implement an eligibility platform to support 
key State Exchange functions, including the display and selection of 
QHPs and the processing of eligibility applications and determinations 
for Exchange enrollment and insurance affordability programs. However, 
we believe that a State that met any technology requirements that we 
set

[[Page 26261]]

would still need to demonstrate the non-technology capabilities and 
functions required of a State Exchange, gained from experience, 
operating an SBE-FP that we discuss above. For example, State Exchanges 
need to coordinate sharing of plan information and plan management work 
with issuers, plan and provide training to Navigators and Assisters, 
and plan and implement consumer outreach activities, such as drafting 
notices, providing training to call center and other staff on relevant 
policies and procedures, and writing and updating website and other 
consumer-facing materials.
    Often, States that are transitioning from an FFE to operating a 
State Exchange draw on the work of contracted vendors and companies 
that have assisted with other States' Exchange transitions in 
developing that State's eligibility and enrollment platform or website. 
It is possible that a State might indicate that it would be 
technologically ready to transition directly to operating a State 
Exchange, without first operating an SBE-FP, due to its decision to 
contract with vendors and companies, who would apply the same or 
similar plans for development and implementation of its eligibility and 
enrollment platform. However, it is not possible for a State seeking to 
newly establish a State Exchange to identically apply development and 
implementation plans and other resources utilized for an eligibility 
platform in already-established State Exchanges, because in our 
experience those Exchanges may operate with partner State agencies and 
programs, such as Medicaid and CHIP, differently from the State that is 
seeking to newly establish a State Exchange. As Insurance Affordability 
Programs may require State-specific programming for an eligibility 
platform to make a correct eligibility determination, or for 
appropriate information to be displayed on consumer-facing resources, a 
State's readiness to operate an eligibility platform requires 
consideration and work on other elements than prior demonstrated 
capabilities in technology planning and Exchange management. 
Additionally, some States may pursue an integrated eligibility system 
between the State Exchange and the State Medicaid agency in which the 
State Exchange's eligibility system can determine eligibility for non-
MAGI Medicaid, as well as other State programs, while other States may 
have different eligibility determination agreements between the State 
Exchange and the State Medicaid agency.
    As a result, we believe that the experience gained from first 
operating an SBE-FP and providing additional time for interoperability 
with other State programs and establishing relationships with consumers 
and advocates makes it necessary to first operate an SBE-FP before 
operating a State Exchange.
    Comment: One commenter stated that although experience gained 
operating an SBE-FP for States transitioning from the FFE to a State 
Exchange would be valuable, the options for plan management activities 
provided to States operating State Exchanges are more flexible than the 
options provided to States operating an SBE-FP. They also stated that 
relationships with interested parties may also change when operating an 
SBE-FP and later operating a State Exchange, due to the difference in 
responsibilities and authorities granted to SBE-FPs and those granted 
to State Exchanges. They expressed concern that the need to attend to 
these differences in responsibilities and flexibilities could strain 
the resources of smaller States whose ultimate goal is to establish a 
State Exchange rather than an SBE-FP.
    Response: While we agree that some plan management responsibilities 
differ for a State Exchange and an SBE-FP, the differences are 
relatively minor and therefore the experience operating an SBE-FP can 
generally be applied to the responsibilities of State Exchanges. As an 
example, both State Exchanges and SBE-FPs have the legal authority and 
responsibility to establish QHP certification processes with issuers, 
review QHP applications, and make QHP certification decisions, 
including the responsibility for coordinating with their participating 
QHP issuers on plan data corrections. Given the similarity between 
State Exchange and SBE-FP plan management activities, as well the 
significant resources and planning required for an SBE-FP to conduct 
plan management activities, we believe that implementing a SBE-FP 
before implementing a State Exchange will allow a State to demonstrate 
its capacity to manage and implement this key Exchange functionality.
2. Election To Operate an Exchange After 2014 (Sec.  155.106)
    In the HHS Notice of Benefit and Payment Parameters for 2025 
proposed rule (88 FR 82510, 82551), we proposed changes to the Exchange 
Blueprint (OMB control number: 0938-1172) requirements for States 
seeking to operate a State Exchange. We proposed to revise Sec.  
155.106(a)(2) to add a requirement that a State, as part of its 
activities for its establishment of a State Exchange, provide upon 
request, supplemental documentation to HHS detailing the State's 
implementation of its State Exchange functionality. Such supporting 
documentation would inform HHS's decision to approve or conditionally 
approve a State Exchange and could include, for example, materials 
demonstrating progress toward meeting State Exchange Blueprint 
requirements, documentation that details a State's plans to implement 
and meet the Exchange functional requirements as laid out in the State 
Exchange Blueprint, or plans to engage in consumer assistance programs 
and activities. In the proposed rule (88 FR 82552) we noted, we would 
provide guidance and direction to each State with our requests for 
supplementary information so that each State understands the purpose of 
the requests and how the requested information would help us determine 
whether the State meets the functional requirements for operating a 
State Exchange. Because the ability to request additional detail on a 
State's Exchange implementation plans is crucial for identifying risk 
areas for a State Exchange's operations, it is essential to determining 
that a State Exchange is ready to operate. The current State Exchange 
Blueprint application provides that we may require live demonstrations 
of Exchange functionality on the State Exchange's platform, as well as 
supporting documentation, as evidence of the State's progress toward 
meeting State Exchange Blueprint application requirements. In order to 
set clear expectations, we proposed to codify that as part of the 
State's submission of a State Exchange Blueprint application, HHS has 
the authority to request any evidence HHS determines necessary for the 
State to detail its implementation of the required State Exchange 
functionality. This could include HHS requiring a State to submit 
detailed plans regarding its State Exchange consumer assistance 
programs and activities, such as information on its direct outreach 
plans. In the proposed rule we noted, we would request supporting 
documentation from States with the goal of imposing minimal burden on a 
State's ability to meet its State Exchange Blueprint requirements, 
while maintaining the objective of gathering sufficient information to 
assess a State's readiness to operate a State Exchange and ensure that 
a State is sufficiently implementing and scaling policies, procedures, 
operations, technology, and administrative capacities to meet the needs 
of the State's consumers. We would use the information in a State's 
State Exchange Blueprint application, as well as any

[[Page 26262]]

supporting documentation and evidence, to make a determination of 
whether to grant approval for a State's establishment and operation of 
a State Exchange for its intended first open enrollment period.
    We also proposed to add new Sec.  155.106(a)(2)(i) and (ii) to 
require that when a State submits its State Exchange Blueprint 
application to HHS for approval, the State must provide the public with 
notice and a copy of its State Exchange Blueprint application along 
with certain other information. We stated that, to facilitate such 
public notice, HHS would post a State Exchange Blueprint application, 
submitted by a State to its public-facing website within 90 calendar 
days of receipt. Further, we proposed to require that at some point 
following a State's submission of its State Exchange Blueprint 
application to HHS and before HHS's approval or conditional approval of 
the State Exchange Blueprint application, a State must conduct at least 
one public engagement event (such as a townhall meeting or public 
hearing) in a timeline and manner (for instance, considering whether to 
conduct in-person and/or virtually) considered effective by the State, 
with concurrence from HHS, at which interested parties can learn about 
the State's intent to establish a State Exchange and the State's 
progress toward executing that transition. We also proposed to require 
that while a State is in the process of establishing a State Exchange 
and until HHS has approved or conditionally approved the State Exchange 
Blueprint application, a State must conduct periodic public engagements 
at which interested parties would continue to learn about the State's 
progress towards establishing a State Exchange, in a timeline and 
manner considered effective by the State with concurrence from HHS. We 
are finalizing these provisions as proposed. However, based on comments 
we received, we now plan to publicly post the State's Blueprint 
application within 30 days of receipt.
    The Exchange Blueprint serves as a vehicle for a State to document 
its progress toward implementing its intended Exchange operational 
model. The submission and approval of Exchange Blueprints is an 
iterative process that generally takes place over the course of 15 
months prior to a State's first open enrollment operating a State 
Exchange. Further, the establishment of a State Exchange involves 
significant collaboration between HHS and States to develop plans and 
document readiness for the State to transition from an Exchange that 
uses the Federal platform to one that operates its own eligibility and 
enrollment platform. State activities as part of this transition 
process include completing key milestones, meeting established 
deadlines, and implementing contingency measures. We believe that a 
mandatory process whereby States notify the public of their plans to 
establish State Exchanges and provide an opportunity to meet with 
interested parties to provide updates helps ensure that interested 
parties are aware these activities are occurring and can provide input 
on how States can successfully establish State Exchanges.
    As stated in the proposed rule (88 FR 82553), a primary goal of 
these proposals is to strengthen the transparency requirements of the 
State Exchange Blueprint review and approval process. Based on our 
experience supporting and providing oversight to States in their 
establishment of State Exchanges, we believe that all States 
establishing Exchanges would benefit from having a more transparent 
process to facilitate input from interested parties, including 
consumers and issuers. A more transparent process would provide 
opportunities for consumers to learn more about a State's establishment 
process and plans, which can build consumer trust and help support a 
State's enrollment goals. States planning to establish State Exchanges 
could use public events like town halls or hearings to meet these 
transparency requirements.
    We further note that compliance with these transparency 
requirements could help States that establish State Exchanges meet the 
consultation requirements with interested parties under Sec.  155.130. 
Section 155.130 requires an Exchange to regularly consult on an ongoing 
basis with a list of eleven stakeholder groups, including educated 
health care consumers who are QHP enrollees and, if applicable, 
Federally recognized Tribes, as defined in the Federally Recognized 
Indian Tribe List Act of 1994, 25 U.S.C. 479a. For example, during a 
State's establishment of its Exchange, the State and these interested 
parties could formalize a process under which they would continue to 
confer as required by Sec.  155.130.
    We sought comment on this proposal, including comments related to 
additional ways States seeking to establish State Exchanges could 
provide greater transparency to interested parties, including 
consumers, regarding the process for establishing State Exchanges. 
After consideration of the comments and for the reasons outlined in the 
proposed rule and our responses to comments, we are finalizing as 
proposed the amendment to Sec.  155.106(a)(2) to require as part of a 
State's activities for its establishment of a State Exchange, the State 
provide, upon request, supplemental documentation to HHS detailing the 
State's implementation of its State Exchange functionality. Such 
supplemental documentation may, for example, demonstrate progress 
toward meeting State Exchange Blueprint requirements, or detail a 
State's plans for how it intends to implement and meet the Exchange 
functional requirements as laid out in the State Exchange Blueprint.
    We also finalize as proposed new paragraph Sec.  155.106(a)(2)(i) 
which states that, upon submitting an Exchange Blueprint application to 
operate a State Exchange, the State shall issue a public notice of its 
Exchange Blueprint application submission through its website and 
include a copy of the Exchange Blueprint application, a description of 
the Plan Year for which the State seeks to transition to a State 
Exchange, language indicating that the State is seeking approval from 
HHS to transition to a State Exchange, and information about when and 
where the State will conduct public engagements regarding the State's 
Exchange Blueprint application. To facilitate public notice, HHS will 
post a State Exchange Blueprint application submitted by a State to its 
public-facing website within 90 calendar days of receipt.
    Finally, we finalize as proposed new paragraph Sec.  
155.106(a)(2)(ii) to require that at some point following a State's 
submission of its State Exchange Blueprint application to HHS and 
before HHS approves or conditionally approves the State's Exchange 
Blueprint application, a State must conduct at least one public 
engagement event (such as a townhall meeting or public hearing) in a 
timeline and manner (for instance, considering whether to conduct in-
person and/or virtually) considered effective by the State, with 
concurrence from HHS, at which interested parties can learn about the 
State's intent to establish a State Exchange and the State's progress 
toward executing that transition.
    After consideration of the comments and for the reasons outlined in 
the proposed rule and our responses to comments, we are finalizing 
these requirements with a modification to clarify that the State must 
submit supplemental information to HHS, upon request, detailing the 
State's implementation of its State Exchange functionality, including 
information on the ability to implement and comply

[[Page 26263]]

with Federal requirements for operating an Exchange. This information 
will assist in CMS determining whether the State meets the functional 
requirements for operating a State Exchange. We summarize and respond 
to public comments received on these proposals below.
    Comment: Most commenters broadly supported the proposals associated 
with a State's election to operate a State Exchange, as it relates to 
both the requirements for a State to submit supporting documentation to 
HHS detailing the State's implementation of its State Exchange 
functionality, and, to provide the public with notice and a copy of its 
State Exchange Blueprint application and engage in periodic public 
hearings when a State submits its State Exchange Blueprint application 
to HHS for approval.
    These commenters generally believed that the proposals would help 
States better implement and operate a State Exchange, provide 
transparency to States' interested parties, and improve consumer 
protections. One commenter stated that the resulting transparency may 
help interested parties become better aware of a State's transition 
plans and may submit helpful feedback to States, which States could 
consider in their transition planning.
    Response: We appreciate and agree with these comments, many of 
which summarized or elaborated on the benefits that we described in the 
proposed rule.
    Comment: A few commenters stated that the proposed provisions are 
arbitrary because all States that have transitioned to a State Exchange 
in the past several years have done so without the requirement for 
States to submit additional information or documentation on its State 
Exchange implementation progress or plans. One of these commenters 
requested that CMS provide a definitive list of additional 
documentation it may require from States, as well as stated that the 
request for additional information may impose additional burden, in 
terms of time and resources, on a State. Another commenter opposed 
these proposals more generally.
    Response: HHS's collection of additional information and 
documentation demonstrating an Exchange's operational readiness is 
logically related to setting standards for establishing a State 
Exchange; thus these provisions are not arbitrary.\125\ Regarding 
information we may require of States seeking to establish an Exchange, 
we anticipate requesting additional documentation that demonstrates a 
State's ability to successfully operate a State Exchange, including 
documentation that demonstrates progress toward implementing a State 
Exchange. Moreover, we disagree that States that have previously 
established a State Exchange did not submit such documentation. The 
current State Exchange Blueprint application already includes requests 
for supporting documentation that a State is progressing toward meeting 
State Exchange Blueprint application requirements. Therefore, this 
provision codifies existing policy, which existing State Exchanges have 
complied with. We believe these regulations will underscore to States 
the importance of submitting supporting information that we request, 
which we have regularly pursued with all States that have transitioned 
to State Exchanges over the past several years.
---------------------------------------------------------------------------

    \125\ See section 1321 of ACA.
---------------------------------------------------------------------------

    Comment: One commenter stated that although they saw the benefit in 
our proposal to require that at some point following a State's 
submission of its State Exchange Blueprint application to HHS a State 
must conduct at least one public engagement, they did not agree with 
such public engagements taking place every 3 months. The commenter 
noted that conducting public engagements every 3 months could be too 
burdensome on a State, which would delay a State in its State Exchange 
implementation plans. This commenter requested additional detail on the 
significance of this proposal.
    Response: We proposed that following a State's submission of its 
State Exchange Blueprint application to HHS, a State must conduct at 
least one public engagement (such as a townhall meeting or public 
hearing) in a timeline and manner (for instance, considering whether to 
conduct in-person and/or virtually) considered effective by the State. 
Additionally, we proposed that during a State's process of establishing 
a State Exchange, and until HHS has approved or conditionally approved 
the State Exchange Blueprint application, it must periodically conduct 
additional public engagements. We did not prescribe how often these 
public engagements must occur, and we encourage States to hold them as 
frequently as would be beneficial to its State Exchange planning and to 
keeping its interested parties informed.
    We believe any potential burden on States from conducting regular 
public engagement is outweighed by the benefit to interested parties, 
such as consumers and advocate groups, in having the opportunity to 
learn about, and provide input on, a State's Exchange implementation 
plans, which the State may utilize in developing its State Exchange 
implementation plans.
    Comment: One commenter suggested that CMS require States to request 
feedback on its Blueprint application during the public engagements 
from a set group of interested parties which would include agents, 
brokers, and EDE entities.
    Response: We encourage States that are establishing a State 
Exchange to utilize the public engagement provisions as a pathway to 
fulfilling its stakeholder consultation requirements under Sec.  
155.130, which requires a State Exchange to regularly conduct 
stakeholder consultations with certain entities, including agents and 
brokers. In meeting the public engagement policies being finalized in 
this rule, we encourage States to seek feedback from these particular 
groups as specified in Sec.  155.130, as well as other groups, such as 
EDE entities, so that the State's efforts can translate into its 
required stakeholder consultation requirements under Sec.  155.130.
    Comment: One commenter stated that they supported the proposal, but 
urged CMS to ensure that it provides States with sufficient resources 
to facilitate a transitioning State's demands.
    Response: We have established a robust program to support States 
that seek to establish a State Exchange and to ensure that the 
transition of consumers from the Federal platform to the State Exchange 
is as seamless as possible. This includes having dedicated teams to 
support States in establishing a State Exchange, well defined processes 
for assessing a State Exchange's operational readiness and 
transitioning of the State's consumers and Exchange functions off the 
Federal platform, and a technical assistance program to ensure State 
Exchange functions meet Federal requirements. We also have the ability 
to adjust the support we provide to respond to State-specific needs 
during a State's process for establishing a State Exchange. We will 
continue to consider these needs when supporting any State that decides 
to establish a State Exchange in the future.
    Comment: One commenter stated that the proposed regulations do not 
address consequences if a State fails to meet Federal standards after 
implementing a State Exchange, and suggested that we delineate 
corrective action plans, civil monetary penalties, or other actions 
that would be taken if a State Exchange fails to meet Federal 
standards.
    Response: We utilize specific oversight processes and tools (for

[[Page 26264]]

example, the State-based Marketplace Annual Reporting Tool, along with 
independent external programmatic and financial audits), under the 
authority at Sec.  155.1200, to assess State Exchange compliance with 
Federal rules on an ongoing basis. This process generally involves 
working with States to ensure that they are able to respond to, and 
take corrective action on, any identified deficiencies before civil 
monetary penalties are assessed or other enforcement actions are taken. 
Under section 1313(a)(4) of the ACA, if HHS determines that an Exchange 
has engaged in serious misconduct with respect to compliance with 
Exchange requirements, it has the option to rescind up to 1 percent of 
payments due to a State under any program administered by HHS until 
such misconduct is resolved. We will also consider the development of 
new guidance in the future to enhance transparency of Exchange 
operations and compliance by State Exchanges with Federal requirements.
    Comment: A few commenters suggested that we require States that are 
establishing a State Exchange to provide a formal notice and comment 
period to the public after a State's Blueprint application is publicly 
posted. One commenter suggested that HHS publicly post a State's 
Blueprint application within 30 days of receipt, instead of the 90-day 
period mentioned in our proposal for this rule.
    Response: We appreciate the suggestion to consider requiring that 
States provide a formal notice and comment period to the public after 
their Blueprint application is posted. At this time, we believe that 
the new requirement at Sec.  155.106(a)(2)(ii) requiring a State to 
conduct at least one public engagement at which interested parties can 
learn about the State's intent to establish a State Exchange and the 
State's progress toward executing that transition, provides sufficient 
notice and ability for interested parties to comment. We will consider 
this suggestion for future rulemaking if we observe that the new 
requirement results in States being unable to obtain feedback from 
interested parties on a State's transition. Additionally, we appreciate 
the suggestion that HHS publicly post a State's Blueprint application 
within 30 days of receipt, instead of the 90-day period mentioned in 
our proposal for this rule, and we agree that publicly posting the 
application within this timeframe would benefit the public by providing 
more time and opportunities for interested parties to provide comments 
to us and the State. Accordingly, we intend to publicly post a State's 
Blueprint application within 30 days upon receipt by HHS. HHS would 
only post a State's initial Blueprint application,
    Comment: One commenter suggested that we require States, as part of 
their Blueprint application, to submit documentation providing 
enrollment targets and plans to reduce the uninsured population and 
improve coverage in the initial years following the establishment of 
their State Exchange. Another commenter suggested that we require 
States to demonstrate clear metrics towards meeting their Blueprint 
goals on a periodic basis, after completing the Blueprint approval 
process.
    Response: We appreciate the suggestions from these commenters. We 
will consider the development of new tools in future rulemaking that 
would enhance transparency into the performance of Exchanges, both for 
States newly transitioning to a State Exchange and for existing State 
Exchanges.
3. Additional Required Benefits (Sec.  155.170)
    In the HHS Notice of Benefit and Payment Parameters for 2025 
proposed rule (88 FR 82510, 82553), we proposed to amend Sec.  
155.170(a)(2) to provide that a covered benefit in a State's EHB-
benchmark plan would be considered an EHB. We are finalizing this 
policy as proposed, except for minor grammatical changes to improve 
clarity.
    Under this policy, there will be no obligation for the State to 
defray the cost of a State mandate enacted after December 31, 2011, 
that requires coverage of a benefit covered in the State's EHB-
benchmark plan. Benefits that are covered in a State's EHB-benchmark 
plan would not be considered in addition to EHB and would remain 
subject to the various rules applicable to the EHBs, including the 
prohibition on discrimination in accordance with Sec.  156.125, 
limitations on cost sharing in accordance with Sec.  156.130, and 
restrictions on annual or lifetime dollar limits in accordance with 
Sec.  147.126.
    Section 1311(d)(3)(B) of the ACA permits a State to require QHPs 
offered in the State to cover benefits in addition to EHB, but requires 
the State to make payments, either to the individual enrollee or to the 
issuer on behalf of the enrollee, to defray the cost of these 
additional State-required benefits.
    Under longstanding policy, benefits mandated after December 31, 
2011, other than for compliance with Federal requirements, are 
considered in addition to EHB (and thus not EHB) without regard as to 
whether the mandated benefits are embedded in the State's EHB-benchmark 
plan. Specifically, under Sec.  155.170, a State mandate is considered 
`in addition to EHB' if it: is the result of State action taken after 
December 31, 2011; \126\ requires coverage of benefits specific to 
care, treatment, and services; \127\ requires QHPs to cover the 
benefits; \128\ and was not enacted to comply with Federal 
requirements. As a result, States must defray the associated costs of 
QHP coverage of such benefits, and those costs may not be included in 
the percentage of premium attributable to coverage of EHB for purpose 
of calculating APTC. In addition, because the benefits are not EHB, 
they are not subject to EHB nondiscrimination rules at Sec.  156.125, 
the annual limitation on cost sharing at Sec.  156.130, and 
restrictions on annual or lifetime dollar limits at Sec.  147.126.
---------------------------------------------------------------------------

    \126\ EHB Rule (78 FR 12838). A State action can be by statute, 
regulation, guidance, or other State action. 2017 Payment Notice (81 
FR 12242).
    \127\ Requirements related to provider types, cost sharing, 
benefit delivery methods, or reimbursement methods are not specific 
to care, treatment, and services. EHB Rule (78 FR 12838).
    \128\ If a State action applies to the individual and small 
group markets, it applies to QHPs; if a State allows for the sale of 
large group plans as QHPs, a State-mandated benefit for the large 
group market applies to QHPs. EHB Proposed Rule (77 FR 70647 through 
70648) (finalized without modification in the EHB Rule (78 FR 
12838)).
---------------------------------------------------------------------------

    In the years since we finalized Sec.  155.170, we received feedback 
from States and other interested parties, including in comments 
submitted to the EHB RFI (87 FR 74097) that we issued in 2022, that we 
should reconsider this provision. This feedback indicated that States 
struggle to understand and operationalize Sec.  155.170, and that 
States that seek to mandate coverage of benefits are unintentionally 
removing EHB protections from benefits already included in the State's 
EHB-benchmark plan.
    We believe that finalizing the proposal will promote consumer 
protections and facilitate compliance with the defrayal requirement by 
making the identification of benefits in addition to EHB more 
intuitive.
    Under the policy, if a State mandates coverage of a benefit that is 
in its EHB-benchmark plan, the benefit will continue to be considered 
EHB and the State will not have to defray the costs of that mandate. 
However, if at a future date the State updates its EHB-benchmark plan 
under Sec.  156.111 and removes the mandated benefit from its EHB-
benchmark plan, the State may have to defray the costs of the benefit

[[Page 26265]]

under the factors set forth at Sec.  155.170 as it will no longer be an 
EHB after its removal from the EHB-benchmark plan. In addition, 
starting in PY 2025, a State that is defraying the costs of a benefit 
required by a mandate that is in addition to EHB under Sec.  155.170 
will be permitted to cease defraying the costs of that benefit if the 
benefit is included in its EHB-benchmark plan or upon updating its EHB-
benchmark plan in the future to include such benefit coverage.
    As stated in the proposed rule (88 FR 82553), we acknowledge that 
there are States that may have been defraying the costs of benefits 
under the current policy that will be able to stop defraying those 
costs since we are finalizing this policy. We proposed this change to 
be effective starting with plan years beginning on or after January 1, 
2025, to allow for issuers to make necessary modifications to their 
plan designs and plan filings to reflect any possible changes in 
designation of benefits as EHB as a result of this policy. For example, 
under this policy, if a State ceases defraying the costs of a State-
mandated benefit to issuers because it is covered in its EHB-benchmark 
plan, issuers will update their plan filings accordingly beginning in 
PY 2025 to reflect that the benefit is covered as an EHB and will be 
included in the percentage of premium attributable to coverage of EHB 
for the purpose of calculating APTC. We also noted that those States 
will not be able to recoup the cost of benefits they have already 
defrayed. In addition, we acknowledge that the start and end dates of 
State legislative sessions vary greatly by State, and that this policy 
may occur during State legislative sessions that are considering State 
actions that will be impacted by the change.
    We noted that this policy may impact health plans that are not 
directly subject to the EHB requirements, such as self-insured group 
health plans and fully-insured group health plans in the large group 
market that are required to comply with the annual limitation on cost 
sharing and restrictions on annual or lifetime dollar limits in 
accordance with applicable regulations with respect to such EHBs.\129\ 
Such plans will be affected by this policy only to the extent that a 
State changes benefits in its EHB-benchmark plan and such plan selects 
that State's EHB-benchmark plan for purposes of defining EHBs covered 
by the plan that are subject to the annual limitation on cost sharing 
and prohibition on lifetime and annual dollar limits under sections 
2707 and 2711 of the PHS Act, respectively. It may also impact a Basic 
Health Program (BHP) established under section 1331 of the ACA and 
Medicaid Alternative Benefit Plans (ABPs) implemented pursuant to 
section 1937 of the Act.
---------------------------------------------------------------------------

    \129\ See parallel requirements to Sec.  147.126 at 26 CFR 
54.9815-2711, and 29 CFR 2590.715-2711. Additionally, section 
2707(b) of the PHS Act, as added by the ACA, was adopted by 
reference into section 9815 of the Code and section 715 of the 
Employee Retirement Income Security Act (ERISA).
---------------------------------------------------------------------------

    After consideration of comments and for the reasons outlined in the 
proposed rule and our responses to comments, we are finalizing this 
provision as proposed with minor grammatical changes to improve 
clarity. We summarize and respond to public comments received on the 
proposed defrayal policy below.
    Comment: Most commenters supported the proposed updates to our EHB 
mandate defrayal policy. Commenters cited myriad concerns with current 
mandate defrayal policy that would be alleviated by the proposal.
    State regulators and advocacy groups stated that there has been 
confusion around operationalizing existing Federal requirements for the 
defrayal of State-mandated benefits. Commenters asserted that this 
policy change would alleviate an apparent inconsistency between 
Sec. Sec.  155.170 and 156.111 under which a benefit could be 
``essential'' for purposes of a State's EHB-benchmark plan selected by 
each State under Sec.  156.111, but ``not essential'' for purposes of 
the defrayal requirement under Sec.  155.170. Many commenters noted 
that the confusion related to defrayal under current policy was 
deterring States from addressing benefit coverage in their States 
through mandates.
    A few commenters noted that, currently, it is a costly and time-
intensive process for States to conduct mandate reviews to determine 
whether a new benefit would be subject to defrayal. They noted that 
because the proposal ultimately would make it easier to understand what 
benefits are EHB, it will help State regulators ensure that patients 
and consumers receive the protections that attach to EHB and facilitate 
decision-making by State policymakers seeking to ensure a robust 
benefit package for Exchange consumers. Many commenters supported the 
proposal to ensure that EHB maintain their protections, regardless of 
whether a State mandates it.
    Many commenters noted the clarity from the proposed change will 
allow States to be more responsive to the needs of their States and 
specifically help advance health equity, mitigate health disparities, 
and improve access for those with disabilities and chronic conditions. 
A commenter noted that EHBs retaining protections, such as 
nondiscrimination rules, limitations on cost sharing, and restrictions 
on annual or lifetime dollar limits, is crucial for patients, 
particularly those with chronic conditions or complex health care 
needs, as it ensures access to essential health services with less 
financial burden.
    Response: We understand that whether a State mandate will require 
defrayal is an important consideration for State policymakers. We agree 
with commenters that amending Sec.  155.170(a)(2) to provide that a 
covered benefit in a State's EHB-benchmark plan is considered an EHB 
will make it easier for State policymakers to make defrayal 
determinations because it will be clearer that benefits in an EHB-
benchmark plan do not require defrayal. We also anticipate that this 
change will help States and legislatures to understand the consequences 
of mandating benefits better and make it simpler overall for States to 
address health equity concerns in their States through mandates and 
EHB-benchmark plan updates.
    Comment: State Departments of Insurance noted that the date-based 
cutoff for State-mandated benefit defrayal under Sec.  155.170(a)(2)--
under which a benefit that is required by State action taking place on 
or after January 1, 2012, is not EHB--inhibits State innovation in QHP 
benefit design. A comment from one State's Department of Insurance 
noted that, from the perspective of a legislator, the current defrayal 
rules can be perceived as an impediment to updating coverage to reflect 
new developments in health care delivery. One commenter stated that the 
current mandate defrayal policy discourages certain States from passing 
life-saving cancer-related mandates because of the cost or 
complications in implementing defrayal. Another commenter noted that 
several initiatives to expand mandated benefits in its State have 
either been unsuccessful or were delayed due to the possibility of a 
mandate defrayal.
    Response: These comments are consistent with feedback we have 
received about this provision prior to this rulemaking. In the years 
since we finalized Sec.  155.170, we have received feedback from States 
and other interested parties that we should reconsider the policy, 
including in comments submitted to the EHB RFI (87 FR 74097) that we 
issued in 2022. Many commenters to the EHB RFI specifically recommended 
repealing or modifying Sec.  155.170(a)(2) to define benefits in a 
State's EHB-benchmark plan as not ``in addition to EHB.'' In our 
experience, States often are unsure whether they are

[[Page 26266]]

making correct defrayal determinations due to the complexity of the 
current policy. Throughout the years of providing technical assistance 
to States analyzing whether mandates require defrayal, one of the most 
common areas of confusion has been an apparent inconsistency between 
Sections Sec. Sec.  155.170 and 156.111, regarding whether a benefit 
can be ``essential'' for purposes of the Federally required EHB-
benchmark plan selected by each State, but not be an EHB for the 
purposes of defrayal. We agree with commenters that States have 
struggled to understand and operationalize the requirements under 
current mandate defrayal policy and that the amendments we propose to 
Sec.  155.170 will resolve such confusion. Therefore, we are finalizing 
the proposal to amend Sec.  155.170(a)(2) to provide that a covered 
benefit in a State's EHB-benchmark plan is considered an EHB. We 
believe this amendment will facilitate compliance with the defrayal 
requirement by making the identification of benefits in addition to EHB 
more intuitive.
    Comment: Many commenters expressed concern that some State efforts 
to mandate certain benefits could unintentionally result in removing 
EHB protections from benefits already included in the State's EHB-
benchmark plan. Several commenters noted that the current policy has 
created unnecessary uncertainty related to EHB protections and 
financial barriers for people enrolled in EHB coverage.
    Response: The finalization of this policy will preserve EHB 
protections for benefits in a State's EHB-benchmark plan, and there 
would be no obligation for States to defray the cost of any State 
mandate enacted after December 31, 2011 that requires coverage of a 
benefit covered under a State's EHB-benchmark plan. Benefits that are 
covered in a State's EHB-benchmark plan will be subject to the various 
rules applicable to EHB, including the prohibition on discrimination in 
accordance with Sec.  156.125, limitations on cost sharing in 
accordance with Sec.  156.130, and restrictions on annual or lifetime 
dollar limits in accordance with Sec.  147.126.
    Comment: Several commenters that opposed the proposal asserted that 
permitting States to deem a benefit EHB by reference to its inclusion 
in an EHB-benchmark plan contradicts the statutory intent of the ACA's 
EHB framework, which the commenters asserted intended a comprehensive 
assessment of typicality among commercial coverage amidst a series of 
clear statutory guardrails. A commenter asserted that section 1302 of 
the ACA authorizes HHS to define EHB, but noted that it does not allow 
it to do so in a manner that elevates State EHB-benchmark plans to a 
place of prominence not envisioned by the statute. A commenter urged 
CMS to be cautious of interpreting what constitutes an EHB too broadly 
and suggested that the definition of ``essential'' health benefits 
should remain focused on a set of benefits that follow the categories 
established in the ACA and should be representative of benefits offered 
in a ``typical employer plan,'' as required under the statute.
    A few commenters that opposed the proposal suggested that it would 
permit States to avoid defraying the cost of any additional benefit so 
long as they updated their EHB-benchmark plans, effectively nullifies 
the cost defrayal obligation, and cannot be squared with the statute's 
requirements. Those commenters asserted that Congress struck a careful 
balance in section 1311(d)(3)(B) of the ACA; it afforded States the 
authority to mandate additional benefits but required them to defray 
costs when doing so.
    Commenters who supported the proposal noted that the proposal is 
more consistent with the plain language and intent of section 
1311(d)(3)(B) of the ACA which requires States to defray the cost of 
benefits that are ``in addition to the essential health benefits'' than 
the existing requirements related to defrayal. One commenter noted the 
proposal will benefit consumers by ensuring that QHPs include the full 
range of benefits commonly included in typical employer plans in a 
State, consistent with the intent of the ACA's EHB provision. A few 
commenters noted that limiting EHB-benchmark benefits that do not 
require defrayal only to those enacted on or before December 31, 2011, 
was arbitrary and limits the ability of States to ensure plans meet the 
current needs of consumers. Another commenter noted that requiring a 
State to defray a mandate for coverage of a benefit for which coverage 
was already required under the State's EHB-benchmark plan makes little 
sense and it also does not comport with the language of the ACA. 
Several commenters noted that the proposal applied a commonsense 
approach and would make the identification of benefits in addition to 
EHB more intuitive and innate.
    Response: This policy change aligns with the plain language and 
intent of the ACA. Section 1311(d)(3)(B)(ii)(II) of the ACA requires 
States to defray the cost of any additional benefits described in 
clause (i), which refers to any benefits that the State requires a QHP 
to offer in addition to the essential health benefits specified under 
section 1302(b). Section 1302 of the ACA grants the Secretary broad 
authority to define EHB, directs that the EHB be equal in scope to the 
benefits provided under a typical employer plan, and that they include 
items and services in at least 10 general categories of EHB. Exercising 
the authority under section 1302(b), in 2013 we defined EHB using a 
benchmark-based approach whereby the State selects an EHB-benchmark 
plan that is utilized as a reference document for all plans subject to 
the EHB requirements in the State. Even after revisions to the EHB-
benchmark policy over the years, States remain primarily responsible 
for selecting an EHB-benchmark plan that complies with scope of benefit 
requirements that ensure the EHB-benchmark is equal to the scope of 
benefits provided under a typical employer plan. This EHB-benchmark 
selection process is the cornerstone of how States define EHB, and we 
believe finalizing a policy whereby all benefits covered in a State's 
EHB-benchmark plan remain EHB revises the defrayal policy in a manner 
more consistent with the ACA, as well as the EHB-benchmark plan 
selection process. States will continue to be required to defray the 
cost of State mandated benefits that are in addition to EHB under the 
finalized standard.
    We further note that this proposal is not introducing a change 
regarding benefits in an EHB-benchmark plan generally being EHB. Under 
longstanding policy, EHB are defined by HHS with a State benchmark-
based framework, such that an issuer subject to EHB requirements must 
provide benefits that are substantially equal to the benefits selected 
by the State in its EHB-benchmark plan. Furthermore, statutory 
guardrails on States expanding EHB in their States remain in place. As 
described in the preamble to Sec.  156.111, the typicality standard 
functions as both a ceiling and floor to limit a State's EHB-benchmark 
plan selections. Benefits can be defined as EHB in a State through two 
avenues: (1) they were mandated by State action prior to December 31, 
2011, and/or (2) they are included in a State's EHB-benchmark plan or 
otherwise required as EHB pursuant to Sec.  156.115. The distinction of 
which avenue defines a benefit as an EHB is meaningless for all 
purposes except for the analysis of defrayal obligations arising from 
State mandates and for whether the benefit can be substituted under 
Sec.  156.115(b). Under the prior policy, a benefit that was selected 
as an EHB in a State's EHB-benchmark plan could shift to being a

[[Page 26267]]

benefit that is ``in addition to EHB'' for purposes of defrayal if the 
State mandates such coverage after December 31, 2011, and the State did 
not have a mandate for such coverage in place prior to December 31, 
2011. Under the finalized policy, there will be no obligation for the 
State to defray the cost of a State mandate enacted after December 31, 
2011, that requires coverage of a benefit covered in the State's EHB-
benchmark plan.
    Comment: One commenter suggested that the proposed change to the 
additional benefits rule is impermissibly arbitrary and capricious 
under the Administrative Procedure Act (APA) because it fails to 
address how the current rule is designed to guard against the concern, 
previously recognized by the agency, that a State could ``embed any 
desired benefit mandate into the EHB-benchmark plan, without any 
requirement to defray the obligation'' (83 FR 17010). Another commenter 
commended HHS for responding to interested party comments submitted to 
the EHB RFI (87 FR 74097). Another commenter suggested that the 
statutory language does not contain an exception to the defrayal 
process for benefits that become EHB because of their inclusion in a 
State's EHB-benchmark plan. That commenter asserted that the proposal 
departs from the plain language of the ACA, as well as the defrayal 
framework as developed through years of rulemaking and guidance, and 
suggested that, rather than introducing further ambiguity into the EHB 
cost defrayal process, CMS reiterate the position it articulated in the 
2019 Notice of Benefit and Payment Parameters that State-required 
benefits mandated by State action taking place after December 31, 2011, 
other than for purposes of compliance with Federal requirements, would 
continue to be considered in addition to EHB even if embedded in the 
State's newly selected EHB-benchmark plan under the proposals at Sec.  
156.111.\130\
---------------------------------------------------------------------------

    \130\ 85 FR 29164, 29218.
---------------------------------------------------------------------------

    Response: We acknowledge that a concern over States embedding any 
desired benefit mandate into their EHB-benchmark plan without any 
requirement to defray the obligation informed the finalization of the 
requirements in the 2019 Payment Notice. However, in the 5 years since 
that rule was finalized, we have received consistent feedback that the 
standard was confusing and hindering State compliance with defrayal 
requirements. Many commenters to the EHB RFI in 2022 specifically 
recommended repealing or modifying Sec.  155.170(a)(2) to define 
benefits in a State's EHB-benchmark plan as not ``in addition to EHB.'' 
Further, States are limited in the benefits that they can embed in 
their EHB-benchmark plans, as they must continue to meet the 
requirements as finalized in this rule at Sec.  156.111(b)(2)(ii). We 
believe the consumer protections resulting from this policy change 
outweigh the prior concern over States embedding any desired benefit 
mandate into their EHB-benchmark plan without any requirement to 
defray.
    Comment: Many commenters that opposed the proposal expressed 
concerns that it would lead to a dramatic increase in the volume of 
State benefit mandates and drive-up premiums for consumers and 
employers, increase costs for the Federal Government and taxpayers, and 
reduce the availability of affordable Exchange plan options. A few 
commenters who supported the proposal also noted that State 
policymakers must be cognizant of the impact any new mandates could 
have on premiums and Federal tax credits. A State's Department of 
Insurance noted that allowing the State to require QHPs to cover 
additional benefits without defrayal of costs provides the State needed 
flexibility over plan benefits to optimize affordability and health 
benefit comprehensiveness.
    Response: Based on experience providing technical assistance to 
States that are considering State-mandated benefits or changes to its 
EHB-benchmark plans, we believe that States appropriately balance the 
need for coverage of a specific benefit with the potential impact it 
may have on costs. This analysis typically includes a consideration of 
the impact on premiums and the corresponding impact on tax credits. We 
do not disagree with commenters that this amendment may result in 
increased Federal outlays in the form of higher APTC; however, this 
defrayal rule does not increase the opportunity for States to increase 
the generosity of their EHB-benchmark plans more than is already 
theoretically possible, as States have been always permitted to add 
benefits to their EHB-benchmark plan, provided those additions comply 
with the scope of benefits requirements at 45 CFR 156.111(b)(2). In 
States that update EHB-benchmark plans to add benefits, the costs of 
which are currently being defrayed by the State, the percentage of 
premium attributable to coverage of EHB for purpose of calculating 
would increase just as if the State updated its EHB-benchmark plan 
through the process set forth in Sec.  156.111 and in compliance with 
the scope of benefits requirements. In a State that enacts a mandate 
for a benefit that is currently covered in its EHB-benchmark plan, 
there will be no effect on premium tax credits as the benefit was 
already included in the percentage of premium attributable to coverage 
of EHB for purpose of calculating since it was EHB.
    Comment: A few commenters expressed concern that under the proposed 
rule, there is no guardrail to prevent manipulation of the EHB-
benchmark plan to avoid cost defrayal--especially because the agency is 
also proposing to eliminate the generosity standard at Sec.  156.111 
that limits the selection of benefits in EHB-benchmark plans. A 
commenter stated that in light of removing the generosity standard it 
is negligent of CMS to propose rules that do not require a financial 
analysis of the costs that may be incurred by mandates and expressed 
concern that without such financial analysis, CMS has no method of 
determining the cost of the new plan, which, with enhanced benefits, 
may have substantially higher premiums and increase the cost of APTC 
that will be incurred by the Federal Government.
    A commenter articulated a sequence of events this commenter 
believes could lead to States manipulating the EHB-benchmark plan 
update process to avoid defrayal. The commenter supposed that a State 
enacts a mandate applicable only to large group health plans (and not 
QHPs) which would not require defrayal. Afterwards, the State updates 
its-EHB-benchmark to cover that benefit, using the large group plans 
that were required to cover it as a reference point for a ``typical'' 
employer plan. Individual and small group plans would then be required 
to cover the benefit as an EHB, with no cost defrayal--even though the 
benefit was not included in any typical employer plan before the State 
mandated it. The commenter stated that CMS has provided no reasonable 
justification for opening the door to such manipulation, nor any 
alternative guardrails. A different commenter noted a similar concern 
that under the proposal, States could seamlessly switch from State 
action to benchmarking for mandates without incurring costs, and 
existing mandates could transition into EHBs through EHB-benchmark plan 
updates.
    Another commenter remarked that changes to a State's EHB-benchmark 
plan take a long time (noting that if a State identifies a particular 
need in the summer of 2024, it would not be able to adopt a new EHB-
benchmark plan that addressed that need until, at a minimum, plan year 
2027). The

[[Page 26268]]

commenter stated that States may legitimately believe that the EHB-
benchmark update timeline is unacceptable when lack of coverage for a 
particular service is contributing to health disparities and worsening 
the health of the State's population. As a result, the commenter 
explained that some States have contemplated the option of enacting a 
mandate through legislation or administrative action that has immediate 
effect, while at the same time pursuing changes to the EHB-benchmark 
for a later date. While these States will likely be subject to defrayal 
requirements for the period of time that the State mandates coverage of 
a benefit without that benefit being covered under the State's EHB-
benchmark plan, a State may be willing to assume temporarily the costs 
of mandated benefits in order for the benefit to be available to State 
residents sooner than the benefit can or will be added to the State's 
EHB-benchmark plan. The commenter noted that the policy, however, seems 
to indicate that once a State is subject to defrayal, it will continue 
to have to defray even if a benchmark change is subsequently adopted. 
The commenter suggested this result seems to be an unintended loophole 
in the current rules that is not necessary to advance the goals of the 
ACA, and its only effect is to deter States from seeking necessary 
coverage changes.
    Response: We are not persuaded that States will use the additional 
flexibility afforded by this proposal to add unbounded benefits as EHB. 
In our experience providing technical assistance to States regarding 
State-mandated benefits and EHB-benchmark plan updates, States approach 
the provision of health benefits in good faith and with great 
consideration for ensuring balance between an appropriate scope of 
covered benefits with any corresponding increase in costs. States must 
continue to operate within the overall EHB framework established by 
HHS, and we intend to continue to provide robust technical assistance 
to States to ensure their compliance.
    Further, we believe that the generosity standard is not necessary 
to ensure the State EHB-benchmark plan selections are not unbounded 
given that, as described in the preamble to section 156.111, the 
typicality standard functions as both a ceiling and floor to limit a 
State's EHB-benchmark plan selections. Specifically, the typicality 
standard alone limits the potential generosity of a State's EHB-
benchmark plan to be no greater than the generosity provided by the 
most generous typical employer plan, because a State would be unable to 
demonstrate that a more generous plan was equal in scope to any of the 
typical employer plans defined at Sec.  156.111(b)(2)(i).
    The scenario the commenter was concerned about would allow for 
manipulation of the EHB-benchmark plan update process would not, in 
practice, present an opportunity for manipulation. States have been 
able to add individual benefits to their EHB-benchmark plans through 
the update process outlined at Sec.  156.111 since the 2019 Payment 
Notice (83 FR 16930, 17009), which provided States with additional 
flexibility with respect to the benefits and coverage in the EHB-
benchmark plans. In addition, we note that the EHB-benchmark plan 
update process is not instantaneous, and States incur costs to update 
their EHB-benchmark plans.
    We believe there is a high likelihood that confusion related to the 
existing mandate defrayal policy has made it difficult for interested 
parties to discern whether States are complying with the defrayal 
requirements. With clearer standards, there will be less confusion 
about State defrayal obligations.
    We agree that the policy subjecting a State to defrayal of a 
benefit even if the State subsequently adds coverage of that benefit to 
the State's EHB-benchmark plan is counterintuitive and does not advance 
the goals of the ACA.
    Comment: A commenter suggested that if the proposal is finalized, 
it would only apply to benefits that are ``already covered in the 
State's EHB [benchmark plan]'' at the time the mandate is passed rather 
than applying prospectively to benefits added to a benchmark plan after 
the mandate is passed.
    Response: We believe this commenter's approach would not 
sufficiently address the concerns about benefits that States, issuers, 
and consumers believe are subject to EHB protections (based on their 
inclusion in a State's EHB-benchmark plan) not being EHB because of the 
defrayal provision. The approach would also further perpetuate a 
complex and confusing standard. Furthermore, under the commenter's 
suggestion, a State mandate would result in certain benefits never 
being able to become EHB (regardless of whether they are added to the 
EHB-benchmark plan in the future).
    Comment: A commenter requested that HHS reiterate that State 
legislation stating that a benefit mandate is not to be considered an 
addition to EHB does not override the defrayal requirement. The 
commenter also expressed concern over the increasing trend for States 
to pass legislation with clauses stating that a benefit mandate will 
not be operative if there is a finding that the mandate requires 
defrayal under the requirements in Sec.  155.170.
    Response: States may not exempt themselves from the Federal 
requirement to defray State mandated benefits that are in addition to 
EHB through State legislation. While clauses stating that a benefit 
mandate will not be operative if there is a finding that the mandate 
requires defrayal are not prohibited by Sec.  155.170, we caution 
States that, absent clear direction from the State following the bill's 
passing as to whether or not the State has identified the required 
benefit as in addition to or not in addition to EHB, such clauses cause 
confusion for issuers about whether a benefit mandate is in effect and 
whether the benefit is in addition to EHB (and therefore whether the 
benefit is subject to the various rules applicable to the EHBs, 
including the prohibition on discrimination in accordance with Sec.  
156.125, limitations on cost sharing in accordance with Sec.  156.130, 
and restrictions on annual or lifetime dollar limits in accordance with 
Sec.  147.126). We recommend that States issue bulletins or guidance 
for issuers with a determination of whether the benefit mandate is in 
effect as soon as possible after conducting an analysis of whether the 
benefit mandate requires defrayal.
    We have also noticed State legislative bills that include clauses 
stating that the requirement to defray mandates is precluded if HHS 
fails to respond to the State's request for confirmation of whether new 
mandates require defrayal within a certain time. Under Sec.  155.170, 
such provisions do not comply with Sec.  155.170 as they 
inappropriately put the onus on HHS to decide whether the mandate is in 
addition to EHB rather than on the State. Failure by HHS to respond to 
State requests asking for a determination of whether new mandates 
require defrayal does not excuse States from defrayal requirements. 
Under Sec.  155.170, it is the State's responsibility to identify which 
State required benefits require defrayal. While States are encouraged 
to reach out to us concerning State defrayal questions in advance of 
passing and implementing benefit mandates, HHS does not provide 
determination of whether a benefit mandate requires defrayal.
4. Consumer Assistance Tools and Programs of an Exchange (Sec.  
155.205)
    In the HHS Notice of Benefit and Payment Parameters for 2025 
proposed rule (88 FR 82510, 82554), we proposed at Sec.  155.205(a) to 
establish additional minimum standards for Exchange call

[[Page 26269]]

center operations, including requirements that all Exchanges, other 
than SBE-FPs and SHOP Exchanges that do not provide for enrollment in 
SHOP coverage through an online SHOP enrollment platform, meet the 
following additional requirements: their call center must provide 
consumers with access to a live call center representative during the 
Exchanges' published hours of operation; and their live call center 
representatives must be able to assist consumers with their QHP 
application, which includes providing consumers information on their 
APTC and CSR eligibility, helping consumers understand their QHP 
options, helping consumers select a QHP, and helping consumers submit 
QHP enrollment applications to the Exchange. We are finalizing these 
standards with modifications.
    Currently, Sec.  155.205(a) requires that Exchanges provide for 
operation of a consumer-accessible, toll-free call center that 
addresses the needs of consumers requesting assistance. For a State 
requesting to establish a State Exchange, we review its plans to 
implement and meet call center requirements under Sec.  155.205(a) as 
described in the State Exchange Blueprint application. Through the 
Blueprint process, we review and assess a State's call center 
operational plan for consistency with standards governing its hours of 
operation, staffing levels, and service level goals (including wait 
times and abandonment rates), as well as for consistency with best 
practices utilized by existing Exchanges, including the FFEs' call 
center. Once a State Exchange has been established and is operating, 
HHS monitors Exchange call center operations through the annual 
collection of performance monitoring data, as specified at Sec.  
155.1200(b)(3). The data collected includes call center volume, wait 
times, calls abandoned, and average call center handle time.\131\
---------------------------------------------------------------------------

    \131\ OMB Control Number: 0938-1119.
---------------------------------------------------------------------------

    As stated in the proposed rule (88 FR 82554), we recognize the 
value in each Exchange being able to tailor customer service level 
expectations based on their experience in the areas they serve, 
including setting hours of operation that meet the needs of their 
consumers. As such, we did not propose to establish minimum standards 
for customer service staffing levels. We will continue to assess and 
monitor Exchanges' compliance with Sec.  155.205(a) through the 
Blueprint process and annual collection of compliance reports, as 
specified at Sec.  155.1200(b)(2). We also intend to utilize the 
finalized requirement that transitioning States submit documentation 
through their Blueprint application, which will strengthen our review 
of Exchange call center plans.
    In this final rule, we are requiring that all Exchanges, other than 
SBE-FPs and SHOP Exchanges that do not provide for enrollment in SHOP 
coverage through an online SHOP enrollment platform, meet the following 
additional requirements: their call center must provide consumers with 
access to a live call center representative during the Exchanges' 
published hours of operation; and their live call center 
representatives must be able to assist consumers with their Exchange 
application, which includes providing consumers information on their 
APTC and CSR eligibility, facilitating a consumer's comparison of QHPs, 
and helping consumers submit their Exchange applications to the 
Exchange.
    Sections 1311(d)(4)(B) and 1321 of the ACA require that Exchanges 
provide for the operation of a toll-free telephone hotline to respond 
to requests for assistance, and section 1413(b)(1)(A)(ii) of the ACA 
requires that a consumer's application for QHP coverage can be filed by 
telephone. We believe that our policy will support these statutory 
requirements by ensuring that consumers have access to live 
representatives with Exchange call centers, during a reliable window of 
time, who can assist consumers with their Exchange applications.
    We believe that all State Exchange call centers already meet the 
minimum standards that were proposed, and we know that the call center 
for the Exchanges on the Federal platform are meeting them. As such, 
this policy seeks to standardize and strengthen Exchange consumer 
assistance capabilities without imposing additional burden on current 
Exchanges or hindering Exchanges' ability to be innovative in their 
call center functions. The changes finalized here will ensure that 
regardless of where a consumer is in the United States, the consumer 
will be able to speak to a live representative who can assist the 
consumer with the Exchange application process during the hours of 
operation for that State's call center. We also want to ensure that a 
State does not solely rely on an automated telephone system for 
Exchange application assistance because we believe speaking to a live 
representative will help troubleshoot consumer Exchange application 
issues, provide in real time an opportunity for a live representative 
to explain Exchange application terminology to a consumer, ensure the 
consumer provides the most correct information in the QHP application 
to alleviate unnecessary follow-up, and provide greater overall 
consumer satisfaction. We believe that call centers should have a basic 
level of customer service especially as they relate to hours and 
operations and staffing levels to limit wait times for Exchange 
application assistance. We also know based on our work with State 
Exchanges and the Exchanges on the Federal platform that the Exchanges 
have created and continue to maintain robust call centers.
    We sought comment on this proposal.
    After consideration of comments and for the reasons outlined in the 
proposed rule and our responses to comments, we are finalizing this 
provision with modifications to the proposed language at Sec.  
155.205(a) to clarify the role of a live call center representative 
during the Exchanges' published hours of operation is to assist 
consumers with submitting their Exchange application as required at 
Sec.  155.405(c)(2)(ii).
    We summarize and respond to public comments received on the 
proposed minimum standards for Exchange call center operations below.
    Comment: Some commenters expressed concerns that the proposed 
requirement was meant to replace or duplicate the act of insurance 
sales or to significantly increase the scope of the assistance 
currently provided through an Exchange's live call center 
representatives.
    Response: The intent of the proposal was not to revise the scope of 
assistance currently provided by live call center representatives, and 
instead was meant to bolster the consumer experience while Exchanges 
meet the basic statutory requirements at sections 1311(d)(4)(B) and 
1413(b)(1)(A)(ii) of the ACA, which requires Exchanges to provide for 
the operation of a toll-free telephone hotline to respond to requests 
for assistance and to provide consumers with the ability to file an 
Exchange application by telephone.
    Comment: Several commenters cited benefits to the proposal 
including increased consumer understanding of the Exchange application 
process through real-time conversation; continuity of coverage across 
health insurance programs since call centers often also support 
Medicaid enrollment assistance; and increased assistance to those with 
limited health insurance literacy, computer literacy, or limited 
internet access.
    Response: We agree with the consumer assistance benefits 
highlighted in these comments and believe the finalized live call 
center representative requirement will aid consumers in these ways.

[[Page 26270]]

    Comment: Several commenters requested CMS also consider 
establishing a standard for call center wait times and abandonment 
rates.
    Response: We did not consider wait times or abandonment rates in 
this proposal as we believe our current oversight mechanisms enable us 
to sufficiently review call center performance. Currently, Sec.  
155.205(a) requires that Exchanges provide for operation of a consumer-
accessible, toll-free call center that addresses the needs of consumers 
requesting assistance. For a State requesting to establish a State 
Exchange, we review its plans to implement and meet call center 
requirements under Sec.  155.205(a) as described in the State Exchange 
Blueprint application. Aside from the call center requirements under 
Sec.  155.205(a), we utilize the Blueprint process to review and assess 
a State's call center operational plan for consistency with standards 
governing its hours of operation, staffing levels, and service level 
goals (including wait times and abandonment rates), as well as for 
consistency with best practices utilized by existing Exchanges, 
including the FFEs' call center. Once a State Exchange has been 
established and is operating, HHS monitors Exchange call center 
operations through the annual collection of performance monitoring 
data, as specified at Sec.  155.1200(b)(3).
    Comment: Several commenters requested CMS also consider 
establishing a standard requiring all call centers provide dedicated 
lines for consumers with disabilities and/or limited English 
proficiency.
    Response: We did not consider dedicated lines for consumers living 
with disabilities and/or with limited English proficiency in this 
proposal. However, to ensure compliance with 155.205(a), we review to 
ensure that all Exchange call centers have a TTY line service available 
for consumers living with disabilities, a Spanish version of their 
website, and a dedicated line for oral interpretation services in at 
least 105 languages. Further, Sec. Sec.  155.205(c)(1), (c)(2)(i), and 
(c)(3) require Exchanges, QHP issuers, and web brokers to provide both 
written translations and oral interpretations of information in plain 
language in a manner accessible to consumers with disabilities and 
limited English proficiency.
    Comment: Several commenters stated that alignment of call center 
standards provides consumers with a more uniform experience regardless 
of Exchange model type or geography.
    Response: We agree that the minimum standard finalized in this 
proposal will secure a more level consumer call center experience 
regardless of where in the country a consumer is located or what 
Exchange model is operating in their State.
    Comment: A few commenters requested CMS make all call center data 
public similar to the release of Medicaid Unwinding call center data.
    Response: We appreciate commenters' interest in publishing Exchange 
call center data. We are committed to providing transparency into 
Exchange operations and are exploring the release of call center data 
at a future time. Additionally, in the interest of transparency, we are 
considering the development of new tools, potentially through future 
rulemaking, that will provide further public understanding into the 
performance of Exchanges.
    Comment: A few commenters opposed the proposal citing the need for 
State flexibility in establishing call center standards including the 
incorporation of new call center technology to assist consumers.
    Response: We appreciate and understand the need for State 
flexibility to meet the needs of their consumers. This policy does not 
aim to replace any technological investment States are willing to make 
to expand their call center offerings. Recognizing that budgetary 
constraints exist, and States often have to choose how to spend limited 
resources, we maintain that live call center representatives to assist 
consumers remains the minimum necessary to ensure sections 
1311(d)(4)(B) and 1413(b)(1)(A)(ii) of the ACA are satisfied.
    Comment: A few commenters opposed the proposal citing that CMS did 
not properly justify why the new live representative standard was 
needed.
    Response: We disagree that this live call center representative 
minimum standard was not properly justified. We recognized and stated 
in the proposed rule that all Exchanges currently meet the newly 
proposed standard. However, we cannot guarantee that the minimum 
standard being finalized will continue to be met in future years by the 
present Exchanges or by States looking to transition to State Exchanges 
in the future. As we stated in the proposed rule, we believe speaking 
to a live representative would help troubleshoot consumer Exchange 
application issues, provide in real time an opportunity for a live 
representative to explain Exchange application terminology to a 
consumer, ensure the consumer provides the most correct information in 
the Exchange application to alleviate unnecessary follow-up, and 
provide greater overall consumer satisfaction. Thus, to ensure 
continuity of the live call center representative standard, we have 
decided to finalize this proposal with the modifications noted above.
    Comment: A few commenters opposed the proposal stating that 
requiring live call center representatives to assist a consumer with 
``selecting a QHP'' violated their State laws since only licensed 
agents and brokers are permitted to engage in the business of insurance 
product solicitation in that State, and that the proposed standard 
would create de facto minimum staffing levels.
    Response: As we previously explained in this final rule, the intent 
of this policy was not to revise the scope of assistance currently 
provided by live call center representatives and was instead meant to 
bolster the consumer experience while Exchanges meet the basic 
statutory requirements at sections 1311(d)(4)(B) and 1413(b)(1)(A)(ii) 
of the ACA, which requires Exchanges to provide for the operation of a 
toll-free telephone hotline to respond to requests for assistance and 
to provide consumers with the ability to file an Exchange application 
by telephone. This policy does not direct live call center 
representatives to solicit or sell insurance or engage in any similar 
practice related to insurance that generally requires a license under 
State law. As such, for the purpose of clarity, we have amended the 
regulatory language initially proposed in Sec.  155.205(a) to clarify 
that live call center representatives will be required to facilitate a 
consumer's comparison of QHPs.
    We recognize the value in each Exchange being able to tailor 
customer service level expectations based on their experience in the 
areas they serve. Consequently, we did not propose to establish minimum 
standards for customer service staffing levels. We will continue to 
assess and monitor Exchanges' compliance with Sec.  155.205(a) through 
the Blueprint process and annual collection of compliance reports, as 
specified at Sec.  155.1200(b)(2). As such, we are finalizing this 
provision with some changes to clarify that the role of a live call 
center representative during the Exchanges' published hours of 
operation is to assist consumers with their Exchange application as 
required at Sec.  155.405(c)(2)(ii).

[[Page 26271]]

5. Requirement for Exchanges To Operate a Centralized Eligibility and 
Enrollment Platform on the Exchange's Website (Sec. Sec.  155.205(b); 
155.302(a)(1))
    In the HHS Notice of Benefit and Payment Parameters for 2025 
proposed rule (88 FR 82510, 82554), we proposed to amend Sec.  
155.205(b)(4) to require that an Exchange operate a centralized 
eligibility and enrollment platform on the Exchange's website (or, for 
an SBE-FP, the Federal eligibility and enrollment platform), such that 
the Exchange allows for the submission of the single, streamlined 
application for enrollment in a QHP and insurance affordability 
programs by consumers, in accordance with Sec.  155.405, through the 
Exchange's website, and that the Exchange performs eligibility 
determinations for all consumers based on submissions of the single, 
streamlined application. Further, we proposed to amend Sec.  
155.302(a)(1) to clarify that the Exchange, through the centralized 
eligibility and enrollment platform operated on the Exchange's website 
(or, for an SBE-FP, the Federal eligibility and enrollment platform), 
is the entity responsible for making all determinations regarding the 
eligibility for QHP coverage and insurance affordability programs 
regardless of whether an individual files an application for enrollment 
in a QHP on the Exchange's website or on a non-Exchange website 
operated by an entity described under Sec.  155.220, such as a web-
broker defined at Sec.  155.20, or a DE entity or QHP issuer described 
under Sec.  155.221. As we believe the eligibility determination 
function is inherently a function that should only be performed by the 
Exchange, the amendment to Sec.  155.302(a)(1) also clarifies that only 
the private vendors or State entities that an Exchange contracts with 
to operate its centralized eligibility and enrollment platform can 
perform this function on behalf of an Exchange, and prohibits an 
Exchange from solely relying on non-Exchange entities, including a web-
broker (defined at Sec.  155.20) or other entities under Sec. Sec.  
155.220 or 155.221, to make such eligibility determinations on behalf 
of an Exchange.
    We also proposed to amend Sec.  155.205(b)(5) to require that an 
Exchange operate a centralized eligibility and enrollment platform on 
the Exchange's website (or, for an SBE-FP, by relying on the Federal 
eligibility and enrollment platform) so that the Exchange (or, for an 
SBE-FP, the Federal eligibility and enrollment platform) meets the 
requirement under Sec.  155.400(c) to maintain records of all 
effectuated enrollments in QHPs, including changes in effectuated QHP 
enrollments.
    As background for these amendments, Sec.  155.205(b) states that an 
Exchange must maintain an up-to-date website that allows consumers to 
receive eligibility determinations for QHPs and insurance affordability 
programs and provides standardized comparative information on each 
available QHP and a calculator to facilitate the comparison of 
available QHPs after the application of any APTC and any CSRs. Section 
1413(c)(1) of the ACA also requires that Exchanges develop a secure 
electronic interface that allows consumers to apply for health 
insurance coverage online and electronically receive an eligibility 
determination and that Exchanges conduct verifications of eligibility 
through electronic data interfaces. However, currently, there is no 
explicit regulatory or statutory requirement that Exchanges operate a 
centralized eligibility and enrollment platform on their website for 
performing all eligibility determinations for QHPs and insurance 
affordability programs. Nonetheless, all Exchanges currently provide 
access to a centralized eligibility and enrollment platform and process 
for consumers that they serve, and all Exchanges also currently perform 
all eligibility determinations through the operation of a centralized 
eligibility and enrollment platform on their websites. In order to 
codify existing policy and practices and help set clear expectations 
for existing Exchanges and States that may seek to operate State 
Exchanges in the future, we proposed these amendments to require that 
Exchanges may not allow eligibility determinations to be made outside 
of the Exchanges' own centralized eligibility and enrollment platform 
by another entity for applications for QHP coverage nor for selections 
for enrollment in a QHP.
    We also proposed to amend Sec.  155.302(a) to codify the Exchange's 
obligation and role as the sole entity responsible for conducting 
eligibility determinations. For example, if an Exchange permits an 
eligible web-broker to operate a non-Exchange website that interfaces 
with an Exchange to assist consumers with DE in QHPs offered through 
the Exchange as described in Sec. Sec.  155.220(c)(3) and 155.221, the 
Exchange must ensure that the Exchange continues to maintain 
responsibility for conducting all eligibility determinations for 
applications submitted for QHP coverage and related insurance 
affordability programs. While HHS has not delegated these functions to 
DE entities in FFE and SBE-FP States, currently, Exchanges may allow 
entities described in Sec.  155.220, among others that meet applicable 
requirements, to be able to function as an eligible contracting entity 
under Sec.  155.110(a) that can carry out determinations regarding QHP 
coverage eligibility and eligibility for related insurance 
affordability programs on behalf of the Exchange. This amendment to 
Sec.  155.302(a) prohibits Exchanges from delegating the responsibility 
to conduct eligibility determinations to any non-Exchange entities, 
besides entities that the Exchanges have elected to contract with to 
operate the centralized eligibility and enrollment platform. Consistent 
with these amendments, we proposed to maintain the current requirement 
under Sec.  155.302(a) that SBE-FPs rely on HHS, through the operation 
of the centralized HealthCare.gov eligibility and enrollment platform, 
to carry out all eligibility determinations for their Exchanges.
    As we also stated in the proposed rule (88 FR 82555), this proposal 
ties together the disparate, but related, requirements that exist 
across 45 CFR part 155 that speak to the real-time and tightly 
integrated nature of the online eligibility functions that Exchanges 
are required to perform (specifically the tight integration needed 
between the Exchange-operated website, single streamlined application, 
and back-end automated eligibility verifications based on information 
provided by applicants to arrive at an eligibility determination), by 
clearly stating the principle that Exchanges are solely responsible for 
conducting eligibility determinations, and that Exchanges need to meet 
the required eligibility functions that exist across 45 CFR part 155 
through operating a centralized eligibility and enrollment platform on 
their website, regardless of whether an application is submitted 
through the Exchanges' website or through eligible non-Exchange 
entities that are assisting an individual in enrolling in a QHP.
    We believe the lack of a clear statement in the regulations at 45 
CFR part 155 affirming the requirement that the Exchange must make all 
determinations regarding eligibility for QHP coverage and related 
insurance affordability programs through a centralized eligibility and 
enrollment platform on the Exchange's website are oversights, as other 
sections of the regulations implementing the ACA in title 45 of the CFR 
allude to a requirement or expectation that an Exchange operates in 
this way already, or the regulations are written in a way such that it 
would be difficult to fulfill

[[Page 26272]]

their requirements if an Exchange did not operate as proposed in these 
amendments.
    As an example of an implementing regulation of the ACA that would 
require an Exchange to operate in this manner, Sec.  155.220 permits 
qualified individuals to be enrolled in a QHP through the Exchange with 
the assistance of a web-broker, while Sec.  155.220(c)(3)(ii)(A), and 
by reference Sec.  155.220(c)(3)(i)(F), require that if the non-
Exchange website of a web-broker is used to complete an Exchange 
eligibility application, that web-broker's website must also provide 
consumers with the ability to withdraw from the process and use the 
Exchange's website described in Sec.  155.205(b) instead at any time. 
If an Exchange did not provide an ability on its website for a consumer 
to complete an eligibility application, then it would not be possible 
to fulfill the requirements of Sec. Sec.  155.220(c)(3)(ii)(A) and 
(i)(F).
    To ensure that the requirements of Sec. Sec.  155.220(c)(3)(ii)(A) 
and (i)(F), and 155.205(b) are fulfilled, we believe it is important 
that Exchanges allow a consumer to continue the application process 
through the centralized eligibility and enrollment platform operated on 
the Exchange's own website should the consumer chose to withdraw from 
the application process that was begun on a web-broker's non-Exchange 
website; or, if the Exchange is an SBE-FP, allow the consumer to 
continue the application process through the website of the Federal 
platform.
    As another example, QHP issuers that assist consumers with 
enrollment in QHPs are currently required under Sec.  156.265(b)(2) to 
either direct the consumer to the Exchange's website to file an 
eligibility application or ensure that the consumer's eligibility 
application is completed through the Exchange website or submitted 
through Exchange-approved web services in order for the Exchange to 
conduct an eligibility determination. To align with these requirements, 
we believe that it is important to finalize the amendment to Sec.  
155.302(a)(1) to provide that an Exchange must perform all eligibility 
determinations through operating a centralized eligibility and 
enrollment platform on the Exchange's website, and that only those 
entities that an Exchange chooses to enter into an agreement with to 
operate its centralized eligibility and enrollment platform, as allowed 
for under Sec.  155.110(a), can carry out this function on behalf of 
the Exchange.
    In addition to these examples of how current regulations may 
require an Exchange to operate according to the proposed amendments to 
Sec. Sec.  155.205 and 155.302, we believe that consumers may be harmed 
without these policies in place. If an entity other than the Exchange 
conducted eligibility determinations, consumers might receive incorrect 
or inconsistent eligibility determinations, as entities other than the 
Exchange may not update their systems with the same eligibility 
determination rules or logic as the Exchange itself when Federal or 
State policies or regulations impacting eligibility for QHP coverage 
and insurance affordability programs come into effect or are updated, 
including the implementation and maintenance of State-specific 
eligibility rules and logic for Medicaid and CHIP programs. As a 
result, a non-centralized eligibility system model introduces increased 
program integrity risk as to the accuracy of eligibility 
determinations, which introduces increased risk of inaccurate APTC 
payments to QHP issuers and increased risk to consumers of potential 
tax liability when filing taxes and reconciling their APTC with the PTC 
allowed.
    In addition, the websites and eligibility platforms provided by 
non-Exchange entities may not include the same informational content 
for consumers that an Exchange provides to consumers through the 
Exchange's website, such as information related to Medicaid and CHIP 
programs or the availability of special enrollment periods before or 
after the open enrollment period. As a result, some consumers might not 
provide information in their application in such a manner as to receive 
a correct eligibility determination and thus, enroll in the wrong 
coverage or not enroll in any coverage. Lastly, consumers may prefer to 
enroll directly through the eligibility and enrollment platform hosted 
and operated on an Exchange's website because they are more comfortable 
with sharing their personal information through a platform hosted by 
the Exchange.
    In light of these considerations, we proposed to amend Sec. Sec.  
155.205(b)(4) and (5), and 155.302(a)(1) to address these gaps. Since 
all Exchanges currently provide access to a centralized eligibility and 
enrollment platform and process for consumers that they serve, and all 
Exchanges also currently perform all eligibility determinations through 
the operation of a centralized eligibility and enrollment platform on 
their websites, we believe the impact of these policies are minimal.
    We sought comment on these proposals.
    After consideration of comments and for the reasons outlined in the 
proposed rule and our responses to comments, we are finalizing this 
provision as proposed. We summarize and respond to public comments 
received on the proposed requirement that an Exchange operate a 
centralized eligibility and enrollment platform on the Exchange's 
website below.
    Comment: Several commenters opposed the proposed policy requiring a 
State Exchange to operate a centralized eligibility and enrollment 
platform on the Exchange's website, citing that it undermines State 
flexibility to operate their own Exchanges. One commenter noted that 
State flexibility is the hallmark of the State Exchange model, and if 
HHS' goal is for more States to implement State Exchanges, then this 
proposal should not be implemented. A few commenters opposed to the 
proposal asserted that HHS is dictating a specific technical approach 
that will potentially restrict States from employing innovative or more 
suitable solutions.
    Response: As we noted in the preamble to this provision, this 
proposal codifies and ties together existing regulatory requirements 
under 45 CFR part 155 that require a State Exchange to operate a 
centralized eligibility and enrollment platform on the Exchange's 
website. Furthermore, all Exchanges currently provide access to a 
centralized eligibility and enrollment platform and process for the 
consumers that they serve, and all Exchanges also currently perform all 
eligibility determinations through the operation of a centralized 
eligibility and enrollment platform on their websites. While this 
proposal is consistent with current policy and State practice, there 
may be States transitioning to State Exchanges in the future that would 
not prioritize establishing a centralized eligibility and enrollment 
platform in the absence of this policy. This standard will ensure State 
Exchange accountability for conducting eligibility determinations, and 
ensure program integrity in adjudicating eligibility applications, 
while preserving State flexibility to allow consumers access to DE 
entity application assisters and permitting web-brokers and QHP issuers 
to assist consumers with direct enrollment in QHPs. Additionally, this 
provision does not limit State flexibility to contract with an eligible 
vendor, State Medicaid agency, or other State agency that may offer 
various technical solutions for eligibility system operations.
    Based upon current State initiatives to transition from an FFE to a 
State Exchange, as well as ongoing interest in the State Exchange model 
from other FFE States, we do not believe that

[[Page 26273]]

finalizing this policy will meaningfully discourage States from 
transitioning to or maintaining their status as a State Exchange.
    Finally, we disagree that the proposal could limit States' ability 
to employ innovative or more suitable technical solutions. While the 
proposal obligates a State Exchange to operate a centralized 
eligibility and enrollment platform on the Exchange's website, it is 
not prescriptive concerning the technical infrastructure supporting the 
system, nor does it regulate the number and types of entities an 
Exchange may contract with to develop and operate a centralized 
eligibility and enrollment platform.
    Comment: A few commenters opposed the proposal clarifying that the 
State Exchange is the entity responsible for making all determinations 
regarding eligibility for QHP coverage, citing that State Exchanges 
should have the flexibility to support eligibility and enrollment 
functions through contractual arrangements with web-brokers or DE 
entities.
    One commenter opposed to the proposal sought clarification 
regarding whether State Exchanges could leverage EDE entities to 
support eligibility and enrollment operations, and questioned whether a 
State Exchange can contract with multiple entities to fulfill the 
requirement for an Exchange to operate a centralized eligibility and 
enrollment platform on the Exchange's website. Relatedly, a few 
commenters opposed to the proposal observed that some State Exchanges' 
eligibility and enrollment platforms are provided by private entities 
that serve as web-brokers in other States; these commenters requested 
HHS clarify that this arrangement is allowable.
    One commenter opposed this proposal noting it ``conflicts with 
current regulations that allow web brokers to enroll people in QHPs `in 
a manner that constitutes enrollment through the Exchange.' '' The 
commenter asserted that through the regulation's use of the word 
``constitutes,'' this regulation allows State Exchanges to establish 
enrollment pathways that qualify as enrollment through the Exchange, 
but do not actually enroll consumers through the Exchange.
    Response: We are amending Sec.  155.302(a)(1) to clarify that the 
State Exchange, through the centralized eligibility and enrollment 
platform operated on the Exchange's website, is the entity responsible 
for making all determinations regarding eligibility for QHP coverage 
and insurance affordability programs, regardless of whether an 
individual files an application for enrollment in a QHP on the 
Exchange's website or on a non-Exchange website operated by an entity 
described under Sec.  155.220, such as a web-broker defined at Sec.  
155.20, a DE entity per Sec.  155.221, or a QHP issuer described under 
Sec. Sec.  155.221 and 156.1230.
    It is necessary to elucidate the Exchange's obligation and role as 
the sole entity responsible for conducting eligibility determinations 
to ensure accountability for eligibility determinations, accuracy and 
uniformity in the eligibility determination process, and consistency 
with existing regulatory requirements under 45 CFR part 155.
    In response to the comment seeking clarification regarding whether 
State Exchanges can contract with EDE entities for the centralized 
eligibility and enrollment platform on the Exchange's website, we point 
to the amendment at Sec.  155.302(a)(1) that prohibits an Exchange from 
relying on an entity described under Sec.  155.220, such as a web-
broker defined at Sec.  155.20, or a DE entity (which includes EDE 
entities) described under Sec.  155.221, from making eligibility 
determinations on behalf of the Exchange. Therefore, this regulation 
precludes DE and EDE entities from entering into arrangements with an 
Exchange to operate its centralized eligibility and enrollment 
platform. However, Sec. Sec.  155.220 and 155.221 detail the scope of 
the eligibility- and enrollment-related support functions DE and EDE 
entities can perform on behalf of an Exchange, through an agreement 
with the Exchange.
    In response to the comment inquiring whether a State Exchange can 
contract with multiple entities to fulfill the requirement for an 
Exchange to operate a centralized eligibility and enrollment platform 
on the Exchange's website, we confirm that a State Exchange can enter 
into an agreement with one or more entities to operate its centralized 
eligibility and enrollment platform, as allowed for under Sec.  
155.110(a), and in accordance with the regulation at Sec.  
155.302(a)(1).
    As we believe the eligibility determination function is inherently 
a function that should only be performed by the Exchange, the amendment 
to Sec.  155.302(a)(1) clarifies that only the private vendors or State 
entities that an Exchange contracts with to operate its centralized 
eligibility and enrollment platform can perform this function on behalf 
of an Exchange, and prohibits an Exchange from solely relying on non-
Exchange entities, including a web-broker (defined at Sec.  155.20) or 
other entities under Sec. Sec.  155.220 or 155.221, to make such 
eligibility determinations on behalf of an Exchange.
    In response to the comments observing that some State Exchanges' 
eligibility and enrollment platforms are provided by private entities 
that serve as web-brokers in other States, we note that only those 
entities that an Exchange chooses to enter into an agreement with to 
operate its centralized eligibility and enrollment platform, as allowed 
for under Sec. Sec.  155.110(a) and 155.302(a), can perform eligibility 
determinations on behalf of the Exchange. In turn, private entities 
that an Exchange has contractual relationships with outside of 
operating its centralized eligibility and enrollment platform, would 
not be allowed to perform eligibility determinations on behalf of the 
Exchange.
    Finally, concerning the comment charging that this proposal 
conflicts with current regulations allowing web-brokers to enroll 
qualified individuals in QHPs in a manner that constitutes enrollment 
through the Exchange, we disagree that the requirement for an Exchange 
to operate a centralized eligibility and enrollment platform on the 
Exchange's website is inconsistent with web-brokers' ability to assist 
consumers with direct enrollment in QHPs, as described in Sec.  
155.220(a)(2). A web-broker's ability to assist consumers with their 
eligibility application submission and enrollment in QHPs is separate 
and distinct from the eligibility determination function reserved for 
the State Exchange's centralized eligibility and enrollment platform on 
the Exchange's website (which can be delivered by a private vendor or 
State entity under contract with the State Exchange). The requirement 
for an Exchange to operate a centralized eligibility and enrollment 
platform does not preclude web-brokers' ability to assist consumers 
with enrollment in QHPs in a manner that constitutes enrollment through 
the State Exchange.
    While Sec.  155.220(a)(2) allows web-brokers to enroll qualified 
individuals in a QHP in a manner that constitutes enrollment through 
the Exchange, the web-broker's non-Exchange website must interface with 
the State Exchange's centralized eligibility and enrollment platform to 
assist consumers with direct enrollment in QHPs. The State's 
centralized eligibility and enrollment platform serves as the system of 
record for all effectuated enrollments in QHPs, in accordance with 
Sec.  155.400. Therefore, the amendments to Sec. Sec.  155.205(b)(4) 
and 155.302(a)(1) requiring that an Exchange operate a centralized 
eligibility and

[[Page 26274]]

enrollment platform on the Exchange's website, and setting forth that 
the Exchange, through the centralized eligibility and enrollment 
platform, is the entity responsible for making all eligibility 
determinations for QHP coverage and insurance affordability programs, 
are codifying existing policy and practice, and are not limiting or 
negating the ability of web-brokers to enroll qualified individuals in 
a QHP in a manner that constitutes enrollment through the Exchange, or 
otherwise restricting opportunities for State Exchanges to expand 
enrollment pathways. As Exchange enrollment channels continue to 
diversify, we are providing this clarification for DE entities, 
existing Exchanges, and States that may seek to operate State Exchanges 
in the future.
    Comment: A few commenters opposed the proposal requiring a State 
Exchange to operate a centralized eligibility and enrollment platform 
on the Exchange's website, stating that the proposal is too vague 
(which could lead to inconsistent State interpretation and 
implementation) or is not supported by CMS' rationale.
    Response: We disagree with these comments, as the intent of the 
proposal is to codify and tie together existing regulations at 45 CFR 
part 155 that require an Exchange to operate a centralized eligibility 
and enrollment platform on the Exchange's website (or, for an SBE-FP, 
the Federal eligibility and enrollment platform), such that the 
Exchange allows for the submission of the single, streamlined 
application for enrollment in a QHP and insurance affordability 
programs by consumers, and the Exchange performs eligibility 
determinations for all consumers based on submissions of the single, 
streamlined application.
    Further, with this proposal we are making clear that the Exchange, 
through the centralized eligibility and enrollment platform operated on 
the Exchange's website (or, for an SBE-FP, the Federal eligibility and 
enrollment platform), is the entity responsible for making all 
determinations regarding the eligibility for QHP coverage and--in 
coordination with State Medicaid and CHIP agencies--insurance 
affordability programs, regardless of whether an individual files an 
application for enrollment in a QHP on the Exchange's website or on a 
non-Exchange website operated by an entity described under Sec.  
155.220, such as a web-broker defined at Sec.  155.20, or a DE entity 
or QHP issuer described under Sec.  155.221.
    Comment: One commenter opposed the proposal and stated that it will 
increase the cost of health insurance.
    Response: We disagree that this proposal will increase the cost of 
health insurance. The proposal codifies and ties together existing 
regulatory requirements across 45 CFR part 155 that require a State 
Exchange to operate a centralized eligibility and enrollment platform 
on the Exchange's website. Furthermore, all Exchanges currently provide 
access to a centralized eligibility and enrollment platform and process 
for the consumers that they serve, and all Exchanges also currently 
perform all eligibility determinations through the operation of a 
centralized eligibility and enrollment platform on their websites. As 
the commenter did not explain how this proposal would increase the cost 
of health insurance, we cannot further address the commenter's 
assertion.
    Comment: Many commenters supported the proposal requiring a State 
Exchange to operate a centralized eligibility and enrollment platform 
on the Exchange's website and stated that it will increase consumer 
protections and reduce consumer risk. Several commenters emphasized the 
risk of individuals receiving inconsistent, confusing, or inaccurate 
results and information if entities other than the Exchange conduct 
eligibility determinations, including potential impact to consumers 
regarding their receipt of financial assistance, their plan choice, or 
their tax liability.
    Response: We agree that consumers may be harmed without this policy 
in place. As we stated in the preamble, if an entity other than the 
Exchange conducts eligibility determinations, consumers might receive 
incorrect or inconsistent eligibility determinations, as entities other 
than the Exchange may not update their systems with the same 
eligibility determination rules or logic as the Exchange itself when 
Federal or State policies or regulations impacting eligibility for QHP 
coverage and insurance affordability programs come into effect or are 
updated, including the implementation and maintenance of State-specific 
eligibility rules and logic for Medicaid and CHIP programs. As a 
result, a non-centralized eligibility system model introduces increased 
program integrity risk as to the accuracy of eligibility 
determinations, increased risk of inaccurate APTC payments to QHP 
issuers, and increased risk to consumers of potential tax liability 
when filing taxes and reconciling their APTC with the PTC allowed.
    Comment: Many commenters supported the proposal clarifying that a 
State Exchange, through the centralized eligibility and enrollment 
platform operated on the Exchange's website, is solely responsible for 
making all determinations regarding consumer eligibility for QHP 
coverage and insurance affordability programs. Several commenters 
supported codifying the prohibition on non-Exchange entities (such as 
web-brokers or DE entities) rendering eligibility determinations.
    Response: As noted in the preamble, we agree that the Exchange, 
through the centralized eligibility and enrollment platform operated on 
the Exchange's website (or, for an SBE-FP, the Federal eligibility and 
enrollment platform), is the entity responsible for making all 
determinations regarding the eligibility for QHP coverage and insurance 
affordability programs regardless of whether an individual files an 
application for enrollment in a QHP on the Exchange's website or on a 
non-Exchange website operated by an entity described under Sec.  
155.220, such as a web-broker defined at Sec.  155.20, or a DE entity 
or QHP issuer described under Sec.  155.221.
    As we believe the eligibility determination function is inherently 
a function that should only be performed by the Exchange, the policy 
also clarifies that only the private vendors or State entities that an 
Exchange contracts with to operate its centralized eligibility and 
enrollment platform can perform this function on behalf of an Exchange, 
and prohibits an Exchange from solely relying on non-Exchange entities, 
including a web-broker (defined at Sec.  155.20) or other entities 
under Sec. Sec.  155.220 or 155.221, to make such eligibility 
determinations on behalf of an Exchange.
    Comment: Several commenters stated that the proposed policy will 
make enrollment into coverage easier, more streamlined, or more 
efficient for consumers, will ensure transparency, accountability, and 
accuracy for applicants, or will help reduce administrative barriers 
for individuals seeking coverage through an Exchange.
    Response: We agree that the proposal requiring a State Exchange to 
operate a centralized eligibility and enrollment platform on the 
Exchange's website will support a more accurate and efficient 
eligibility determination and enrollment experience for applicants and 
reduce administrative barriers for consumers pursuing coverage through 
an Exchange. As noted in the preamble, an Exchange must maintain an up-
to-date website that allows consumers to receive eligibility 
determinations for QHPs and insurance affordability programs. This 
proposal codifies existing policy and practices and helps set clear 
expectations for current Exchanges and

[[Page 26275]]

States that may seek to operate State Exchanges in the future.
    Comment: Several commenters supported the proposal requiring a 
State Exchange to operate a centralized eligibility and enrollment 
platform on the Exchange's website and noted that it would provide 
applicants with flexibility to continue applying for, and enrolling in, 
coverage through the centralized eligibility and enrollment platform on 
an Exchange's website, if they choose to withdraw an application 
initiated on the website of a non-Exchange entity. A few commenters 
observed that this flexibility is consistent with the ``no wrong door'' 
application process promoted by the ACA.
    Response: To ensure that the requirements of Sec. Sec.  
155.220(c)(3)(ii)(A) and (i)(F), and 155.205(b) are fulfilled, we agree 
it is important that Exchanges allow a consumer to continue the 
application process through the centralized eligibility and enrollment 
platform operated on the Exchange's own website should the consumer 
choose to withdraw from the application process that was initiated on a 
web-broker's non-Exchange website (or, if the Exchange is an SBE-FP, 
allow the consumer to continue the application process through the 
website of the Federal platform). We also agree that by facilitating 
multiple pathways through which consumers can submit a single, 
streamlined application for QHP coverage and insurance affordability 
programs--whether through the State Exchange's centralized eligibility 
and enrollment platform on the Exchange's website, through non-Exchange 
websites hosted by web-brokers and DE entities (as allowed by the State 
Exchange), or through Medicaid and CHIP programs operating eligibility 
systems that aren't integrated with the State Exchange--this 
flexibility around application pathways for enrollment in QHP coverage 
and insurance affordability programs aligns with the ACA's ``no wrong 
door'' principle.
    Comment: A few commenters supported the proposed policy requiring a 
State Exchange to operate a centralized eligibility and enrollment 
platform on the Exchange's website and stated that it would make it 
easier for State Exchanges to monitor and evaluate Exchange efficiency 
and effectiveness, as well as implement and maintain State-specific 
Medicaid and CHIP program rules.
    Response: We agree that a State Exchange's centralized eligibility 
and enrollment platform, through which the Exchange conducts all 
eligibility determinations and maintains all records of effectuated QHP 
enrollments, should facilitate State oversight and review of Exchange 
eligibility and enrollment efficacy. We also agree that an Exchange's 
centralized eligibility and enrollment platform should enable timely 
system updates reflecting changes to State-specific eligibility rules 
and logic for the Medicaid and CHIP programs.
6. 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(h))
    In the HHS Notice of Benefit and Payment Parameters for 2025 
proposed rule (88 FR 82556 and 82557), we proposed to amend Sec. Sec.  
155.220(h)(2) and (3) by deleting the current references to ``the HHS 
reconsideration entity'' and replacing them with ``the CMS 
Administrator'' and by specifying that, instead of the HHS 
reconsideration entity, the CMS Administrator, who is a principal 
officer, would be the entity responsible for handling these 
reconsideration decisions. Agents, brokers, and web-brokers whose 
Exchange agreement(s) to participate in the FFEs or SBE-FPs have been 
terminated for cause would continue to have the ability to request a 
reconsideration of such action in the manner and form established by 
HHS by requesting a reconsideration within 30 calendar days of the date 
of the written termination notice from HHS. We proposed that the 
request for reconsideration would be made to the CMS Administrator. In 
the proposed rule, we stated this proposal would improve transparency 
by specifying who would review reconsideration requests under Sec.  
155.220(h).
    Exchange agreement suspensions and terminations play a critical 
role in stopping potentially fraudulent enrollments or other fraudulent 
behavior in the FFEs and SBE-FPs. Currently, Sec.  155.220(g) 
establishes the framework for suspension and termination of an agent's, 
broker's, or web-broker's Exchange agreement(s) for cause in four 
instances.\132\ First, Sec.  155.220(g)(1) allows HHS to terminate an 
agent's, broker's, or web-broker's Exchange agreement(s) when there is 
a specific finding of noncompliance or pattern of noncompliance that is 
sufficiently severe. Second, Sec.  155.220(g)(3)(ii) enables HHS to 
terminate an agent's or broker's Exchange agreement(s) when an agent or 
broker fails to maintain the appropriate license in every State in 
which the agent or broker actively assists consumers with applying for 
APTC and CSRs or with enrolling in QHPs through the FFEs and SBE-FPs. 
Third, HHS will terminate an agent's, broker's, or web-broker's 
Exchange agreement(s) under Sec.  155.220(g)(5)(ii) when there is a 
finding or determination by a Federal or State entity that an agent, 
broker, or web-broker engaged in fraud or abusive conduct that may 
result in imminent or ongoing consumer harm using personally 
identifiable information (PII) of Exchange enrollees or applicants or 
in connection with an Exchange enrollment or application. Fourth, under 
Sec.  155.220(g)(5)(i)(B), HHS may terminate an agent's, broker's, or 
web-broker's Exchange agreement(s) following a suspension of the 
agreement(s) under Sec.  155.220(g)(5)(i)(A) if the agent, broker, or 
web-broker submitted rebuttal evidence that does not persuade HHS to 
lift the suspension, or if the agent, broker, or web-broker fails to 
submit rebuttal evidence during the suspension period.
---------------------------------------------------------------------------

    \132\ Section 155.220(f) establishes the framework for an agent, 
broker, or web-broker to terminate an agent's, broker's, or web-
broker's Exchange agreement(s) with HHS. We did not propose any 
changes with respect to the terminations under Sec.  155.220(f). 
These terminations are not eligible for reconsideration under Sec.  
155.220(h) because they are agent, broker, or web-broker initiated 
actions.
---------------------------------------------------------------------------

    If an agent's, broker's, or web-broker's Exchange agreement(s) has 
been terminated for cause, under Sec.  155.220(h)(1), the agent, 
broker, or web-broker can request reconsideration of such action in the 
manner and form established by HHS. The agent, broker, or web-broker 
must submit the reconsideration request to the HHS reconsideration 
entity within 30 calendar days of the date of the written termination 
notice from HHS.\133\ Current regulations also require the HHS 
reconsideration entity to notify the agent, broker, or web-broker of 
its decision, in writing, within 60 calendar days of the date it 
receives the request for reconsideration.\134\ Currently, Sec.  
155.220(h)(3) further provides that this decision constitutes HHS' 
final determination.
---------------------------------------------------------------------------

    \133\ 45 CFR 155.220(h)(2).
    \134\ 45 CFR 155.220(h)(3).
---------------------------------------------------------------------------

    The current framework in Sec.  155.220(h) does not define or 
identify ``the HHS reconsideration entity'' responsible for making 
these decisions. As noted earlier in this final rule, we proposed 
revising Sec. Sec.  155.220(h)(2) and (3) by deleting the existing 
references to ``the HHS reconsideration entity'' and replacing them 
with ``the CMS Administrator.'' This policy would ensure that authority 
to review requests for reconsideration of decisions to

[[Page 26276]]

terminate an agent's, brokers, or web-broker's Exchange agreement(s) 
for cause are vested in a principal officer.
    We sought comments on this proposal.
    After consideration of comments and for the reasons outlined in the 
proposed rule and our responses to comments, we are finalizing this 
proposal without modification. We summarize and respond to public 
comments we received on this proposal below.
    Comment: A few commenters expressed their support for the proposal 
by stating their approval of the clarification and improved 
transparency it will provide.
    Response: We appreciate these comments in support of the amendments 
to Sec.  155.220(h). As previously noted, this amendment specifies that 
agents, brokers, and web-brokers assisting consumers on the FFEs and 
SBE-FPs can submit a request to the CMS Administrator to reconsider 
HHS' decision to terminate their Exchange agreement(s) for cause.
7. Adding and Amending Language To Ensure Web-Brokers Operating in 
State Exchanges Meet Certain HHS Standards Applicable in the FFEs and 
SBE-FPs (Sec.  155.220)
    In the HHS Notice of Benefit and Payment Parameters for 2025 
proposed rule (88 FR 82510, 82557), we proposed to amend Sec.  155.220 
to apply certain existing HHS standards for Exchanges that use the 
Federal platform that apply to web-brokers \135\ assisting the FFEs' 
and SBE-FPs' \136\ consumers with enrolling in QHPs and/or assisting 
consumers with applying for APTC/CSRs in State Exchanges, for both the 
State Exchange's Individual Exchange and SHOP. In the proposed rule, we 
stated our proposals would ensure that minimum HHS standards governing 
web-broker non-Exchange website display of standardized QHP comparative 
information, disclaimer language, information on eligibility for APTC/
CSRs, operational readiness, standards of conduct, and access by web-
broker downstream agents and brokers apply to web-brokers across all 
Exchanges.\137\ We believe that extending these standards across all 
Exchanges, to newly apply to State Exchanges, is important given the 
increased interest from State Exchanges in using web-brokers to assist 
consumers with enrollment in QHPs offered through Exchanges to maximize 
enrollment opportunities. The ability of consumers and applicants to 
have consistent, reliable information from web-brokers who, to the 
extent permitted by the State and the applicable Exchange, assist 
consumers with enrolling and applying for QHPs offered on the Exchange, 
with or without APTC and CSRs, in a manner that constitutes enrollment 
through the Exchange \138\ is an important consumer safeguard, 
particularly given that web-brokers may operate across Exchange models. 
These proposals are intended to ensure that certain HHS standards are 
extended to protect State Exchange consumers as minimum requirements 
while also providing State Exchanges with continued flexibility and 
discretion to decide whether and how to utilize web-brokers to assist 
State Exchange consumers and applicants with enrolling in QHPs and 
applying for APTC/CSRs. Finally, these proposals align with other 
proposed changes to extend certain existing HHS standards at Sec.  
155.221 that currently apply to DE entities \139\ assisting the FFEs' 
and SBE-FPs' consumers and applicants with direct enrollment in QHPs 
and applying for APTC/CSRs to also apply in State Exchanges. We 
proposed that these proposed changes would be effective on the date of 
publication of this final rule.
---------------------------------------------------------------------------

    \135\ Web-broker is defined at Sec.  155.20 as ``an individual 
agent or broker, group of agents or brokers, or business entity 
registered with an Exchange under Sec.  155.220(d)(1) that develops 
and hosts a non-Exchange website that interfaces with an Exchange to 
assist consumers with direct enrollment in QHPs offered through the 
Exchange as described in Sec.  155.220(c)(3) or Sec.  155.221. The 
term also includes an agent or broker direct enrollment technology 
provider.''
    \136\ See Sec.  155.220(l).
    \137\ The amendments to Sec.  155.220 we are finalizing will not 
impact how agents, brokers, or web-brokers may assist consumers and 
applicants in SBE-FP States. Section 155.220(l) currently provides 
that an agent, broker, or web-broker who enrolls qualified 
individuals, qualified employers, or qualified employees in coverage 
in a manner that constitutes enrollment through an SBE-FP or assists 
individual market consumers with submission of applications for APTC 
and CSRs through an SBE-FP, must comply with all applicable FFE 
standards in Sec.  155.220. We did not propose and are not 
finalizing any changes to this existing framework for agents, 
brokers, or web-brokers who provide assistance in SBE-FP States.
    \138\ See 77 FR 18334 through 18336.
    \139\ DE entities permitted to participate in the FFEs and SBE-
FPs include, to the extent permitted by applicable State law: (1) 
QHP issuers that meet the applicable requirements in Sec. Sec.  
155.221 and 156.1230, and (2) web-brokers that meet the applicable 
requirements in Sec. Sec.  155.220 and 155.221. 45 CFR 155.221(a).
---------------------------------------------------------------------------

    Section 1312(e) of the ACA provides that the HHS Secretary shall 
establish procedures under which a State may allow agents, brokers, and 
web-brokers to enroll individuals and small employers in QHPs offered 
through an Exchange and to assist individuals in applying for APTC/CSRs 
for QHPs sold through an Exchange. The Secretary also has authority 
under section 1321(a) of the ACA to promulgate regulations with respect 
to the establishment and operation of Exchanges, the offering of QHPs 
through such Exchanges, and such other requirements as the Secretary 
determines appropriate.\140\ HHS previously leveraged these authorities 
to establish the existing agent, broker, and web-broker standards 
applicable in FFE and SBE-FP States codified in Sec.  155.220.\141\
---------------------------------------------------------------------------

    \140\ Section 1321(a)(1)(A), (B), and (D) of the ACA.
    \141\ See 77 FR 18444, as amended at 78 FR 15533; 78 FR 54134; 
79 FR 13837; 81 FR 12338; 81 FR 94176; 84 FR 17563; 85 FR 37248; 86 
FR 24288; 87 FR 27388; and 88 FR 25917.
---------------------------------------------------------------------------

    In new paragraph (n), we proposed to apply the web-broker 
standardized QHP comparative information and the accompanying 
Enrollment Support disclaimer requirements in Sec.  155.220(c)(3)(i)(A) 
to web-brokers operating in State Exchanges, and consequently to these 
State Exchanges. Consistent with Sec.  155.220(c)(3)(i)(A)(1) through 
(6), web-broker non-Exchange websites used to complete the QHP 
selection must disclose and display the standardized comparative QHP 
information provided by the Exchange or directly by QHP issuers, 
consistent with the requirements of Sec.  155.205(c) for all QHPs, 
including Qualified Dental Plans (QDPs),\142\ offered through the 
Exchange. The standardized comparative information on each available 
QHP that must be displayed by the web-broker on its non-Exchange 
website is the following information provided by the Exchange or 
directly by QHP issuers: (1) premium and cost-sharing information 
(total and net premium based on APTC and CSR, if applicable); \143\ (2) 
the summary of benefits and coverage; (3) identification of whether the 
QHP is a bronze, silver, gold or platinum level plan, or a catastrophic 
plan; (4) the results of the enrollee satisfaction survey; (5) quality

[[Page 26277]]

ratings assigned by HHS; and (6) the provider directory made available 
to the Exchange. The results of the enrollee satisfaction survey should 
be displayed in accordance with instructions in the CMS Quality Rating 
Information Bulletin.\144\ As described in the CMS Quality Rating 
Information Bulletin, State Exchanges already have some flexibility to 
customize the display of quality ratings assigned by HHS for their 
respective QHPs.\145\ For example, State Exchanges can make some State-
specific customizations, such as to incorporate additional State or 
local quality information or to modify the display names of the quality 
ratings assigned by HHS. Under this proposal, web-brokers in State 
Exchanges should use the same consumer-facing labels for the quality 
ratings that HHS displays on HealthCare.gov (that is, ``Overall 
Rating,'' ``Medical Care,'' ``Member Experience,'' and ``Plan 
Administration'') unless the State Exchange modified the display names 
for these labels. If the State Exchange has modified the display names, 
web-brokers operating in State Exchanges should use the display names 
used on the State Exchange website. Web-brokers operating in State 
Exchanges should also align their display of the quality ratings to 
reflect any permitted State-specific customizations, such as the 
addition of State or local quality information. Additionally, 
consistent with the approach for display of quality ratings by web-
brokers in the FFEs and SBE-FPs and by State Exchanges, if a QHP was 
not eligible to receive a rating or did not receive a rating for other 
reasons, web-brokers participating in State Exchanges would need to 
display ``New plan--Not Rated'' or ``Not Rated'' in place of the 
quality ratings.\146\ When displaying the quality rating assigned by 
HHS on their non-Exchange websites, web-brokers operating in State 
Exchanges would be required to prominently display the disclaimer 
language specified in the CMS Quality Rating Information Bulletin, 
which mirrors the language that web-brokers in the FFEs and SBE-FPs 
must display on their non-Exchange websites.\147\
---------------------------------------------------------------------------

    \142\ With some limited exceptions, QDPs are considered a type 
of QHP. See 77 FR 18315. Web-brokers assisting consumers in the FFEs 
and SBE-FPs are expected to follow the same requirements for QDPs as 
for QHPs, including display of all applicable QDPs offered through 
the Exchange and all available information specific to each QDP on 
their websites. However, because it is not possible to enroll in 
QDPs through DE unless also enrolling in medical QHPs, web-brokers 
are permitted to modify their QDP displays accordingly (for example, 
by displaying QDPs after medical QHPs to ensure a consumer has first 
selected a medical QHP). See CMS. (2023, July 12). Federally-
facilitated Exchange (FFE) Enrollment Manual. CMS. Section 4.3, p.47 
and Section 4.4.2, p. 52. https://www.cms.gov/files/document/ffe-enrollment-manual-2023-5cr-071323.pdf. Under this proposal, these 
same standards governing QDPs would apply to web-brokers in State 
Exchanges.
    \143\ See CMS. (2023, July 12). Federally-facilitated Exchange 
(FFE) Enrollment Manual. CMS. Section 4.4.2, p. 52. https://www.cms.gov/files/document/ffe-enrollment-manual-2023-5cr-071323.pdf.
    \144\ See CMS. (2023, May 2). Quality Rating Information 
Bulletin. CMS. Section III, p. 3. https://www.cms.gov/files/document/py2024-qrs-display-bulletin.pdf. See Exchange and Insurance 
Market Standards for 2015 and Beyond; Final Rule, 79 FR 30240 at 
30310-30311 (May 27, 2014).
    \145\ Sec. Sec.  155.1400 and 155.1405. Also see 85 FR 29214 
through 29216.
    \146\ See CMS. (2023, May 2). Quality Rating Information 
Bulletin. CMS. Section III, p. 3. https://www.cms.gov/files/document/py2024-qrs-display-bulletin.pdf.
    \147\ Id.
---------------------------------------------------------------------------

    State Exchanges are also currently required to display the quality 
ratings assigned by HHS and the results of the enrollee satisfaction 
survey, in the form and manner specified by the Secretary.\148\ This 
includes prominently displaying the same disclaimer language on the 
State Exchange website or a static website when displaying the quality 
ratings assigned by HHS and the results of the enrollee satisfaction 
survey.\149\ Web-brokers would be able to access QHP quality rating 
information for a State Exchange they are operating in, including the 
quality ratings assigned by HHS and enrollee satisfaction survey 
results,\150\ from the State Exchange.
---------------------------------------------------------------------------

    \148\ See Sec. Sec.  155.1400 and 155.1405. Also see Sec.  
155.205(b)(1)(iv) and (v). Exchanges can satisfy the requirement to 
display the enrollee satisfaction survey results by displaying the 
quality ratings assigned by HHS (which incorporate member experience 
data from the survey). See 79 FR 30310 through 30311.
    \149\ See CMS. (2023, May 2). Quality Rating Information 
Bulletin. CMS. Section III, p. 3. https://www.cms.gov/files/document/py2024-qrs-display-bulletin.pdf.
    \150\ Consistent with the approach for Exchanges, for purposes 
of compliance with the HHS minimum standards, web-brokers would be 
able to satisfy the requirement to display the enrollee satisfaction 
survey results by displaying the quality ratings assigned by HHS 
(which incorporate member experience data from the survey).
---------------------------------------------------------------------------

    This list of standardized QHP comparative information that web-
brokers must disclose and display on their non-Exchange websites used 
to complete QHP selection in FFE and SBE-FP States mirrors the 
information that Exchanges are required to disclose and display on 
their respective websites.\151\ This approach ensures consumers have 
access to the same QHP comparative information whether they elect to 
enroll through the Exchange's website or through a web-broker's non-
Exchange website. We proposed to extend these same standardized 
comparative information requirements, as minimum HHS standards, that 
would need to be met by web-brokers participating in State Exchanges 
and consequently to these State Exchanges. We similarly proposed to 
extend the Enrollment Support disclaimer referenced in Sec.  
155.220(c)(3)(i)(A) beyond FFE and SBE-FP States to also extend to web-
brokers participating in State Exchanges and consequently to these 
State Exchanges. The goal of this disclaimer is 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 the Exchange website if they wish to enroll in those QHPs. In 
particular, when a website of a web-broker is used in FFE or SBE-FP 
States to complete the QHP selection, but it does not support 
enrollment for a QHP,\152\ the web-broker's website must prominently 
display the standardized Enrollment Support disclaimer \153\ provided 
by HHS, as follows:
---------------------------------------------------------------------------

    \151\ See Sec.  155.205(b)(1). Also see 87 FR 642 (explaining 
that ``(i)ncluding this [list of] information within Sec.  155.220, 
instead of through a cross-reference to Sec.  155.205(b)(1), would 
provide better clarity and ease of reference. . .'').
    \152\ A web-broker's non-Exchange website may not support 
enrollment in a QHP if a web-broker does not have an appointment 
with a QHP issuer, and therefore, is not permitted under State law 
to enroll consumers in coverage offered by that issuer.
    \153\ CMS. (2023, July 12). Federally-facilitated Exchange (FFE) 
Enrollment Manual. CMS. Section 4.4.2, p. 52. https://www.cms.gov/files/document/ffe-enrollment-manual-2023-5cr-071323.pdf.

    ``(Name of Company) does not support enrollment in this 
Qualified Health Plan at this time. To enroll in this Qualified 
Health Plan, visit the Health Insurance Marketplace[supreg] \154\ 
website at HealthCare.gov.''
---------------------------------------------------------------------------

    \154\ Health Insurance Marketplace[supreg] is a registered 
service mark of the HHS.

    To prominently display the disclaimer, it must be written in a font 
size no smaller than the majority of text on the website page and must 
be noticeable in the context of the website by (for example) using a 
font color that contrasts with the background of the website page.\155\ 
In addition, the Enrollment Support disclaimer must appear on the web-
broker's non-Exchange website in close proximity to where the QHP 
information is displayed if the web-broker does not support enrollment 
in any such QHP, so it is noticeable to the consumer.\156\ Web-brokers 
can also meet this prominent display requirement 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 disclaimer on the same website page or 
otherwise displays the required disclaimer (for example, in a pop-up 
bubble that appears while hovering over the visual cue).\157\ We 
proposed to require web-brokers assisting consumers in State Exchanges 
to comply with these same requirements, while also providing these 
State Exchanges some flexibility regarding the disclaimer

[[Page 26278]]

language required to be displayed by their web-brokers.
---------------------------------------------------------------------------

    \155\ See 78 FR 27260. Also see CMS. (2023, July 12). Federally-
facilitated Exchange (FFE) Enrollment Manual. CMS. Section 4.4.1, p. 
49-50 and Section 4.4.2, p. 54-55. https://www.cms.gov/files/document/ffe-enrollment-manual-2023-5cr-071323.pdf.
    \156\ See 78 FR 27260. Also see CMS. (2023, July 12). Federally-
facilitated Exchange (FFE) Enrollment Manual. CMS. Section 4.4.2, p. 
52. https://www.cms.gov/files/document/ffe-enrollment-manual-2023-5cr-071323.pdf.
    \157\ Id.
---------------------------------------------------------------------------

    For State flexibility, under this proposal, the HHS-provided 
disclaimer language must be used as a minimum starting point, but State 
Exchanges may add State-specific language to the Enrollment Support 
disclaimer, provided the additional language does not conflict with the 
HHS-provided standardized disclaimer. This would permit a State 
Exchange to replace references and links to the Health Insurance 
Marketplace[supreg] and HealthCare.gov in the HHS-provided disclaimer 
language with the appropriate reference or links to the State 
Exchange's website for the Enrollment Support disclaimer that web-
brokers assisting consumers in the State Exchange would be required to 
prominently display on their non-Exchange websites. Additionally, State 
Exchanges may require web-brokers operating in their State to translate 
the disclaimer text into languages appropriate for the State as this 
type of additional requirement would not conflict with the HHS-provided 
disclaimer language or minimum standards. As with all informational 
materials, standard plain language practice is to write at or near a 
fourth-grade reading level and not to exceed an eighth-grade reading 
level. We explained that we expect that any additional State-specific 
customizations to this disclaimer would be written accordingly, and 
that we would be available to provide technical assistance to State 
Exchanges that want to add State-specific language. We proposed to 
codify this State flexibility at new paragraph (n)(1).
    In addition, consistent with Sec.  155.220(c)(3)(i)(G), when used 
to assist FFE consumers, the web-broker's non-Exchange website must 
also prominently display a standardized disclaimer \158\ provided by 
HHS, referred to as the General non-FFE disclaimer, that informs 
consumers and applicants that the web-broker's website is not the 
Exchange website, notes that the web-broker's non-Exchange website may 
not support enrollment in all QHPs, and provides a web link to the 
Exchange's website. This same requirement extends beyond the FFEs and 
also applies to SBE-FPs today.\159\ In new paragraph (n), we proposed 
to extend this disclaimer requirement to also apply to web-brokers 
operating in State Exchanges, and consequently to these State 
Exchanges, while providing these State Exchanges some flexibility to 
add State-specific language to this disclaimer, provided the additional 
language does not conflict with the HHS-provided disclaimer language. 
We proposed to codify this State flexibility in new paragraph (n)(1). 
Similar to the adoption of this disclaimer for consumers in an FFE or 
an SBE-FP,\160\ we stated in the proposed rule that we continue to 
believe this additional standard is in the best interest of consumers, 
as it would help them distinguish between the Exchange website and web-
broker non-Exchange websites. We therefore also identified it as an 
important baseline consumer protection that should extend to consumers 
across all Exchanges.
---------------------------------------------------------------------------

    \158\ CMS. (2023, July 12). Federally-facilitated Exchange (FFE) 
Enrollment Manual. CMS. Section 4.4.2, p. 54. https://www.cms.gov/files/document/ffe-enrollment-manual-2023-5cr-071323.pdf.
    \159\ 45 CFR 155.220(l).
    \160\ 78 FR 37046.
---------------------------------------------------------------------------

    The General non-FFE disclaimer provided by HHS that must be 
prominently displayed by web-brokers participating in the FFEs and SBE-
FPs reads:

    ``Attention: This website is operated by (Name of Company) and 
is not the Health Insurance Marketplace[supreg] website. In offering 
this website, (Name of Company) is required to comply with all 
applicable Federal law, including the standards established under 45 
CFR 155.220(c) and (d) and standards established under 45 CFR 
155.260 to protect the privacy and security of personally 
identifiable information. This website may not support enrollment in 
all Qualified Health Plans (QHPs) being offered in your State 
through the Health Insurance Marketplace[supreg] website. For 
enrollment support in all available QHP options in your State, go to 
the Health Insurance Marketplace[supreg] website at HealthCare.gov.

    Also, you should visit the Health Insurance Marketplace[supreg] 
website at HealthCare.gov if:
     You want to select a catastrophic health plan. (This only 
needs to be included if the web-broker does not offer catastrophic 
plans.)
     You want to enroll members of your household in separate 
QHPs. (This only needs to be included if the web-broker does not allow 
multiple enrollment groups for its Classic DE pathway; note that EDE 
Entities are required to support multiple enrollment groups.)
     You want to enroll members of your household in dental 
coverage. The plans offered here do not offer pediatric dental coverage 
and you want to choose a QHP offered by a different issuer that covers 
pediatric dental services or a separate dental plan with pediatric 
coverage. (This only needs to be included if the web-broker does not 
offer assistance with enrollment in adult coverage or pediatric dental 
coverage.)

    (Name of web-broker's website) offers the opportunity to enroll 
in either QHPs or off-Marketplace coverage. Please visit 
HealthCare.gov for information on the benefits of enrolling in a 
QHP. Off-Marketplace coverage is not eligible for the cost savings 
offered for coverage through the Marketplaces. (This final paragraph 
must be displayed if the web-broker offers consumers assistance with 
off-Marketplace coverage options.)''

    To prominently display this disclaimer, it must be written in a 
font size no smaller than the majority of text on the website page and 
must be noticeable in the context of the website by (for example) using 
a font color that contrasts with the background of the website 
page.\161\ In addition, the disclaimer must be prominently displayed on 
both the initial user landing page and on the landing page displaying 
QHP options that appear before the applicant makes a decision to 
purchase coverage (QHP selection page). In FFE and SBE-FP States, the 
disclaimer must use the exact language provided by HHS, must include a 
functioning web link to HealthCare.gov, and must be viewable without 
requiring the user to select or click on an additional link. The 
disclaimer must also be displayed in the same non-English language as 
any language(s) the web-broker maintains screens for on its 
website.\162\ The web-broker may change the font color, size, or 
graphic context of the information to ensure that it is noticeable to 
the user in the context of its website or the other written material. 
We proposed to require web-brokers assisting consumers in State 
Exchanges must comply with these same requirements for prominent 
display of this disclaimer.
---------------------------------------------------------------------------

    \161\ See 78 FR 27260. Also see CMS. (2023, July 12). Federally-
facilitated Exchange (FFE) Enrollment Manual. CMS. Section 4.4.1, p. 
49-50 and Section 4.4.2, p. 54-55. https://www.cms.gov/files/document/ffe-enrollment-manual-2023-5cr-071323.pdf.
    \162\ See 45 CFR 155.205(c)(2)(iv)(C).
---------------------------------------------------------------------------

    Consistent with the policy for the extension of the Enrollment 
Support disclaimer to State Exchanges and their web-brokers, under this 
proposal, the HHS-provided disclaimer language must be used as a 
minimum starting point, but State Exchanges may add State-specific 
language, provided the additional language does not conflict with the 
HHS-provided standardized disclaimer.
    This would permit State Exchanges to replace references and links 
to the Health Insurance Marketplace[supreg] and HealthCare.gov in the 
HHS-provided disclaimer language with the appropriate reference or 
links to the State Exchange's website for the

[[Page 26279]]

disclaimer under Sec.  155.220(c)(3)(i)(G) that web-brokers assisting 
consumers in State Exchanges would be required to prominently display 
on their non-Exchange websites. Additionally, while web-brokers 
assisting consumers in State Exchanges would be required to specify in 
their disclaimer that they are subject to applicable Federal 
requirements, under this policy, we anticipate State Exchanges would 
leverage this flexibility to direct their web-brokers to omit citations 
to Federal requirements included in the HHS-provided language to the 
extent those provisions do not apply, such as Sec.  155.220(d). State 
Exchanges would also be permitted under this proposal to modify the 
disclaimer required under Sec.  155.220(c)(3)(i)(G) to specify 
applicable provisions of State law. Further, to the extent that web-
brokers in State Exchanges may offer off-Exchange coverage options, we 
would require them to include the HHS-provided disclaimer language that 
distinguishes between such coverage options and QHPs sold through the 
Exchange, noting in particular that such off-Exchange coverage options 
are not eligible for cost savings offered with a QHP sold through the 
Exchange, and providing a link to the State Exchange website for more 
information. Similar to the approach adopted for web-brokers 
participating in FFE and SBE-FP States, bracketed language included in 
the HHS-provided disclaimer language would not be required for web-
brokers assisting consumers in State Exchanges to comply with the HHS 
minimum standards unless applicable or otherwise required by the State 
Exchange. State Exchanges could also require web-brokers operating in 
their State to translate the disclaimer text required under Sec.  
155.220(c)(3)(i)(G) into languages appropriate for the State as this 
type of additional requirement would not conflict with the HHS-provided 
disclaimer language or minimum standards. As with all informational 
materials, standard plain language practice is to write at or near a 
fourth-grade reading level and not to exceed an eighth-grade reading 
level. We explained that HHS expects that any State-specific additions 
or customizations to this disclaimer would be written accordingly, and 
that we would be available to provide technical assistance to State 
Exchanges that want to add State-specific language to this disclaimer.
    In new paragraph (n), we also proposed to extend the requirement in 
Sec.  155.220(c)(3)(i)(I), which requires the prominent display by web-
brokers of the information provided by HHS pertaining to a consumer's 
eligibility for APTC or CSRs on the web-broker's non-Exchange website, 
to web-brokers operating in State Exchanges and, consequently, to these 
State Exchanges. We established this requirement for web-brokers in FFE 
and SBE-FP States to increase the likelihood that consumers understand 
their potential eligibility for APTC and CSRs and potential liability 
for excess APTC repayment and can factor those determinations into 
their QHP selection and the amount of APTC they elect to take.\163\ We 
identified this as another important consumer protection that should be 
part of the HHS minimum web-broker standards in Sec.  155.220 that also 
extends to web-brokers in State Exchanges. Consistent with the 
proposals described above to extend the requirements at Sec.  
155.220(c)(3)(i)(A) and (G), we proposed to also extend the display 
obligations in Sec.  155.220(c)(3)(i)(I) to apply to web-brokers in 
State Exchanges. As such, to prominently display this information, it 
must appear in a font size no smaller than the majority of text on the 
website page and must be noticeable in the context of the website by 
(for example) using a font color that contrasts with the background of 
the website page.\164\ We similarly proposed to require web-brokers in 
State Exchanges to display information provided by, and as specified 
by, the State Exchange regarding a consumer's eligibility for APTC or 
CSRs. Additionally, we proposed flexibility in how consumer eligibility 
information for APTC or CSRs is displayed on websites by web-brokers in 
State Exchanges, at the direction of the State Exchange on the display 
of that information. This flexibility is intended to provide State 
Exchanges the ability to define how consumer education information 
about the State Exchanges, including the consumer eligibility 
information for APTC or CSRs, is customized and presented on their web-
brokers' websites. For example, we recognize that State Exchanges may 
wish to require their web-brokers include additional consumer 
educational information or State-specific content to meet the needs of 
their consumers and applicants. We explained that we believe allowing 
the flexibility for State Exchanges and their web-brokers to customize 
the consumer eligibility information for APTC or CSRs that must be 
prominently displayed on the web-broker's non-Exchange website would 
provide a necessary baseline. More specifically, meeting these 
standards would provide consistency for all Exchange consumers 
receiving assistance from web-brokers through their non-Exchange 
websites and would ensure that all Exchange consumers are provided 
accurate and sufficient information on potential eligibility for APTC 
and CSRs and the potential liability for excess APTC repayment, whether 
they apply and enroll for coverage through the applicable Exchange's 
website or through a web-broker's non-Exchange website. We proposed to 
codify this State flexibility in new proposed paragraph (n)(1).
---------------------------------------------------------------------------

    \163\ 81 FR 61499.
    \164\ See 78 FR 27260. Also see CMS. (2023, July 12). Federally-
facilitated Exchange (FFE) Enrollment Manual. CMS. Section 4.4.1, p. 
49-50 and Section 4.4.2, p. 54-55. https://www.cms.gov/files/document/ffe-enrollment-manual-2023-5cr-071323.pdf.
---------------------------------------------------------------------------

    In the proposed rule (88 FR 82560 and 82561), we also proposed to 
add new Sec.  155.220(c)(4)(iii) to extend certain downstream agent and 
broker requirements at Sec.  155.220(c)(4)(i) that currently apply to 
web-brokers in FFE and SBE-FP States and govern the use of the web-
broker's non-Exchange website by other agents or brokers assisting 
Exchange consumers to also apply to web-brokers, and their downstream 
agents and brokers, in States with State Exchanges, and consequently to 
these State Exchanges. Under the proposed new provision, web-brokers 
that permit other agents or brokers, through a contract or other 
arrangement, to use the web-broker's non-Exchange website to help an 
applicant or enrollee complete a QHP selection or complete the Exchange 
eligibility application would be required to meet the standards at 
Sec.  155.220(c)(4)(i)(A), (B), (D), and (F) when assisting consumers 
in States with a State Exchange. To extend this framework to also apply 
in State Exchanges, we proposed to capture in new Sec.  
155.220(c)(4)(iii) that all references to ``HHS'' and ``Federally-
facilitated Exchange'' in Sec.  155.220(c)(4)(i)(A), (B), (D), and (F) 
would be understood to mean and be replaced with a reference to the 
applicable State Exchange.
    The goal of the downstream agent and broker framework codified in 
Sec.  155.220(c)(4)(i) is to ensure that agents or brokers who utilize 
a web-broker's non-Exchange website to help applicants complete a QHP 
selection or complete the Exchange eligibility application comply with 
necessary safeguards related to transparency, oversight, and consumer 
support. It ensures appropriate oversight by the web-broker and allows 
for closer monitoring by the applicable Exchange. In the proposed rule 
(88 FR 82561), we

[[Page 26280]]

explained that we believe the extension of the identified HHS minimum 
standards to State Exchanges and their web-brokers is especially 
important since some agents, brokers, and web-brokers operate in 
multiple States and would benefit from a standardized framework and set 
of requirements.
    As part of the State Exchanges' oversight of the use of web-broker 
non-Exchange websites, we also encouraged State Exchanges to adopt a 
temporary suspension framework similar to Sec.  155.220(c)(4)(ii) that 
applies in FFE and SBE-FP States. This provision permits HHS to 
temporarily suspend the ability of a web-broker to make its non-
Exchange website available to its downstream agents and brokers to 
transact information with HHS if HHS discovers a security or privacy 
incident or breach. The suspension extends for the period in which HHS 
begins to conduct an investigation and until the incident or breach is 
remedied to HHS' satisfaction. It is another important feature of HHS' 
oversight of the use of web-broker non-Exchange websites in FFE and 
SBE-FP States that protects consumers data and safeguards Exchange 
operations and systems. State Exchanges that choose to permit web-
brokers to host non-Exchange websites to assist consumers with QHP 
selections and submission of Exchange eligibility applications should 
consider adoption of similar measures.
    In the proposed rule (88 FR 82561 and 82562), we proposed to add 
new paragraph (n)(2) to extend web-broker operational readiness 
requirements to State Exchanges and their web-brokers. Under this 
proposal, web-brokers operating in State Exchanges would be required to 
demonstrate operational readiness to the applicable State Exchange 
prior to the web-broker's website being used to complete an Exchange 
eligibility application or a QHP selection. The standards under Sec.  
155.220(c)(6) applicable to operational readiness reviews performed by 
HHS of web-brokers' non-Exchange websites used to assist the FFEs' and 
SBE-FPs' consumers to apply and enroll in QHP coverage through the 
Exchange, with or without APTC and CSRs, is a critical part of the 
oversight framework for HHS' Direct Enrollment (DE) program (including 
both Classic DE and Enhanced Direct Enrollment (EDE)).
    In the 2018 Payment Notice final rule, we adopted rules to capture 
operational readiness requirements applicable to web-brokers that host 
non-Exchange websites to complete QHP selection.\165\ In the 2020 
Payment Notice final rule, we finalized amendments that moved the 
parallel operational readiness requirements for web-brokers and QHP 
issuers to Sec.  155.221(b)(4), accounting for the fact that DE 
entities participating in EDE in the FFEs and SBE-FPs host the 
Eligibility application in addition to QHP selection.\166\ In the 2022 
Payment Notice final rule, we finalized amendments to codify more 
detail describing the operational readiness reviews applicable to web-
brokers participating in FFE and SBE-FP States by adding a new Sec.  
155.220(c)(6).\167\ We identified these operational readiness 
requirements as necessary safeguards to protect consumer data and the 
efficient and effective operation of the Exchange while also supporting 
innovation and the creation of additional approved pathways for FFE and 
SBE-FP consumers to enroll in QHP coverage in a manner that constitutes 
enrollment through the Exchange.
---------------------------------------------------------------------------

    \165\ 81 FR 94120.
    \166\ 84 FR 17522 through 17525.
    \167\ 86 FR 24208 through 24209.
---------------------------------------------------------------------------

    As part of the proposal to extend an operational readiness review 
requirement to State Exchanges and their web-brokers, we proposed in 
new paragraph (n)(2) to require these State Exchanges to establish the 
form and manner for their web-brokers to demonstrate operational 
readiness, which may include submission or completion of the same items 
addressed in Sec.  155.220(c)(6)(i)-(v) to the State Exchanges, in the 
form and manner specified by the applicable State Exchanges. These 
standards, which apply in FFE and SBE-FP States, ensure operational 
readiness and compliance with all applicable requirements prior to the 
web-broker's non-Exchange website being used to complete Exchange 
eligibility application or a QHP selection. They make sure consumers 
and applicants are not able to enroll in Exchange coverage nor submit 
an Exchange application via a web-broker's non-Exchange website that is 
not operationally ready. Websites that have not been tested to see if 
they are operationally ready may not provide consumers and applicants 
with proper eligibility determinations or may have security flaws that 
could make a breach involving consumer PII more likely. Mandating that 
web-brokers participating in State Exchanges meet standards set by the 
applicable State Exchange to demonstrate operational readiness helps 
reduce this risk in all Exchanges. In the proposed rule (88 FR 82562), 
we encouraged State Exchanges to adopt operational readiness review 
standards consistent with the requirements captured in Sec.  
155.220(c)(6)(i)-(v) and to also consider leveraging the audits that 
web-brokers use to demonstrate compliance with the operational 
readiness review requirements applicable in FFE and SBE-FP States. Such 
an approach would promote standardization across Exchanges in terms of 
operational readiness requirements applicable for web-brokers while 
building in flexibility for State Exchanges. We explained that we 
recognize it is important to provide State Exchanges flexibility to 
tailor the operational readiness review process to best serve their 
operational and business needs. For example, State Exchanges may have 
the need to structure their operational readiness reviews to emphasize 
or prioritize different web-broker functionalities that meet State-
specific needs and rules. Therefore, we proposed the requirement that 
State Exchanges must establish operational readiness requirements for 
their web-brokers to demonstrate compliance with applicable 
requirements and technological readiness prior to the web-broker's 
website being used to complete an Exchange eligibility application or a 
QHP selection, while providing these State Exchanges with flexibility 
to define the contours of those requirements. We proposed to capture at 
the end of the new paragraph (n) the accompanying proposed requirement 
that web-brokers in States with State Exchanges comply with the 
applicable State Exchanges' operational readiness standards under 
paragraph (n)(2).
    Finally, in the proposed rule (88 FR 82562), we proposed in new 
paragraph (n)(1) to extend the current web-broker FFE standard of 
conduct established at Sec.  155.220(j)(2)(i) to also apply to web-
brokers assisting consumers in State Exchanges, and consequently to 
these State Exchanges. This FFE standard already extends to web-brokers 
assisting consumers in SBE-FP States.\168\ As proposed to be applied in 
State Exchanges, web-brokers would be required to provide consumers 
with correct information, without omission of material fact, regarding 
the applicable State Exchange, QHPs offered through the applicable 
State Exchange, and insurance affordability programs.\169\ In addition, 
web-brokers who assist with

[[Page 26281]]

or facilitate enrollment of qualified individuals, qualified employers, 
or qualified employees, in coverage in a manner that constitutes 
enrollment through a State Exchange, or assist individuals in applying 
for APTC and CSRs for QHPs sold through a State Exchange, would also be 
required to refrain from marketing or conduct that is misleading 
(including by having a website that the State Exchange determines could 
mislead a consumer into believing they are visiting the State 
Exchange's website), coercive, or discriminates based on race, color, 
national origin, disability, age, or sex. To extend this FFE standard 
of conduct to State Exchanges, we proposed in the last sentence of new 
paragraph (n) that all references to ``HHS'' and ``the Federally-
facilitated Exchanges'' in Sec.  155.220(j)(2)(i) would be understood 
to mean and be replaced with a reference to ``the applicable State 
Exchange, applied to web-brokers,'' and the reference to 
``HealthCare.gov'' in Sec.  155.220(j)(2)(i) would be understood to 
mean and be replaced with a reference to ``the State Exchange website, 
applied to web-brokers.''
---------------------------------------------------------------------------

    \168\ See 45 CFR 155.220(l). A parallel requirement also applies 
to QHP issuer DE entities in FFE and SBE-FP States. See 45 CFR 
155.221(a)(1) and (i), and 156.1230(b)(2). As discussed below, in 
this rulemaking, we proposed and are finalizing the extension of the 
parallel QHP issuer DE entity requirement to State Exchanges and 
their QHP issuer DE entities.
    \169\ See 42 CFR 435.4 for the definition of insurance 
affordability programs.
---------------------------------------------------------------------------

    We sought comment on these proposals, especially from States 
operating, or seeking to operate, State Exchanges. We also sought 
comment on which of the other current provisions at Sec.  155.220 
should or should not apply to State Exchanges and web-brokers that 
assist consumers in State Exchanges.
    After consideration of comments and for the reasons outlined in the 
proposed rule and our responses to comments, we are finalizing these 
proposals without modification. Below, we summarize and respond to 
public comments received on the proposals to require web-brokers 
operating in State Exchanges meet certain HHS standards applicable in 
the FFEs and SBE-FPs.
    Comment: Most commenters were broadly supportive of these 
proposals. Several commenters specifically cited that the provisions 
extending web-broker website display of standardized QHP comparative 
information, disclaimer language, information on eligibility for APTC/
CSRs, operational readiness, standards of conduct, and access by web-
broker downstream agents and brokers across all Exchange types are all 
important consumer safeguards. Several commenters stated these 
provisions would generally enhance the consumer shopping experience, by 
providing consumers with a higher-quality and more consistent user 
experience that allows them access to accurate information about 
coverage and insurance affordability programs, whether they utilize the 
Exchange's website or web-brokers' non-Exchange websites.
    A few commenters stated that if State Exchanges leveraged, where 
appropriate, HHS operational readiness reviews conducted for FFE and 
SBE-FP web-brokers, this may both help to alleviate the compliance 
burden on web-brokers participating in State Exchanges and on those 
State Exchanges, which would help increase the likelihood of web-broker 
participation in State Exchanges. One commenter further expanded on 
this, stating that the proposals to encourage streamlined operational 
readiness and compliance activities across State Exchanges via States 
leveraging HHS operational readiness reviews and artifacts (that is, 
findings) for web-brokers will make it easier for a web-broker to 
participate in multiple State Exchanges.
    A few commenters expressed appreciation that the proposals afford 
State Exchanges sufficient flexibility, such as the ability to 
implement State-specific operational readiness assessments or to 
incorporate State-specific information into the standardized 
disclaimers.
    Response: We appreciate and agree with these comments, many of 
which summarized or elaborated on these proposals' benefits that we 
described in the proposed rule.
    Comment: Several commenters that expressed general support for 
these proposals also suggested that CMS should consider requiring web-
brokers to implement additional consumer protection standards and other 
consumer-oriented tools and information on their websites in the 
future, citing that it is especially important that web-brokers provide 
streamlined and approved information on State Exchange coverage on 
their websites. These commenters, however, did not identify which 
additional standards in Sec.  155.220 we should consider requiring web-
brokers participating in State Exchange to meet for future benefit 
years nor did the commenters otherwise offer specific suggestions for 
other standards, tools, or information, that should similarly be 
considered for implementation in the future.
    Response: We appreciate commenters' feedback and agree that 
adoption of consumer protection standards applicable to the use of web-
broker non-Exchange websites to enroll consumers in QHPs and help 
consumers apply for APTC/CSRs via State Exchanges is important. As we 
explained in the proposed rule (88 FR 82557 and 82558), section 1312(e) 
of the ACA provides that the HHS shall establish procedures under which 
a State may allow agents, brokers, and web-brokers to enroll 
individuals in QHPs offered through Exchanges. In the proposed rule, we 
sought comment on which of the current provisions at Sec.  155.220 
should or should not apply to State Exchanges and web-brokers that 
assist consumers in State Exchanges, and we continue to encourage 
specific feedback from interested parties on additional consumer 
protection standards, consumer-orientated tools, or information that we 
should consider adopting in the future, particularly from State 
Exchanges and web-brokers operating in Exchanges.
    Comment: One commenter suggested that if State Exchanges wish to 
adopt standards for web-brokers that are different from the minimum HHS 
standards that HHS proposed to extend to web-brokers assisting 
consumers in State Exchanges and, consequently, those State Exchanges, 
HHS should establish a process to allow States to apply standards that 
are different from the HHS default minimum standards. This commenter 
noted the HHS standards are a reasonable starting point, but that 
States should have the flexibility to enforce their own standards.
    Response: We appreciate the commenter's recommendation that State 
Exchanges should have the flexibility to establish and enforce their 
own standards for web-brokers. As explained in the proposed rule (88 FR 
82557), the HHS standards we are finalizing as applicable to State 
Exchanges and their web-brokers are intended to serve as a starting 
point by extending certain baseline critical protections to consumers 
in all Exchanges. These standards focus on ensuring proper eligibility 
determinations, protecting against security breaches or incidents 
through implementation of operational readiness reviews, and minimizing 
consumer confusion. State Exchanges can establish additional standards 
for web-brokers that are more stringent than the HHS standards, as long 
as any standard established by the State for its web-brokers does not 
prevent, or conflict with, the application of the HHS standards \170\ 
applicable to web-brokers operating in State Exchanges. For example, 
while a State Exchange could not forego requiring their web-brokers to 
participate in operational readiness activities, as required under new 
Sec.  155.220(n)(2), a State Exchange may establish the form and manner 
for their web-brokers to demonstrate

[[Page 26282]]

operational readiness, including requiring their web-brokers to submit 
documentation the State Exchange believes would support its evaluation 
of a web-broker's operational readiness. If a State Exchange wants to 
replace an otherwise applicable HHS standard with an alternative State 
standard for its web-brokers, the State can consider using the existing 
process under section 1332 of the ACA to pursue such change, provided 
the State is able to do so in accordance with section 1332 
requirements. Section 1332 of the ACA permits States to apply for a 
waiver from certain ACA requirements \171\ to implement innovative and 
individualized State strategies to provide State residents with access 
to high quality, affordable health insurance coverage. Section 1312(e) 
of the ACA is among the provisions that a State can seek to waive under 
section 1332 of the ACA.\172\ Therefore, a State with a State Exchange 
that wants to amend the new HHS minimum standards under Sec.  155.220 
applicable to its web-brokers and replace it with an alternative State 
standard can apply for a section 1332 waiver to pursue such a change. 
For a section 1332 waiver to be approved, the Departments must 
determine that the waiver meets certain statutory guardrails \173\ and 
other applicable requirements.\174\ For more information on the process 
to submit section 1332 waiver applications, see https://www.cms.gov/marketplace/states/section-1332-state-innovation-waivers. In addition, 
as outlined above, the framework adopted in this final rule as 
applicable to State Exchanges and their web-brokers incorporates 
certain flexibilities for State Exchanges. For example, State Exchanges 
may add State-specific information to the standardized disclaimers 
required to be displayed by their web-brokers. As another example, 
State Exchanges may specify the form and manner for their web-brokers 
to demonstrate operational readiness prior to the web-broker's internet 
website being used to complete an Exchange eligibility application or a 
QHP selection.
---------------------------------------------------------------------------

    \170\ See section 1311(k) of the ACA.
    \171\ The following provisions can be waived under section 1332 
of the ACA: (1) Part I of subtitle D of Title I of the ACA (relating 
to the establishment of QHPs); (2) Part II of subtitle D of Title I 
of the ACA (relating to consumer choices and insurance competition 
through Health Benefit Exchanges); (3) Section 1402 of the ACA 
(relating to reduced cost sharing for individuals enrolling in 
QHPs); and (4) Sections 36B (relating to refundable credits for 
coverage under a QHP), 4980H (relating to shared responsibility for 
employers regarding health care coverage), and 5000A (relating to 
the requirement to maintain minimum essential coverage) of the 
Internal Revenue Code (Code)
    \172\ See section 1332(a)(2)(B) of the ACA.
    \173\ In order for a section 1332 waiver to be approved, the 
Departments must determine that the waiver meets the guardrails such 
that the waiver will provide coverage that is at least as 
comprehensive as the coverage provided without the waiver; provide 
coverage and cost-sharing protections against excessive out-of-
pocket spending that are at least as affordable as without the 
waiver; provide coverage to at least a comparable number of 
residents as without the waiver; and not increase the Federal 
deficit. See section 1332(b)(1)(A)-(D) of the ACA.
    \174\ See 45 CFR 155.1300-155.1332 and 31 CFR 33.100-33.132.
---------------------------------------------------------------------------

    Finally, to the extent that a State Exchange permits web-brokers to 
assist its consumers, the State Exchange will remain the entity with 
primary responsibility for oversight and enforcement of applicable 
standards.
    Comment: A few supporting commenters requested that HHS share 
information on how the Department would track compliance by State 
Exchange web-brokers with the HHS minimum standards.
    Response: An Exchange is the primary entity responsible for 
overseeing and ensuring compliance by their web-brokers with applicable 
Federal and State rules and regulations, while HHS has the authority to 
oversee the implementation and operation of Exchanges, including 
optional web-broker programs that a State Exchange may elect to 
operate, and Exchange compliance with Federal requirements. For new 
State Exchanges, under Sec.  155.105, States that seek to operate a 
State Exchange must complete and submit an Exchange Blueprint 
application. The Exchange Blueprint application documents that an 
Exchange will meet the legal and operational readiness requirements 
required of a State Exchange. As part of a State's Blueprint 
submission, the State also agrees to demonstrate operational readiness 
to implement and execute the Federal requirements applicable to State 
Exchanges, which would include the new requirements under Sec.  155.220 
applicable to State Exchange that elect to implement a web-broker 
program. A State Exchange that elects to operate an optional web-broker 
program would be required to include information in its Blueprint to 
demonstrate operational readiness to implement and support ongoing 
operations of an optional web-broker program consistent with applicable 
requirements in Sec.  155.220. As discussed in other sections of this 
rule, we are also codifying requirements related to the approval of a 
State Exchange whereby we will require a State seeking to establish a 
State Exchange to provide supplemental information in its Blueprint 
application to demonstrate its ability to implement and comply with the 
requirements for operating a State Exchange, including requirements 
associated with the operation of a web-broker program. Such supporting 
information would inform HHS's decision to approve or conditionally 
approve a State Exchange and would help facilitate HHS' oversight of 
compliance with Federal requirements applicable to State Exchanges and 
their web-brokers.
    Additionally, under Sec.  155.105, an existing State Exchange must 
notify HHS in writing before making a significant change to its 
approved Exchange Blueprint, and no significant change to an Exchange 
Blueprint may be effective until it is approved by HHS in writing or 60 
days after HHS receipt of a completed request. Accordingly, for 
existing State Exchanges that seek to newly implement and operate an 
optional web-broker program, we would require the State to submit an 
updated Exchange Blueprint and participate in operational readiness 
reviews related to the implementation and ongoing operation of such a 
web-broker program because we would consider a State Exchange 
implementing a web-broker program to be a significant change. Once 
implemented, for a State Exchange operating a web-broker program, HHS 
would monitor the operations of a State Exchange through the annual 
reporting by State Exchanges related to compliance with Federal 
requirements, consistent with our oversight authority at Sec.  
155.1200(b)(2). Specifically, HHS would use this oversight authority to 
evaluate State Exchange compliance with the policies we are finalizing 
at Sec.  155.220 for those State Exchanges that elect to operate a web-
broker program, as HHS does with other aspects of State Exchange 
operations on an annual basis. If there is information suggesting a 
State Exchange or one of its web-brokers does not meet the requirements 
of the policies we are finalizing at Sec.  155.220, we would notify the 
State Exchange and give them an opportunity to address the potential 
non-compliance. We will consider the development of new, additional 
tools to assist with oversight that could enhance transparency into 
compliance by State Exchanges, including their web-broker programs, 
with applicable Federal requirements. We may also consider use of other 
oversight tools and authority, including those under Part 155 of our 
regulations, as appropriate.
    Comment: A few commenters who opposed the proposals broadly stated 
that State Exchanges should maintain their current flexibility for 
establishing rules governing their web-broker programs, given that 
State Exchanges understand their markets best. One of these commenters 
further stated that the

[[Page 26283]]

proposals may hinder web-broker creativity with how web-brokers display 
information on their non-Exchange websites in States with State 
Exchanges, but the commenter did not offer more specific feedback to 
explain how the proposal would hinder creativity or innovation by web-
brokers. Another opposing commenter generally stated that HHS should 
focus on developing regulations that encourage web-broker participation 
in the Exchanges. One commenter who broadly supported the goals of the 
proposals stated that while measures should be taken in State Exchanges 
with regard to web-broker operations to incorporate necessary consumer 
safeguards, HHS should provide State Exchanges flexibility in 
identifying how to implement such safeguards.
    Response: We agree that States and State Exchanges understand their 
market dynamics best, and as such, our goal with these proposals was to 
identify the subset of existing HHS minimum standards that should apply 
across all Exchanges to provide baseline consumer protections while 
also maximizing opportunities for State Exchange flexibility and 
encouraging broad web-broker participation. For example, while we are 
requiring that web-brokers in State Exchanges display specific 
disclaimers to provide consumers with clear and consistent information, 
we also are providing flexibility for State Exchanges to incorporate 
State-specific information into these website disclaimers, provided the 
additional language does not conflict with the HHS-provided 
standardized disclaimer. These disclaimers provide standardized 
information to consumers on important topics, such as the consumer's 
eligibility for APTC/CSRs and limitations on the choice of QHPs that 
consumers may enroll in on a web-broker's non-Exchange website.
    We do not believe that the requirement for web-brokers to display 
such disclaimers should hinder web-broker participation, particularly 
since all web-brokers participating in a particular State Exchange will 
need to display the same disclaimers and will need to display similar 
disclaimers across all Exchanges. As another example, while we are 
requiring that web-brokers in State Exchanges demonstrate operational 
readiness to the applicable State Exchange, we are also providing State 
Exchanges flexibility in how they establish their operational readiness 
requirements and assessment process, while at the same time encouraging 
State Exchanges to leverage HHS operational readiness activities for 
web-brokers participating in FFE and SBE-FPs where appropriate.
    We believe that the application of these HHS minimum standards 
across all Exchanges will encourage web-broker participation, as State 
Exchanges implementing operational readiness requirements for web-
brokers that align with the HHS framework would facilitate web-broker 
participation across multiple State Exchanges leveraging the same 
standards. While the HHS minimum standards we are finalizing as 
applicable to State Exchanges and their web-brokers provides a common 
set of baseline requirements, the framework adopted in this rule also 
provides State Exchanges flexibility to implement additional web-broker 
requirements based on the specific needs of their markets.
    Additionally, we disagree that the HHS minimum standards we are 
extending to State Exchanges and their web-brokers will hinder 
creativity with respect to how web-brokers participating in State 
Exchanges display information on their non-Exchange websites. While 
these proposals represent a minimum set of standards for how 
information is presented on web-broker non-Exchange websites across all 
Exchanges, the standards are not prescriptive concerning how web-
brokers can further customize their websites to better appeal to and 
serve consumers. For example, some web-brokers assisting consumers in 
the FFEs and SBE-FPs have implemented additional website 
functionalities that do not conflict with the minimum set of HHS 
standards concerning how information must be presented on web-broker 
websites, such as novel plan recommendation algorithms, affordability 
estimates, and plan filters.
8. Establishing Requirements for DE Entities Mandating HealthCare.gov 
Changes Be Reflected on DE Entity Non-Exchange Websites Within a Notice 
Period Set by HHS (Sec.  155.221(b))
    In the HHS Notice of Benefit and Payment Parameters for 2025 
proposed rule (88 FR 82510, 82562), we proposed to revise Sec.  
155.221(b) to require that HealthCare.gov changes be reflected and 
prominently displayed on DE entity non-Exchange websites assisting 
consumers in FFEs and SBE-FPs within a specific notice period \175\ set 
by HHS. We explained that we conduct various DE entity monitoring 
programs, including website display reviews, and routinely identify 
areas where DE entity non-Exchange websites can improve the user 
experience and more closely align with HealthCare.gov. The changes that 
we proposed to require DE entities to make to their non-Exchange 
websites included changes that enhance the consumer experience, 
simplify the plan selection process, and increase consumer 
understanding of plan benefits, cost-sharing responsibilities, and 
eligibility for financial assistance. This proposal would codify our 
existing practice of communicating important changes to the 
HealthCare.gov display to EDE entities to ensure their EDE websites 
conform to those changes and provide the same vital information to 
consumers, expand our existing change requests processes to permit 
entities to request deviations from required display changes, require 
DE entities that do not participate in EDE to comply with this 
practice, and require State Exchanges that choose to implement a DE 
program to require their DE entities to implement and prominently 
display website changes in a manner that is consistent with display 
changes made to the State Exchanges' websites on their non-Exchange 
websites for purposes of assisting consumers with DE in QHPs offered 
through the Exchange in a manner that constitutes enrollment through 
the Exchange.
---------------------------------------------------------------------------

    \175\ ``Notice period'' refers to the time period that DE 
entities have to reflect and prominently display HealthCare.gov 
changes communicated to them by HHS pursuant to this proposal.
---------------------------------------------------------------------------

    The display requirements for DE entity non-Exchange websites are 
captured in Sec. Sec.  155.220, 155.221, 156.265, and 156.1230. The 
website display requirements are often technical in nature and can 
require subsequent release of guidance to provide technical and 
operational details to support their implementation. When HHS makes 
changes to the HealthCare.gov display, we notify EDE entities assisting 
consumers in the FFEs and SBE-FPs of these changes and require that 
they make them to their non-Exchange websites via the HHS-initiated 
change request process outlined in the Third-Party Auditor Operational 
Readiness Reviews for the Enhanced Direct Enrollment Pathway and 
Related Oversight Requirements guidance document referred to as the 
``Third-Party Auditor Guidelines.'' \176\ This process helps ensure 
consumers receive vital information they need in a timely fashion. We 
refer readers to the 2025 Payment Notice proposed rule (88 FR

[[Page 26284]]

82563) for further discussion of the background for this proposal.
---------------------------------------------------------------------------

    \176\ CMS. (2023, March 1). Third-party Auditor Operational 
Readiness Reviews for the Enhanced Direct Enrollment Pathway and 
Related Oversight Requirements. CMS. Section IX.B., pp. 72-74. 
https://www.cms.gov/files/document/guidelines-enhanced-direct-enrollment-audits-year-6-final.pdf.
---------------------------------------------------------------------------

    As stated in the proposed rule (88 FR 82563), this proposal 
codifies and expands this existing, HHS-initiated change request 
practice for EDE entities non-Exchange websites and supports 
consistency as to the timing of display changes across enrollment 
platforms, which will help ensure all Exchange consumers have timely 
access to accurate, clear information as they navigate the QHP 
selection and enrollment processes. Most DE partners in FFE and SBE-FP 
States participate in EDE and therefore are already familiar with and 
complying with this proposal because it is part of the existing 
requirements, as outlined in the Third-Party Auditor Guidelines. 
However, this will be new for some DE partners, such as those that only 
participate in Classic DE, because they are not currently subject to 
these requirements, which currently only apply to DE entities that 
participate in EDE in FFE and SBE-FP States. It is especially important 
that changes to the HealthCare.gov display are reflected on non-
Exchange websites, including websites used for both Classic DE and EDE, 
as a steadily increasing number of the FFEs' and SBE-FPs' consumers 
enroll in Exchange plans via these DE pathways. This proposal will help 
ensure consumers using these DE pathways benefit from the policies we 
introduce to improve the HealthCare.gov website display by enhancing 
the consumer experience, increasing consumer understanding, and 
simplifying the plan selection process.
    We recognize that the technical details necessary to implement 
website display changes must be communicated to DE entities with 
sufficient notice for development prior to implementation. As such, we 
proposed that HHS would provide DE entities with advance notice to give 
them time to implement the changes on their non-Exchange websites. We 
explained that we intend for the duration of the advance notice period 
to correspond to the complexity of the change and the urgency with 
which the change must be reflected on the DE entity's non-Exchange 
website (that is, we intend to provide a longer advance notice period 
for implementation of changes requiring more complex website-
development work, or for lower-urgency changes). We explained that we 
would categorize display changes as simpler versus more complex based 
on a combination of factors, including, but not limited to, 
consideration of the following: number of website pages affected; 
number of data fields affected; nature of the change (that is, text-
based versus data-based); whether the change is static or dynamic based 
on user input; whether the change updates QHP data provided by us \177\ 
or involves the display of new data not previously provided by us (that 
is, new data types would be considered a more complex change due to the 
web-development work required to integrate a new PUF data field or MAPI 
data variable); and whether the change may affect backend algorithms 
for plan sorting, filtering, or recommendations. The complexity of the 
change would be the primary factor determining the length of the 
advance notice period. Generally, we would expect to provide 
approximately 30 calendar days' advance notice of simpler display 
changes and up to 90 or more calendar days' advance notice for more 
complex changes. However, in situations where we have determined that 
it is urgent that HealthCare.gov display changes are similarly made to 
DE entities' non-Exchange websites to communicate necessary information 
to consumers regarding their plan selection or enrollment, we explained 
that we may provide fewer than 30 days' advance notice, but not less 
than 5 business days' advance notice. When considering the urgency of a 
display change, we further explained that we would consider a number of 
factors, including, but not limited to, the following: potential to 
impact consumers' understanding of plan benefits and cost-sharing 
responsibilities; potential for consumers to receive an incorrect 
eligibility determination; potential impact to the consumer's 
understanding of their eligibility for financial assistance (that is, 
APTC or CSR); proximity to the Open Enrollment period (with changes 
becoming more urgent as Open Enrollment nears, as implementing changes 
prior to Open Enrollment is critical for ensuring the greatest number 
of consumers are able to benefit from the changes); and whether failure 
to implement the change may result in a display that is misleading or 
confusing to consumers.
---------------------------------------------------------------------------

    \177\ We provide DE entities with the QHP comparative 
information that must be displayed in accordance with Sec.  
155.220(c)(3)(i)(A) and Sec.  156.1230(a)(1)(ii). We provide this 
data via the Public Use Files (PUF) (https://www.cms.gov/cciio/resources/data-resources/marketplace-puf) and through non-Exchange 
website integration with the Marketplace Application Program 
Interface (MAPI) (https://developer.cms.gov/marketplace-api/). In 
this context, website integration refers to connecting the non-
Exchange website with Exchange data by using the MAPI.
---------------------------------------------------------------------------

    We proposed to amend Sec.  155.221 to add new paragraph (b)(6), 
which would require DE entities in FFE States to implement and 
prominently display website changes in a manner that is consistent with 
display changes made by HHS to HealthCare.gov by meeting standards 
communicated and defined by HHS within a time period set by HHS, unless 
HHS approves a deviation from those standards. Consistent with Sec.  
155.221(i), this new DE entity non-Exchange website display requirement 
would also apply to DE entities that enroll qualified individuals in 
coverage in a manner that constitutes enrollment through an SBE-FP or 
assist individual market consumers with submission of applications for 
APTC and CSRs through an SBE-FP.
    We are cognizant of, and support, DE entity non-Exchange websites' 
use of innovative decision-support tools and user interface design to 
help consumers shop for and select QHPs that best meet their needs. 
This proposal is not intended to prohibit or otherwise stand in the way 
of DE entities' development of such tools and consumer interfaces. 
Consistent with the existing approach for implementation of HHS-
initiated changes described in the Third-Party Auditor Guidelines, we 
explained that we would implement this requirement with a focus on 
requiring DE entities in FFE and SBE-FP States to mirror any display 
changes made to HealthCare.gov that impact a consumer's understanding 
of plan benefits, cost-sharing responsibilities, and eligibility for 
financial assistance. For each required change, DE entities in FFE and 
SBE-FP States would need to implement on their non-Exchange websites 
conforming display changes in a manner that is consistent with display 
changes made by HHS to HealthCare.gov by meeting standards defined by 
HHS. We explained that we would provide DE entities flexibility in 
their user interface graphic design, provided that their design 
complies with the standards defined by HHS in the notification of 
required change(s). As part of this proposal, we would require that all 
front-end website changes (that is, website changes that would affect 
the visual aspects of the website that users see and interact with) be 
prominently displayed on DE entity non-Exchange websites. As used in 
this context, ``prominently displayed'' means that text must be written 
in a font size no smaller than the majority of the text on the web 
page, text must be displayed in the same non-English language as any 
language(s) the DE entity maintains translations for on its 
website,\178\ and any display changes must be noticeable in the context 
of the website (that is, DE entity non-Exchange websites must use

[[Page 26285]]

a font or graphic color that contrasts with the background of the web 
page and ensure any graphics and iconography that they are required to 
display are readable without requiring the user to increase their 
magnification percentage greater than 100 percent). The DE entity may 
change the font color, size, or graphic context of the information to 
ensure that it is noticeable to the user in the context of its website 
or other written material.
---------------------------------------------------------------------------

    \178\ 45 CFR 155.205(c)(2)(iv).
---------------------------------------------------------------------------

    For example, in a scenario where HealthCare.gov is updated to 
display new help text communicating educational content to consumers 
that is designed to help a consumer better understand plan benefits, 
cost-sharing responsibility, or eligibility for financial assistance, 
we would require the DE entity's non-Exchange website to display that 
help text or similar text. When notifying DE entities about the 
required change, we would establish and communicate the standards that 
must be met for display of the required change, such as the new help 
text that must be prominently displayed on their websites. If the 
standards allow the DE entity to display similar text to the language 
used on HealthCare.gov (for example, when information must be 
communicated but there is a low risk of misinterpretation of the 
information such that we will not require DE entities to display the 
exact language used on HealthCare.gov), we would provide DE entities 
with information on how the help text is displayed on HealthCare.gov, 
along with the standards that must be met, while also outlining the 
flexibility for DE entities to adapt the language to reflect their own 
entity branding if it generally conveys the same information and 
meaning as the help text displayed on HealthCare.gov. In this example, 
we would also allow flexibility as to the location of the help text if 
it adheres to the prominent display requirements discussed earlier in 
this proposal. In this scenario, DE entities would be able to adjust 
the language and decide on the location of the help text on the QHP 
selection page(s) without seeking prior approval from HHS. However, we 
would monitor implementation through existing periodic website review 
monitoring per Sec.  155.220(c)(5) and, as described in the Third-Party 
Auditor Guidelines,\179\ may notify the DE entity if we find that their 
language does not convey the same meaning as the help text displayed on 
HealthCare.gov or if we find the help text is not prominently 
displayed. Such notification would occur via a letter that would 
provide the DE entity with feedback explaining the noncompliance and 
required corrective actions (such letter is referred to as ``Technical 
Assistance''). If Technical Assistance fails, we may potentially take 
enforcement action to address the identified instances of non-
compliance, which could include temporarily suspending the DE entity's 
ability to transact information with the Exchange if we discover 
circumstances that pose unacceptable risk to eligibility determination, 
Exchange operations, or Exchange systems, if warranted.\180\
---------------------------------------------------------------------------

    \179\ CMS. (2023, March 1). Third-party Auditor Operational 
Readiness Reviews for the Enhanced Direct Enrollment Pathway and 
Related Oversight Requirements. CMS. Section X.F., p. 69. https://www.cms.gov/files/document/guidelines-enhanced-direct-enrollment-audits-year-6-final.pdf.
    \180\ 45 CFR 155.221(e).
---------------------------------------------------------------------------

    Additionally, we explained that we recognize that some DE entities 
may have system constraints that prevent them from precisely mirroring 
the HealthCare.gov display approach, and so we proposed that if a DE 
entity is unable to implement the standards defined by HHS, or the DE 
entity has an idea for implementation that does not meet the standards 
but would effectively communicate the same information to consumers, we 
may permit a deviation. We proposed that DE entities that are 
interested in pursuing a deviation must submit deviation requests to 
HHS and proposed that such requests would be subject to review by HHS 
in advance of implementation of any alternative display approaches. We 
explained that deviation requests must include a proposed alternative 
display and accompanying rationale. The rationale must explain why the 
DE entity is unable to implement the standards or how the DE entity's 
idea for implementation that does not meet the HHS standards would 
effectively communicate the same information to consumers. Therefore, 
similar to the differential website display requirements for 
standardized plans applicable to web-broker and QHP issuer DE entities 
at Sec. Sec.  155.220(c)(3)(i)(H) and 156.265(b)(3)(iv) and the HHS-
initiated change request process, we proposed to allow DE entities to 
request a deviation from the standards communicated by HHS for required 
display changes to align with HealthCare.gov by submitting a proposed 
alternative display and accompanying rationale or explanation for why a 
deviation is necessary. In reviewing deviation requests, HHS would 
consider whether the same level of differentiation and clarity is being 
provided under the deviation requested by the DE entity as is provided 
on HealthCare.gov. Other factors and criteria HHS would consider 
include, but are not limited to, whether the proposed alternative 
website display adheres to the standards for prominent display 
described in this proposal and whether the display provides correct 
information, without omission of material fact, that does not have the 
potential to be misleading to consumers.
    Under the proposed approach, the deviation request would have to be 
submitted and approved by HHS before DE entities would be permitted to 
implement any alternative website displays. Deviation requests would 
not toll the advance notice period. This deviation request process is 
separate and distinct from the flexibilities in user interface graphic 
design that we would allow without preapproval as long as the design 
and display otherwise meets the applicable standards defined and 
communicated by HHS for the display change. DE entities would only need 
to request a deviation from the requirements of the standards 
communicated by HHS if the DE entity seeks to deviate from those 
standards or specifications when it implements a display change to its 
Non-Exchange website that is required by HHS pursuant to this proposal.
    We also proposed in new Sec.  155.221(j)(3) to extend this new 
proposed DE entity non-Exchange website display requirement to require 
State Exchanges that choose to implement a DE program to require their 
DE entities to implement and prominently display website changes in a 
manner that is consistent with display changes made by State Exchanges 
to the State Exchanges' website on their non-Exchange websites. We 
believe it is necessary for consumers utilizing DE entities in States 
with State Exchanges to have access to the same vital information 
pertaining to their plan selection and enrollment process as they would 
have if they were enrolling via the State Exchanges' websites. Under 
this proposal, we would require State Exchanges to establish and 
communicate standards for required display changes and to set the time 
period within which display changes must be implemented on DE entities' 
non-Exchange websites. State Exchanges would also be required to review 
deviation requests submitted by DE entities and establish their own 
deviation request process should the State Exchange elect to permit 
deviation requests. DE entities are required to follow the process 
established by the State Exchange. We would provide flexibility for 
State Exchanges to develop their own process for

[[Page 26286]]

communicating those standards, setting advance notice periods, and 
establishing a deviation request process as needed to meet the business 
needs of the State Exchange. We would encourage State Exchanges that 
choose to implement a DE program to consider the same factors described 
above (that is, urgency and complexity of the change) when determining 
the advance notice period. Similarly, we would encourage State 
Exchanges to provide their DE entities with examples of the State 
Exchange website display change and technical assistance, including 
technical implementation guidance, to ease the burden of implementing 
and prominently displaying required changes. We would require State 
Exchanges to apply HHS's standard for ``prominently display,'' 
explained earlier in this section of this final rule, to help ensure 
that important enrollment, eligibility, and other information is as 
noticeable and clear to consumers using DE entities' websites in State 
Exchanges as it is to consumers using State Exchange websites or 
HealthCare.gov, which we believe will enhance the user experience, 
increase understanding, and simplify the plan selection process for all 
consumers.
    As part of this proposal to extend the requirement for DE entities 
to reflect Exchange website changes on their non-Exchange websites to 
State Exchanges and their DE entities, we would rely on State Exchanges 
that choose to implement a DE program to enforce compliance with these 
requirements and take enforcement action when their DE entities fail to 
comply and update their non-Exchange websites to mirror changes made to 
the State Exchange website. We would be available to provide technical 
assistance to support the State Exchanges' efforts to take appropriate 
enforcement action as needed to ensure compliance with applicable 
requirements. There may exist scenarios where the website display 
requirements may differ between the FFEs or SBE-FPs versus the State 
Exchanges (for example, in scenarios where a State Exchange uses the 
HealthCare.gov disclaimer language and adds State-specific information 
such as replacing a HealthCare.gov hyperlink with the State Exchange 
hyperlink). In such scenarios, DE entities would be required to tailor 
their non-Exchange website display to the requirements of the Exchange 
through which the consumer is seeking assistance. Based on our 
experience providing oversight of DE entity website displays in FFE and 
SBE-FP States, we understand that many DE entities are familiar with 
and have the capability to tailor website displays based on different 
scenarios and, as such, we anticipate DE entities will have the 
capability to tailor website displays to mirror the website of the 
Exchange the consumer is shopping for coverage in.
    With an increasing number of consumers utilizing the DE pathways to 
enroll in coverage through the Exchanges, we believe it is important to 
codify a requirement to mandate changes made to HealthCare.gov (or for 
State Exchanges, the State Exchanges' websites) be implemented on DE 
entity non-Exchange websites within a timeframe specified by HHS (or, 
for DE entities assisting consumers in State Exchanges, within a 
timeframe specified by the State Exchange). These proposals would 
ensure consumers using DE entity non-Exchange websites have a similar 
user experience, with access to the same information in a similar 
manner as provided on HealthCare.gov and State Exchange websites.
    We sought comment on all aspects of these proposals.
    After consideration of comments and for the reasons outlined in the 
proposed rule and our responses to comments, we are finalizing these 
proposals without modification but with technical changes to the 
regulatory text. These changes clarify that DE entities in States with 
State Exchanges must implement and prominently display website changes 
in a manner consistent with display changes made to the State Exchange 
website, unless the State Exchange approves a deviation from those 
standards under the deviation request process that the State Exchange 
is required to establish, should the State Exchange elect to permit 
deviation requests. We acknowledge that the language in the proposed 
rule, including its regulatory text, may have been confusing and 
subject to different interpretations, and accordingly, we clarify our 
intent and the regulatory text in this final rule. The approach, as 
clarified by these technical changes, is consistent with the proposal 
as discussed in the preamble to the proposed rule (88 FR 82565), which 
stated that the State Exchange would be required to establish a 
deviation request process and review deviation requests submitted by DE 
entities, should the State Exchange want to permit deviations. The 
commenters appear to have interpreted the proposed rule consistent with 
these technical changes, with one commenter specifically suggesting HHS 
encourage State Exchanges to consider deviation requests. For clarity, 
we also are making technical changes to the regulatory text at Sec.  
155.221(j)(3), which stated in the proposed rule (88 FR 82651) that 
State Exchanges must require their direct enrollment entities to 
implement and prominently display ``changes adopted for display on the 
State Exchanges' websites.'' The revised regulatory text now states 
that State Exchanges must require their DE entities to implement and 
prominently display ``website changes in a manner that is consistent 
with the display changes made by State Exchanges to the State 
Exchanges' websites.'' This technical change aligns the regulatory text 
of Sec.  155.221(j)(3) with paragraph (b)(6) but does not represent a 
change in the policy discussed in the proposed rule (88 FR 82565).
    We summarize and respond below to public comments received on the 
proposed requirement that HealthCare.gov or State Exchange website 
changes be reflected and prominently displayed on DE entity non-
Exchange websites within a specific notice period set by HHS or the 
State Exchange.
    Comment: Most commenters who addressed these proposals supported 
their adoption as proposed, stating benefits such as enhanced consumer 
protection, accuracy, efficiency, and consistency across Exchanges. One 
commenter noted these changes will also establish consistency between 
Classic DE and EDE websites in FFE and SBE-FP States. A few commenters 
noted these proposals expand HHS' existing practice of ensuring 
adequate communication of HealthCare.gov changes to consumers across 
platforms and Exchange types. One commenter stated these proposals will 
limit consumer confusion or consumer action based on ``outdated 
eligibility or plan availability information.'' A few commenters 
recommended that web-brokers be required to display all plan 
information in a manner that exactly replicates the HealthCare.gov or 
State Exchange website display. One commenter emphasized that providing 
DE entities with technical and operational assistance is vital for 
ensuring changes are executed correctly and effectively. One commenter 
opposed these proposals, stating that it diminishes the value of DE and 
contradicts the ability for DE entities to tailor their experience to 
best suit consumers.
    Response: We appreciate the comments in support of these 
requirements and agree they will ultimately minimize consumer 
confusion, support consistency across Exchanges, and promote increased 
consumer understanding by mandating

[[Page 26287]]

that DE entity non-Exchange websites reflect and prominently display 
changes made to the applicable Exchange's website within the notice 
period set by HHS or the State Exchange, as applicable. As described 
above and in the proposed rule (88 FR 82563 through 82565), we agree 
that this approach will codify our existing HHS-initiated change 
request practices for communicating HealthCare.gov changes to EDE 
partners and expand it to apply across all DE non-Exchange websites in 
FFE and SBE-FP States for both Classic DE and EDE.
    We agree this policy may limit consumer confusion or consumer 
action based on outdated eligibility or plan information insofar as 
this policy requires DE entities to reflect and prominently display 
changes that increase consumer understanding of eligibility for 
financial assistance or plan information on their non-Exchange websites 
(for example, making plan information--or a link to it--more 
conspicuous on a web page). We note that this policy does not impact 
existing requirements for web-broker websites used to complete QHP 
selection in FFE and SBE-FP States \181\ to provide consumers the 
ability to view all QHPs offered through the Exchange.\182\ This policy 
also does not impact existing requirements for web-broker websites used 
to complete QHP selection in FFE and SBE-FP States to display QHP 
information and information pertaining to a consumer's eligibility for 
APTC or CSRs under Sec. Sec.  155.220(c)(3)(i)(A) and (I), which also 
extends to web-brokers assisting consumers in State Exchanges under new 
Sec.  155.220(n). We note that under Sec.  155.221(a)(2), these 
requirements also apply to DE entity non-Exchange websites in the FFEs 
and SBE-FPs \183\ to the extent those DE entities are web-brokers, and 
under proposed Sec.  155.220(n), these requirements would apply to DE 
entity non-Exchange websites operating in State Exchanges to the extent 
those DE entities are web-brokers.
---------------------------------------------------------------------------

    \181\ See Sec.  155.220(l).
    \182\ See Sec.  155.220(c)(3)(i)(B).
    \183\ See Sec.  155.221(i).
---------------------------------------------------------------------------

    We appreciate the emphasis on the need for HHS to provide technical 
and operational assistance and are committed to providing such 
assistance to ensure DE entities in the FFEs and SBE-FPs have the tools 
and information required to implement the required display changes 
accurately and efficiently. We encourage State Exchanges that choose to 
implement DE programs to provide similar support to their DE entities.
    We acknowledge the comments requesting that web-brokers be required 
to exactly replicate the HealthCare.gov or State Exchange website 
display. However, we did not propose nor are we finalizing such a 
requirement.\184\ As described above and in the proposed rule (88 FR 
82564), we support DE entity non-Exchange websites' use of innovative 
decision-support tools and user interface design, and we believe that 
requiring an exact replication of HealthCare.gov or State Exchange 
websites would hinder such innovation. We believe the approach we are 
adopting, including permitting flexibility in DE entity non-Exchange 
website user interface graphic design \185\ when implementing required 
HealthCare.gov or State Exchange website display changes and the 
deviation requests process,\186\ will allow DE entities sufficient 
flexibility to integrate required changes within the context of their 
non-Exchange website. The approach will simultaneously provide 
necessary consumer protections by requiring the DE entity's user 
interface design to comply with the standards defined by HHS or the 
State Exchange or, in the case of deviation requests submitted to HHS, 
by requiring HHS to consider whether the same level of differentiation 
and clarity is provided under the deviation requested by the DE entity 
as is provided on HealthCare.gov when considering deviation requests. 
We encourage State Exchanges to establish a deviation request process, 
and we expect that State Exchanges will consider the business needs of 
their Exchange and the interests of consumers in their State, including 
consumer protection, when they review deviation requests, should the 
State Exchange elect to permit deviation requests.
---------------------------------------------------------------------------

    \184\ We note that under Sec.  155.220(c)(3)(i)(A), (B) and (D) 
web-brokers operating in FFEs are required to disclose and display 
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, provide consumers the ability to view all QHPs 
offered through the Exchange, and display all QHP data provided by 
the Exchange. These same requirements currently apply to web-brokers 
operated in SBE-FPs. See 45 CFR 155.220(l). As finalized in this 
rule and reflected in new Sec.  155.220(n), the web-broker 
requirement in Sec.  155.220(c)(3)(i)(A) that web-brokers disclose 
and display on their non-Exchange website the standardized QHP 
information provided by the Exchange or directly by QHP issuers also 
extends to web-brokers in State Exchanges.
    \185\ This approach does not require entities to directly mirror 
the Exchange website displays. Rather, Exchanges will define and 
communicate standards that DE entities must meet when implementing 
and prominently displaying website display changes in a manner that 
is consistent with the display changes made to the Exchange 
websites. DE entities will have flexibility in how they reflect and 
incorporate those changes within the context of their user interface 
graphic design, provided their display meets the standards 
communicated by the Exchanges. For further discussion and an example 
of how this flexibility will be applied. See 2025 Payment Notice 
proposed rule (88 FR 82564-82566).
    \186\ In the proposed rule (88 FR 82565), we proposed that if a 
DE entity is unable to implement the standards defined by HHS, or 
the DE entity has an idea for implementation that does not meet the 
standards but would effectively communicate the same information to 
consumers, HHS may permit a deviation. We proposed that DE entities 
that are interested in pursuing a deviation must submit deviation 
requests to HHS and proposed that such requests would be subject to 
review by HHS in advance of implementation of any alternative 
display approaches. We explained that deviation requests must 
include a proposed alternative display and accompanying rationale. 
The rationale must explain why the DE entity is unable to implement 
the standards or how the DE entity's idea for implementation that 
does not meet the standards would effectively communicate the same 
information to consumers. Finally, we proposed that State Exchanges 
would also be required to establish their own deviation request 
process and review deviation requests submitted by their DE entities 
should the State Exchange elect to permit deviation requests. State 
Exchanges would have flexibility to establish a deviation request 
process as needed to meet the business needs of the State Exchange 
and would have discretion to approve or reject a deviation request 
from one of its DE entities. We are finalizing this approach as 
proposed but with technical changes to affirm that State Exchanges 
must establish a deviation request process should the State Exchange 
elect to permit deviation requests.
---------------------------------------------------------------------------

    We do not agree with the commenter that suggested these 
requirements diminish the value of DE or contradict the ability for DE 
entities to tailor their experience to best suit consumers. As 
discussed previously in this section of this final rule, these 
requirements support flexibility in the implementation of required 
changes by DE entities. They are not intended to impair DE entities' 
ability to tailor their user interface design. For example, DE entities 
are allowed to make changes to the font color, size, or graphic context 
of the information to ensure that it is noticeable in the context of 
its website. Rather, they establish a pathway for DE entities to 
innovate while ensuring that DE entity non-Exchange websites provide 
the same level of differentiation and clarification for consumers as is 
provided on HealthCare.gov or a State Exchange's website. We continue 
to believe that, as explained in the proposed rule (88 FR 82563), these 
requirements will help ensure all Exchange consumers have timely access 
to accurate, clear information as they navigate the QHP selection and 
enrollment processes. As a result, we expect they will help make DE an

[[Page 26288]]

accessible, valuable tool for all Exchange consumers.
    Comment: A few commenters expressed concern that the deviation 
request process could be used to circumvent Federal policy. The 
commenters requested that HHS only grant deviations upon a 
demonstration of a special need and that HHS clarify that it may 
request additional documentation to periodically reassess whether the 
deviation remains justified.
    Response: We acknowledge the concern that the deviation request 
process could be used to circumvent Federal policy. However, we do not 
share this concern. As described above and in the proposed rule (88 FR 
82565), we intend to review all deviation requests submitted by DE 
entities assisting consumers in the FFEs and SBE-FPs to ensure the 
deviation, at a minimum, provides the same level of differentiation and 
clarification as is provided on HealthCare.gov. We do not intend to 
approve deviation requests for display approaches that are inconsistent 
with the display change made to HealthCare.gov. We encourage State 
Exchanges to establish deviation requests processes and anticipate 
State Exchanges that opt to establish such a process will adopt a 
similar framework to review deviations requests and monitor 
implementation of approved deviations to ensure compliance by their DE 
entities.
    Although we appreciate the suggestion that deviation requests 
should be limited to demonstration of special need, we note that the 
commenter did not define what they meant by ``special need'' in this 
context. If the commenter means to suggest that deviation requests 
should only be granted when system constraints prevent DE entities from 
precisely mirroring the HealthCare.gov display approach, and that 
deviation requests should not be granted when a DE entity has an 
innovative idea for implementation that does not meet the standards but 
would effectively communicate the same information to consumers, then 
we do not agree with this suggestion. This suggestion, if implemented, 
would be in opposition to our longstanding support for and 
encouragement of innovation by DE entities because it would prohibit 
the ability of DE entities to use the deviation request process to 
propose innovative website displays, decision-support tools, and user 
interface designs. Our experience operating the DE program in the FFE 
and SBE-FPs, particularly in soliciting feedback from DE entities 
regarding the effects of innovative website displays, decision support 
tools, and user interfaces, has helped inform display updates to 
HealthCare.gov.
    We acknowledge the comment requesting we clarify that we may 
request additional documentation to periodically reassess whether the 
deviation remains justified. As described above and in the proposed 
rule (88 FR 82564), for DE entities assisting consumers in the FFEs and 
SBE-FPs, we will monitor DE entity implementation through existing 
periodic website review monitoring per Sec.  155.220(c)(5) and as 
described in the Third-Party Auditor Guidelines. Our periodic reviews 
will include review of DE entities' implementation of approved 
deviations and may also include a review of the documentation submitted 
in connection with the deviation request. We may request updated 
documentation from DE entities if our review suggests that the 
deviation no longer remains justified. For example, if the initial 
approval was granted based on a factor which appears no longer relevant 
(for example, if approval was granted for the DE entity to implement an 
alternative display while the entity was in the process of switching to 
a new DE Technology Provider \187\), we would request updated 
documentation from the DE entity confirming whether the initial 
approval conditions are still relevant (for example, has the entity 
completed its transition to a new DE Technology Provider, using the 
previous example). We encourage State Exchanges to adopt these same 
practices in reviewing deviation requests and monitoring implementation 
of approved deviations to ensure compliance by their DE entities.
---------------------------------------------------------------------------

    \187\ See Sec.  155.20 for definitions of an ``Agent or broker 
direct enrollment technology provider'' and ``Qualified health plan 
issuer direct enrollment technology provider.''
---------------------------------------------------------------------------

    Comment: One commenter noted that members of the web-broker and DE 
community appreciate the general regulatory framework offered by HHS 
for the FFEs and SBE-FPs under Sec. Sec.  155.220 and 155.221 and would 
appreciate the adoption of uniform regulatory standards by State 
Exchanges, including as to DE entity non-Exchange website 
implementation of Exchange website display changes under new Sec.  
155.221(b)(6) and (j)(3). One commenter requested that HHS clarify what 
would happen in instances where State Exchanges that choose to 
implement a DE program do not meet the requirements associated with 
this proposal. One commenter supported the proposal to require DE 
entities operating in States with State Exchanges to implement State 
Exchange website display changes on their non-Exchange websites but 
wanted HHS to encourage these States to implement the following 
practices when requiring DE entities to make changes to their websites: 
solicit feedback from industry partners; provide ample advance notice; 
provide flexibility in website user interfaces; and permit deviations 
subject to the approval of the State Exchange. One commenter similarly 
supported the proposal to require DE entities utilized by State 
Exchanges to implement State Exchange website display changes on their 
non-Exchange websites but encouraged HHS ``to grant the maximum amount 
of flexibility to State Exchanges in how they implement that process,'' 
explaining that this would allow State Exchanges to ``innovate and 
reduce the burden needed for EDE entities to produce novel tools to 
benefit consumers and agents.''
    Response: We generally agree with the commenter that suggested 
State Exchanges should adopt web-broker and DE entity standards 
consistent with the standards for web-brokers and DE entities in the 
FFEs and SBE-FPs. In the proposed rule (88 FR 82564 through 82565), we 
proposed extending the requirements under Sec.  155.221(b)(6) to State 
Exchanges and DE entities assisting consumers in those State Exchanges. 
We also proposed extending certain HHS minimum standards applicable to 
web-brokers (88 FR 82557 through 82562) and DE entities (88 FR 82566 
through 82571) operating in the FFEs and SBE-FPs to web-brokers and DE 
entities in States with State Exchanges and, consequently, those State 
Exchanges.
    If there is information that suggests a State Exchange or one of 
its DE entities does not meet the requirements of Sec.  155.221(j) and 
in particular, (j)(3), we would notify the State Exchange and give them 
an opportunity to address the concerns. We intend to consider the 
development of new, additional tools to assist with oversight that 
could enhance transparency into compliance by State Exchanges, 
including their DE programs, with applicable HHS requirements including 
those relating to DE under Sec.  155.221(j)(3). We may also consider 
use of other oversight tools and authority, including those under part 
155 of our regulations, as appropriate.
    As described in the responses to comments received on the proposals 
to require that DE entities and web-brokers operating in State 
Exchanges meet certain standards applicable in the FFEs and SBE-FPs 
(sections III.D.7 and III.D.9 of this final rule), pursuant to Sec.  
155.105, States that seek to operate a State

[[Page 26289]]

Exchange must complete and submit an Exchange Blueprint application. 
The Exchange Blueprint application documents that an Exchange will meet 
the legal and operational readiness requirements required of a State 
Exchange. As part of a State's Blueprint submission, the State also 
agrees to demonstrate operational readiness to implement and execute 
the Federal requirements applicable to State Exchanges, which would 
include the new requirements under Sec. Sec.  155.220 and 155.221 
applicable to State Exchanges that elect to implement a web-broker or 
DE program. A State Exchange that elects to operate an optional web-
broker or DE program would be required to include information in its 
Blueprint to demonstrate operational readiness to implement and support 
ongoing operations of an optional web-broker or DE programs consistent 
with applicable requirements in Sec. Sec.  155.220 and 155.221. As 
discussed in other sections of this final rule, we are also codifying 
requirements at Sec.  155.105 related to the approval of a State 
Exchange whereby we will require a State seeking to establish a State 
Exchange to provide supplemental information in its Blueprint 
application to demonstrate its ability to implement and comply with the 
requirements for operating a State Exchange, including requirements 
associated with the operation of a DE program should a State elect to 
operate one. Such supporting information would inform HHS's decision to 
approve or conditionally approve a State Exchange and would help 
facilitate HHS' oversight of compliance with Federal requirements 
applicable to State Exchanges and their DE entities. Additionally, 
under Sec.  155.105(e), an existing State Exchange must notify HHS in 
writing before making a significant change to its approved Exchange 
Blueprint, and no significant change to an Exchange Blueprint may be 
effective until it is approved by HHS in writing or 60 days after HHS 
receipt of a completed request.
    Accordingly, for existing State Exchanges that seek to newly 
implement and operate a DE program, HHS would require the State to 
submit an updated Exchange Blueprint and participate in operational 
readiness reviews related to the implementation and ongoing operation 
of such a DE program, as we would consider a State Exchange 
implementing a DE program a significant change. We would also use this 
information in the Blueprint Application from a State Exchange on how 
they intend to implement the DE entity non-Exchange website display 
update requirements to assess a State Exchange's compliance with Sec.  
155.221(j)(3), and we would generally look to the State Exchange to 
oversee implementation by DE entities of non-Exchange website display 
changes pursuant to Sec.  155.221(j)(3) on an ongoing basis.
    We acknowledge the commenter's suggestion that we encourage State 
Exchanges to solicit feedback from industry partners, provide ample 
advance notice, provide flexibility in website user interfaces, and 
permit deviations subject to the approval of the State Exchange. 
Although we also acknowledge the commenter's suggestion that we should 
grant the maximum amount of flexibility to State Exchanges in how they 
implement these requirements, we note the commenter did not provide 
further details or clarification on what additional flexibilities, if 
any, should be granted to State Exchanges. As a result, we are unsure 
what the commenter is referring to. However, we agree with several of 
the commenter's points. As we explained in the proposed rule (88 FR 
82565), we encourage State Exchanges to develop their own processes 
that best meet their business needs. Consistent with the commenter's 
suggestion, we encourage State Exchanges to solicit feedback from 
industry partners, including web-brokers and DE entities, and provide 
an advance notice period whose length corresponds to the complexity of 
the required display change and the urgency with which the change must 
be reflected on the DE entity's non-Exchange website. Also consistent 
with the commenter's suggestion, our policy requires State Exchanges to 
establish a deviation request process while providing the State 
Exchange discretion to approve or reject deviation requests, should the 
State Exchange elect to permit deviation requests. If the State 
Exchange permits deviation requests, we encourage State Exchanges to 
consider granting deviation requests if the DE entity is unable to 
implement the standards defined by the State Exchange or has an idea 
for implementation that does not meet those standards but would 
effectively communicate the same information to consumers. We also 
agree that State Exchanges should permit DE entities flexibility in how 
they reflect and incorporate required display changes within the 
context of their user interface graphic design, provided their display 
meets the standards communicated by the Exchanges. We also encourage 
State Exchanges to adopt the same requirements and framework HHS will 
follow for DE entity non-Exchange website display updates for the FFEs 
and SBE-FPs, whenever possible.
9. Ensuring DE Entities Operating in State Exchanges Meet Certain 
Standards Applicable in the FFEs and SBE-FPs (Sec.  155.221)
    In the HHS Notice of Benefit and Payment Parameters for 2025 
proposed rule (88 FR 82510, 82566), we proposed to amend Sec.  155.221 
to extend certain existing HHS standards applicable to DE entities 
assisting the FFEs' and SBE-FPs' \188\ consumers and applicants with 
direct enrollment in QHPs and applying for APTC/CSRs to DE entities 
operating in State Exchanges, in both the Individual Market Exchanges 
and SHOPs. These policies would extend certain HHS DE program standards 
to DE entities operating in State Exchanges, and consequently to those 
State Exchanges that, to the extent permitted by applicable State law, 
permit DE entities to assist their consumers and applicants with direct 
enrollment in QHPs and applying for APTC/CSRs in a manner that 
constitutes enrollment through an Exchange.\189\ These policies would 
also ensure that certain minimum HHS standards would apply to DE 
entities across all Exchanges, including standards governing DE entity 
marketing and display of QHPs and non-QHPs, providing consumers with 
correct information and refraining from certain conduct \190\ marketing 
of non-QHPs, website disclaimer language, and operational readiness.
---------------------------------------------------------------------------

    \188\ See 45 CFR 155.221(i) (``A direct enrollment entity that 
enrolls qualified individuals in coverage in a manner that 
constitutes enrollment through a State Exchange using the Federal 
platform, or assists individual market consumers with submission of 
applications for advance payments of the premium tax credit and 
cost-sharing reductions through a State Exchange using a Federal 
platform must comply with all applicable Federally-facilitated 
Exchange standards in this section.'').
    \189\ See 78 FR 37065 through 37066 and 78 FR 54124 through 
54126.
    \190\ Consistent with the amendments and policies adopted in 
this final rule, this standard applies to both QHP issuer DE 
entities, as well as web-brokers DE entities, across all Exchange 
types. For QHP issuer DE entities, see 45 CFR 155.221(a)(1) and (i), 
and 156.1230(b)(2). For web-broker DE entities, see 45 CFR 
155.220(j)(2)(i), (l), and (n), and 155.221(a)(2).
---------------------------------------------------------------------------

    Notably, we stated in the proposed rule (88 FR 82566) that our 
regulations do not currently address whether and how DE entities may 
assist consumers and applicants with DE in QHPs and submission of 
applications for APTC/CSRs in a manner that constitutes enrollment 
through a State Exchange. We believe that current and future State

[[Page 26290]]

Exchanges may seek to implement DE programs similar to the FFEs and 
SBE-FPs. As such, we believe that DE entities seeking to assist State 
Exchange consumers with DE in QHPs and submission of applications for 
APTC/CSRs in a manner that constitutes enrollment through an Exchange 
should meet the same or, at a minimum, similar standards that DE 
entities in the FFEs and SBE-FPs are required to meet to protect 
consumers and safeguard Exchange operations. These standards would 
mitigate the potential for consumer confusion of QHPs with non-QHPs 
(including eligibility for APTC and/or CSR as it relates to QHPs versus 
non-QHPs) and about which products are or are not available through the 
Exchange, helping to ensure proper eligibility determinations and 
protect against security incidents through implementation of 
operational readiness reviews (as websites that have not been tested 
for operational readiness may provide improper eligibility 
determinations or have security flaws that could increase the 
likelihood of a breach involving consumer PII).\191\
---------------------------------------------------------------------------

    \191\ The amendments to Sec.  155.221 we are finalizing will not 
impact how DE entities may assist consumers and applicants in SBE-FP 
States. Section 155.221(i) provides that a DE entity that enrolls 
qualified individuals in coverage in a manner that constitutes 
enrollment through an SBE-FP or assists individual market consumers 
with submission of applications for APTC and CSRs through an SBE-FP, 
must comply with all applicable HHS standards in Sec.  155.221. We 
did not propose and are not finalizing any changes to this existing 
framework for DE entities who assist consumers and applicants in 
SBE-FP States.
---------------------------------------------------------------------------

    We recognize that, to date, no State Exchanges have implemented DE 
programs; however, as we stated in the proposed rule (88 FR 82566 and 
82567), we anticipate that there may be growing interest in doing so. 
As such, we recognize a potential burden on State Exchanges that would 
newly be subject to the standards being proposed, if they choose to 
implement DE programs. This would include drafting new policies, 
updating standards, and potentially hiring additional staff to perform 
functions not currently being performed by the State Exchanges, 
including providing technical assistance during development and 
implementation of DE programs in the State Exchanges, creating the 
framework for and conducting operational readiness reviews, including 
developing and maintaining documentation needed to complete the 
operational readiness reviews, as well as conducting ongoing oversight 
and taking appropriate enforcement action in response to DE entity non-
compliance with applicable requirements. This potential burden would 
also include requiring and overseeing web-development and the hosting 
of non-Exchange websites by DE entities participating in these State 
Exchanges to ensure compliance with the proposed minimum standards 
outlined in this rulemaking.
    Similar to the agent, broker and web-broker requirements under 
Sec.  155.220, currently, Sec.  155.221 only applies to DE entities 
assisting consumers and applicants in the FFEs and SBE-FPs. Section 
155.221(a) provides that the FFEs will permit the following entities to 
assist consumers with DE in QHPs offered through the Exchange in a 
manner that is considered to be through the Exchange, to the extent 
permitted by applicable State law: (1) QHP issuers that meet the 
applicable requirements in Sec. Sec.  155.221 and 156.1230, and (2) 
web-brokers that meet the applicable requirements in Sec. Sec.  155.220 
and 155.221. These same entities are permitted to assist consumers with 
DE in QHPs offered through the Exchange in a manner that is considered 
to be through the Exchange, to the extent permitted by applicable State 
law, in SBE-FP States.\192\ The HHS DE Program includes two DE 
pathways: Classic DE and EDE. The proposal to extend certain existing 
HHS standards applicable to DE entities participating in FFE and SBE-FP 
States to State Exchanges and their DE entities would also apply to the 
operation of Classic DE and EDE within these State Exchanges. That is, 
under this policy, State Exchanges that choose to implement DE programs 
in their States would be permitted to adopt the same pathways or tailor 
their configuration in a manner best suited to their operational and 
business needs, so long as their DE programs meet the HHS minimum 
standards under Sec.  155.221 that we proposed to extend to State 
Exchanges and their DE entities. We explained that we would be 
available to provide extensive technical assistance to State Exchanges 
that choose to implement DE programs.
---------------------------------------------------------------------------

    \192\ 45 CFR 155.221(i).
---------------------------------------------------------------------------

    As detailed further below, we proposed to add paragraph (j) to 
Sec.  155.221 to extend certain HHS minimum DE entity standards in 
Sec.  155.221 to DE entities operating in State Exchanges and, 
consequently, to these State Exchanges that choose to implement DE 
programs in their States. Through this proposed approach, we seek to 
ensure that DE entities assisting these State Exchanges' consumers with 
DE in QHPs and applying for APTC/CSRs in a manner that constitutes 
enrollment through the Exchange meet HHS minimum standards governing DE 
entity marketing and display of QHPs, providing consumers with correct 
information and refraining from certain conduct, marketing of non-QHPs, 
website disclaimer language, and operational readiness. We explained 
that, under this proposed approach, we would encourage State Exchanges 
to require DE entities to engage a third-party auditor to perform the 
operational readiness review audits of their DE entities, consistent 
with the operational readiness framework adopted by HHS for the FFEs 
and SBE-FPs. As stated earlier, we recognize that there may be a 
growing interest from State Exchanges to operate DE programs, and we 
seek to establish a set of HHS minimum standards to ensure appropriate 
safeguards are in place, regardless of the Exchange model. Further, the 
proposed approach to establish a minimum set of HHS standards that 
would apply to DE entities across all Exchanges would support 
efficiency in DE entity operations across all Exchanges, including 
State Exchanges, while also providing flexibility for State Exchanges 
to tailor their DE program and establish their own standards with 
respect to operational readiness demonstrations by their DE entities, 
including whether to require third-party audits of DE entities and to 
impose additional requirements beyond the proposed HHS minimum 
standards as they determine may be appropriate based on their 
operational or business needs. As described above, if they choose to 
implement DE programs, the State Exchanges would be required to draft 
policies, update standards, and potentially hire additional staff to 
perform functions and activities not currently being performed by the 
State Exchanges in order to comply with these policies.
    We proposed to update Sec.  155.221(a), which identifies the 
entities permitted to be DE entities in FFE and SBE-FP States, to apply 
across all Exchanges, including State Exchanges. Under this proposal, 
State Exchanges that choose to implement a DE program may permit QHP 
issuers and web-brokers that meet applicable requirements to assist 
consumers with submitting applications for APTC/CSRs and DE in QHPs 
offered through the Exchange in a manner that is considered to be 
through the Exchange. Under the framework proposed in the proposed 
rule, the applicable requirements that would extend to web-broker DE 
entities in States with State Exchanges would include certain 
paragraphs of Sec. Sec.  155.220(c) and (j) and 155.221(a), (b), (c), 
(d), and (j). We describe above the extension of certain HHS web-broker

[[Page 26291]]

standards in Sec.  155.220(c) and (j) to State Exchanges and their web-
brokers and detail below the HHS web-broker DE entity standards in 
Sec.  155.221(a), (b), (c), (d), and (j) we proposed extending to web-
broker DE entities in State Exchanges. As described further below, we 
proposed that the applicable requirements that would apply to QHP 
issuer DE entities in State Exchanges would be certain HHS QHP issuer 
DE entity standards in Sec. Sec.  155.221(a), (b), (c), (d), and (j) 
and 156.1230(b). The proposals to extend certain HHS requirements in 
Sec.  155.221 to these State Exchanges' web-broker DE entities are 
intended to align with the proposals described above to extend certain 
HHS standards and consumer protections in Sec.  155.220 to these State 
Exchanges' web-brokers.\193\ The proposals to extend certain HHS 
requirements to QHP issuer DE entities are similarly intended to 
establish a minimum set of standards and consumer protections, with the 
HHS requirements generally serving as a floor for State Exchanges that 
choose to implement DE programs. As detailed further below, as part of 
these proposals to extend certain HHS requirements to DE entities, we 
would rely on State Exchanges to enforce compliance with these 
requirements and take enforcement action as needed when a DE entity 
fails to comply with applicable requirements. However, we would provide 
technical assistance to support State Exchange efforts to take 
appropriate enforcement action as needed to ensure compliance with 
applicable requirements.
---------------------------------------------------------------------------

    \193\ As previously noted, the HHS requirements for web-brokers 
in Sec. Sec.  155.220 and 155.221 also currently extend to web-
brokers participating in SBE-FPs. See 45 CFR 155.220(l) and 
155.221(i).
---------------------------------------------------------------------------

    Consistent with the cross-reference in Sec.  155.221(a)(1), we 
proposed to extend the HHS requirements of Sec.  156.1230(b) governing 
QHP issuer DE entities to also apply to QHP issuer DE entities 
assisting consumers with submitting applications for APTC/CSRs and DE 
in QHPs offered through the Exchange in States with State Exchanges. As 
reflected in new section Sec.  155.221(a)(1)(i), for purposes of 
extending the HHS requirements of Sec.  156.1230(b) to these States 
Exchanges and their QHP issuer DE entities, references in Sec.  
156.1230(b) to ``Federally-facilitated Exchange,'' ``HHS,'' and 
``HealthCare.gov'' would be understood to mean ``the applicable State 
Exchange,'' ``the applicable State Exchange,'' and ``the applicable 
State Exchange website,'' respectively. Consistent with Sec. Sec.  
156.1230(b)(1) and (2), to directly enroll consumers in a manner that 
is considered to be through the Exchange, QHP issuer DE entities are 
required to comply with the applicable requirements in Sec.  155.221 
and provide consumers with correct information, without omission of 
material fact, regarding the Exchanges, QHPs offered through the 
Exchanges, and insurance affordability programs,\194\ and refrain from 
marketing or conduct that is misleading (including by having a DE 
website that HHS determines could mislead a consumer into believing 
they are visiting HealthCare.gov), coercive, or discriminates based on 
race, color, national origin, disability, age, or sex. These HHS 
standards already extend to QHP issuer DE entities in SBE-FP 
States.\195\ We proposed to extend these HHS requirements to also apply 
them to QHP issuer DE entities in State Exchanges. State Exchanges' QHP 
issuer DE entities would similarly be required to provide consumers 
with correct information, without omission of material fact, regarding 
the Exchanges, QHPs offered through the Exchanges, and insurance 
affordability programs.\196\ In addition, QHP issuer DE entities in 
State Exchanges would also be required to refrain from marketing or 
conduct that is misleading (including by having a DE website that the 
State Exchange determines could mislead a consumer into believing they 
are visiting the Exchange's website), coercive, or discriminates based 
on race, color, national origin, disability, age, or sex. We solicited 
comments on whether Sec.  156.1230 should also be amended to affirm its 
applicability to these State Exchanges and their QHP issuer DE 
entities.\197\
---------------------------------------------------------------------------

    \194\ See 42 CFR 435.4 for the definition of insurance 
affordability programs.
    \195\ See 45 CFR 155.221(a)(1) and (i).
    \196\ Id.
    \197\ We noted in the proposed rule (88 FR 82568) that if Sec.  
156.1230 were amended to affirm its applicability to these State 
Exchanges and their QHP issuer DE entities, parallel revisions may 
be made to Sec.  156.1230 in the final rule to also capture and 
affirm its applicability to SBE-FPs and their QHP issuer DE 
entities.
---------------------------------------------------------------------------

    In addition, we proposed that all Exchanges, including State 
Exchanges that choose to implement DE programs, must require their DE 
entities, both web-broker and QHP issuer DE entities, to meet the HHS 
standards under Sec.  155.221(b)(1) governing plan display and 
marketing for QHPs and any other products offered on the Exchange. 
These HHS standards governing plan display and marketing for QHPs and 
any other products offered on the Exchange currently apply today to 
approved web-broker and QHP issuer DE entities in FFE and SBE-FP 
States.\198\ As such, in new paragraph (j), we proposed to extend Sec.  
155.221(b)(1), and the exceptions in Sec.  155.221(c), to DE entities 
participating in State Exchanges and, consequently, to these State 
Exchanges. Under this proposal, DE entities participating in State 
Exchanges would be required to display and market QHPs offered through 
the Exchange, individual health insurance coverage as defined in Sec.  
144.103 offered outside the Exchange (including QHPs and non-QHPs other 
than excepted benefits), and any other products, such as excepted 
benefits, on at least three separate website pages on its non-Exchange 
website, except as permitted under Sec.  155.221(c). Pursuant to the 
exception under Sec.  155.221(c)(1), a DE entity operating in a State 
Exchange would be permitted to display and market individual health 
insurance coverage offered outside the Exchange (including QHPs and 
non-QHPs other than excepted benefits) on the same website pages when 
assisting individuals who have communicated receipt of an offer of an 
individual coverage health reimbursement arrangement as described in 
Sec.  146.123(c) (as a standalone benefit, or in addition to an offer 
of an arrangement under which the individual may pay the portion of the 
premium for individual health insurance coverage that is not covered by 
an individual coverage health reimbursement arrangement using a salary 
arrangement pursuant to a cafeteria plan under section 125 of the 
Internal Revenue Code) but would be required to clearly distinguish 
between the QHPs offered through the Exchange and individual health 
insurance coverage offered outside the Exchange (including QHPs and 
non-QHPs other than excepted benefits), and prominently communicate 
that APTC and CSRs are available only for QHPs purchased through the 
Exchange, that APTC are not available to individuals who accept an 
offer of an individual coverage health reimbursement arrangement or opt 
out of an individual coverage health reimbursement arrangement that is 
considered affordable, and that a salary reduction arrangement under a 
cafeteria plan may only be used toward the cost of premiums for plans 
purchased outside the Exchange. Under this proposal, pursuant to the 
exception in Sec.  155.221(c)(2), DE entities operating in States with 
State Exchanges would be permitted to display and market Exchange-
certified stand-alone dental plans offered outside the Exchange and 
non-certified stand-alone dental plans on the same website pages.
---------------------------------------------------------------------------

    \198\ 45 CFR 155.221(b)(1) and (i).

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

[[Page 26292]]

    In new paragraph (j), we also proposed to extend the HHS marketing 
standard at Sec.  155.221(b)(3) to DE entities participating in State 
Exchanges and, consequently, to State Exchanges that choose to 
implement a DE program, such that these DE entities would also be 
required to limit marketing of non-QHPs during the Exchange eligibility 
application and QHP selection process in a manner that minimizes the 
likelihood that consumers will be confused as to which products and 
plans are available through the Exchange and which products and plans 
are not, except as permitted under Sec.  155.221(c)(1). Refer to the 
discussion above regarding the exception in Sec.  155.221(c)(1) 
pertaining to DE entities assisting individuals who have communicated 
receipt of an offer of an individual coverage health reimbursement 
arrangement as described in Sec.  146.123(c), as a standalone benefit 
or in addition to an offer of an arrangement under which the individual 
may pay the portion of the premium for individual health insurance 
coverage that is not covered by an individual coverage health 
reimbursement arrangement using a salary arrangement pursuant to a 
cafeteria plan under section 125 of the Internal Revenue Code.
    As we explained in the proposed rule (88 FR 82568 and 82569), we 
believe requiring DE entities participating in all Exchanges to meet 
the plan display and marketing requirements in Sec.  155.221(b)(1) and 
(3) adopted by HHS for FFE and SBE-FP States would provide necessary 
safeguards for consumers who may participate in DE programs across all 
Exchange models, including in State Exchanges. Requiring DE entities 
across all Exchanges to meet these HHS plan display and marketing 
requirements would protect consumers by minimizing their confusion 
regarding which products and plans are available through the Exchange, 
which products and plans are not, and which products and plans are 
eligible for APTC and CSRs. Further, the adoption of uniform 
requirements across Exchanges in this regard can also alleviate burden 
on DE entities from having to build different programs and comply with 
a unique set of requirements for each State Exchange that chooses to 
implement a DE program, as well as burden on a State Exchange from 
having to develop an entirely new set of requirements for DE entities 
that participate in their State Exchange. We recognize that elsewhere 
in this rulemaking, we have built in flexibility for State Exchanges to 
tailor certain aspects of their DE programs and associated oversight 
processes to best suit their State-specific needs and requirements (for 
instance, the operational readiness review requirements for web-brokers 
and DE entities participating in State Exchanges). In this case, 
however, we believe that the benefits to consumers of uniformly 
applying the plan display and marketing requirements in Sec.  
155.221(b)(1) and (3) to ensure they apply to all Exchanges as minimum 
standards outweigh the potential drawbacks of reducing discretion and 
flexibility to State Exchanges with respect to modifying these baseline 
requirements. We solicited comments on whether State Exchanges should 
instead be provided with broader discretion and flexibility to 
establish their own plan display and marketing requirements tailored to 
their consumers or local needs.
    In new paragraph (j), we also proposed to extend the existing 
standardized disclaimer requirement in Sec.  155.221(b)(2) to apply to 
DE entities participating in State Exchanges and, consequently, to 
these State Exchanges that choose to implement a DE program. Pursuant 
to Sec.  155.221(b)(2) and (i), DE entities in FFE and SBE-FP States 
are required to prominently display a standardized disclaimer in the 
form and manner provided by HHS.\199\ This disclaimer is separate from 
the Enrollment Support and General non-FFE standardized disclaimers 
under Sec.  155.220(c)(3)(i)(A) and (G), respectively, that web-brokers 
are required to display when their non-Exchange websites are used to 
complete a QHP selection or complete the Exchange eligibility 
application.\200\ The standardized disclaimer required under Sec.  
155.221(b)(2) instead is intended to help consumers understand the 
difference between QHPs and non-QHPs, and that financial assistance 
(that is, APTC and CSRs) is only available for QHPs. Under this 
proposal, DE entities in State Exchanges, like DE entities in FFEs and 
SBE-FPs under existing Sec.  155.221(b)(2), would also be required to 
prominently display a standardized disclaimer that similarly informs 
consumers about the differences between QHPs and non-QHPs, and that 
financial assistance is only available for QHPs. The purpose of this 
standardized disclaimer is to assist consumers in distinguishing 
between DE entity non-Exchange website pages that display QHPs and 
those that display non-QHPs, and for which products APTC and CSRs are 
available. Consistent with the current practice for the other 
standardized disclaimers provided by HHS under Sec. Sec.  155.220 and 
156.1230, we would provide further details on the HHS standards for the 
text and other display details for the standardized disclaimer in 
technical guidance.
---------------------------------------------------------------------------

    \199\ See 84 FR 17523.
    \200\ As detailed above, we proposed to extend the Enrollment 
Support and General non-FFE standardized disclaimers to State 
Exchanges and web-brokers participating in those State Exchanges and 
are finalizing these proposals without modification.
---------------------------------------------------------------------------

    This proposal would require that the disclaimer be prominently 
displayed on the non-Exchange website of a DE entity assisting 
consumers in State Exchanges when a consumer navigates away from any 
website page that markets or displays QHPs offered through the Exchange 
(that is, on-Exchange QHPs) to any website page that markets or 
displays QHPs offered outside the Exchange (that is, off-Exchange QHPs) 
or non-QHPs. Each DE entity would be required to display this 
disclaimer on its own interstitial website page or on a pop-up window.
    We proposed in paragraph (j)(1) to provide State Exchanges with 
flexibility regarding the standardized disclaimer language that would 
be required to be displayed by their DE entities, provided that the 
additional language does not conflict with the HHS-provided 
standardized disclaimer. This proposed flexibility is similar to the 
flexibility we are finalizing in section III.D.7 of this final rule for 
State Exchanges to modify the web-broker Enrollment Support and General 
non-FFE standardized disclaimers under Sec.  155.220(c)(3)(i)(A) and 
(G), such that the HHS-provided language for the standardized 
disclaimer under Sec.  155.221(b)(2) must be used as a minimum starting 
point but State Exchanges may add State-specific information to the 
disclaimers, provided the additional language does not conflict with 
the HHS-provided standardized disclaimer.\201\ This would permit State 
Exchanges to replace references to the Exchange or Marketplace with the 
appropriate reference to the State-specific Exchange name. Under this 
proposal, State Exchanges may also require web-brokers and QHP issuers 
operating as DE entities in their States to translate the disclaimer 
text into languages appropriate for the States, as this type of 
additional requirement would not conflict with the HHS-provided 
disclaimer language or minimum standards. As with all informational 
materials, standard plain language

[[Page 26293]]

practice is to write at or near a fourth-grade reading level and not to 
exceed an eighth-grade reading level. We explained that we expect that 
any State-specific additions or customizations to this disclaimer would 
be written accordingly. As we explained in the proposed rule (88 FR 
82569), we would be available to provide technical assistance to State 
Exchanges that want to add State-specific language to the standardized 
disclaimer under Sec.  155.221(b)(2). In using HHS-provided disclaimer 
language as a minimum starting point, DE entities in State Exchanges 
would be required to display a disclaimer that provides information to 
assist consumers in distinguishing between DE entity non-Exchange 
website pages that display QHPs and those that display non-QHPs and for 
which products APTC and CSRs are available, all during a single 
shopping experience for consumers.
---------------------------------------------------------------------------

    \201\ Consistent with the current practice for the other HHS-
provided standardized disclaimers under Sec. Sec.  155.220 and 
156.1230, we will provide details on the text for the standardized 
disclaimer under Sec.  155.221(b)(2) in guidance.
---------------------------------------------------------------------------

    We believe establishing the HHS language as a minimum standard for 
the standardized disclaimer under Sec.  155.221(b)(2) that DE entities 
must display across all Exchanges would provide a necessary baseline. 
We also believe that meeting these standards would ensure consumers and 
applicants are receiving sufficient information to help them 
distinguish between DE entity website pages displaying QHPs versus 
pages displaying non-QHPs and provide general uniformity among the 
different Exchange models when enrollment or enrollment information is 
provided outside of the Exchange through a DE entity's non-Exchange 
website.
    Similar to the proposed requirement to extend operational readiness 
requirements to web-brokers in States with State Exchanges, we also 
proposed to extend operational readiness requirements to DE entities in 
State Exchanges and, consequently, to these State Exchanges. DE 
entities that participate in FFE and SBE-FP States are required, 
pursuant to Sec.  155.221(b)(4) and (i), to demonstrate to HHS 
operational readiness and compliance with applicable requirements prior 
to the DE entity's non-Exchange website being used to complete an 
Exchange eligibility application or a QHP selection. In new paragraph 
(j)(2), we proposed to extend DE entity operational readiness 
requirements to State Exchanges. Under this policy, DE entities 
participating in State Exchanges would be required to demonstrate 
operational readiness and compliance with applicable requirements to 
the State Exchange prior to the DE entity's website being used to 
complete an Exchange eligibility application or a QHP selection. We 
also proposed in new paragraph (j)(2) to require these State Exchanges 
to establish the form and manner for their DE entities to demonstrate 
operational readiness and compliance with applicable requirements, 
which may include submission or completion of the same items business 
audit documentation or security and privacy audit documentation in 
Sec.  155.221(b)(4)(i) and (ii) to the State Exchange, in the form and 
manner specified by the applicable State Exchange. Pursuant to Sec.  
155.221(b)(4)(i) and (ii), HHS may request a DE entity submit a number 
of documents to demonstrate compliance with applicable requirements, as 
well as the operational readiness of its non-Exchange website. The 
required documentation may include privacy questionnaires, privacy 
policy statements, and terms of services, business audit reports, 
interconnection security agreements, security and privacy controls 
assessment and plans, security, and privacy assessment reports, plans 
of action and milestones, privacy impact assessments, system security 
and privacy plans, incident response plans, and vulnerability scan 
results. We proposed to codify these documentation standards in new 
paragraphs (j)(2)(i) and (ii) as illustrative examples of the type of 
requirements that we encourage State Exchanges that choose to implement 
a DE program to adopt as part of their operational readiness and 
compliance reviews of DE entities non-Exchange websites.
    This proposal would require DE entities participating in State 
Exchanges to meet operational readiness requirements established by the 
State Exchanges, and State Exchanges would have flexibility when 
establishing operational readiness requirements for their respective DE 
programs, potentially leveraging the items in Sec.  155.220(b)(4)(i) 
and (ii) as the starting point for their operational readiness 
requirements and associated reviews. Similar to the web-broker 
operational readiness reviews under Sec.  155.220(c)(6), the standards 
under Sec.  155.221(b)(4) governing the HHS operational readiness 
reviews of DE entity non-Exchange websites are also a critical part of 
the oversight framework for HHS' DE program (both Classic DE and EDE) 
available in the FFEs and SBE-FPs. These standards as they apply to DE 
entities participating in FFE and SBE-FP States help ensure operational 
readiness and compliance with applicable requirements prior to the DE 
entity's non-Exchange website being used to complete Exchange 
eligibility application or a QHP selection and help ensure consumers 
would not be able to enroll via a DE entity's website that is not 
operationally ready. Websites that have not been tested to see if they 
are operationally ready may not provide consumers with proper 
eligibility determinations or may have security flaws that could make a 
breach involving consumer PII more likely. Mandating DE entities that 
participate in State Exchanges meet minimum standards set by the State 
Exchanges for operational readiness would help reduce this risk in all 
Exchanges.
    We recognize that some State Exchanges that choose to implement a 
DE program may seek to utilize DE entities already participating in DE 
in the FFEs or SBE-FPs. As part of establishing its operational 
readiness requirements for participating DE entities, we specifically 
encourage those State Exchanges to adopt the same operational readiness 
requirements for DE entities established by HHS, including the third-
party auditor framework adopted by HHS pursuant to Sec.  155.221(f) and 
(g). We also encourage those State Exchanges to leverage HHS' review of 
those third-party audits and determinations made as to the DE entities' 
functionality and operational readiness to operate with the Federal 
platform (HealthCare.gov) as part of their assessment of DE entity 
compliance and readiness to operate in their State Exchange. We 
recognize that leveraging HHS' reviews may supplement other State-
specific operational readiness reviews and requirements that State 
Exchanges that choose to implement a DE program might develop.
    Adopting HHS's operational readiness requirements for DE entities 
under Sec.  155.221(b)(4), (f), and (g) and leveraging HHS's review of 
third-party audits and determinations made as to DE entities' 
functionality and operational readiness would support State Exchanges 
in having confidence in the ability of those DE entities to also 
participate in State Exchanges when HHS determined that those DE 
entities have already demonstrated operational readiness and compliance 
with applicable requirements to operate with the Federal platform 
(HealthCare.gov). This approach would also help minimize the burden of 
operational readiness reviews on State Exchanges and on their DE 
entities. For example, if the State Exchange uses the single 
streamlined eligibility application described in Sec.  155.405 and the 
DE entity has already been approved to participate in the FFEs or SBE-
FPs, we would encourage State Exchanges to accept

[[Page 26294]]

HHS' review of and determinations made as to the DE entity's audit 
documentation without conducting further review to confirm operational 
readiness of the DE entity's non-Exchange website and compliance with 
the HHS minimum standards. However, we also recognize that to-date, all 
State Exchanges have implemented (or intend on implementing) 
alternative single, streamlined eligibility applications and 
eligibility systems that are tailored to their State-specific needs and 
rules. Thus, it is important to provide State Exchanges with 
flexibility to establish their own operational readiness requirements 
and associated reviews in a manner that is tailored to best meet their 
State-specific needs, since State Exchanges are best positioned to make 
those decisions. In the proposed rule (88 FR 82570), we therefore 
encouraged, but did not propose to require, these State Exchanges to 
adopt the same operational readiness requirements and third-party 
auditor framework that HHS adopted under Sec.  155.221(b)(4), (f), and 
(g) for DE entities assisting FFE and SBE-FP consumers.
    We explained that we would also encourage State Exchanges that 
choose to implement a DE program to consider requiring their DE 
entities to engage a third-party auditor, consistent with standards 
adopted by HHS at Sec.  155.221(f) and (g) that apply in FFE and SBE-FP 
States, to perform the operational readiness reviews, for example, to 
provide an unbiased confirmation that the DE entities are able to 
appropriately conduct eligibility determinations. However, we did not 
propose to mandate that State Exchanges require their DE entities to 
perform such third-party audits as we recognize that State Exchanges 
may want to establish their own State-specific requirements and 
mechanisms to confirm DE entity operational readiness and compliance 
with applicable requirements (both HHS and State-specific standards), 
and we want to ensure State Exchanges have the flexibility to establish 
operational readiness review requirements that are tailored to meet 
State-specific rules and requirements. For example, as noted above in 
this section of this final rule, if the State Exchange uses an 
alternative to the single streamlined application described in Sec.  
155.405, we would not recommend leveraging HHS' eligibility application 
audit under Sec.  155.221(b)(4)(iii), as the HHS audit results may not 
be applicable to the State Exchange's alternative eligibility 
applications and associated State-developed eligibility systems. 
However, if the State Exchange uses the single streamlined application 
described in Sec.  155.405 we would encourage the State Exchange to use 
the same third-party auditor framework and requirements that HHS 
adopted for FFE and SBE-FP States, as well as accept HHS' review of the 
third-party audits and determinations made as to the DE entity's 
operational readiness and compliance with the HHS minimum standards 
without conducting further review for DE entities that have already 
been approved to participate in the FFEs or SBE-FPs, unless there are 
other unique State-specific requirements that warrant further, targeted 
review.
    As State Exchanges establish DE programs, we recognized that it may 
be in their interest to permit a DE entity to provide consumers with 
access to DE entity application assisters, as defined at Sec.  155.20, 
to provide assistance with applying for a determination or 
redetermination of eligibility for individual market coverage through 
the Exchange and insurance affordability programs. As such, in new 
paragraph (j), we proposed to extend Sec.  155.221(d) to State 
Exchanges and their DE entities to allow DE entity application 
assisters, when permitted by the applicable State Exchange and only to 
the extent permitted by applicable State law, to assist individuals in 
the individual market with applying for a determination or 
redetermination of eligibility for coverage through the Exchange and 
for insurance affordability programs, provided that such DE entities 
ensure that each of its DE entity application assisters meets the 
requirements in Sec.  155.415(b). Section 155.415(b) establishes 
minimum standards for QHP issuer and DE entity application assisters 
regarding required training on QHP options and insurance affordability 
programs, eligibility, benefits rules and regulations, and compliance 
with the Exchange's privacy and security standards and applicable State 
laws related to the sale, solicitation and negotiation of insurance 
products, including any applicable State licensure laws and State laws 
related to confidentiality and conflict of interest.
    Although Sec.  155.415(b) is generally applicable to all Exchanges, 
paragraph (b)(1) establishes required training on QHP options and 
insurance affordability programs, eligibility, and benefits rules and 
regulations with respect to providing assistance in the FFEs or SBE-
FPs. As proposed to be applied in State Exchanges, DE entities and 
their application assisters would be required under new paragraph (j) 
to complete appropriate State-required training and registration in a 
manner specified by the State Exchange consistent with Sec.  
155.415(b)(1). This State-required training and registration should 
similarly include training on QHP options and insurance affordability 
programs, eligibility, and benefits rules and regulations, as training 
on these topics would be necessary to ensure consumers are provided 
with vital information about these topics if DE entities and their 
application assisters were permitted to assist consumers with QHP 
shopping and DE in coverage offered through State Exchanges.
    In addition, under this proposal, to meet the requirements of Sec.  
155.415(b)(2) and (3), DE entities that participate in a State Exchange 
and want to use DE entity application assisters would be required to 
coordinate with the State Exchange and appropriate State agencies to 
ensure they are meet the Exchange privacy and security standards at 
Sec.  155.260 consistent with Sec.  155.415(b)(2), as well as comply 
with State laws related to the sale, solicitation, and negotiations of 
health insurance products consistent with Sec.  155.415(b)(3).
    In the proposed rule (88 FR 82571), we also encouraged State 
Exchanges, as part of their establishment of DE programs, to adopt an 
immediate suspension framework, similar to Sec.  155.221(e) that 
applies in FFE and SBE-FP States, that provides for the immediate 
suspension of a DE entity's ability to transact information with the 
State Exchange if the State Exchange discovers circumstances that pose 
unacceptable risk to the accuracy of the State Exchange's eligibility 
determinations, operations, or information-technology systems until the 
incident or breach is remedied or sufficiently mitigated to the State 
Exchange's satisfaction. This provision is an important feature of HHS' 
oversight of the use of DE entity non-Exchange websites in FFE and SBE-
FP States that protects consumer data and safeguards Exchange 
operations and systems. State Exchanges that choose to establish a DE 
program and permit DE entities to use non-Exchange websites to assist 
consumers with QHP selection and submission of Exchange eligibility 
applications should consider adoption of similar measures.
    Finally, under new proposed Sec.  155.221(j)(3), we proposed to 
extend the new requirement that would be applicable in FFE and SBE-FP 
States under proposed Sec.  155.221(b)(6) (the proposal discussed in 
section III.D.8 of this final rule to mandate that DE entities 
implement and prominently display website changes in a manner that is 
consistent with display changes

[[Page 26295]]

made by HHS to HealthCare.gov by meeting standards communicated and 
defined by HHS within a time period set by HHS) to apply to DE entities 
operating in State Exchanges and, consequently, to these State 
Exchanges. As reflected in the last clause of new proposed Sec.  
155.221(j)(3), for the purposes of extending this requirement to DE 
entities operating in the State Exchanges, references to an FFE website 
would be understood to mean the State Exchange website, references to 
HHS would be understood to mean the State Exchange, and references to 
``unless HHS approves a deviation from those standards'' would be 
understood to mean ``unless the State Exchange approves a deviation 
from those standards under the deviation request process the State 
Exchange is required to establish should the State Exchange elect to 
permit deviation requests.'' Refer to the discussion in section III.D.8 
of this final rule for additional details on the extension of this 
proposal to State Exchanges and their DE entities.
    We sought comment on these proposals, especially from States 
operating, or seeking to operate, State Exchanges. We were particularly 
interested in comments regarding which of the other current HHS 
standards at Sec.  155.221 should or should not apply to State 
Exchanges that choose to implement a DE program.
    After consideration of comments and for the reasons outlined in the 
proposed rule and our responses to comments, we are finalizing these 
provisions as proposed. Below, we summarize and respond to public 
comments received on our proposal to amend Sec.  155.221 to extend 
certain existing HHS standards applicable to DE entities assisting the 
FFEs' and SBE-FPs' consumers and applicants with direct enrollment in 
QHPs and applying for APTC/CSRs to DE entities operating in State 
Exchanges, in both the Individual Market Exchanges and SHOPs.
    Comment: Most commenters were broadly supportive of these 
proposals. Several commenters specifically cited that requiring DE 
entities to display and market QHPs through the Exchange, individual 
health insurance coverage as defined in Sec.  144.103 offered outside 
the Exchange (including QHPs and non-QHPs other than excepted 
benefits), and any other products on separate website pages (except as 
permitted under Sec.  155.221(c)), and requiring DE entities to limit 
marketing of non-QHPs during the Exchange eligibility application and 
QHP selection process, were important consumer safeguards. Several 
commenters additionally cited that the proposals would generally 
enhance the consumer shopping experience by providing consumers with a 
higher-quality and more consistent user experience that allows them to 
access accurate coverage information whether they utilize the 
Exchange's website or a DE entity's non-Exchange website.
    A few commenters stated that if State Exchanges leveraged HHS's 
review of third-party audits and determinations made as to DE entities' 
operational readiness and compliance with applicable requirements, 
particularly with respect to security and privacy, that would help 
reduce duplication of efforts and alleviate the compliance burden of 
operational readiness activities on DE entities participating in State 
Exchanges and those State Exchanges, helping to increase the likelihood 
of DE entity participation in State Exchanges. Some of these commenters 
further expanded on this, stating that if State Exchanges leveraged 
HHS's review of third-party audits and determinations made as to DE 
entities' operational readiness and compliance with applicable 
requirements, that would help DE entities avoid having to comply with a 
unique set of operational readiness requirements for each State 
Exchange that chooses to implement a DE program. This could provide 
consistency, and it may facilitate DE entities' increased participation 
across Exchanges by potentially allowing them to leverage some of their 
operational readiness activities for FFE States in State Exchange 
States.
    Response: We appreciate commenters' support for these proposals. 
For the reasons we explained in the proposed rule (88 FR 82568), we 
agree that requiring DE entities to display and market QHPs through the 
Exchange, individual health insurance coverage as defined in Sec.  
144.103 offered outside the Exchange (including QHPs and non-QHPs other 
than excepted benefits), and any other products on separate website 
pages (except as permitted under Sec.  155.221(c)), and requiring DE 
entities to limit marketing of non-QHPs during the Exchange eligibility 
application and QHP selection process, are important consumer 
safeguards that will help provide consumers across all Exchanges with a 
more consistent shopping experience. These safeguards are particularly 
important as there is increasing interest among State Exchanges in 
pursuing DE, which, absent this proposal, may result in divergence 
across Exchanges in terms of both DE plan display and marketing 
practices and the consumer experience.
    We also agree that with the commenters that if State Exchanges that 
choose to implement a DE program leveraged HHS's review of third-party 
audits and determinations made as to DE entities' operational readiness 
and compliance with applicable requirements, that would help alleviate 
the burden of operational readiness activities on DE entities in 
participating in State Exchanges and those State Exchanges. We further 
agree that the reduced burden may encourage DE entity participation in 
the State Exchanges. As we explained in the proposed rule (88 FR 
82562), we generally encourage any State Exchange that elects to 
implement a DE program to leverage our operational readiness reviews 
conducted for DE entities in the FFEs and SBE-FPs, as appropriate.
    We note that in establishing the standards for their DE programs, 
State Exchanges that elect to implement a DE program must develop 
criteria and a process for assessing the operational readiness and 
compliance of their DE entities with applicable rules, and these State 
Exchanges may develop operational readiness requirements that address 
or reflect State-specific needs and requirements. Notably, our policy 
provides State Exchanges with the flexibility to tailor their criteria 
and process to reflect such State-specific needs and requirements. For 
example, a State may develop standards and processes for testing the 
State-specific interfaces and associated functionality between their DE 
entity non-Exchange websites and the State Exchange's centralized 
eligibility and enrollment platform that go beyond what is required by 
the HHS standards under Sec.  155.221(b)(4), to ensure that eligibility 
applications completed on DE entity non-Exchange websites result in 
accurate eligibility determinations based on State-specific rules for 
eligibility. Similarly, a State may decide to develop processes to 
confirm a DE entity is able to effectively carry out eligibility 
functions with the State Medicaid agency that go beyond what is 
required by the HHS standards under Sec.  155.221(b)(4), to ensure that 
an eligibility application completed on a DE entity non-Exchange 
website results in accurate eligibility determinations based on State-
specific rules for Medicaid eligibility.
    Comment: A few commenters who supported the proposals stated that 
the final rule should indicate how CMS will track compliance with the 
requirements applicable to State Exchanges that choose to implement DE 
programs under Sec.  155.221(j).
    Response: We monitor State Exchange compliance with Exchange 
requirements under Part 155 of our regulations through the annual

[[Page 26296]]

collection and review of State-submitted information, performance 
monitoring data, financial reporting, and independent external audits, 
as specified at Sec.  155.1200. We will use that information and data 
to drive our efforts to monitor compliance with Sec.  155.221(j) by 
State Exchanges that choose to implement DE programs. We also rely on 
regular communications with the State Exchanges to assess compliance 
with applicable requirements, as well as to gather information and 
provide technical assistance as needed. We may also consider the 
development of new additional tools to assist with oversight that could 
enhance transparency into compliance by State Exchanges with applicable 
requirements, including those applicable to their DE entities under 
Sec.  155.221(j).
    In addition, pursuant to Sec.  155.105, States that seek to operate 
a State Exchange must complete and submit an Exchange Blueprint 
application. The Exchange Blueprint application documents that an 
Exchange will meet the legal and operational readiness requirements 
required of a State Exchange. As part of a State's Blueprint 
submission, the State also agrees to demonstrate operational readiness 
to implement and execute the HHS requirements applicable to State 
Exchanges, which would include the new requirements under Sec.  
155.221(j) applicable to State Exchanges that choose to implement a DE 
program. As discussed in other sections of this rule, HHS is also 
codifying requirements related to the approval of a State Exchange 
whereby HHS will require a State seeking to establish a State Exchange 
to provide supplemental information in its Blueprint application to 
demonstrate its ability to implement and comply with the requirements 
for a State Exchange, which would include the provision of information 
from State Exchanges that choose to implement a DE program on how they 
intend to implement the new requirements in Sec.  155.221(j) and 
oversee compliance going forward. Such supporting information would 
inform HHS's decision to approve or conditionally approve a State 
Exchange and would help facilitate HHS' oversight of compliance with 
HHS requirements applicable to State Exchanges that choose to implement 
a DE program. Additionally, under Sec.  155.105, an existing State 
Exchange must notify HHS in writing before making a significant change 
to its approved Exchange Blueprint, and no significant change to an 
Exchange Blueprint may be effective until it is approved by HHS in 
writing or 60 days after HHS receipt of a completed request. 
Accordingly, for existing State Exchanges that seek to newly implement 
a DE program, HHS would require the State to submit an updated Exchange 
Blueprint and participate in operational readiness reviews related to 
the implementation and ongoing operation of such a DE program, as we 
would consider a State Exchange implementing a DE program a significant 
change. Once implemented, for State Exchange ongoing operation of a DE 
program, HHS would monitor State Exchange operations through the annual 
reporting by State Exchanges related to compliance with Federal 
requirements, consistent with our oversight authority at Sec.  
155.1200(b)(2). Specifically, HHS would use this oversight authority to 
evaluate State Exchange compliance with the policies we are finalizing 
at Sec.  155.221 for those State Exchanges that elect to operate a DE 
program, as HHS does with other aspects of State Exchange operations on 
an annual basis. If there is information suggesting a State Exchange or 
one of its DE entities does not meet the requirements of Sec.  
155.221(j), we would notify the State Exchange and give them an 
opportunity to address the potential non-compliance. HHS intends to 
consider the development of new, additional tools to assist with 
oversight that could enhance transparency into compliance by State 
Exchanges, including their DE programs, with applicable Federal 
requirements. We may also consider use of other oversight tools and 
authority, including those under Part 155 of our regulations, as 
appropriate.
    Comment: A few commenters suggested that CMS should implement even 
more stringent standards in the future, citing that it is especially 
important that DE entities provide consumers with clear, correct 
information about QHPs and insurance affordability programs, 
particularly that they display all plans in their cost comparison tools 
and not segregate plans that they do not sell.
    Response: We agree with commenters that it is crucial that DE 
entities provide consumers with clear, correct information about QHPs 
and insurance affordability programs. The extension of certain 
standards applicable to DE entities assisting the FFEs' and SBE-FPs' 
consumers and applicants to DE entities operating in State Exchanges 
will help ensure that all DE entities consistently provide consumers 
with clear, correct information about their Exchange coverage options. 
The framework adopted in this final rule will do so by requiring that 
DE entities across all Exchanges meet minimum standards governing DE 
entity marketing and display of QHPs and non-QHPs, providing consumers 
with correct information and refraining from certain conduct, marketing 
of non-QHPs, website disclaimer language, and operational readiness.
    While there are other standards under Sec.  155.221 that are 
applicable to DE entity operations in FFE and SBE-FP States, for the 
reasons stated in the proposed rule (88 FR 82566) and earlier in this 
section of this final rule, we are extending to DE entities in State 
Exchanges the subset of critical standards that we believe help ensure 
proper eligibility determinations, protect against security breaches or 
incidents through implementation of operational readiness reviews, and 
minimize consumer confusion. At the same time, for the reasons stated 
in the proposed rule (88 FR 82567) and earlier in this section of this 
final rule, our approach preserves flexibility for State Exchanges that 
choose to implement a DE program to tailor their programs and establish 
their own standards with respect to certain aspects of their DE 
programs, such as operational readiness demonstrations and suspension 
frameworks. We believe this flexibility will help ensure that State 
Exchanges' DE programs and their standards are designed to meet the 
particular operational and business needs of the State Exchanges.
    In the proposed rule, we sought comment on which of the current 
provisions at Sec.  155.221 should or should not apply to State 
Exchanges and DE entities that assist consumers in State Exchanges. We 
continue to encourage specific feedback from interested parties, 
particularly from State Exchanges and DE entities operating in State 
Exchanges, on additional provisions in Sec.  155.221 we should consider 
extending to State Exchanges and their DE entities or new standards 
that we should consider adopting for all Exchanges and DE entities in 
the future.
    Comment: Several commenters opposed the extension of certain HHS 
standards under Sec.  155.221 to State Exchanges and their DE entities, 
with a majority of those commenters stating that it generally hinders 
State Exchanges' flexibility in establishing their own rules that 
govern their DE programs. One commenter who supported the proposal 
stated it supports measures to protect necessary consumer safeguards to 
ensure access to consistent, reliable information from DE entities. 
However, this commenter suggested that CMS permit State Exchanges 
additional flexibility to implement measures that they

[[Page 26297]]

determine will best support those consumer safeguards to ensure 
consumers can more easily access enrollment assistance from web-broker 
DE entities. A few commenters stated that State Exchanges best 
understand their market dynamics and can be the most creative in 
regulating a DE program in their States. Further, a few commenters 
stated that the proposed approach imposes an unnecessary burden on 
State Exchanges, which will now have to develop policies and procedures 
to enforce the HHS DE standards extended to them and their DE entities 
under Sec.  155.221(j). One commenter requested that CMS provide 
additional detail on why current State Exchange standards related to DE 
programs are insufficient.
    Response: We agree that State Exchanges are best positioned to make 
certain judgments about how to regulate DE programs in their States, 
and the framework we are finalizing gives them flexibility to do so. 
For example, as we stated in the proposed rule (88 FR 82570), we 
recognize that it is important to provide State Exchanges with 
flexibility to adopt their own operational readiness requirements in a 
manner that is tailored to best meet the State-specific needs and 
requirements of the State Exchanges. Accordingly, we encouraged, but 
did not propose to require, State Exchanges to adopt the same 
operational readiness requirements and third-party auditor framework 
that HHS adopted under Sec.  155.221(b)(4), (f), and (g) for DE 
entities assisting FFE and SBE-FP consumers. Similarly, we also 
encouraged, but did not propose to require, State Exchanges to adopt an 
immediate suspension framework, similar to Sec.  155.221(e) that 
applies in FFE and SBE-FP States, that provides for the immediate 
suspension of a DE entity's ability to transact information with the 
State Exchange if the State Exchange discovers circumstances that pose 
unacceptable risk to the accuracy of the State Exchange's eligibility 
determinations, operations, or information-technology systems until the 
incident or breach is remedied or sufficiently mitigated to the State 
Exchange's satisfaction.
    At the same time, however, we continue to believe, for the reasons 
stated in the proposed rule (88 FR 82566) and earlier in this section 
of this final rule, that it is important to extend to DE entities in 
State Exchanges--and, consequently, those State Exchanges that choose 
to implement a DE program--certain HHS standards that we identified as 
critical consumer protections to help ensure proper eligibility 
determinations, protect against security breaches or incidents through 
implementation of operational readiness reviews, and minimize consumer 
confusion. Still, we appreciate commenters' input on the degree of 
flexibility that should be afforded to State Exchanges, and we may 
consider that feedback to inform potential additional proposals or 
changes in this area in future rulemaking.
    We recognize that this approach may impose a burden on State 
Exchanges that choose to implement DE programs, since they would newly 
be subject to the HHS standards being extended to them and their DE 
entities. We document that burden in the Regulatory Impact Analysis and 
Information Collection Requirement sections of this final rule.\202\ 
However, we see potential for State Exchanges to realize benefits from 
implementing DE entity programs and adhering to the HHS standards being 
extended to them. For example, implementing DE programs would diversify 
and expand enrollment channels that State Exchange consumers could use 
to enroll in QHPs offered through the Exchange and apply for APTC/CSRs. 
As a result, more consumers may enroll in coverage offered on those 
State Exchanges, which would lead State Exchanges receiving a greater 
amount of user fees from issuers on their Exchanges. Furthermore, State 
Exchanges may benefit from reduced consumer traffic on their websites, 
given a shift in some consumer traffic to DE entity non-Exchange 
websites. That may reduce State Exchanges' website maintenance costs, 
as well as costs related to providing assistance to consumers with 
using those websites.
---------------------------------------------------------------------------

    \202\ Also see 88 FR 82615 through 82617, 82625, and 82633.
---------------------------------------------------------------------------

    In response to the commenter who requested that we provide 
additional detail on why current State Exchange standards related to DE 
programs are insufficient, as we explained in the proposed rule (88 FR 
82566) and noted earlier in this final rule, our regulations do not 
currently address whether and how DE entities may assist consumers and 
applicants with enrollment in QHPs and submission of applications for 
APTC/CSRs in State Exchanges, and to-date, no State Exchange has 
implemented a DE program. We pursued these proposals as we anticipate 
State Exchanges will be interested in exploring such programs to expand 
the available channels for consumers to apply for and enroll in 
Exchange coverage, and it is important for baseline consumer 
protections and Exchange operation safeguards to apply across all 
Exchange types.
    Comment: One commenter stated that the proposal could be viewed as 
overreaching, exceeding the statutory authority granted to HHS under 
the ACA. The commenter suggested that the ACA allows significant leeway 
for State Exchanges to manage their Exchange programs, including the 
operation of web-brokers and DE programs. This commenter stated that by 
imposing rigid HHS standards, CMS may inadvertently hinder the growth 
and success of DE pathways.
    Response: We appreciate the commenter's feedback. As we explained 
in the proposed rule (88 FR 82566), section 1312(e) of the ACA provides 
that the HHS Secretary shall establish procedures under which a State 
may allow agents, brokers, and web-brokers to enroll individuals in 
QHPs. The Secretary also has authority under section 1321(a) of the ACA 
to promulgate regulations with respect to the establishment and 
operation of Exchanges, the offering of QHPs through such Exchanges, 
and such other requirements as the HHS Secretary determines 
appropriate.\203\ HHS previously leveraged these authorities to 
establish the existing agent, broker, and web-broker standards 
applicable in FFE and SBE-FP States, which are currently codified in 
Sec. Sec.  155.220 and 155.221.\204\ In addition, section 1413 of the 
ACA directs the Secretary to establish, subject to minimum 
requirements, a streamlined enrollment process for enrollment in QHPs 
and all insurance affordability programs. This authority, along with 
the Secretary's rulemaking authority under section 1321(a) of the ACA, 
was previously leveraged to establish the existing QHP issuer DE entity 
requirements applicable in FFE and SBE-FP States, which are codified in 
Sec. Sec.  155.221, 156.265, and 156.1230.\205\ We therefore disagree 
that the amendments to Sec.  155.221 exceed the authority granted to 
HHS under the ACA.
---------------------------------------------------------------------------

    \203\ Section 1321(a)(1)(A), (B) and (D) of the ACA.
    \204\ See 77 FR 18334 through 18336; 78 FR 15533; 78 FR 54134; 
79 FR 13837; 81 FR 12338; 81 FR 94176; 83 FR 16981 through 16982; 84 
FR 17563; 85 FR 37248; 86 FR 24288; 87 FR 27388; and 88 FR 25917.
    \205\ See 77 FR 18425 through 18246; 78 FR 54124 through 54126; 
81 FR 12309 through 12310; 81 FR 94152; 81 FR 94184; 83 FR 16981 
through 16982, 17030; 84 FR 17521 through 17525, 17546 through 
17547; and 86 FR 24209 through 24214.
---------------------------------------------------------------------------

    We do not intend, or expect, for the extension of certain HHS 
standards applicable to DE entities assisting the FFEs' and SBE-FPs' 
consumers and applicants to DE entities operating in State Exchanges 
that choose to

[[Page 26298]]

implement a DE program to hinder the growth or success of DE pathways. 
Notably, to date, no State Exchanges have implemented DE programs. As 
we explained in the proposed rule (88 FR 82566) and earlier in this 
section of this final rule, we are extending to DE entities in State 
Exchanges (that choose to implement DE programs) the standards that we 
identified as critical safeguards to help ensure proper eligibility 
determinations, protect against security breaches or incidents through 
implementation of operational readiness reviews, and minimize consumer 
confusion. At the same time, for the reasons stated in the proposed 
rule (88 FR 82567) and earlier in this section of this final rule, our 
policies preserve flexibility for State Exchanges to tailor their DE 
programs and establish their own standards with respect to certain 
aspects of their DE programs, such as operational readiness 
demonstrations and suspension frameworks. We believe this flexibility 
will help ensure that State Exchange DE programs and their standards 
are designed to meet the particular operational and business needs of 
the State Exchanges, while also protecting consumers and safeguarding 
Exchange operations. We also note that if State Exchanges leverage 
HHS's review of third-party audits and determinations made as to DE 
entities' operational readiness and compliance with applicable 
requirements, as our approach encourages them to, that would alleviate 
the burden of operational readiness activities on DE entities in 
participating in State Exchanges and those State Exchanges, which would 
encourage DE entity participation in those State Exchanges.
    Comment: A few commenters suggested that in the future, CMS should 
require State Exchanges to implement DE programs. These commenters 
stated that Exchange DE programs can have a positive impact on 
enrollment in QHPs offered through those Exchanges given recent 
enrollment growth among FFE and SBE-FP States, which can be attributed 
in some part to the DE program HHS adopted for FFEs and SBE-FPs. One 
commenter requested that CMS regularly publish statistics on the number 
of consumers who select a plan and enroll in QHPs offered on the FFEs 
or SBE-FPs through DE entity non-Exchange websites, to support the 
ability of interested parties, particularly State Exchanges, to assess 
whether DE may benefit their consumers in the future.
    Response: We appreciate commenters' feedback and agree that DE 
programs can have a positive impact on enrollment in QHPs offered 
through Exchanges. As we explained in the proposed rule and earlier in 
this section of this final rule, section 1312(e) of the ACA provides 
that the HHS shall establish procedures under which a State may allow 
agents, brokers, and web-brokers to enroll individuals in QHPs. 
Accordingly, Sec.  155.221(a), as finalized by this final rule, 
provides that Exchanges may permit QHP issuers and web-brokers that 
meet applicable requirements to assist consumers with direct enrollment 
in QHPs offered through the Exchange in a manner that is considered to 
be through the Exchange, to the extent permitted by applicable State 
law. We did not propose to require State Exchanges to implement a DE 
program and decline to adopt such a requirement in this final rule. As 
finalized, the amendments to Sec.  155.221 establish HHS minimum 
standards to ensure key consumer safeguards also apply to State 
Exchange consumers if the State Exchange elects to operate a DE 
program.
    We note that we published data on the impact of the DE program HHS 
adopted for FFE and SBE-FP States and encourage interested parties to 
review such data.\206\ For example, we published a comparison of plan 
year 2020 and plan year 2021 open enrollment plan selection data by 
enrollment channel at https://www.cms.gov/CCIIO/Resources/Forms-Reports-and-Other-Resources/Downloads/Impact-EDE-OEP-2021-Coverage.pdf.
---------------------------------------------------------------------------

    \206\ https://www.cms.gov/marketplace/resources/forms-reports-other.
---------------------------------------------------------------------------

10. Failure To Reconcile (FTR) Process (Sec.  155.305(f)(4))
    In the HHS Notice of Benefit and Payment Parameters for 2025 
proposed rule (88 FR 82510, 82571), we proposed changes and updates to 
Sec.  155.305(f)(4). We proposed, in connection with the FTR process 
described in Sec.  155.305(f)(4), to require all Exchanges, including 
State Exchanges, to send notices to tax filers for the first year in 
which they failed to reconcile APTC starting in PY 2025 as an initial 
warning to inform and educate tax filers that they need to file and 
reconcile or risk being determined ineligible for APTC if they fail to 
file and reconcile for a second consecutive year. We are finalizing 
this policy as proposed, except that we have modified paragraph 
(f)(4)(i) and added paragraphs (f)(4)(i)(A) and (B) to clarify that an 
Exchange must either send a notice to a tax filer as described above or 
send a more general notice to an enrollee or their tax filer explaining 
that they are at risk of losing APTC. This modification does not impact 
any substantive rights or obligations described in the proposed rule, 
but rather clarifies in regulation text the method by which Exchanges 
can comply with the requirement.
    As part of the 2024 Payment Notice (88 FR 25814 through 25816), we 
changed the FTR process such that an Exchange may only determine 
enrollees ineligible for APTC after a tax filer (or a tax filer's 
spouse, if married) has failed to file a Federal income tax return and 
reconcile their past APTC for two consecutive years (specifically, 
years for which tax data will be utilized for verification of household 
income and family size). However, in that rule, we did not impose a 
requirement for Exchanges to notify enrollees during the first year 
that the applicable tax filer failed to file and reconcile.
    In the HHS Notice of Benefit and Payment Parameters for 2025 
proposed rule, we proposed to require that all Exchanges be required to 
send informative notices at least annually to tax filers who have 
failed to file and reconcile. Since Exchanges are prohibited from 
sending protected Federal tax information (FTI) to an individual who 
may not be the tax filer, only the FTR Open Enrollment notices sent 
directly to the tax filer may directly state that the IRS data 
indicates the tax filer failed to file and reconcile, consistent with 
standards applicable protection of FTI. An Exchange may not always be 
able to send FTR Open Enrollment notices directly to the tax filer 
because Exchange notices may be sent to the household contact or 
enrollee on the household's Exchange account or insurance policy, as is 
done in the Exchanges on the Federal platform, and this person is not 
necessarily the tax filer. Therefore, to comply with the prohibition on 
sending FTI (including information about failing to file and reconcile) 
in cases where the household contact or enrollee is not the tax filer, 
the Exchange may send notices that contain broad, general language 
regarding FTR referred to as ``combined notices.'' For example, an 
Exchange can send the same Exchange Open Enrollment Notice to multiple 
groups of consumers at risk for APTC discontinuation in the upcoming 
coverage year such as those flagged as having FTR status, those for 
whom the Exchange has received updated income information that suggests 
the consumers may have income too high to qualify for APTC, and those 
who did not permit the Exchange to check IRS data. Because the combined 
notices are sent to some

[[Page 26299]]

consumers who are currently unaffected by FTR, and not exclusively to 
individuals who are affected by FTR, they are generally not considered 
FTI under IRS rules and may be sent using the standard notice 
functionality without the protections required for FTI.
    As background, Exchange enrollees whose tax filer fails to comply 
with current Sec.  155.305(f)(4) are referred to as having failed to 
``file and reconcile.'' These individuals are referred to as having FTR 
status, and the Exchanges conduct the FTR process to identify such 
individuals. In the 2024 Payment Notice (88 FR 25814 through 25816), we 
finalized a new process for Exchanges to conduct FTR to address 
concerns that the pre-existing FTR process requiring Exchanges to 
determine an enrollee ineligible for APTC after one year of having an 
FTR status could be overly punitive. Under the previous policy, 
enrollees occasionally had their APTC ended due to delayed data 
processing, in which case their only remedy was to appeal to get their 
APTC reinstated. Enrollees or their tax filers also may have been 
confused by or received inadequate education on the requirement to file 
and reconcile. HHS' and the State Exchanges' experiences with running 
FTR operations showed that Exchange enrollees often do not understand 
the requirement that their tax filer must file a Federal income tax 
return and reconcile their APTC or that they must also submit IRS Form 
8962 to properly reconcile their APTC, even though both the single, 
streamlined application used by Exchanges on the Federal platform and 
the QHP enrollment process require a consumer to attest to 
understanding the requirement to file and reconcile. Note, the updated 
policy in the 2024 Payment Notice does not relieve tax filers from 
their requirement to reconcile each year nor any potential tax 
liability. By making these changes to the FTR processes in the 2024 
Payment Notice and requiring Exchanges to determine an enrollee 
ineligible for APTC only after having an FTR status for two consecutive 
years (specifically, years for which tax data will be utilized for 
verification of household income and family size), Exchanges now have 
more opportunity to conduct outreach and send notices to enrollees or 
their tax filers for whom data indicate the tax filer has failed to 
file and reconcile and to prevent erroneous terminations of APTC, as 
well as to provide access to APTC for an additional year even when APTC 
would have been correctly terminated under the original FTR process.
    There are limitations to these notices; notices that are sent 
directly to the tax filers and explicitly describe their FTR status 
must be compliant with IRS requirements for disclosing FTI, which can 
be a complex process and incompatible with some Exchanges' 
infrastructure. Alternatively, combined notices, which do not contain 
FTI, have limitations in that they do not explicitly inform the 
recipients that they are at risk of losing APTC due to the household 
tax filer being found to have failed to file and reconcile. However, 
both types of notices will create an opportunity for State Exchanges to 
educate enrollees or their tax filers on the requirement to reconcile 
their APTC with the PTC allowed. This will address the consumer 
confusion and knowledge gaps that were identified by both HHS and State 
Exchanges, which were key considerations in making the changes to the 
FTR process described in the 2024 Payment Notice, wherein tax filers 
now must be identified as FTR status for two years prior to having 
their APTC removed. With this additional year for tax filers to correct 
their FTR status, consumers will be better able to take appropriate 
action prior to losing their APTC and file and reconcile in response to 
these notices.
    Under the policy finalized in this rule, Exchanges on the Federal 
platform will continue to send notices to enrollees and their tax 
filers for the year in which the tax filer has failed to reconcile 
APTC. Direct notices to the tax filer will provide an initial warning 
to inform and educate them that they need to file and reconcile, or 
risk being determined ineligible for APTC if they fail to file and 
reconcile for a second consecutive tax year. A combined notice to the 
enrollee will provide more general information about the risk of losing 
APTC. State Exchanges will be required to send either one of these 
notices and may send a combined notice to the tax filer if desired. Our 
policy to codify this practice for Exchanges on the Federal platform 
and require State Exchanges to notify either an enrollee or their tax 
filer as described above, ensures that tax filers who have been 
determined to have FTR status for one year are adequately educated on 
the file and reconcile requirement, and have ample opportunity to 
address the issue and file and reconcile their APTC before they are 
determined to have FTR status for two consecutive years. This policy 
supports compliance with the filing and reconciling requirement under 
section 36B(f) of the Code and its implementing regulations at 26 CFR 
1.36B-4(a)(1)(i) and (a)(1)(ii)(A), minimizes the potential for APTC 
recipients to incur large tax liabilities over time, and supports 
eligible enrollees' continuous enrollment in Exchange coverage with 
APTC by avoiding situations where enrollees become uninsured when their 
APTC is terminated. Additionally, this policy better aligns State 
Exchanges' Failure to Reconcile processes with that of the Exchanges on 
the Federal platform.
    We sought comment on this proposal.
    After consideration of comments and for the reasons outlined in the 
proposed rule and our responses to comments, we are finalizing this 
provision with modifications to require all Exchanges to either send 
informative notices directly to a tax filer alerting them of their FTR 
status, or to send informative notices that do not contain FTI either 
to the enrollee or their tax filer if through the income verification 
processes described in Sec.  155.320, they have been found to have 
failed to reconcile their APTC for only one year. We are reorganizing 
the regulatory text at Sec.  155.305(f)(4)(i) to create paragraphs 
(f)(4)(i)(A) and (f)(4)(i)(B) for ease of readability, and are 
clarifying that new paragraph (f)(4)(i)(B) describes the notifications 
Exchanges may send to an enrollee or their tax filer that informs them 
that they may be at risk of being determined ineligible for APTC in the 
future, but does so without conveying FTI. We are also clarifying in 
this final rule that we will provide Exchanges with additional guidance 
on implementation, in particular around notice language, which is 
informative to the consumer without sharing protected FTI. We summarize 
and respond to public comments received on the proposed policy below.
    Comment: The majority of commenters supported the proposal 
requiring an Exchange to notify enrollees and their tax filers of their 
FTR status when they are identified as having failed to reconcile for 
one year. Several of these commenters in particular cited its positive 
impact on continuity of coverage for consumers enrolled in Exchange 
coverage.
    Response: We agree that the proposed FTR policy will have a 
positive impact on enrollee retention of APTC and coverage by ensuring 
enrollees and their tax filers are well informed of the tax 
reconciliation requirement and/or of a potential FTR status.
    Comment: A few commenters opposed the proposal requiring all 
Exchanges to check FTR and send FTR notices on an annual basis to 
enrollees, or their tax filers, who have an FTR status. These 
commenters stated that it is prohibitively difficult to send notices

[[Page 26300]]

containing protected FTI to enrollees or their tax filers. One of these 
commenters agreed with the importance of informing tax filers of the 
tax credit reconciliation requirement but disagreed with the proposed 
method. This commenter stated that Exchanges and their consumers are 
better served by flexible real-time education, rather than annual 
mandatory notices.
    Response: We recognize the complexity of sharing FTI with 
enrollees, which is why the proposed requirement allows for the use of 
combined notices. These combined notices may contain broad, general 
language, and can be sent to multiple groups of consumers at risk for 
APTC discontinuation in the following coverage year. We currently 
provide samples of such combined notices amongst other resources online 
at Marketplace.cms.gov. Additionally, we will provide technical 
assistance, guidance, and updated sample notice language to Exchanges 
in advance of implementation for plan year 2025.
    While we are finalizing the requirement for Exchanges to send on an 
annual basis FTR notices to consumers identified as having an FTR 
status, we appreciate that there are other approaches to educating 
consumers on the FTR requirements. We wish to note that Exchanges will 
have flexibility in the notice content and process. While annual 
notices are a minimum requirement, Exchanges are welcome to expand on 
these with real-time education and other consumer outreach.
    Comment: A few commenters opposed this proposal, citing the need 
for State flexibility in Exchange operations.
    Response: Exchanges will still have flexibility in the manner of 
sending and content of FTR notices, but this policy provides important 
consumer protections by ensuring that enrollees and/or their tax filers 
are at a minimum informed of the APTC reconciliation requirement as 
well as the potential for loss of APTC eligibility each year. While 
Exchanges will have the opportunity to provide additional outreach and 
education, we see these annual notices as a minimum standard.
    Comment: One commenter opposed this proposal, stating that they did 
not consider Exchanges to be the optimal choice to send annual FTR 
notices. This commenter suggested that the IRS would be a better agency 
to create and send out these notices, in particular due to the 
protections around FTI.
    Response: The IRS has existing processes under which tax filers may 
be contacted if they file a tax return without reconciling APTC. 
However, Exchanges are also well-suited to send these FTR notices. 
Exchanges are already equipped to send a variety of different notice 
types to QHP enrollees, both through mail and Exchange portals. 
Furthermore, we know through the ``Annual Eligibility Redetermination 
Plans'' shared by State Exchanges with HHS that prior to HHS pausing 
FTR operations for all Exchanges in 2020 due to the effects of the 
COVID-19 public health emergency, the majority of State Exchanges were 
already sending out either direct or combined FTR notices to enrollees 
or their tax filer, similar to the ones being described in this rule. 
Exchanges will be able to utilize these existing structures to develop 
and send FTR notices in compliance with this rule. Additionally, 
Exchanges are allowed to send out informative, combined notices that do 
not contain protected FTI.
    Comment: Many commenters expressed support for the proposal, or 
support for the intention of the proposal, but also expressed the need 
for CMS to provide further guidance and support on best-practices and 
clear, actionable language for the notices. In particular, they 
requested that HHS provide guidance in developing the combined notices 
that do not contain protected FTI. Several of these commenters shared 
concerns that since these notices cannot explicitly state that the 
enrollee or their tax filer has FTR status due to FTI privacy rules, 
the notices may be confusing or ineffective, in particular since they 
will be warning about the possibility of losing APTC as far as one year 
out. Several of these commenters requested that HHS refine this 
language and provide templates to other Exchanges to ensure that 
notices are consistent. One of these commenters also suggested that 
these consumers would not be able to gain clarity by contacting the 
Exchange call-center, as its employees are similarly bound by rules 
surrounding the disclosure of FTI.
    Response: We appreciate these comments and acknowledge that the tax 
reconciliation requirement is complex and can be complicated to convey 
to consumers. We are developing updated FTR notices for enrollees or 
their tax filers who are found with a one-year FTR status as well as 
for those found with a two-year FTR status. These notices will be 
posted publicly at Marketplace.cms.gov once finalized, in advance of 
implementation for the PY 2025 open enrollment period. Exchanges will 
be able to use this notice language to train and educate their call-
center staff on different ways to educate consumers of the APTC 
reconciliation requirement, without disclosing FTI. We will also work 
with Exchanges to provide technical assistance and guidance in advance 
of the restart of FTR operations.
    In the meantime, sample notices that were sent out to individuals 
with FTR status prior to the pause in 2020 are available at 
Marketplace.cms.gov and can help guide Exchanges as they prepare for 
implementation and further develop their own notices. We also would 
like to note that many State Exchanges have already developed FTR 
notices and noticing processes that were utilized prior to the FTR 
pause.
    Comment: A few commenters expressed support for the current 
proposal, acknowledging that educating consumers through annual FTR 
notices protects them and their coverage. However, these commenters 
also stated that the FTR process overall is flawed, overly punitive to 
consumers, and a threat to continuity of coverage. As such these 
commenters urged its repeal.
    Response: We believe that the changes finalized in the 2024 Notice 
of Benefit and Payment Parameters, along with the changes finalized in 
this rule, properly balance consumer protections and program integrity 
concerns, and therefore support that we should continue to improve the 
FTR process rather than repeal it entirely.
11. Verification Process Related to Eligibility for Enrollment in a QHP 
Through the Exchange (Sec.  155.315(e))
    In the HHS Notice of Benefit and Payment Parameters for 2025 
proposed rule (88 FR 82510, 82572), we proposed changes and updates to 
Sec.  155.315. We proposed to amend Sec.  155.315(e) by revising 
paragraph (e)(1) to permit all Exchanges to accept an applicant's 
attestation of incarceration status and paragraph (e)(2) to allow 
Exchanges to electronically verify a consumer's current incarceration 
status using an HHS-approved verification data source. We also proposed 
to amend the reference in paragraph (e)(3) to reflect that if an 
Exchange verifies an applicant's attestation of incarceration status 
using an approved data source and the attestation is not reasonably 
compatible with the information provided from the stated data source or 
other information provided by the applicant or in the records of the 
Exchange, then the Exchange must follow the data matching issue (DMI) 
process set forth in Sec.  155.315(f). We noted in the proposed rule 
that if the proposed policy was finalized, Exchanges using the Federal 
eligibility and enrollment platform, including SBE-FPs, that currently 
use the incarceration verification data source

[[Page 26301]]

offered through the Federal Data Services Hub (the ``Hub'') would be 
able to accept consumer attestation of incarceration status without 
further verification of incarceration status.
    As background, section 1312(f)(1)(B) of the ACA states that an 
individual shall not be treated as a qualified individual for 
enrollment in a QHP if, at the time of enrollment, the individual is 
incarcerated, other than incarceration pending the disposition of 
charges. Sections 155.315(e) and (e)(1) currently state that Exchanges 
must verify incarceration status with a data source approved by HHS and 
deemed accurate, current, and offering less administrative complexity 
than paper verification. When an individual's incarceration attestation 
conflicts with information from an approved data source or other 
information provided by the applicant or in the records of the 
Exchange, Sec.  155.315(e)(3) requires Exchanges to create a DMI as 
outlined in Sec.  155.315(f). However, if an approved data source is 
unavailable, an Exchange may accept attestation of incarceration 
without further verification under Sec.  155.315(e)(2).
    Under proposed paragraphs (e)(1) and (2), an Exchange would be able 
to accept a consumer's attestation of incarceration status or propose 
an electronic data source for incarceration verification to HHS for 
approval and use that approved source to verify incarceration status. 
Should a State Exchange choose to propose use of an alternative 
electronic data source for verifying incarceration status, HHS would 
review such proposals in accordance with the process under Sec.  
155.315(h), through which HHS would make a determination based on the 
proposed use of the alternative data source and whether it minimizes 
administrative costs and burdens on individuals while it maintains 
accuracy and minimizes delay. We proposed at paragraph (e)(3) that if 
an Exchange verifies an applicant's attestation of incarceration status 
using an approved data source as provided under proposed paragraph 
(e)(2), to the extent that the applicant's attestation is not 
reasonably compatible with information from the approved data source or 
other information provided by the applicant or in the records of the 
Exchange, the Exchange would be required to follow the DMI procedures 
at Sec.  155.315(f).
    In the Exchange Establishment Rule (77 FR 18362), we recognized 
that there may be challenges in the availability of electronic 
incarceration verification data but believed that so long as an 
incarceration verification data source existed that has been approved 
by HHS, it should be used to verify incarceration status. We also 
recognized that requesting consumer attestation of incarceration status 
and accepting such attestation without further verification when an 
accurate data source was unavailable is necessary since incarceration 
status is a statutory standard for eligibility to enroll in a QHP.
    Exchanges using the Federal eligibility and enrollment platform, 
including SBE-FPs, currently verify whether an applicant is 
incarcerated through the Hub by using the Social Security 
Administration's (SSA) Prisoner Update Processing System (PUPS). PUPS 
is currently maintained by SSA and is the only national database that 
reflects information from Federal, State, and local correctional 
records. Our experience administering the Federal eligibility and 
enrollment platform, along with the experience from the State Exchanges 
that have used the PUPS data, have demonstrated that verifying 
incarceration data using PUPS has resulted in a high number of DMIs, 
few of which identify QHP applicants who are incarcerated. For example, 
we conducted an internal study and found that out of 110,802 
incarceration DMIs generated between PYs 2018 to 2019, 96.5 percent of 
them were resolved in favor of the applicant. More importantly of those 
3,878 applicants whose DMIs were not resolved in their favor (3.5 
percent of 110,802), we found that only a total of 2,469 applied for 
QHP coverage during PYs 2018 and 2019. Of these 2,469 ineligible 
applicants, 950 applicants were released from either prison or jail 
within 90 days after the application submission date. Excluding these 
individuals leaves 1,519 QHP-ineligible individuals, of which 921 
applicants effectuated coverage (that is, made the binder payment), 
which is allowed while awaiting DMI clearance, thus resulting in an 
improper APTC payment. An average annual APTC per individual of $1,569 
was estimated for the 921 QHP ineligible applicants with effectuated 
policies.\207\ This yields potential improper payments of approximately 
$361,262.25 over 3 months. Because only a very small number of 
incarcerated individuals apply to enroll in QHPs, verifying 
incarceration status using PUPs and conducting the DMI process outlined 
at Sec.  155.315(f) results in Exchanges saving only a fraction of 
improper overpayment of APTC, and those savings are dwarfed by the 
administrative costs imposed by using PUPs and conducting the DMI 
process.
---------------------------------------------------------------------------

    \207\ This per-person per-year estimate was calculated by 
multiplying the monthly APTC benefit that each ineligible and 
effectuated applicant was estimated to receive in their FFE 
application by the maximum number of months the applicant could have 
been enrolled in a QHP while still incarcerated and pending DMI 
clearance. For open enrollment applications, an enrollment start 
date of January 1 was used (45 CFR 155.410). For special enrollment 
period applicants, the previous coverage effective date rules were 
used where if the applicant applied between the 1st and 15th of the 
month, an enrollment start date of the 1st of the following month 
was used. If the applicant applied after the 16th of the month, an 
enrollment start date of the 1st of the month 2 months following the 
application month was used. 45 CFR 155.420.
---------------------------------------------------------------------------

    We conducted a cost-benefit assessment and determined that the cost 
to verify incarceration status electronically far exceeds potential 
savings. Should the Exchange conduct an electronic incarceration 
verification check, such as a verification check of a consumer's 
attestation using PUPS data, it would cost more than $4 million to 
operate yearly, along with a one-time implementation startup cost of 
approximately $200,000. Furthermore, connecting to an alternative 
incarceration data source, such as PUPS, and conducting the DMI process 
outlined at Sec.  155.315(f) can be very costly to Exchanges. In PY 
2019, nearly 38,000 out of 78,000 applicants with an incarceration DMI 
submitted documents to attempt to resolve the incarceration DMI. To 
process DMIs, the Exchange incurs costs for the eligibility-
verification contractor on a fixed-price basis totaling about $0.57 
million per year for verification of incarceration. This figure does 
not include other costs related to sending notices to consumers, 
processing appeals, and handling call center transactions. Our 2019 
study concluded that those who receive an incarceration DMI are 
statistically likely to be eligible to enroll in a QHP as the 
applicants were released from either prison or jail within 90 days 
after the application submission date. However, an unresolved 
incarcerated DMI can result in a complete loss of coverage.
    The processes of notifying consumers of their DMIs and resolving 
them have been burdensome and has negatively impacted the consumer 
experience. When an incarceration DMI is generated, applicants are 
required to provide documentation to show that they are no longer 
incarcerated.\208\ This creates a significant enrollment burden for 
formerly incarcerated individuals, a population comprised of a 
significant number of people with disabilities.\209\

[[Page 26302]]

Many documents that can prove incarceration status cannot be obtained 
without an unexpired proof of identity document, and most cannot be 
obtained without submitting non-refundable payments. Incarceration may 
inhibit one's financial savings, and formerly incarcerated individuals 
are less likely to secure employment.\210\
---------------------------------------------------------------------------

    \208\ HealthCare.gov. (n.d.) How do I resolve a Data Matching 
Issue. Dept. of Health and Human Services. https://www.healthcare.gov/help/how-do-i-resolve-an-inconsistency/#incarceration-status.
    \209\ Apel, R., and Sweeten, G. (2010, Aug. 1). The Impact of 
Incarceration on Employment during the Transition to Adulthood. 
Social Problems, 57(3), 448-479. https://doi.org/10.1525/sp.2010.57.3.448.
    \210\ Id.
---------------------------------------------------------------------------

    These findings support our beliefs that incarcerated individuals 
apply for QHP coverage at very low rates, and that their applications 
are considered to be a very low program integrity risk for Exchanges, 
which do not warrant always conducting an extensive incarceration 
verification check. We also believe that previous guidance to conduct 
incarceration status verification \211\ may have contributed to 
inequity in the Exchange population, as Black adults were imprisoned at 
five times the rate for White adults \212\ and are more likely to face 
systemic obstacles hindering their ability to secure employment post 
incarceration.\213\
---------------------------------------------------------------------------

    \211\ 45 CFR 155.315(e).
    \212\ Nellis, A. (2021). The Color of Justice: Racial and Ethnic 
Disparity in State Prisons. The Sentencing Project. https://www.sentencingproject.org/app/uploads/2022/08/The-Color-of-Justice-Racial-and-Ethnic-Disparity-in-State-Prisons.pdf; Sabol, W.J., and 
Johnson, T.L. (2022). Justice System Disparities: Black-White 
National Imprisonment Trends, 2000 to 2020. Council on Criminal 
Justice. https://secure.counciloncj.org/np/viewDocument?
    \213\ Sirios, C., and Western, B. (2017, Feb.). Racial 
Inequality in Employment and Earnings after Incarceration. Harvard 
University. https://scholar.harvard.edu/files/brucewestern/files/racial_inequality_in_employment_and_earnings_after_incarceration.pdf.

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

    Given these concerns, we proposed to amend Sec.  155.315(e) by 
revising paragraph (e)(1) to permit all Exchanges to accept consumer 
attestation of incarceration status without further electronic 
verification. We proposed to revise paragraph (e)(2) to permit 
Exchanges to verify consumer incarceration status using an HHS-approved 
verification data source that is current, accurate, and minimizes 
administrative costs and burdens. We believe these policies would 
improve the Exchange enrollment process, reduce operational challenges 
for Exchanges, and reduce burdens on applicants, all while maintaining 
program integrity and ensuring that the alternative incarceration 
verification data source that may be used by Exchanges is not unduly 
burdensome or costly to administer.
    We also proposed changes to paragraph (e)(3) to reflect that if an 
Exchange verifies an applicant's attestation of incarceration status 
using an approved data source, and the attestation is not reasonably 
compatible with the information from the approved data source or other 
information provided by the applicant or in the records of the 
Exchange, the Exchange must then follow the DMI process set forth in 
Sec.  155.315(f).
    We sought comment on this proposal, particularly from State 
Exchanges and other users of PUPS data through the Hub. We also 
expressed particular interest in comments about whether State Exchanges 
intend to continue using PUPS data to verify incarceration status. We 
also sought input from any State Medicaid agency that uses PUPS data 
available through the Hub.
    After consideration of comments and for the reasons outlined in the 
proposed rule and our responses to comments, we are finalizing this 
provision as proposed to require Exchanges to start accepting consumer 
attestation of incarceration status without further verification or for 
Exchanges to use a data source for incarceration verification approved 
by HHS. We summarize and respond to public comments received below.
    Comment: Many commenters supported the proposal to amend the 
current process of incarceration status verification by accepting 
consumer attestation or through the verification of incarceration 
status with an alternative data source. Commentors commended CMS for 
acknowledging the barriers faced by justice-involved populations and 
taking steps to minimize inequitable access to health insurance 
coverage.
    Response: We agree that the policy to accept consumer attestation 
of incarceration status without further electronic verification will 
reduce administrative costs and burdens associated with verification of 
incarceration status. Additionally, the policy allows Exchanges the 
flexibility to continue verification of incarceration status using an 
HHS-approved data source that is current, accurate, and reduces 
administrative costs and burdens. We believe that this policy will 
equitably improve access to health care coverage for justice-involved 
individuals.
    Comment: One commenter supported the recommendation that CMS 
provide educational materials and outreach for those leaving the 
incarceration facilities to be better informed about their pathways to 
enrolling in health care.
    Response: We thank the commenter for this recommendation and agree 
that educational materials and outreach should be made available for 
those leaving the incarceration facilities. We have resources available 
on HealthCare.Gov and will continue to make updates as needed for 
accuracy.
    Comment: One commenter recommended using commercially available 
incarceration data to connect with soon-to-be-released individuals with 
social services.
    Response: We thank the commenter for bringing up the commercially 
available data that connects people with social services after their 
release and agree that such service could be useful. We will take this 
recommendation into consideration for future rulemaking.
    Comment: One commenter asked CMS to clarify the process for HHS to 
approve a data source, including by listing the criteria that HHS will 
use to assess whether an alternative data source should be approved.
    Response: We decline to specify additional criteria HHS will use to 
approve an alternative data source beyond those included in the 
proposal: that the data source provide data that are current and 
accurate, and that its use minimizes administrative costs and burdens. 
We also note that a data source that does not timely report release 
from incarceration for recently paroled individuals is unlikely to meet 
HHS' standard. We would need to conduct additional market research and 
secure funding for the purposes of identifying and utilizing an 
alternative incarceration verification data source that is approved for 
all Exchanges and Medicaid and CHIP agencies. Any State Exchange that 
is interested in using alternative data sources for incarceration 
verification should submit its proposal to HHS for review, as an update 
to their Exchange Blueprint, as described in Sec.  155.315(h).
    Comment: Some commentors stated that the proposed rule contradicts 
the recently published GAO guidance \214\ on verification of self-
attestation which was published to implement President Biden's 
Executive Order \215\ for reducing improper payments, identity theft, 
and benefit fraud, issued in response to fraud, waste, and abuse during 
the COVID-19 Public Health Emergency.
---------------------------------------------------------------------------

    \214\ Government Accountability Office. (2022, Feb. 10). 
Emergency Rental Assistance: Additional Grantee Monitoring Needed to 
Manage Known Risk. https://www.gao.gov/assets/gao-22-105490.pdf.
    \215\ https://www.whitehouse.gov/briefing-room/statements-releases/2023/03/02/fact-sheet-president-bidens-sweeping-pandemic-anti-fraud-proposal-going-after-systemic-fraud-taking-on-identity-theft-helping-victims/.
---------------------------------------------------------------------------

    Response: In alignment with GAO's published guidance to reduce 
fraud, we provided extensive cost benefit analysis in the proposed rule 
to outline the

[[Page 26303]]

minuscule amount of improper payments made to incarcerated individuals, 
contrasted with the large administrative costs and burdens to verify 
incarceration status. Based on this analysis, we estimate that there 
would be expected cost savings for Exchanges of approximately 
$20,317,000 resulting from this policy. This means that the finalized 
policy change to verify incarceration status will save taxpayer funds. 
Within the cost benefit analysis, we provided additional information on 
the potential costs of investing in an alternative data source to 
verify incarceration.
    Comment: One commenter asked CMS to clarify whether Exchanges that 
currently using PUPS comply with the proposal.
    Response: As the PUPS data that is made available through the 
Federal Data Services Hub has been an existing HHS-approved data source 
for incarceration verification, State Exchanges may consider the PUPS 
data current, accurate, and its use to minimize administrative costs 
and burdens for their State without seeking approval from HHS. State 
Exchanges that currently use the PUPS data may continue using this data 
source for incarceration verification, should they choose to do so, 
without seeking re-approval from HHS. We also encourage any State 
Exchange that is currently using this data source to conduct a similar 
evaluation as we described in the proposed rule (for the FFE and SBE-
FPs), to determine whether continued use of the PUPS data is a cost-
effective approach for incarceration verification. We will provide 
technical assistance to any State Exchange that is currently using PUPS 
data through the Federal Data Services Hub that wishes to modify its 
approach to instead accept self-attestation or to use an alternative 
data source for incarceration verification.
    Comment: One commenter asked for an amendment to the Medicare 
regulation at 42 CFR 411.4(b) which describes when an individual is in 
custody to align with post-incarceration coverage policies in the 
Exchange and Medicaid.
    Response: We thank the commenter for bringing this to our attention 
but note that the comment is outside the scope of this rule.
    Comment: One commenter supported the proposal and noted that cost-
benefit analysis for the proposed change is sufficient but advised that 
CMS should amend the proposed rule to omit any mentions of health and 
racial equities as it ``might fall to an arbitrary and capricious 
challenge under the Administrative Procedures Act''.
    Response: HHS has the authority to modify the incarceration 
verification process under section 1411(c)(4)(B) of the ACA, as well as 
under our general rulemaking authority in section 1321(a) of the ACA. 
We maintain that we have provided several non-arbitrary rationales for 
the policy described in this rule, including that mandatory 
verification of incarceration status is costly to taxpayers, burdensome 
for applicants, and reduces access to health care for justice-involved 
populations which reduces health and racial equity.
    Comment: A few commenters appeared unclear about the proposal and 
vaguely opposed it, claiming that HHS did not provide enough evidence 
as to why current practices are insufficient, the proposal would 
increase the cost of health insurance, and the proposal would not 
provide Exchanges with sufficient operational flexibility.
    Response: We clarify that the policy allows Exchanges to start 
accepting consumer attestation of incarceration status without further 
verification unless the Exchange chooses to verify consumer attestation 
using a data source approved by HHS to be current and accurate and 
minimize administrative costs and burdens. Exchanges must generate a 
DMI if a mismatch between consumer attestation and the data is present. 
Additionally, there is no basis to believe this rule will increase the 
cost of health insurance. As demonstrated in the cost benefit analysis 
provided in the rule, it will be cost effective for Exchanges to accept 
consumer attestation of incarceration status without further 
verification, and Exchanges that decline to use an alternative data 
source will not incur additional costs to verify incarceration status, 
as explicitly demonstrated in the RIA section of the rule. Finally, we 
believe that we provided sufficient flexibility in this rule as State 
Exchanges may elect to accept attestation of incarceration status or 
use an alternative data source approved by HHS.
12. Verification Process Related to Eligibility for Insurance 
Affordability Programs (Sec.  155.320)
    In the HHS Notice of Benefit and Payment Parameters for 2025 
proposed rule (88 FR 82510, 82574), we proposed to reinterpret State 
Exchange and State Medicaid and Children's Health Insurance Program 
(CHIP) agency use of the Federal Data Services Hub (Hub) to access and 
use the income data provided by the optional Verify Current Income 
(VCI) Hub service as a State Exchange or a State Medicaid and CHIP 
agency function, because these State entities use this optional service 
to implement eligibility verification requirements applicable to them. 
While we proposed to redesignate use of the VCI Hub service by State 
Exchanges and State Medicaid and CHIP agencies as a State function, HHS 
would continue to maintain contracts that make this service available 
through the Hub for State Exchange and State Medicaid and CHIP agency 
use as part of its ongoing implementation of sections 1411 and 1413 of 
the ACA. We proposed to amend Sec.  155.320(c) to reflect this 
reinterpretation for the Exchanges. Under this proposal, States would 
pay annually in advance for the State Exchanges and Medicaid and CHIP 
agencies' anticipated utilization of the optional VCI Hub service and 
be required to reconcile with HHS on an annual basis the anticipated 
utilization of CSI data provided by the VCI Hub service with the actual 
utilization. In the alternative, we proposed that HHS would invoice 
States on a monthly basis for their actual utilization of CSI data 
provided by the VCI Hub service after that utilization occurs. We noted 
that State Medicaid and CHIP agencies would be eligible for Federal 
matching for the cost of this service, as described in this section.
    Under our proposal, Exchanges and State Medicaid and CHIP agencies 
may opt to continue to use the VCI Hub service to support their 
eligibility verification processes for Exchange QHP coverage or 
Medicaid and CHIP if they pay for the cost of their use of the service. 
For instance, Exchanges would still be able to use this current income 
information to verify a tax household's annual income attestation if 
they are unable to verify income using SSA Title II data, IRS income 
tax data, or a combination of both SSA and IRS data, in determining 
eligibility for APTC. Because Exchanges and State Medicaid and CHIP 
agencies are permitted, but not required to use the VCI Hub service to 
fulfill the mandatory eligibility determination requirements imposed on 
them, accessing the CSI data via the VCI Hub service should be 
characterized as an Exchange or State Medicaid and CHIP agency 
function.
    Consistent with section 1413 of the ACA, HHS would continue to 
provide access to optional data sources through the Hub to support the 
streamlined application processes. However, as these functions would be 
considered Exchange or State Medicaid and CHIP agency functions, and 
not HHS functions, HHS would no longer fund Exchange or State Medicaid 
and CHIP agency use of these sources and would

[[Page 26304]]

only provide access to States who paid for their use of the service. 
HHS bears a cost for Exchange and State Medicaid and CHIP agency use of 
the CSI data accessed through the VCI Hub service. Under the proposed 
interpretation, State Exchanges and State Medicaid and CHIP agencies 
would be required to pay for their use of the VCI Hub service. However, 
where applicable, State costs for State Medicaid and CHIP agencies may 
be eligible for Federal matching funds at the 75 percent match of the 
cost of a State Medicaid agency's utilization of the VCI Hub service, 
as outlined in 42 CFR 433.116, and match CHIP costs at a State's 
enhanced Federal Medical Assistance Percentage (FMAP).
    Since the VCI Hub service was established in 2013 for use by both 
Exchanges and State Medicaid and CHIP agencies, utilization of the VCI 
Hub service has grown significantly over time, both in the number of 
State Exchanges and State Medicaid and CHIP agencies using the service, 
and the number of applicants and beneficiaries that require income 
verification as Exchange populations have increased over time. During 
the first open enrollment in 2013, only the Exchanges on the Federal 
platform, two State Exchanges, and eight State Medicaid and CHIP 
agencies used data from the VCI Hub service for eligibility 
determinations. In that first year, the Exchanges on the Federal 
platform initiated about 88 percent of all requests, or ``pings,'' to 
the VCI Hub service for income verification. In the past decade, more 
State Medicaid and CHIP agencies and State Exchanges have started using 
the VCI Hub service; as of June 2023, 34 States, including the District 
of Columbia and Puerto Rico, use the VCI Hub service for their State 
Medicaid and CHIP programs, and 10 of those States also use the service 
to verify QHP eligibility for their State Exchanges. Our analysis shows 
that as of January 2024, over 76 percent of monthly pings to the VCI 
Hub service were from State Medicaid and CHIP applications, including 
renewals of eligibility for Medicaid or CHIP coverage, and the 
Exchanges on the Federal platform now account for less than 5 percent 
of the total volume.\216\
---------------------------------------------------------------------------

    \216\ In the proposed rule (88 FR 82576), we reported that as of 
March 2023, over 70 percent of monthly pings to the VCI Hub service 
were from State Medicaid and CHIP applications, including renewals 
of eligibility for Medicaid or CHIP coverage, and the Exchanges on 
the Federal platform accounted for less than 10 percent of the total 
volume.
---------------------------------------------------------------------------

    If new State Medicaid and CHIP agencies or State Exchanges are 
permitted to request access to the VCI Hub service, we forecast that in 
the next 5 years, transaction volume to the VCI Hub service would 
increase by over 17 percent. These trends in utilization have provided 
us with a clear picture of the primary uses and utilizers of the VCI 
Hub service. Specifically, we have learned that the queries submitted 
by States to the VCI Hub service have been for income verification by 
State Medicaid and CHIP agencies to determine Medicaid and CHIP 
eligibility, and by State Exchanges to assess or determine Medicaid and 
CHIP eligibility and determine APTC eligibility. Accordingly, we now 
believe this activity that has been categorized as an HHS function 
would be better categorized as: (1) a State Medicaid and CHIP agency 
eligibility determination function under title XIX or title XXI of the 
Act when the determination is initiated by a State Medicaid and/or CHIP 
agency; and (2) as an Exchange function when the determination is 
initiated by an Exchange.
    While we believe the utilization of this optional data source is an 
Exchange or State Medicaid and CHIP agency function, making the 
optional data sources available through the Hub is consistent with the 
requirements at sections 1411 and 1413 of the ACA related to 
establishment and participation in a coordinated eligibility and 
enrollment system for all insurance affordability programs. As such, to 
facilitate Exchanges' and States Medicaid and CHIP agencies' access to 
this optional CSI data that is available through the VCI Hub service, 
HHS will continue to maintain contracts that make access to these 
resources available through the Hub for Exchange and State Medicaid and 
CHIP agency use.
    In making this proposal, we noted that while use of the VCI Hub 
service is an integral part of the eligibility determination process in 
most States, Exchanges and State Medicaid and CHIP agencies may have 
access to other data sources to verify income. As noted previously, we 
are aware that many States have access to other comprehensive data 
sources, such as State quarterly wage data. Generally, as dictated by 
individual State law, employers are required to report employee 
information such as payroll and unemployment insurance contribution 
data to a State department, such as the State Department of Labor or a 
similar office. In place of the optional VCI Hub service, State 
Exchanges continue to have flexibility under 45 CFR 155.315(h) and 
155.320(c)(3)(iv) to use an alternative verification source, like State 
wage data, when income is not verified using IRS tax data or SSA title 
II data. We encouraged State Exchanges, State Medicaid and CHIP 
agencies, and other interested parties, to submit comments regarding 
any operational burden, policy, or budget challenges regarding access 
to other State data sources of the proposed change.
    As part of our consideration of the policies in this rulemaking, we 
considered requiring State Medicaid and CHIP agencies and State 
Exchanges to obtain their own contracts to administer their CSI data 
usage; however, we had concerns that these services cannot be procured 
reasonably and expeditiously, which would undermine the system we have 
implemented under section 1413 of the ACA. We also believe that there 
may be benefits to the State Medicaid and CHIP agencies and State 
Exchanges that prefer to use the CSI data accessible through the VCI 
Hub service in their States. Therefore, we proposed to retain optional 
access to the VCI Hub service on behalf of State Medicaid and CHIP 
agencies and State Exchanges that prefer to continue to use this 
service and are willing to pay for their CSI data usage. Under this 
policy, State Medicaid and CHIP agencies and State Exchanges can choose 
to discontinue their use of the CSI data accessible through the VCI Hub 
service.
    Given these considerations, we proposed to amend 45 CFR 
155.320(c)(1) to add new paragraph (c)(1)(iii) to require that 
beginning July 1, 2024, State Exchanges would be required to pay for 
100 percent of their utilization of the CSI income data provided by the 
VCI Hub service.\217\ We refer readers to the proposed rule (88 FR 
82576) for an explanation of implementation of this policy.
---------------------------------------------------------------------------

    \217\ The FFEs' and SBE-FPs' costs for accessing these services 
would be covered by the FFEs' and SBE-FPs' user fees.
---------------------------------------------------------------------------

    Similarly, we proposed to require that beginning July 1, 2024, 
States pay in advance for their Medicaid and CHIP utilization of the 
optional, and not required, VCI Hub service to fulfill their Medicaid 
and/or CHIP eligibility determination requirements. As noted above, 
consistent with the requirements at section 1413 of the ACA (related to 
establishment and participation in a coordinated eligibility and 
enrollment system for all insurance affordability programs), which is 
incorporated into the Medicaid and CHIP statutes at sections 1943(b)(3) 
and 2107(e)(1), respectively, of the Act, in order to facilitate 
States' access to this optional CSI data that is available through the 
VCI Hub service, we would continue to

[[Page 26305]]

maintain contracts that enable States to efficiently access CSI data 
through the VCI Hub service. However, under our proposal, States would 
be required to pay the cost incurred by HHS when the State requests CSI 
data through the VCI service offered by the Hub.
    In the alternative, HHS also considered whether it could invoice 
States on a monthly basis for their actual utilization of CSI data 
provided by the VCI Hub service after that utilization occurs. If 
appropriate, this alternative policy could be adopted in the final 
rule. We considered these mechanisms for implementing State Exchange 
and Medicaid and CHIP agency payments for use of the VCI Hub service 
and solicited comments on whether a different implementation approach 
would be more efficient or otherwise preferable. We refer readers to 
the proposed rule (88 FR 82576 through 82577) for an explanation of 
implementation of this policy and an alternative payment structure.
    Finally, we proposed that the interpretation characterizing use of 
the VCI Hub service as a function of State Exchanges and Medicaid and 
CHIP agencies and not an HHS function be effective on July 1, 2024. We 
recognize that this implementation date may be difficult for States, 
especially those with biennial budget cycles. However, given our 
determination that eligibility verifications using CSI data by State 
Exchanges and Medicaid and CHIP agencies is most appropriately 
characterized as a function of these agencies and not an HHS function, 
we believe it is appropriate to move forward with this change as 
expeditiously as possible, while giving States some time to plan for 
the change. For this reason, we proposed a July 1, 2024, effective date 
for this provision.
    We sought comment on these proposed changes, including whether we 
should make this interpretation effective as of July 1, 2024, or a 
different date. We were interested in learning whether State Exchanges 
and Medicaid and CHIP agencies would seek to cease or restrict their 
use of the VCI Hub service, possibly using it as a last resort, and 
what impact, if any, might these proposed changes have on the amount of 
time it takes applicants to verify their income or the time it takes 
for States to make an eligibility determination. We also sought comment 
on the extent to which States may be interested in potential avenues to 
reduce operational burdens or address budget challenges facing State 
Exchanges and Medicaid and CHIP agencies. Namely, we were interested in 
whether States would be interested in opportunities to pay an 
additional fee that would allow them to reuse VCI Hub service 
verification results across multiple Federally-funded and State-
administered human service programs (with cost allocation across those 
programs); whether States have separate, direct access to the same or 
similar source of VCI Hub services, and the cost of such direct access; 
and whether States anticipate that reuse of verification data, coupled 
with cost allocation across programs, would reduce operational burdens 
or address budget challenges facing State Exchanges and Medicaid and 
CHIP agencies.
    After consideration of comments and for the reasons outlined in the 
proposed rule and our responses to comments, we are finalizing this 
provision as proposed to reinterpret State Exchange and State Medicaid 
and CHIP agency use of the Hub to access and use the income data 
provided by the optional VCI Hub service as a State Exchange or a State 
Medicaid and CHIP agency function, and that beginning July 1, 2024, 
State Exchanges and State Medicaid and CHIP agencies will be required 
to pay for the costs of their access to and use of the VCI Hub service. 
We are also finalizing the proposal with a modification: rather than 
requiring States to pay in advance for their use of the VCI Hub 
Service, HHS will invoice States monthly for the amount the State must 
pay to reimburse HHS for the costs of their access and actual 
utilization of CSI income data from the prior month. Specifically, HHS 
will invoice States on a monthly basis for their actual utilization of 
the CSI income data accessed through the VCI Hub Service, as well as an 
administrative fee to account for any direct or indirect costs of 
making CSI income data accessed through the VCI Hub service available 
to Exchanges and State Medicaid and CHIP agencies, in accordance with 
the Intergovernmental Cooperation Act and interpretive OMB Circulars A-
97 and A-25.\218\ As such, we have revised the regulatory text to 
remove language stating that State Exchanges must pay for their 
utilization of the VCI Hub service annually and in advance, as well as 
references to reconciliation. We summarize and respond to public 
comments received on the proposed policy below.
---------------------------------------------------------------------------

    \218\ See Circular No. A-25 Revised. https://www.whitehouse.gov/wp-content/uploads/2017/11/Circular-025.pdf. See also Circular No. 
A-97. https://www.whitehouse.gov/wp-content/uploads/2017/11/Circular-097.pdf.
---------------------------------------------------------------------------

    Comment: One commenter supported our proposal to reinterpret State 
Exchange and State Medicaid and CHIP agency use of the VCI Hub service 
to access CSI income data as a State Exchange or a State Medicaid and 
CHIP agency function. The commenter stated that being able to access 
CSI income data through the Hub would enhance the accuracy and 
efficiency of eligibility determinations for either Exchange QHP or 
Medicaid and/or CHIP coverage, while also improving the overall 
accuracy and protecting the integrity of the income verification 
process for eligibility for either of these programs.
    Response: We agree that use of the VCI Hub service and the CSI 
income data accessed through the service is an integral part of the 
eligibility determination process in most State Exchanges and State 
Medicaid and CHIP agencies and provides an optional means to improve 
the overall accuracy of income verifications, especially in cases where 
an applicant's annual or current income is not verified using other 
Federal data sources, such as IRS income tax data or SSA Title II 
income. We also agree that access and use of the VCI Hub service 
ensures the program integrity of Exchanges, as the income data accessed 
through the VCI Hub service can ensure that applicants who are eligible 
to receive APTC do so. Because of these benefits to both State 
Exchanges and State Medicaid and CHIP agencies, HHS will continue to 
maintain existing contracts that make access to these resources 
available through the Hub for State Exchange and State Medicaid and 
CHIP agency use, as HHS has over the course of the last decade. 
Additionally, State Exchanges and State Medicaid and CHIP agencies that 
do not have access to the VCI Hub service and wish to begin utilizing 
and paying for CSI income data accessed through the VCI Hub service may 
do so by submitting a request to HHS for review and approval to connect 
to the VCI Hub services, as States are not permitted to begin using the 
service without prior HHS approval. However, even though CSI income 
data accessed through the VCI Hub service is optional, we still believe 
that it is appropriate that this service be considered a State Exchange 
or State Medicaid and CHIP agency function.
    Comment: Several commenters opposed the proposal to require State 
Exchanges and State Medicaid and CHIP agencies to pay for their 
utilization of the CSI income data accessed through the VCI Hub service 
as they noted that it would negatively impact consumers in various 
ways. For example, some commenters were concerned that the proposal 
would undermine current State efforts to improve renewals of a 
consumer's eligibility for Medicaid or CHIP coverage. In particular, 
these commenters were concerned that the

[[Page 26306]]

proposal would limit States' use of available data to determine 
eligibility before requesting additional income information from the 
consumer, often referred to as ex parte renewals, which have been 
especially important since the Medicaid continuous enrollment condition 
ended and Medicaid unwinding began. One commenter noted that ex parte 
renewals allow a State Medicaid or CHIP agency to renew a consumer's 
coverage without requiring the consumer to submit a renewal form, and 
thus reduce the risk of loss of coverage due to procedural reasons. The 
commenter also noted that charging State Medicaid and CHIP agencies for 
their use of the VCI Hub service would only impede efforts to increase 
ex parte renewals (as has been encouraged by the Administration) 
because this policy would have significant fiscal impacts for Medicaid 
and CHIP agencies if additional income data is needed from the VCI Hub 
service. As a result, the commenter predicted that some State Medicaid 
and CHIP agencies may choose to stop using the VCI Hub service, which 
would impact Medicaid and CHIP renewals.
    A few commenters also expressed their concern that if State 
Exchanges or State Medicaid and CHIP agencies pivot to alternative data 
sources rather than using the CSI income data accessed through the VCI 
Hub service, less accurate data may lead to inaccurate eligibility 
determinations for either Exchange QHP or Medicaid and/or CHIP 
coverage, which could harm consumers by causing them to incur large tax 
liabilities due to income inaccuracies or increasing churn. Finally, a 
few commenters noted that the proposal could also lead to consumer harm 
due to increases in premiums, as States make budget adjustments to pay 
for their use of the VCI Hub service, whereas other commenters were 
concerned that charging Hub data fees could have negative impacts, such 
as reducing State flexibility to operate their own Exchanges as they 
see fit.
    Response: We believe that this policy change, which will take 
effect on July 1, 2024, should not significantly impact State Medicaid 
unwinding activities. After the continuous enrollment condition ended 
on March 31, 2023, States were required to, over time, complete 
renewals consistent with Federal requirements for all individuals 
enrolled in their Medicaid program as of that date, disenroll 
individuals if they were no longer eligible, and determine potential 
eligibility of those individuals for certain other sources of coverage. 
States are required under 42 CFR 435.916(a) to redetermine eligibility 
without requiring information from the individual (that is, ex parte 
renewal), unless necessary. Per 42 CFR 435.948(a), States generally 
have flexibility to decide what data sources are useful when conducting 
electronic data matches to verify income as part of the ex parte 
renewal process. Examples of income data sources that could be used in 
lieu of or in addition to the VCI Hub service to conduct ex parte 
renewals include but are not limited to: State quarterly wage data, 
State unemployment compensation data, State income tax data, 
Supplemental Nutrition Assistance Program (SNAP) data, and Temporary 
Assistance for Needy Families (TANF) data. We encourage States to use a 
variety of available data sources to maximize utilization of the ex 
parte process and ensure coverage is maintained for eligible 
individuals. Additionally, to support States facing significant 
operational and Medicaid eligibility and enrollment system issues and 
to help minimize procedural disenrollments as they resumed routine 
operations, we have granted States section 1902(e)(14)(A) waivers to 
support unwinding efforts.219 220 A number of these 
strategies are focused on facilitating the renewal process by limiting 
the need for requests for additional information from beneficiaries, 
thus leading to fewer procedural disenrollments and reducing State 
administrative burdens during this transition period.
---------------------------------------------------------------------------

    \219\ SHO# 22-001: Promoting Continuity of Coverage and 
Distributing Eligibility and Enrollment Workload in Medicaid, the 
Children's Health Insurance Program (CHIP), and Basic Health Program 
(BHP) Upon Conclusion of the COVID-19 Public Health Emergency: 
https://www.medicaid.gov/sites/default/files/2022-03/sho22001.pdf.
    \220\ Available State Strategies to Minimize Terminations for 
Procedural Reasons During the COVID-19 Unwinding Period: Operational 
Considerations for Implementation, December 2023: https://www.medicaid.gov/sites/default/files/2023-12/considerations-for-procedural-termination-strategies.pdf.
---------------------------------------------------------------------------

    We acknowledge the concern raised by commenters that if a State 
chooses to reduce its use of the VCI Hub service due to this policy 
change, this may result in additional requests for additional 
documentation or other information from individuals to verify income. 
However, we believe there are ways to mitigate this concern. Other 
reliable government data sources, whether State or Federal, are 
available to verify income, some of which must be accessed if useful 
(for example, quarterly wage data, income information from a SNAP case 
file if the individual is receiving SNAP benefits) before a State may 
require additional documentation from the individual.\221\ 
Additionally, States have the flexibility to implement strategic data 
hierarchies, which would allow States to implement business logic 
regarding how data sources and other available information are used in 
making an ex parte eligibility determination, including only requesting 
CSI income data from the VCI Hub service in cases where income could 
not be verified using these other data sources, such as the examples 
listed above. Because States have flexibility to adjust how and when 
they access the VCI Hub service, and because other reliable government 
sources of income information are available, we do not predict the 
policy will result in inaccurate eligibility determinations.
---------------------------------------------------------------------------

    \221\ We note, as discussed in the 2012 final rule on 
Eligibility Changes Under the Affordable Care Act of 2010, ``[t]he 
time lag in the availability of quarterly wage data would not 
justify a State concluding that such data is not useful to verifying 
income eligibility and routinely relying instead on documentation 
provided by the individual'' (77 FR 17175).
---------------------------------------------------------------------------

    We understand the concern raised from States that up-to-date and 
accurate income data is essential for both State Exchanges and State 
Medicaid and CHIP agencies to make accurate eligibility determinations 
for Exchange QHP, Medicaid, or CHIP coverage and that this policy may 
lead to consumers incurring large tax liabilities when filing their 
Federal income taxes or increase churn in and out of Medicaid or CHIP 
coverage. However, there are consumer protections in place to protect 
consumers from incurring large tax liabilities. For example, all 
Exchanges are required to give consumers the opportunity to provide 
more up-to-date and accurate income information through the income DMI 
process. There are also protections in place to help mitigate Medicaid 
and CHIP churn. For example, 42 CFR 435.916 and 457.343 generally 
require that the State Medicaid and CHIP agency provide a 90-day 
reconsideration period, or a longer period elected by the State, which 
allows Medicaid or CHIP beneficiaries who are disenrolled for failure 
to submit the renewal form or necessary information, to provide a 
renewal form or necessary information to their State Medicaid and CHIP 
agency to reconsider eligibility for Medicaid and/or CHIP without 
having to complete a new application. Furthermore, as finalized in the 
2024 Payment Notice (88 FR 25831), Exchanges now have the option under 
Sec.  155.420(c)(6) to provide consumers losing Medicaid or CHIP with 
90 days (instead of 60 days) after the loss of such coverage to enroll 
in a

[[Page 26307]]

QHP through an Exchange through a special enrollment period (SEP), 
which could also help ease transitions into Exchange QHP coverage.
    Finally, we acknowledge that this policy change may cause State 
Exchanges to raise their user fees to pay for accessing CSI income data 
through the VCI Hub service and that this may lead to premium increases 
for consumers. However, we believe that there are ways for States to 
prevent this potential outcome, such as accessing alternative data 
sources for income verification or implementing logic changes to their 
eligibility and enrollment systems to only request CSI income data when 
income cannot be verified using other data sources such as IRS income 
data, State quarterly wage data, etc.
    Comment: Several commenters expressed concern that the proposed 
effective date of July 1, 2024, would give States little time to 
account for the VCI Hub service costs into their FY 2025 budgets, 
explore the viability of alternative verification methods and/or data 
sources, or devise strategies to reduce their utilization of the VCI 
Hub service. A few of these commenters proposed specific delayed dates 
for implementation, ranging from 1 to 3 years after the proposed 
effective date of July 1, 2024. One commenter stated that 46 States 
have fiscal years that run from July 1 to June 30, allowing little time 
to account for the policy change that requires States to pay for their 
utilization of the CSI income data accessed through the VCI Hub service 
in their FY 2025 budgets, as some State legislatures begin this 
activity as early as January 2024. Another commenter noted that its 
State Exchange sets its user fee each year in February, and so would 
not have the opportunity to increase the user fees to pay for the 
policy until February 2025, and expressed concern that increasing user 
fees would have a chilling effect on issuer participation.
    Response: We are finalizing that beginning July 1, 2024, State 
Exchanges and State Medicaid and CHIP agencies will be required to 
reimburse HHS for the costs of their access to and use of the VCI Hub 
service. Because use of the VCI Hub service is optional for State 
Exchanges and State Medicaid and CHIP agencies to verify income, we do 
not believe that it is prudent to delay the implementation of this 
policy. State Exchanges and State Medicaid and CHIP agencies are 
responsible for determining eligibility for their respective programs 
(Exchange QHP coverage or Medicaid/CHIP) and thus responsible for the 
cost to access the optional CSI income data accessed through the VCI 
Hub service used to determine eligibility. Furthermore, States can 
utilize other government data sources (for example, IRS tax data and 
SSA title II data) that are free and, in most cases, will verify an 
applicant's income without the need to also access CSI income data 
accessed through the VCI Hub service.
    While we recognize States' concerns about funding this use of the 
CSI data by July 1, 2024, we have been proactively working with States 
since before the publication of the proposed rule to prepare States for 
this possible transition and will continue to do so. We believe that 
some of these concerns can be mitigated by strategizing ways to reduce 
their reliance on CSI income data by either using alternative data 
sources, such as State quarterly wage data to verify income, or only 
accessing CSI income data if States are unable to verify income using 
other available data sources. For example, an Exchange may implement 
logic changes within their eligibility systems to only request CSI data 
in cases where a consumer's current income could not be verified using 
IRS income tax or SSA title II income data, which would act as a cost-
saving measure for States. To ease the transition by July 1, 2024, we 
will work with States to help navigate how to pay for their use of the 
CSI income data, including those States with only one VCI Hub service 
connection for both their State Exchange and State Medicaid and CHIP 
agency which may require additional effort to allocate the payment 
responsibility between the State Exchange and State Medicaid and CHIP 
agency.
    Lastly, we reiterate that Exchanges and State Medicaid and CHIP 
agencies are not required to use the VCI Hub service to fulfill the 
mandatory eligibility determination requirements.\222\
---------------------------------------------------------------------------

    \222\ State Exchanges continue to have flexibility under 
Sec. Sec.  155.315(h) and 155.320(c)(3)(iv) to use an alternative 
verification source, like State wage data, when income is not 
verified using IRS tax data or SSA title II income data.
---------------------------------------------------------------------------

    Comment: Commenters stated that the proposal will create numerous 
operational and cost challenges for States and charging States for use 
of the VCI Hub service poses an unfair cost burden on State Exchanges. 
One commenter stated that the policy may cause costly system redesign 
or alternative arrangements, such as States establishing their own 
income verification service contracts, as well as increased complexity 
and costs associated with identifying usage of the VCI Hub service that 
is eligible for FMAP. Furthermore, the commenter stated that the new 
costs introduced by this proposal could discourage States from 
transitioning to or maintaining their status as a State Exchange in the 
future. Accordingly, these commenters suggested that HHS should make 
grants available to establish alternate income verification sources for 
States transitioning to a State Exchange, asserting that existing State 
Exchanges have had time to charge user fees, build reserves upon which 
to draw, and have benefited from years of the VCI Hub service without 
any cost to them. Another commenter cautioned that, given increasingly 
tight State budgets, this policy would represent an unanticipated 
outlay that might draw funds away from other critical programs.
    A few commenters objected to the policy on the grounds that HHS has 
not given States an estimate of the costs or historical volume of 
States' use of the VCI Hub service and requested that HHS do so before 
finalizing the policy. One commenter stated that HHS did not provide 
enough evidence as to why Hub data use fees are necessary, especially 
given that States have been successful in enrolling and protecting 
consumers using standards and processes that work best for the 
residents of their respective States. Another commenter noted that this 
policy, if finalized, would result in significant cost to States which 
could be detrimental to further utilization of the VCI Hub service and 
stated that States with a larger Medicaid and CHIP population will bear 
greater cost shift. The commenter stated that it is uncertain if the 
expense will remain sustainable for those States in future budget 
years.
    Response: It is appropriate to reinterpret State Exchange and State 
Medicaid and CHIP agency use of the VCI Hub service to access and use 
the income data provided by the optional VCI Hub service as a State 
Exchange or a State Medicaid and CHIP agency function. Therefore, it is 
also appropriate for States to be responsible for the cost of 
administering the program. Specifically, it is appropriate for States 
with greater Medicaid population and therefore higher use of the 
service to bear a greater cost because the costs of the service are 
driven by the number of returned data matches that the VCI Hub service 
initiates for consumers. Therefore, costs to States will be calculated 
by multiplying the actual number of purchased transactions returned 
from the VCI Hub service by the price per transaction for HHS to 
provide the VCI Hub service, as well as an administrative fee to 
reimburse HHS for any direct or indirect costs of making

[[Page 26308]]

CSI income data accessed through VCI Hub service available to Exchanges 
and State Medicaid and CHIP programs. More detailed cost information 
will be set forth in an Intergovernmental Cooperation Act Agreement 
(IGCA) between HHS and the State Exchange or State Medicaid and CHIP 
agency. We acknowledge that some States may choose to reduce or 
discontinue their use of the VCI Hub Service in response to the costs 
that the finalization of this policy represents to States. We will 
continue to provide the VCI Hub Service to States that choose to 
continue or begin using the VCI Hub service.
    We do not believe that the finalization of this policy will 
meaningfully discourage States from transitioning to, or maintaining, 
their status as a State Exchange. We anticipate that existing State 
Exchanges, as well as States considering transitioning to a State 
Exchange, will employ strategies to encourage efficient use of the VCI 
Hub service, as well as leverage other existing sources of income 
data.\223\ We believe that these strategies will help to keep costs 
below levels that would discourage States from transitioning to, or 
maintaining, their status as a State Exchange.
---------------------------------------------------------------------------

    \223\ State Exchanges continue to have flexibility under 
Sec. Sec.  155.315(h) and 155.320(c)(3)(iv) to use an alternative 
verification source, like State wage data, when income is not 
verified using IRS tax data or SSA title II data.
---------------------------------------------------------------------------

    Regarding the request that HHS provide grants to States newly 
transitioning to a State Exchange to obtain other data sources for 
income verification, currently, HHS is unable to establish such a grant 
program because it lacks the Congressional appropriation to do so. 
States transitioning to a State Exchange should set their Exchange user 
fees appropriately to fund their anticipated utilization of the VCI Hub 
Service (or establish an alternative income verification source such as 
State quarterly wage data) as HHS is setting the FFE and SBE-FP user 
fees to fund the FFE and SBE-FP utilization of the VCI Hub service.
    We also note that, to assist States in estimating the costs of 
continued utilization of the VCI Hub Service, and in anticipation that 
this proposal could be finalized, we made historical cost and 
utilization data of the VCI Hub service available to States with State 
Exchanges and State Medicaid and CHIP agencies that currently utilize 
the VCI Hub Service. We may share historical use data with other States 
that are considering using the VCI Hub service. However, we note that 
this information may be of limited value because of the wide variation 
in factors, such as individual State policy, whether or not a State 
Exchange shares an integrated eligibility system with the State 
Medicaid and CHIP agency, etc., which greatly impacts a State's 
utilization of the VCI Hub service. As noted earlier in this rule, we 
intend to work with States to help navigate how to pay for their use of 
the CSI income data.
    Comment: Several commenters stated that, should HHS finalize the 
proposal to reinterpret use of the VCI Hub service as a function of 
State Exchanges and Medicaid and CHIP agencies and not an HHS function, 
they would prefer a monthly invoice (``postpay'') approach because 
billing for their actual utilization of CSI income data accessed 
through the VCI Hub service would be simpler, more efficient, and would 
avoid additional costs associated with prebilling and reconciliation.
    A few commenters supported the proposal for HHS to charge State 
Exchanges and State Medicaid and CHIP agencies in advance for their 
projected annual use of the VCI Hub service (``to prepay''). One 
commenter stated that paying in advance for their anticipated annual 
usage with an annual reconciliation process would be easier 
administratively and would allow for more certainty in budgeting the 
State's share of the matching costs each year. Another commenter stated 
that a prepay approach may align well with a State's budget processes 
and the regular Advance Planning Document (APD) process used to obtain 
Federal Financial Participation (FFP). Further, the commenter also 
stated that a more frequent than annual (for example, monthly) 
invoicing and estimating usage of the VCI Hub service cadence would 
increase the administrative burden of maintaining the service and would 
be unlikely to alter the methodology by which the State develops costs 
estimates related to their use of the VCI Hub service. Another 
commenter stated that, if a prepay approach is finalized, it would be 
efficient to align the payment to HHS with the State's FFP schedule to 
allow more frequent reconciliation of VCI Hub service usage estimates.
    A few commenters suggested that, because different State Medicaid 
and CHIP agencies have different preferences on how they are invoiced, 
that HHS should consider providing States with several different 
invoicing options so that States can choose which invoicing cadence, 
such as monthly, quarterly, or annually, works best for their State.
    Response: In light of comments received, rather than require that 
States pay in advance for their utilization of the VCI Hub service as 
proposed, we are finalizing the alternative approach we proposed, 
whereby HHS will invoice States on a monthly basis for their actual 
utilization of the CSI income data accessed through VCI Hub service, as 
well as an administrative fee to account for any direct or indirect 
costs of making CSI income data accessed through VCI Hub service 
available to State Exchanges and State Medicaid and CHIP agencies.\224\ 
We agree with commenters that a postpay approach will reduce 
administrative burden on States, increase efficiency, and reflect a 
State Exchange's or State Medicaid and CHIP agency's actual utilization 
of the VCI Hub service from the month prior, rather than a yearly 
estimate that could vary widely due to unforeseen events. Even though 
monthly invoicing increases the frequency of invoices compared to 
annual invoicing, it will also allow State Exchanges and State Medicaid 
and CHIP agencies to quickly realize cost savings from efficient 
utilization of the VCI Hub service and allow State Exchanges and State 
Medicaid and CHIP agencies to become aware of inefficient utilization 
trends, which an annual invoice will not easily capture. We also agree 
with commenters that this alternative approach will avoid additional 
costs associated with prebilling and reconciliation.
---------------------------------------------------------------------------

    \224\ See Circular No. A-25 Revised. https://www.whitehouse.gov/wp-content/uploads/2017/11/Circular-025.pdf. See also Circular No. 
A-97. https://www.whitehouse.gov/wp-content/uploads/2017/11/Circular-097.pdf.
---------------------------------------------------------------------------

    Furthermore, this alternative or ``postpay'' approach will negate 
the need for States to establish, and for HHS to approve, an estimation 
methodology for their projected annual utilization of the VCI Hub 
service, which we believe would be challenging for States to estimate. 
While States could rely on historical utilization of the VCI Hub 
service to project future utilization, as Exchange populations continue 
to grow, past data could become less reliable and could result in 
inaccurate estimates, which could lead to an overly expensive and 
burdensome reconciliation process. Each of the States will execute an 
IGCA with CMS that must be in effect before the VCI Hub service can be 
utilized by the States. Under the terms of the IGCA, CMS will invoice 
the State for the actual costs of the State's use of CSI data provided 
via the VCI Hub service for the previous month.
    We also acknowledge the preference of a few commenters for a prepay 
approach for administrative ease and more certainty in budgeting the 
State share of the matching costs each year. However, we believe that a 
postpay

[[Page 26309]]

approach will be administratively simpler for both participating States 
and HHS compared to a prepay approach. Additionally, we note that, the 
finalization of a postpay approach notwithstanding, States will still 
need to budget for the State's share of matching costs based on their 
utilization estimates of the VCI Hub service.
    At this time, we are unable to facilitate a mixed approach, wherein 
participating States choose between a prepay and postpay approach. A 
mixed approach would require administering parallel sets of policies, 
timelines, and system builds. The operational complexity and 
inefficiency of such an approach would increase the cost of 
administering the VCI Hub Service.
    Comment: One commenter asked HHS to clarify that SBE-FP States 
would not be charged for VCI Hub service Exchange-related expenses as 
this should already be accounted for in the SBE-FP user fees that HHS 
already receives. One commenter proposed a discount on the FFE or SBE-
FP user fee for States that opt to use their own verification services 
instead of the VCI Hub service, stating that such an approach would 
encourage States to invest in alternative verification technologies, 
potentially leading to more tailored and State-specific solutions. One 
commenter opposed any attempt by HHS to apportion VCI Hub service fees 
for Exchange verification activities that result in determination of 
Medicaid, CHIP, or BHP, if applicable, eligibility, stating that these 
activities should be charged to the program for which the individual is 
determined eligible.
    Response: HHS will not invoice SBE-FPs for the cost of access to 
and use of the VCI Hub service when initiated by HHS to the VCI Hub 
service for income verification on behalf of SBE-FPs. Instead, a 
portion of the Exchange user fees that HHS already collects from 
issuers in FFEs and SBE-FPs will fund HHS' access to and use of the VCI 
Hub service on behalf of the FFE and SBE-FPs. HHS will charge Medicaid 
and CHIP agencies in States with SBE-FPs for their access to and use of 
the VCI Hub service.
    We will not reduce the FFE or SBE-FP user fee in an FFE or SBE-FP 
State where the State, State Medicaid and/or CHIP agency opts to use 
their own data source or service for verifying income, instead of the 
VCI Hub Service. Because the FFE and SBE-FP user fee rates are set as a 
percent of premium for all issuers in an FFE or SBE-FP and account for 
the cost of all special benefits provided to the FFE and SBE-FP, we do 
not make specific State adjustments.
    For apportionment of costs between various State programs, we 
clarify that in States with a single Hub connection, the allocation 
between the State Exchange and State Medicaid and CHIP agencies will be 
determined by the States and reported to HHS through the Advance 
Planning Document processes. Conversely, in States with multiple Hub 
connections, each purchased transaction that returned matched data from 
the VCI Hub service will be attributed to the Hub connection through 
which the purchased transaction was initiated. As previously noted, to 
help States assess the potential implications of this proposed policy 
change, we shared data with States on their historical usage of the VCI 
Hub service, broken out by Hub connection in States with more than one 
connection.
    Comment: A commenter stated that Congress should appropriately fund 
HHS and the Hub to ensure that Medicaid and CHIP agencies can access 
important sources of income data. Furthermore, that commenter sought 
clarification from HHS on FFP support for States that sought a direct 
contracting option with a commercial vendor. Another commenter 
supported that Medicaid and CHIP agencies would be eligible for Federal 
matching funds for the cost of the service.
    Response: We note that the finalization of this policy will fund 
State Exchanges' and State Medicaid and CHIP agencies' use of the VCI 
Hub service through monthly charges to those agencies, and fund FFE and 
SBE-FP use of the VCI Hub service through FFE and SBE-FP user fees and 
not by a new Congressional appropriation. We also note that States that 
choose to pursue a direct contracting option with a commercial vendor 
may be eligible for enhanced FFP from HHS for Medicaid utilization of 
these types of services, but not for State Exchange utilization of 
those services. We further note that States that choose to pursue a 
direct contracting option with a commercial vendor for their State 
Medicaid usage may be eligible for 75 percent matching for the 
operation of mechanized claims processing and information retrieval 
systems \225\ and 90 percent matching for any design, development, and 
installation (including for modifications) of eligibility and 
enrollment systems and/or other related Medicaid Enterprise System 
(MES) components used for Medicaid eligibility and determination 
purposes.\226\ For CHIP utilization of commercial vendor services, 
States may be eligible for Federal matching funds under the State's 
CHIP allotment. States should work with their MES State Officers 
through the APD process and ensure that any Federal cost allocation 
requirements (applicable where an expenditure supports multiple 
benefiting programs) for the acquisition and/or contract for these 
services are met.
---------------------------------------------------------------------------

    \225\ See 42 CFR 433.116.
    \226\ See 42 CFR 433.112.
---------------------------------------------------------------------------

    Comment: Another commenter opposed HHS' reinterpretation of the use 
of the VCI Hub service to verify APTC eligibility as a State Exchange 
function and not a Federal function, stating that section 1411 of the 
ACA makes HHS responsible for verification. The commenter asserted that 
section 1411(d) of the ACA allows HHS to delegate responsibility for 
verification to Exchanges, but not for verification of information 
outlined in section 1411(c) of the ACA (which includes income), and 
therefore HHS cannot delegate this verification to Exchanges.
    Response: We acknowledge that section 1411 of the ACA requires HHS 
to be responsible for income verification and clarify that the policy 
at issue here does not delegate income verification to the States. 
Section 1411(c)(3) of the ACA requires that the Secretary submit the 
information described in subsection (b)(3)(A) provided under paragraph 
(3), (4), or (5) of subsection (b) to the Secretary of the Treasury for 
verification of household income and family size for purposes of 
eligibility. However, in some situations, if government sources of 
income (like IRS tax data) indicate that the applicant(s)' attested 
income is significantly different from what IRS returns for the year 
for which coverage is requested, the applicant or enrollee is 
considered to have experienced a chance in circumstances, which allows 
HHS to establish procedures for determining eligibility for APTC and 
CSRs on information other than IRS tax return data as described in 
Sec.  155.320(c)(3)(iii)-(vi).\227\ In these situations, and where 
government sources of income are unavailable, data on current income 
may be used for eligibility determinations and redeterminations for 
financial assistance and is accessed through the VCI Hub service. In 
other words, the purpose of the optional VCI Hub service is to verify 
income in those instances where the Department of Treasury is unable to 
do so and would only be used once the Department of Treasury fails to 
verify income. Therefore, HHS is interpreting

[[Page 26310]]

the statute such that the obligation of the Secretary of HHS to verify 
income is fulfilled once the information has been verified against data 
provided by the Secretary of the Department of Treasury, and any 
additional efforts to verify income (such as through the VCI Hub 
Service) should be construed as being subject to section 1413 of the 
ACA, which gives the Secretary of HHS broad discretion in administering 
the program.
---------------------------------------------------------------------------

    \227\ See section 1412(b)(2) of the ACA.
---------------------------------------------------------------------------

    Comment: A few commenters responded to our request for information 
regarding the extent to which States may be interested in potential 
avenues to reduce operational burdens or address budget challenges 
facing State Exchanges and Medicaid and CHIP agencies, including 
whether the reuse of verification data, coupled with cost allocation 
across programs, would reduce operational burdens or address budget 
challenges, and whether States have separate, direct access to the same 
or similar source of VCI Hub services. One commenter stated that it is 
currently using the CSI data source for all Medicaid and CHIP 
applications but, in the future, will pursue streamlining by using the 
VCI Hub service only for a subset of applications that require 
additional post-eligibility verification. Another commenter was 
interested in the potential efficiencies gained from re-using Hub 
information across multiple State-managed programs but stated that more 
time would be needed to further evaluate such an option.
    Response: We appreciate commenters' interest in the re-use of CSI 
data delivered through the VCI Hub service. We will continue to 
evaluate this option and confer with States regarding efficiencies that 
could result from the re-use of CSI data.
13. Eligibility Redetermination During a Benefit Year (Sec.  
155.330(d))
    In the HHS Notice of Benefit and Payment Parameters for 2025 
proposed rule (88 FR 82510, 82578), we proposed updates and changes to 
155.330. At Sec.  155.330, we proposed to redesignate paragraph (d)(3) 
as paragraph (d)(3)(i) and add paragraph (d)(3)(ii) to require 
Exchanges to conduct periodic checks for deceased enrollees twice 
yearly and subsequently end deceased enrollees' QHP coverage beginning 
with the 2025 calendar year. Additionally, we proposed to add Sec.  
155.330(d)(3)(iii) to grant the Secretary the authority to temporarily 
suspend the periodic data-matching (PDM) requirement during certain 
situations or circumstances that lead to the unavailability of data 
needed to conduct PDM.
    Under Sec.  155.330(d), Exchanges are required to periodically 
examine available data sources, referred to as PDM, to identify whether 
enrollees become deceased, and to identify whether enrollees on whose 
behalf APTC or CSRs are being paid have been found eligible for or are 
enrolled in Medicare, Medicaid, CHIP, or the BHP, if a BHP is operating 
in the service area of the Exchange. Additionally, upon such 
identification, Sec.  155.330(e)(2)(i) requires Exchanges to notify the 
enrollee of the updated information and provide the notified enrollees 
30 days from the date of the notice to appeal PDM findings.
    Currently, Sec.  155.330(d)(3) defines ``periodically'' only for 
PDM activities that identify enrollment in Medicare, Medicaid, CHIP, 
and, if applicable, BHP, meaning that Exchanges must conduct Medicare 
PDM, Medicaid or CHIP PDM, and, if applicable, BHP PDM, twice a year. 
The current regulation does not specify the frequency by which PDM 
activities to identify deceased enrollees must occur, but the 2019 
Program Integrity Rule requires that Death PDM be conducted once 
annually, and we noted that we intended to update the frequency for 
Death PDM in future rulemaking. As explained in the 2019 Program 
Integrity Rule, we did not require Exchanges to perform PDM for death 
at least twice in a calendar year so that Exchanges could prioritize 
the implementation of the new requirement to conduct PDM for Medicare, 
Medicaid, CHIP and, if applicable, BHP eligibility or enrollment at 
least twice yearly. In the proposed rule, we proposed to add Sec.  
155.330(d)(3)(ii) to require Exchanges beginning with the 2025 calendar 
year to conduct periodic checks for deceased enrollees twice yearly and 
subsequently end deceased enrollees' QHP coverage after following the 
procedure specified in Sec.  155.330(e)(2)(i).
    Periodic checks for deceased enrollees help ensure Exchange program 
integrity. This policy would not only align with current FFE policy and 
operations but would also prevent overpayment of QHP premiums and APTC/
CSRs, and accurately capture household QHP eligibility based on 
household size. Additionally, by conducting Death PDMs twice a year, 
Exchanges can prevent future auto re-enrollments or policy effectuation 
for deceased enrollees for the next plan year.
    Additionally, we proposed to add Sec.  155.330(d)(3)(iii) to grant 
the Secretary the authority to temporarily suspend the PDM requirement 
during certain situations or circumstances that lead to an 
unavailability of data needed to conduct PDM. PDMs are conducted as a 
program integrity measure where the prerequisite for conducting a 
proper PDM is assurance of data quality. We recognize that during 
certain circumstances data quality may be incomplete or lagging. For 
example, during the COVID-19 Public Health Emergency, State and local 
agencies had to strain their resources to address backlogs due to job 
losses and other administrative gaps further slowing down response 
times,\228\ thereby, increasing the risk of the Exchanges making 
inaccurate eligibility determinations due to potential data lags. In 
such cases, using such data could pose a risk of improper termination 
of coverage or APTC/CSRs for large numbers of enrollees. These improper 
terminations may be particularly harmful to the consumers. These 
potential harms can be even more likely to occur when the additional 
burdens of DMI resolution are imposed on Medicare and Medicaid 
beneficiaries, who can be vulnerable and underserved and more likely to 
encounter gaps in coverage or a complete lack of coverage as a result 
of failing to resolve the DMIs.\229\ Allowing the Secretary the 
flexibility to temporarily suspend the PDM requirement during certain 
situations where there may be enrollment or data lags may be able to 
prevent an inadvertent increase in the uninsured population, which 
largely consists of vulnerable consumers. We will notify Exchanges of 
such a suspension of PDM activities, and a resumption of PDM 
activities, through subregulatory guidance.
---------------------------------------------------------------------------

    \228\ McDerrmott, D., Cox, C., Rudowitz, R, and Garfield, R. 
(2020, Dec. 9). How Has the Pandemic Affected Health Coverage in the 
U.S.? KFF. https://www.kff.org/policy-watch/how-has-the-pandemic-affected-health-coverage-in-the-u-s/.
    \229\ Hirsch, M. (1994). Health Care of Vulnerable Populations 
Covered by Medicare and Medicaid. Health Care Finance Rev.,15(4):1-
5. https://www.ncbi.nlm.nih.gov/pmc/articles/PMC4193433/.
---------------------------------------------------------------------------

    We anticipate most State Exchanges would be able to meet the 
proposed requirements for Death PDM based on operations already 
reported through the State-based Marketplace Annual Reporting Tool 
(SMART) as well as discussions we have had with the State Exchanges on 
PDM. We also anticipate that changes, including a suspension of the PDM 
requirement, would be well received by the Exchanges and issuers, as it 
is important that consumer information, such as eligibility for APTC or 
QHP coverage, be accurate to avoid expending administrative resources 
on complex processes to correct errors. Eleven State Exchanges reported 
in their

[[Page 26311]]

2022 SMART submissions that they curtailed PDM checks only due to the 
exigency resulting from the COVID-19 Public Health Emergency, which 
expired in May of 2023. Furthermore, we do not anticipate the new 
periodicity requirement for the Death PDM to result in a significant 
administrative burden for State Exchanges because States previously 
conducted PDM checks for deceased enrollees.
    Under section 1313(a)(4) of the ACA, if HHS determines that an 
Exchange has engaged in serious misconduct with respect to compliance 
with Exchange requirements, it has the option to rescind up to 1 
percent of payments due to a State under any program administered by 
HHS until such misconduct is resolved. These existing authorities apply 
to the PDM requirements in Sec.  155.330(d). If HHS were to determine 
that it is necessary to apply this authority due to non-compliance by 
an Exchange with Sec.  155.330(d), HHS would also determine the HHS-
administered program from which it would rescind payments that are due 
to that State. However, if State Exchanges do not comply with the PDM 
requirements, we generally first direct a State Exchange to take 
corrective action. We utilize specific oversight tools (for example, 
the SMART, independent external programmatic & financial audits) to 
ensure compliance and that State Exchanges take appropriate corrective 
action. HHS also provides technical assistance and ongoing monitoring 
to track those actions until the State Exchange remediates the issue 
fully. We sought comment on this proposal.
    After consideration of comments and for the reasons outlined in the 
proposed rule and our responses to comments, we are finalizing this 
provision with modifications. The final rule will require Exchanges to 
start conducting Death PDMs two times a year beginning calendar year 
2025 and will allow the Secretary to temporarily pause PDM during 
certain situations or circumstances that lead to the limited 
availability of data (instead of the unavailability of data, as 
proposed) needed to conduct PDM. We are also adding that the Secretary 
may temporarily pause PDM during certain situations or circumstances 
that lead to the limited availability of documentation needed for an 
enrollee to notify the Exchange that the result of PDM is inaccurate, 
as described in paragraph (e)(2)(i)(C). We summarize and respond to 
public comments received on the proposed policy below.
    Comment: Many commenters supported the proposal to allow the 
Secretary of HHS to temporarily pause PDMs in the event data is 
unavailable to conduct PDM, which may harm consumer enrollment, and for 
the Exchanges to start conducting Death PDMs twice a year starting PY 
2025, in compliance with the ACA requirement.
    Response: We thank the commenters for their support of the proposed 
rule to allow the Secretary of HHS to temporarily pause PDMs in certain 
situations that lead to the unavailability of data needed to conduct 
PDM to limit inadvertent harm to the consumers, and for the Exchanges 
to conduct Death PDMs two times a year and end coverage for identified 
deceased enrollees, thus stopping premium payments and ending coverage 
after proper notification. In the proposed rule, we proposed the 
``unavailability'' of data is when the Secretary would exercise the 
authority to temporarily pause PDMs. In this final rule, we are 
changing ``unavailability'' to ``limited'' availability. From an 
operational and consumer experience standpoint, if complete data is not 
readily available for either the Exchanges or consumers, running a PDM 
may cause inadvertent harm. As a PDM results in termination of coverage 
or complete cessation of financial assistance, Exchanges may be 
rendering consumers uninsured and consumers may also not have 
sufficient documentation to appeal their dual enrollment or deceased 
status due to limited data available from the respective entities.
    Comment: One commenter asked for a clarification that the 
requirement to conduct PDMs is an Exchange requirement and not an 
issuer or DE requirement. The commenter proposed that CMS create unique 
transaction codes to communicate identified deceased enrollee amongst 
entities.
    Response: This policy is for Exchanges to maintain program 
integrity of its operations by identifying and removing deceased 
enrollees twice a year. We ask issuers in Exchanges on the Federal 
platform to direct callers who wish to report a deceased enrollee to 
the Marketplace Call Center at 1-800-318-2596 (TTY: 1-855-889-4325). We 
thank the commenter for the recommendation to implement unique 
transaction codes so Exchanges and issuers can communicate identified 
deceased enrollees. If an enrollee has been verified as deceased 
through the Death PDM process, Exchanges on the Federal platform send 
the issuer an Outbound 834 with a Maintenance Reason Code of ``Term-
PDM'' or ``Cancel-PDM'' which notifies the issuer of upcoming 
termination or cancellation of the deceased enrollee's Exchange 
coverage, unless otherwise resolved within 30 days of initial 
notification to the consumer.
    Comment: A few commenters supported the proposal and asked CMS to 
provide clarity and specific examples and scenarios as to when the 
Secretary of HHS can pause PDM operations, as poor enrollment data can 
occur outside a public health emergency.
    Response: This policy will allow the Secretary to pause PDM 
operations under certain circumstances that lead to the limited 
availability of data needed to conduct PDM. Outside of a public health 
emergency, such circumstances may include enrollment or data lags. We 
are also finalizing that the Secretary may temporarily pause PDM during 
certain situations or circumstances that lead to the limited 
availability of documentation needed for an enrollee to notify the 
Exchange that the result of PDM is inaccurate, as described in 
paragraph (e)(2)(i)(C), If a consumer cannot provide sufficient 
documentation to appeal the PDM findings, they are likely to remain 
uninsured as the PDM process will likely cause the termination of their 
coverage or financial assistance.
    Comment: One commenter stated that requiring States to conduct PDM 
two times a year limits States' flexibility. A few commenters firmly 
opposed the proposed amendment, claiming that the rationale provided 
does not justify additional Federal requirements and that Death PDM is 
unlikely to identify inappropriate enrollments such that the program 
integrity benefits outweigh the cost.
    Response: Based on our experience operating the Federal Platform, 
running Death PDMs two times per year has proven to identify a 
substantial number of deceased enrollees. We believe that this two-
times-a-year requirement is a vital program integrity measure to reduce 
the amount of QHP premiums paid by the deceased enrollees and the 
amount of APTC paid on behalf of the deceased enrollees. As allowed 
under Sec.  155.315(h), State Exchanges have the ability to propose to 
HHS alternative approaches for verifying the consumer information 
required under 45 CFR part 155, subpart D, which includes the periodic 
verification of death status by Exchanges. Per Sec.  155.315(h), HHS' 
criteria for evaluating these alternative approaches include reduction 
of administrative costs and burdens on individuals while maintaining 
accuracy and minimizing delay, as well as maintaining coordination of 
eligibility with Medicaid and CHIP.

[[Page 26312]]

14. Incorporation of Catastrophic Coverage Into the Auto Re-Enrollment 
Hierarchy (Sec.  155.335(j))
    In the HHS Notice of Benefit and Payment Parameters for 2025 
proposed rule (88 FR 82510, 82579), we proposed to incorporate 
catastrophic coverage as defined in section 1302(e) of the ACA into the 
auto re-enrollment hierarchy at Sec.  155.335(j). We proposed this 
policy because the regulation did not address auto re-enrollment for 
catastrophic coverage enrollees, nor did it address a scenario in which 
a catastrophic coverage enrollee would lose eligibility for 
catastrophic coverage in the coming plan year either because they 
exceeded the 30-year age limit or lost eligibility for the exemption 
that allowed them to enroll in a catastrophic plan in spite of 
exceeding the age limit.\230\ Specifically, we proposed to amend Sec.  
155.335(j)(1) and (2) to require Exchanges to re-enroll individuals who 
are enrolled in catastrophic coverage, and who no longer meet the 
criteria for enrollment in a catastrophic plan, into a bronze metal 
level QHP in the same product as the enrollee's current QHP (in the 
case of paragraph (j)(1)), or in the product offered that is the most 
similar to (in the case of paragraph (j)(2)) the enrollee's current 
product, and that has the most similar network compared to the 
enrollee's current QHP; or if no bronze plan is available through this 
product, in the QHP with the lowest coverage level offered under this 
product and that has the most similar network compared to the 
enrollee's current QHP. We also proposed to amend Sec.  
155.335(j)(1)(ii) to (iv) and Sec.  155.335(j)(2)(i) to (iii) to use 
the term ``coverage level'' instead of ``metal level'' so that the 
rules in this section are inclusive of catastrophic coverage enrollees. 
Finally, we proposed to add new Sec.  155.335(j)(5) to establish that 
an Exchange may not newly auto re-enroll into catastrophic coverage an 
enrollee who is currently enrolled in coverage of a metal level as 
defined in section 1302(d) of the ACA. We stated that as part of this 
proposed policy, we would update the Federally-facilitated Exchange 
(FFE) Enrollment Manual to incorporate catastrophic coverage into the 
re-enrollment hierarchy for alternate enrollments, sometimes referred 
to as cross issuer enrollments.\231\
---------------------------------------------------------------------------

    \230\ See Sec.  155.305(h).
    \231\ The FFE Enrollment Manual includes the hierarchy that we 
use to implement Sec.  155.335(j)(3) in Exchanges using the Federal 
platform to crosswalk enrollees whose current issuer no longer offer 
plans available to them through the Exchange. For example, see CMS. 
(2023, July 12). Federally-facilitated Exchange (FFE) Enrollment 
Manual. CMS. Section 3.2.4, pp 29-30. https://www.cms.gov/files/document/ffe-enrollment-manual-2023-5cr-071323.pdf.
---------------------------------------------------------------------------

    We solicited comment on these proposals, including whether they 
reflected the State Exchanges' current practices, whether we should 
consider proposing changes to the auto re-enrollment hierarchy to 
prioritize re-enrollment in catastrophic coverage for enrollees who 
remain eligible for catastrophic coverage in a way that is similar to 
current prioritization of silver level coverage per Sec.  
155.335(j)(1)(ii), and whether there are additional strategies to help 
ensure continuity of coverage for enrollees in catastrophic QHPs.
    After consideration of comments and for the reasons outlined in the 
proposed rule and in our responses to comments, we are finalizing this 
policy as proposed, except that we are amending the new language that 
we proposed at Sec.  155.335(j)(1)(v) and (j)(2)(iv) to incorporate the 
phrase, ``to the extent permitted by applicable State law.'' This 
change aligns these new policies with existing re-enrollment hierarchy 
rules, including Sec.  155.335(j)(2) and (j)(3), which include this 
phrase to indicate that Exchanges must take into account applicable 
State law when implementing auto re-enrollment. As discussed in further 
detail below, this change is also in response to a public comment that 
said Connecticut State law does not permit auto re-enrolling 
catastrophic coverage enrollees losing eligibility for catastrophic 
coverage. We summarize and respond to public comments below.
    Comment: Many commenters supported the proposed policy because they 
agreed that it would help promote continuous coverage for Exchange 
enrollees with catastrophic coverage who do not actively select a plan 
for the upcoming plan year, including enrollees who lose eligibility 
for catastrophic coverage. Several commenters cited State Exchanges, 
including Washington Healthplanfinder and MNsure, that already 
automatically re-enroll catastrophic coverage enrollees.
    Response: We appreciate the information that some State Exchanges 
already auto re-enroll catastrophic coverage enrollees. We agree that 
the policy will help promote continuity of coverage, and as noted in 
the proposed rule, believe that it will also promote transparency and 
clarity for all Exchanges' interested parties.
    Comment: One commenter stated that CMS should explain why current 
State Exchange practices are insufficient. Another commenter stated 
that the proposal did not appear to address an industry issue. Many 
commenters recommended that CMS provide State Exchanges with 
flexibility in terms of whether or when to implement the policy, 
including a number of commenters who otherwise supported the goal of 
helping enrollees maintain continuous coverage. A few commenters that 
opposed the proposal cited their general opposition to limits on State 
flexibility.
    One commenter stated that the Idaho State Exchange had already 
addressed the problems that the proposed rule intended to solve, 
including this proposal. A few commenters stated that the proposal 
would not be effective because several State Exchanges do not currently 
have the ability to auto re-enrollee catastrophic coverage enrollees. 
Another commenter stated that Connecticut law prohibits auto re-
enrolling enrollees losing eligibility for their catastrophic coverage, 
because a law specifies that only a licensed producer or agent may 
recommend a specific plan to a consumer.
    Several commenters recommended that, rather than requiring State 
Exchanges to automatically re-enroll catastrophic coverage enrollees, 
CMS should allow Exchanges to encourage these consumers to actively 
select a new plan, especially in cases where an enrollee would lose 
eligibility for catastrophic coverage. One commenter stated that 
Connect for Health Colorado does not auto re-enroll enrollees losing 
eligibility for catastrophic coverage, and instead performs outreach 
encouraging them to choose a plan that works best for them.
    Several commenters asked that, if the proposal is finalized, CMS 
continue allowing Exchanges to determine their own auto re-enrollment 
hierarchy.
    Response: In response to the comment that Connecticut State law 
does not permit auto re-enrolling catastrophic coverage enrollees 
losing eligibility for catastrophic coverage, we are amending the 
proposed language at Sec.  155.335(j)(1)(v) and (2)(iv) to incorporate 
the phrase, ``to the extent permitted by applicable State law,'' to 
reflect that Exchanges must take into account applicable State law when 
implementing auto re-enrollment. This language aligns paragraph 
(j)(1)(v) with the rest of Sec.  155.335(j); for example, the language 
at paragraphs (j)(2) and (3) specifies that those policies are subject 
to applicable State law. CMS' technical assistance materials also 
account for the fact that Exchange re-enrollment practices may vary 
based on applicable State law. For example, the Frequently Asked 
Questions for the 2023 Marketplace Open Enrollment Period Public Use 
Files explains that certain

[[Page 26313]]

plan crosswalk metrics are not reported for State Exchanges because 
since not all State Exchanges allow for consumers whose product is 
discontinued or whose issuer no longer offers any QHPs to be 
automatically re-enrolled in a new plan.\232\
---------------------------------------------------------------------------

    \232\ See 2023 Public Use Files FAQs (PDF) (https://www.cms.gov/files/document/2023-public-use-files-faqs.pdf), and 2023 Marketplace 
Open Enrollment Period Public Use Files (https://www.cms.gov/data-research/statistics-trends-and-reports/marketplace-products/2023-marketplace-open-enrollment-period-public-use-files).
---------------------------------------------------------------------------

    We are otherwise finalizing the policy as proposed, because we 
believe that automatically re-enrolling all Exchange enrollees who do 
not actively select a plan or terminate their coverage is important to 
help ensure continuity of coverage. We intended this policy to protect 
against disruptions in care that could be avoided through 
implementation of a re-enrollment hierarchy for enrollees in 
catastrophic coverage. We explained in the proposed rule (88 FR 82579) 
that while Exchanges on the Federal platform generally already auto re-
enroll these enrollees, the absence of a re-enrollment hierarchy in 
regulation for catastrophic coverage enrollees meant that we could not, 
as operator of Exchanges on the Federal platform, require issuers to 
provide plan crosswalk information for enrollees losing eligibility for 
catastrophic coverage. We are of the view that this consumer-protective 
policy is reasonable and appropriate regardless of whether it addresses 
an industry issue.
    State Exchanges that cannot implement or choose not to implement 
the re-enrollment hierarchy as described in this rule may seek approval 
from the Secretary to conduct their own annual eligibility 
redetermination process, as described in Sec.  155.335(a)(2)(iii). We 
already consider State Exchanges' requests for flexibility in this area 
on an annual basis, as part of their submission of their eligibility 
re-determination and re-enrollment plans, both in order to mitigate 
burden and to permit innovation that allows Exchanges to best serve 
their enrollees.
    We also appreciate the additional detail from commenters on the 
extent to which State Exchanges do or do not incorporate enrollees in 
catastrophic coverage into their auto re-enrollment processes, 
including that some Exchanges do not currently auto re-enroll 
catastrophic coverage enrollees, or do not automatically re-enroll 
those who will lose eligibility for catastrophic coverage. We agree 
that an ideal enrollment experience is one in which an enrollee 
actively chooses a plan that best fits their needs for the coming year, 
and we note that auto re-enrollment does not prevent Exchanges from 
also performing robust outreach and engagement encouraging all 
enrollees, including those with catastrophic coverage, to actively 
select a new plan for the coming year. This policy, like the rest of 
the auto re-enrollment hierarchy at Sec.  155.335(j), is a safeguard to 
prevent enrollees from losing coverage if they do not actively select a 
plan or cancel their coverage by the end of the annual open enrollment 
period.
    Comment: Two commenters said that this proposal would increase 
health insurance premiums due to increased burden on State Exchanges 
and QHP issuers.
    Response: We disagree that this policy will increase health 
insurance premiums due to increased burden on QHP issuers or State 
Exchanges. As discussed in the proposed rule (88 FR 82580), as the 
operator of Exchanges on the Federal platform, we already include 
almost all catastrophic coverage enrollees in our annual auto re-
enrollment process; therefore, this policy will not increase burden on 
us or on issuers that participate in Exchanges on the Federal platform. 
Furthermore, while two commenters raised general concerns associated 
with increased costs of health insurance, they did not specify how or 
why an Exchange or issuer would incur costs associated with 
incorporating catastrophic coverage enrollees into existing auto re-
enrollment processes already required by Sec.  155.335(j). Thus, we do 
not anticipate that finalization of this policy will result in 
sufficient Exchange or issuer burden to cause premium increases. 
Nevertheless, we note that in the unlikely event that compliance with 
this policy would be burdensome for an Exchange to the point that it 
would result in increased premiums, as discussed earlier, Exchanges may 
seek approval from the Secretary for flexibility as described in Sec.  
155.335(a)(2)(iii).
    We also do not anticipate that implementation of this policy would 
increase QHP issuer burden that would lead to increases in premiums, 
because issuers participating in Exchanges on the Federal platform have 
not raised concerns about supporting auto re-enrollment for 
catastrophic coverage enrollees. As discussed in the proposed rule (88 
FR 82580), only one QHP issuer participating in our auto re-enrollment 
process for Exchanges on the Federal platform did not submit a 
crosswalk option for enrollees losing catastrophic coverage 
eligibility, indicating that compliance with this policy would not 
increase issuers' costs beyond those associated with the existing 
annual QHP Certification process.
    Comment: A few commenters raised the concern that auto re-enrolling 
catastrophic coverage enrollees into a metal level plan could increase 
enrollees' monthly premium payments without their knowledge. One 
commenter added that catastrophic coverage enrollees who are re-
enrolled into bronze coverage could experience further increases in 
premiums in the event the more generous subsidies provided for in the 
ARP and extended by the IRA expire.\233\
---------------------------------------------------------------------------

    \233\ Section 9661 of the ARP amended section 36B(b)(3)(A) of 
the Internal Revenue Code for tax years 2021 and 2022 to decrease 
the applicable percentages used to calculate the amount of household 
income a taxpayer is required to contribute to their second lowest 
cost silver plan, which generally result in increased PTC for PTC-
eligible taxpayers. For those with household incomes no greater than 
150 percent of the FPL, the new applicable percentage is zero, 
resulting in availability of one or more silver-level plans with a 
net premium of $0, if the lowest or second-lowest cost silver plan 
covers only EHBs. The Inflation Reduction Act of 2022 extended these 
changes through tax year 2025.
---------------------------------------------------------------------------

    Response: Section 155.335(c)(3) mitigates the risk that enrollees 
could be enrolled in a metal level plan that increases their premiums 
without their knowledge by requiring all Exchanges to provide a 
qualified individual with an annual redetermination notice that 
includes projected eligibility for the following year, including, if 
applicable, the amount of any APTC and the level of any CSRs or 
eligibility for Medicaid, CHIP or BHP. We send enrollees covered 
through an Exchange on the Federal platform their first reminder to 
update their application and select coverage for the upcoming plan year 
by November 1, the start of Open Enrollment. Also, re-enrollment 
notices that we send to enrollees in all Exchanges on the Federal 
platform are already designed to advise enrollees of the possibility of 
increased cost when applicable, because monthly premiums regularly 
increase from year to year, even for the same plan.\234\
---------------------------------------------------------------------------

    \234\ For a more detailed discussion of CMS annual auto re-
enrollment noticing practices see the HHS Notice of Benefit and 
Payment Parameters for 2024 Final Rule (88 FR 25824).
---------------------------------------------------------------------------

    Finally, we acknowledge that catastrophic coverage enrollees who 
are re-enrolled into bronze coverage could experience increases in 
premiums, including in the event the more generous subsidies provided 
for in the ARP and the IRA expire, and that the expiration of the more 
generous subsidies may cause the amount of premium that must be paid 
directly by the catastrophic coverage enrollee to increase. This, 
however, would be true

[[Page 26314]]

for enrollees at all metal levels, and the risk of increased out-of-
pocket premium costs for enrollees does not outweigh the benefits of 
this policy, which is intended to ensure continuity of coverage for as 
many people as possible, including catastrophic coverage enrollees who 
do not return to the Exchange to actively re-enroll in coverage.
    Comment: A few commenters supported the goal of maintaining 
continuous coverage but raised concerns that auto re-enrollment 
hierarchies may not take into account certain important factors. One 
commenter stated that the current auto re-enrollment hierarchy might 
not adequately account for children's unique health care needs because 
of its focus on providing continuity regarding cost-sharing 
requirements. This commenter recommended stronger universal standards 
for benefits and provider networks, and additional mechanisms to ensure 
alignment between enrollees' current and future plans. Another 
commenter stated that a metal level QHP might not be affordable for 
enrollees who previously had catastrophic coverage and suggested that 
CMS consider a limit on premium or out-of-pocket cost increases for 
automatic enrollment or require plans to provide appropriate 
notification before auto re-enrolling. One commenter asked CMS to 
consider the importance of non-EHB benefits in the auto re-enrollment 
hierarchy, such as dental, vision, or allergy testing benefits.
    Response: We did not propose changes to the re-enrollment hierarchy 
other than incorporating catastrophic coverage into Sec.  155.335(j); 
therefore, any comments on other elements of the re-enrollment 
hierarchy are outside the scope of this rulemaking. We also note that 
this policy does not impact potential issues of benefit or network 
continuity. We acknowledge comments on potential drawbacks to the 
current re-enrollment hierarchy and recommendations to improve 
continuity of coverage based on prioritization of factors that 
enrollees may value. In particular, we will consider potential future 
parameters based on total out-of-pocket cost, though we note that this 
consideration may in some cases conflict with prioritizing plan 
benefit, network type, or product continuity.
    Comment: Several commenters stated that CMS should also allow 
Exchanges to automatically re-enroll enrollees losing catastrophic 
coverage eligibility into a higher metal level QHP when possible, 
without increasing the enrollee's monthly premiums or changing their 
provider network. Some of these commenters added that this would be 
especially helpful for enrollees in catastrophic coverage who would 
qualify for CSRs if automatically re-enrolled in a silver plan. One 
commenter stated that Washington Healthplanfinder already implements 
this policy and has auto re-enrolled more than 50 people aging out of 
catastrophic coverage into a silver QHP with the same or lower premium 
and same carrier and network. The commenter noted that this was 
possible due to a State-based subsidy of up to $250 per month for those 
with incomes under 250 percent FPL who enroll in a silver or gold level 
standard plan.
    Response: We appreciate comments on potential benefits of amending 
the re-enrollment hierarchy to allow Exchanges to auto re-enroll 
catastrophic coverage enrollees into a silver level QHP based on 
financial assistance eligibility. We are not finalizing this policy as 
we need more time to explore the benefits and detriments of such a 
policy. We will consider these comments for future rulemaking. 
Additionally, as discussed earlier, an Exchange may request to apply a 
modified hierarchy to its auto re-enrollment process if approved by the 
Secretary pursuant to Sec.  155.335(a)(2)(iii), including to auto re-
enroll catastrophic enrollees into a higher metal level.
    Comment: One commenter stated that an SEP for former catastrophic 
coverage enrollees who are auto re-enrolled to a bronze plan could help 
consumers avoid a tax liability if they are auto re-enrolled in a plan 
with a higher premium.
    Response: We did not propose and will not finalize any changes to 
SEPs related to incorporating catastrophic coverage into the re-
enrollment hierarchy at Sec.  155.335(j). We appreciate and will take 
the comment under consideration.
    Comment: A few commenters recommended that CMS delay the 
implementation deadline for the policy. One commenter stated that a 
delayed deadline would be helpful because of the 9-12-month lead time 
needed to implement most changes to State Exchanges' IT systems. A few 
commenters stated that flexibility would be helpful given that CMS was 
also proposing a number of other requirements with which Exchanges 
would be required to comply. Another commenter stated that Exchanges 
might need additional time to implement this and other proposed 
policies given increases in enrollment of new or returning consumers 
whose Medicaid coverage is ending due to the expiration of the Medicaid 
continuous enrollment condition in section 6008(b)(3) of the Families 
First Coronavirus Response Act (Pub. L. 116-127).
    Response: We are finalizing this policy with the implementation 
deadline proposed because we believe that automatically re-enrolling 
all Exchange enrollees who do not actively select a plan or terminate 
their coverage is important to help ensure continuity of coverage. As 
discussed previously, State Exchanges that cannot implement or choose 
not to implement the re-enrollment hierarchy as described in this rule 
make seek approval from the Secretary to conduct their own annual 
eligibility redetermination process, as described in Sec.  
155.335(a)(2)(iii), including to defer implementation of this policy to 
a plan year after 2025.
    Comment: A few commenters supported prioritizing auto re-enrollment 
in catastrophic coverage the same way that the current hierarchy 
prioritizes auto re-enrollment in a silver plan--that is, if a silver 
level plan is no longer available in the same product, the Exchange 
must crosswalk to a silver plan in another product that is most 
similar.
    Response: We appreciate these comments in response to our 
solicitation for comments. We did not propose and therefore are not 
incorporating this policy into the final rule but may consider 
proposing this policy in future rulemaking.
15. Premium Payment Deadline Extensions (Sec.  155.400(e)(2))
    In the HHS Notice of Benefit and Payment Parameters for 2025 
proposed rule (88 FR 82510, 82581), we proposed to amend Sec.  
155.400(e)(2) to codify that the flexibility for issuers experiencing 
billing or enrollment problems due to high volume or technical errors, 
or issuers directed to do so by applicable State or Federal 
authorities, is not limited to extensions of the binder payment.
    Section 155.400(e) specifies that Exchanges may require, and the 
FFEs and SBE-FPs will require, enrollees to make a binder payment to 
effectuate enrollment, and paragraph (e)(1) specifies the range of 
dates within which an issuer may establish a deadline to pay binder, 
depending on whether coverage is being effectuated under regular, 
prospective, or retroactive effective dates. In the 2018 Payment Notice 
(81 FR 94058), we added paragraph (e)(2) to address situations in which 
an issuer is unable to timely process binder payments submitted by 
enrollees, which may impact an enrollee's ability to effectuate

[[Page 26315]]

coverage. Specifically, we noted that based on our experience during 
several open enrollment periods, issuers occasionally experience 
technical errors, or a processing backlog caused by an unusually high 
volume of enrollments. As a result, enrollees may be temporarily unable 
to submit premium payments, or the issuer may be unable to process 
payments in a timely manner. We thus established an option for issuers 
to implement a reasonable extension of binder payment deadlines,\235\ 
which ensures that enrollees do not have coverage cancelled due to non-
payment when the enrollee did not have adequate time to pay the binder 
payment.
---------------------------------------------------------------------------

    \235\ We also stated that we do not anticipate extensions to be 
greater than 45 calendar days.
---------------------------------------------------------------------------

    Although we only addressed extensions to the binder payment 
deadlines in Sec.  155.400(e)(1), we did not intend to exclude other 
premium payment scenarios in which Exchanges could, and the Exchanges 
on the Federal platform would, provide similar flexibility. In 
published guidance, such as the 2023 Federally-facilitated Exchange 
(FFE) Enrollment Manual,\236\ we stated that we will exercise 
enforcement discretion with regard to regulatory requirements, such as 
the binder payment and the deadline for payment of premiums under grace 
periods if an issuer is complying with a State regulatory authority's 
request to extend premium payment deadlines and delay termination of 
coverage due to a natural disaster or other emergency within the State.
---------------------------------------------------------------------------

    \236\ CMS. (2023, July 12). 2023 Federally-facilitated Exchange 
(FFE) Enrollment Manual. CMS. Section 6.1.3, p. 89, and Section 
6.10, p. 110. https://www.cms.gov/files/document/ffe-enrollment-manual-2023-5cr-071323.pdf.
---------------------------------------------------------------------------

    For example, in connection with the COVID-19 Public Health 
Emergency declared by the Secretary, HHS exercised enforcement 
discretion \237\ regarding issuers extending premium payment deadlines 
and delaying cancellations or terminations of coverage with the 
permission of the applicable State regulatory authority. We proposed to 
codify that Exchanges may, and Exchanges on the Federal platform would, 
provide flexibility in such circumstances, including circumstances in 
which an issuer is directed to do so by applicable State or Federal 
authorities.
---------------------------------------------------------------------------

    \237\ Pate, R. (2020, March 24). Payment and Grace Period 
Flexibilities Associated with the COVID-19 National Emergency. CMS. 
https://www.cms.gov/files/document/faqs-payment-and-grace-period-covid-19.pdf.
---------------------------------------------------------------------------

    Because current paragraph (e)(2) may be read to limit the 
flexibility Exchanges could provide issuers regarding payments other 
than the binder payment, we also proposed to add the phrase ``and other 
premium payment deadlines.'' Doing so clarifies for interested parties, 
particularly issuers, that Exchanges may, and Exchanges on the Federal 
platform will, provide flexibility regarding premium payment 
requirements other than the binder payment, such as the requirement to 
trigger a grace period to enrollees receiving APTC under Sec.  
156.270(d) if enrollees fail to pay premiums timely.
    We requested comments on this proposal.
    After consideration of comments and for the reasons outlined in the 
proposed rule and our responses to comments, we are finalizing this 
provision as proposed to amend Sec.  155.400(e)(2) to codify that the 
flexibility for issuers experiencing billing or enrollment problems due 
to high volume or technical errors is not limited to extensions of the 
binder payment. We summarize and respond to public comments received on 
the proposed policy below.
    Comment: Most commenters who weighed in on the proposal supported 
it, and stated that it would benefit States, consumers, and issuers. 
One commenter stated that the proposal would make it easier for State 
Exchanges to explore options to improve the consumer experience. 
Another commenter stated that the proposal would allow consumers to 
maintain continuous coverage when technical issues arise that are 
beyond the consumer's control. Finally, another commenter stated that 
the proposal would help issuers experiencing billing or enrollment 
problems due to high volume or technical errors.
    Response: We agree that codifying that the flexibility for issuers 
experiencing billing or enrollment problems due to high volume or 
technical errors is not limited to extensions of the binder payment 
will help support States, consumers, and issuers by allowing consumers 
to maintain continuous coverage when they are unable to satisfy premium 
payment deadlines for certain reasons outside of their control.
    Comment: A few commenters supported the proposal but with 
limitations. One commenter supported the proposal but only in 
meaningfully extenuating circumstances. Another commenter stated that 
they support the proposal but are concerned about consumers falling too 
far behind in payments and requested that the length of the extension 
be kept to a minimum.
    Response: We agree that it is important for this flexibility to be 
limited to specific circumstances where an issuer requires a reasonable 
extension of a binder or premium payment deadline, such as a State 
declaration of natural disaster, and we note that such flexibility is 
always time limited in scope. We expect that payment extensions would 
extend until the high volume or technical errors have been corrected or 
until a reasonable period of time thereafter. We also generally do not 
anticipate extensions due to high volume or technical errors to be 
greater than 45 calendar days based on previous experience with binder 
payment extensions, though extensions related to a State declaration of 
a natural disaster or public health emergency may be longer.
    Comment: One commenter supported the proposal but opposed 
implementing the policy in a manner that creates retroactive 
terminations or otherwise places consumers at risk for non-coverage and 
providers at risk for non-payment during any payment deadline 
extension. The commenter recommended that CMS clarify that any premium 
payment deadline extension must be exhausted before any 3-month grace 
period begins and cannot operate to extend the grace period. In other 
words, the commenter recommended that an APTC-eligible consumer has not 
``fail[ed] to timely pay premiums'' under Sec.  156.270(d) unless and 
until any premium payment deadline extension has been exhausted, 
meaning that coverage could be maintained during the extension period 
and the 3-month grace period (if applicable). One commenter supported 
the proposal but proposed additional flexibility for plans to hold 
payments for prescriptions in a pending status during any extension 
period.
    Response: We clarify that this proposal would not allow retroactive 
termination beyond that already allowed under Sec.  156.270(d). We also 
clarify that we would not consider the 3-month grace period to have 
begun until a consumer has failed to pay any required premium by the 
end of any premium payment deadline extension, consistent with this 
commenter's recommendation. Although we may allow an issuer, in 
connection with a billing or enrollment problem due to high volume or 
technical errors, or at the direction of State or Federal authorities 
(such as the declaration of natural disaster or other emergency), to 
delay placing an enrollee in delinquency, once the grace period has 
begun, issuers must allow enrollees no more than 3 months to pay 
outstanding premium. If the enrollee does not pay all past due premium 
by the end of the third month coverage, subject to any

[[Page 26316]]

applicable threshold policy consistent with Sec.  155.400(g), the 
issuer must terminate the enrollee's coverage retroactively to the end 
of the first month. We also require, in accordance with Sec.  
156.270(d)(1), that during the grace period, the QHP issuer must pay 
all appropriate claims for services rendered to the enrollee during the 
first month of the grace period, including for prescription drugs, and 
may pend claims for services rendered to the enrollee in the second and 
third months of the grace period, including prescription drugs. We do 
not see a reason to treat prescription drugs differently from other 
claims during the grace period. For example, in connection with the 
COVID-19 Public Health Emergency declared by the Secretary, issuers 
complying with a State's Department of Insurance order or 
recommendation to not terminate individual market health insurance 
coverage through a specified date were informed that once a grace 
period was triggered, the requirements applicable to the grace period 
would remain unchanged and would follow the rules outlined in Sec.  
156.270(d).
    Comment: A few commenters stated that the proposal would be 
especially helpful to low-income enrollees who may be impacted by 
factors such as unstable housing or lack of reliable broadband access.
    Response: While we agree that the flexibility codified by this 
proposal may aid consumers, many of whom may be low-income and impacted 
by factors such as housing or lack of reliable broadband access, these 
conditions would not trigger the flexibilities allowed by this policy. 
However, consumers who experience certain hardships may benefit from 
this policy when State or Federal authorities direct issuers to provide 
an extension on payments, such as due to a natural disaster or other 
emergencies in which extenuating circumstances would prevent an issuer 
from being able to receive payment.
16. Initial and Annual Open Enrollment Periods (Sec.  155.410)
    In the HHS Notice of Benefit and Payment Parameters for 2025 
proposed rule (88 FR 82510, 82581), we proposed changes and updates to 
Sec.  155.410. At Sec.  155.410, we proposed to amend paragraph 
(e)(4)(ii) to revise parameters around the adoption of an alternative 
open enrollment period by a State Exchange. We proposed to require that 
for benefit years beginning on or after January 1, 2025, State 
Exchanges must adopt an open enrollment period that begins on November 
1 of the calendar year preceding the benefit year and ends no earlier 
than January 15 of the applicable benefit year, with the option to 
extend the open enrollment period beyond January 15 of the applicable 
benefit year.
    In part 3 of the 2022 Payment Notice (86 FR 53429 through 53432), 
where we extended the open enrollment period for the Exchanges on the 
Federal platform to January 15, we noted several observations regarding 
a 6-week open enrollment period ending on December 15 including that 
certain consumers may be subjected to unexpected plan cost increases 
that they may not be notified about until January, after open 
enrollment concludes. We also observed that extending the open 
enrollment period for the Exchanges on the Federal platform to January 
15 would ensure ample time for Navigators, assisters, certified 
application counselors, agents, and brokers to fully assist all 
interested consumers. We further noted that ending open enrollment on 
January 15 would give consumers additional time to react to updated 
plan cost information and more time to seek enrollment assistance, 
which could improve access to health care coverage, particularly for 
those in underserved communities who face additional barriers to 
accessing health care coverage.
    In the proposed rule (88 FR 82851), we expressed that these 
observations hold true as to State Exchanges and warrant requiring that 
their open enrollment periods also end no earlier than January 15. 
Since we extended the open enrollment period for Exchanges on the 
Federal platform in part 3 of the 2022 Payment Notice final rule, four 
States have transitioned to the State Exchange model, and we anticipate 
that there will be additional State Exchanges in future benefit years, 
which increases the potential for differing open enrollment periods. 
While most of the State Exchanges already hold an open enrollment 
period that ends on or after January 15 of the benefit year, we 
expressed our belief that the risk of shorter open enrollment periods 
in the future requires ensuring a minimum open enrollment period across 
all Exchanges, including State Exchanges. We predicted that this policy 
would impose a minimal burden on most of the State Exchanges.
    Additionally, we stated that ensuring State Exchanges' open 
enrollment periods begin on November 1 of the calendar year and 
continue through at least January 15 of the benefit year--thereby 
ensuring substantial overlap among all Exchange open enrollment 
periods--would reduce consumer confusion in States with State Exchanges 
that currently hold open enrollment periods that are shorter than the 
open enrollment period for the Exchanges on the Federal platform, or 
that begin before November 1 and end earlier than January 15. Consumers 
in these States would have more time to enroll in coverage and would be 
less likely to miss opportunities to enroll due to confusion about the 
duration of the open enrollment period. The combined benefits of this 
policy in terms of reducing consumer confusion and building in 
additional time for consumers to enroll could further increase Exchange 
enrollment and potentially have downstream impacts like improving the 
uninsured rate in States.
    We sought comment on this proposal.
    After consideration of comments and for the reasons outlined in the 
proposed rule and our responses to comments, we are finalizing the 
provision that for benefit years beginning on or after January 1, 2025, 
State Exchanges must adopt an open enrollment period that begins on 
November 1 of the calendar year preceding the benefit year and ends 
January 15 of the applicable benefit year or later. However, we are 
finalizing the rule with an addition: we are adding paragraph 
(e)(4)(iii) to grandfather the open enrollment period of any State 
Exchange that held an open enrollment period that began before November 
1, 2023, and ended before January 15, 2024, for the 2024 benefit year 
so that it can continue to begin open enrollment before November 1 in 
consecutive future benefit years, so long as that State Exchange's open 
enrollment period continues uninterrupted for at least 11 weeks. If the 
State Exchange changes the dates of its open enrollment period after 
the effective date of this rule, it must for that and subsequent 
benefit years hold an open enrollment period that is compliant with the 
requirements of (e)(4)(i) and (ii). We are also amending 
155.410(e)(4)(i) to add a reference to new paragraph (e)(4)(iii).
    We are providing this flexibility in recognition of several 
commenters who cited the operational success of certain State Exchanges 
that have recently held open enrollment periods earlier than November 1 
and requested that we reconsider providing an additional measure of 
flexibility. We do not intend to discourage operational success or 
generate negative downstream impacts (for instance, decreased 
enrollment or revenue) for any State Exchanges that held an open 
enrollment period that began before November 1, 2023, and ended before 
January 15, 2024, for the

[[Page 26317]]

2024 benefit year. We also seek to minimize the potential for 
significant disruption to Exchange operations currently in place to the 
extent possible consistent with this policy, as well as to minimize 
potential burden to Exchanges, consumers, and other interested parties 
(for instance, navigators, assisters, and issuers) acting in reliance 
on existing Exchange operations. We believe this modification to allow 
State Exchanges to grandfather the dates of their open enrollment 
period as described above strikes an appropriate balance between 
standardizing a minimum open enrollment period across Exchanges while 
minimizing operational disruption. This flexibility does not extend to 
State Exchanges that began open enrollment before November 1, 2023, and 
ended before January 15, 2024, for any benefit year other than the 2024 
benefit year.
    We summarize and respond to public comments received on the 
proposed policy below.
    Comment: Many commenters cited the potential benefits of this 
policy, echoing some rationales that CMS provided including: helping to 
maximize the time consumers need to navigate plans and get assistance 
from Navigators/assisters; creating a more consistent window of 
consumer outreach; providing more time for consumers to take into 
account potential plan cost increases in January before enrolling; 
reducing consumer confusion about open enrollment periods due to 
consistency across Exchanges, including after an Exchange transition, 
and more seamless nationwide messaging to consumers given this 
consistency; allowing consumers to shop for coverage after the holiday 
season during which they may be busy and/or more financially-burdened; 
reducing administrative burdens on plans, assisters, and regulators; 
allowing for easier plan switching for auto-re-enrolled consumers; 
helping to increase Exchange enrollment; and eliminating the 
probability of truncated open enrollment periods in future benefit 
years. Several commenters asserted that this proposal would help 
maximize enrollment through greater alignment with the open enrollment 
periods for Medicare and employer-sponsored coverage.
    Response: We thank commenters for their support of this proposal. 
We considered many of these potential benefits and appreciate the 
insight on others.
    Comment: Many commenters appreciated that this policy provides the 
flexibility to extend open enrollment beyond January 15 of the benefit 
year. However, one commenter noted that allowing variation beyond 
January 15 of the benefit year undercuts the stated benefits of 
aligning open enrollment periods across Exchanges.
    Response: While we acknowledge that there is, and may continue to 
be, variation in open enrollment end dates under this policy, we 
underscore that the policy still generally prescribes a consistent 
minimum time-period during which open enrollment will occur across 
Exchanges, which includes the 11 weeks between November 1 through 
January 15 for the vast majority Exchanges, as required under 
(e)(4)(ii), and at least 11 weeks for any State Exchange that has 
grandfathered its open enrollment period. We think this minimum period 
provides ample opportunity for consumers to select a plan and will 
provide an appropriate measure of consistency. We believe this policy 
strikes the appropriate balance of standardization and flexibility for 
State Exchanges since it allows for flexible open enrollment period end 
dates and grandfathering of existing open enrollment periods, while 
generally codifying a national minimum open enrollment period. We 
appreciate commenters that supported this aspect of the policy.
    Comment: Many commenters, including those both opposing and 
supporting the proposal, asserted that States should have the 
flexibility to set their own open enrollment periods, stating that 
States are best positioned to decide on an open enrollment period that 
suits the needs of local markets and consumers, and/or that the 
proposal unnecessarily curtails State flexibility to set an appropriate 
open enrollment period. Several commenters argued specifically that 
States should maintain the flexibility to begin their open enrollment 
periods earlier than November 1 of the benefit year.
    Response: We reiterate that this rule properly balances flexibility 
with uniformity. Currently, all Exchanges except one, including 18 
State Exchanges, begin their annual open enrollment periods on November 
1 of the calendar year preceding the benefit year, and therefore we 
thought that a mandatory November 1 open enrollment start date would 
minimize disruption for Exchanges while promoting consistency. 
Additionally, for the reasons described above and in the proposed rule, 
we believed it was important to extend the open enrollment period to 
January 15 for all Exchanges, but we are allowing States to end their 
open enrollment period later, if desired. Finally, paragraph 
(e)(4)(iii) provides flexibility by grandfathering the open enrollment 
periods for certain Exchanges, as described in more detail in this 
rule.
    Comment: A few commenters expressed concern that the proposal 
provides too much flexibility to continue open enrollment indefinitely 
and should prescribe a deadline to prevent States from operationalizing 
a continuous open enrollment period throughout the year, which could 
impose financial burden and create adverse selection.
    Response: We thank commenters for highlighting an important 
consideration. We believe States are best positioned to balance the 
benefits to their consumers of a longer open enrollment period with the 
market impacts of adverse selection when deciding when, on or after 
January 15, to end their open enrollment period.
    Comment: One commenter recommended that Exchanges be prohibited 
from extending the annual open enrollment deadlines at the last minute, 
particularly toward the end of the open enrollment period, and that 
Exchanges should not deviate from their publicized open enrollment 
timeframes, to help prevent undue administrative burden and potential 
consumer confusion.
    Response: We thank the commenter for highlighting an important 
operational consideration that Exchanges may wish to take into account 
in choosing when and how to end their open enrollment periods. We are 
not prohibiting State Exchanges from providing additional flexibility 
because unforeseen or exceptional circumstances (for instance, 
technical system issues that impact consumers' ability to enroll in 
coverage) may necessitate extending open enrollment to ensure consumers 
have the opportunity to enroll.
    Comment: One commenter recommended that State Exchanges be provided 
the flexibility to set their own open enrollment periods after the 
first year of operating a State Exchange following a State Exchange 
transition.
    Response: We are finalizing this policy to generally make 
consistent the open enrollment period across Exchanges, in part because 
it will reduce consumer confusion, especially after a State Exchange 
transition. While we have allowed some flexibility for Exchanges in the 
grandfathering provision of paragraph (e)(4)(iii), we have done so only 
to minimize disruption of existing open enrollment periods, and believe 
that moving towards more aligned open enrollment

[[Page 26318]]

periods going forward will benefit consumers and increase enrollment.
    Comment: One commenter suggested that they would be amenable to a 
more flexible policy that simply prescribed a minimum number of open 
enrollment days or weeks. This commenter suggested that longer open 
hours or concentrated promotion during open enrollment may have a more 
significant impact than simply prescribing a specific time-period.
    Response: We considered, but did not propose, this type of 
approach. We believe that the proposed policy better balances State 
flexibility with the benefits of consistency for consumers of generally 
requiring a national minimum open enrollment period upon which 
consumers can rely. We note one exception to this which will allow 
certain Exchanges to hold an 11 week open enrollment period consistent 
with the requirements of paragraph (e)(4)(iii).
    Comment: One commenter suggested that current regulations already 
``partially achieve'' the alignment of open enrollment periods across 
Exchanges and that this policy is, therefore, unnecessary.
    Response: The goals of this policy are to largely align open 
enrollment periods across Exchanges and to capitalize on the benefits 
to consumers of a longer open enrollment period. Even if open 
enrollment periods are currently partially aligned, this rule will 
ensure that in the future, all Exchanges hold their open enrollment 
period between November 1 and January 15.\238\
---------------------------------------------------------------------------

    \238\ Any Exchange availing itself of the grandfathering 
provision described in Sec.  155.410(e)(4)(iii) will be required to 
hold an open enrollment period at least between November 1 and 
January 15 if their open enrollment period deviates from that set 
beginning after the effective date of this rule.
---------------------------------------------------------------------------

    Comment: Several commenters recommended that States be provided the 
flexibility to, or that CMS instead prescribe, an open enrollment 
period that ends no later than December 31 of the calendar year 
preceding the benefit year, to encourage consumers to enroll in a full 
12 months of coverage.
    Response: We reiterate the various benefits of requiring the open 
enrollment period to continue until at least January 15 of the benefit 
year. These include ensuring consumers are not subjected to plan cost 
increases that they may not be notified about until after open 
enrollment ends; giving Navigators, certified application counselors, 
and agents and brokers ample time to assist all interested applicants; 
providing consumers with additional time to enroll in coverage after 
the holiday season when they otherwise might be unable to as a result 
of financial or other limitations; and improving access to health 
coverage. Consumers who would like to, and are able to, enroll before 
December 31 still have that option, and Exchanges and interested 
parties may encourage consumers, through marketing, outreach, or other 
means, to obtain coverage for 12 months by enrolling before January 1. 
Therefore, we believe that requiring the annual open enrollment period 
to continue until at least January 15 of the benefit year best 
accommodates different consumer's needs.
    Comment: A few commenters recommended that, in other rulemaking, 
CMS should consider requiring that short-term limited duration 
insurance coverage end by December 31 of a given plan year or that CMS 
should lengthen the period of short-term limited duration insurance 
beyond 3 months.
    Response: We appreciate these comments on short-term limited 
duration insurance but note that term limits for such insurance is 
outside the scope of this rulemaking.
    Comment: One commenter asserted that this proposal is unnecessary, 
as only the Idaho State Exchange held a shorter open enrollment period 
for the 2024 benefit year than what is required under this new policy, 
and that even Idaho's open enrollment period was sufficient in length.
    Response: We thank the commenter for highlighting that this policy 
primarily would impact the operations of one State Exchange among all 
Exchanges nationally. To minimize disruption, we have finalized this 
policy by providing the flexibility for any State Exchange that began 
open enrollment before November 1, 2023, and ended before January 15, 
2024, for the 2024 benefit year to continue to begin open enrollment 
before November 1 and end before January 15 for consecutive future 
benefit years, so long as the open enrollment period continues 
uninterrupted for at least 11 weeks, and unless this State Exchange 
later changes their open enrollment dates. This is to ensure alignment 
with the minimum number of weeks prescribed at paragraphs (e)(4)(i) and 
(ii) for any State Exchange that grandfathers its open enrollment 
period while not requiring that such a State Exchange hold a longer 
open enrollment period than other Exchanges. Aside from this 
flexibility, requiring a national minimum open enrollment period across 
Exchanges for the 11 weeks between November 1 and January 15 strikes an 
appropriate balance between providing State flexibility and ensuring 
substantial overlap of Exchange open enrollment periods nationwide. 
Finally, we underscore that this policy will generally codify this 
national minimum open enrollment standard moving forward.
17. Special Enrollment Periods
a. Effective Dates of Coverage (Sec.  155.420(b))
    In the HHS Notice of Benefit and Payment Parameters for 2025 
proposed rule (88 FR 82510, 82582), we proposed amending Sec.  
155.420(b)(1) and (b)(3)(i) to align the effective dates of coverage 
after selecting a plan during certain SEPs across all Exchanges, 
including State Exchanges, so that qualifying individuals or enrollees 
who select and enroll in a QHP during certain SEPs receive coverage 
beginning the first day of the month after the consumer selects a QHP. 
In order to consolidate and integrate the requirements in Sec.  
155.420(b)(3), without affecting any rights or obligations, we also 
proposed to include the requirements currently in paragraph (b)(3)(ii) 
into proposed paragraph (b)(3)(i) and to delete paragraph (b)(3)(ii).
    In accordance with Sec.  155.420(b)(3)(i), in the FFEs, SBE-FPs, as 
well as several State Exchanges, during a SEP, consumers who select a 
QHP through the Exchange to which regular effective dates specified in 
Sec.  155.420(b) apply have the plan's coverage begin on the first day 
of the month after the consumer's selection. For example, if a consumer 
selects a QHP on March 31, their QHP coverage would start April 1.
    However, in some State Exchanges, a consumer's coverage is only 
made effective on the first day of the month after the consumer has 
selected a plan during a SEP to which regular effective dates specified 
in Sec.  155.420(b) apply if the consumer selects their plan between 
the 1st day and the 15th day of the previous month, per Sec.  
155.420(b)(1). In these State Exchanges, if a consumer selects a plan 
between the 16th day and the last day of the month, coverage will not 
become effective until the first day of the second month after plan 
selection. For example, for these State Exchanges, if a consumer 
selects a plan on March 1, Exchange QHP coverage would start April 1, 
but if that consumer selected a plan on March 16, their Exchange QHP 
coverage would start on May 1. This may result in a coverage gap of 
more than a month for these consumers.
    As consumers typically qualify for SEPs due to a life event that 
may disrupt their previous coverage (such as a move to a new State, or 
a change in household

[[Page 26319]]

size due to birth or divorce, or a loss of other health insurance, such 
as a loss of Medicaid), these consumers are less likely to have health 
insurance coverage while they wait for their selected QHP coverage to 
begin.
    In addition, when transitioning between Exchanges, such as from an 
Exchange in a State that operates on the Federal platform to a State 
Exchange that does not offer first-of-the-following-month coverage, 
consumers may expect that their coverage becomes effective on the first 
day of the month after selecting a QHP. These consumers might not be 
aware that the effective dates of coverage may differ between 
Exchanges, and they might not take appropriate steps to maintain or 
access alternate coverage while waiting for their QHP to become 
effective. As a result, these consumers may be at risk of coverage gaps 
due to the existing policies governing effective dates of coverage.
    To address this, we proposed amending Sec.  155.420(b)(1) and 
(b)(3)(i) to align effective dates of coverage across all Exchanges 
under these SEPs. We noted that the proposal would require all State 
Exchanges, beginning on January 1, 2025, or an earlier date at the 
option of the Exchange to provide coverage that is effective on the 
first day of the month following plan selection, if a consumer enrolls 
in a QHP during a SEP to which regular effective dates specified in 
Sec.  155.420(b) apply.
    We sought comment on this proposal.
    After consideration of comments and for the reasons outlined in the 
proposed rule and our responses to comments, we are finalizing this 
provision as proposed to amend Sec.  155.420(b)(1) and (b)(3)(i) to 
align the effective dates of coverage after selecting a plan during 
certain SEPs across all Exchanges, including State Exchanges, and to 
require qualifying individuals or enrollees who select and enroll in a 
QHP during certain SEPs to receive coverage beginning the first day of 
the month after the consumer selects a QHP. We are also finalizing the 
proposed modifications to incorporate section Sec.  155.420(b)(3)(ii) 
into the proposed paragraph (b)(3)(i) and deleting paragraph (b)(3)(ii) 
for purposes of simplifying and streamlining this section. We summarize 
and respond to public comments received on the proposed policy below.
    Comment: There was broad support for this proposal from many 
commenters, including health care providers, issuers, disease and 
general advocacy groups, and State Exchanges. Many of these commenters 
agreed with our assertion that requiring a regular effective date of 
coverage for SEPs that is no later than the first day of the month 
after plan selection would reduce the number of consumers who 
experience gaps in coverage. Several commenters also agreed that this 
proposal would ease the experience and reduce potential confusion for 
consumers who transition between Exchanges in different States, due to 
the standardization across States of when QHPs become effective under a 
SEP subject to regular coverage effective date rules. Some current 
State Exchanges noted that they observed that consumers in their States 
experienced fewer gaps in coverage after they adopted the effective 
dates of coverage that we propose here to require in all Exchanges.
    Response: We appreciate, and agree with, the comments and 
additional information provided on how adoption of this proposal may 
benefit consumers.
    Comment: One commenter opposed this proposal, stating that State 
Exchanges are best able to determine the appropriate coverage effective 
dates, and that State Exchanges should retain the flexibility to adopt 
earlier effective dates as they see appropriate. Another commenter 
supported the proposal but encouraged CMS to consider allowing States 
to have more flexibility in determining their own effective dates.
    Response: This proposal does not change the existing ability for 
State Exchanges to elect an earlier coverage effective date under Sec.  
155.420(b)(3)(i) (as currently exists and as proposed). Due to the 
potential for consumers to face gaps in coverage under the existing 
policies governing regular SEP coverage effective dates in certain 
State Exchanges, we believe a regular SEP coverage effective date of no 
later than the first day of the month after plan selection is in the 
best interest of consumers.
    Comment: One commenter stated that this policy would increase costs 
for State Exchanges. One commenter opposed this proposal, stating that 
we had not provided evidence as to why this rule change was needed. 
Another commenter opposed this proposal because it would expand the 
availability of SEPs, stating generally that SEPs encourage adverse 
selection, which may increase costs for health insurance issuers.
    Response: As we note in the proposed rule, we expect that any costs 
to Exchanges and issuers would be minimal. We provided a cost estimate 
in section IV.C of the proposed rule that showed that issuers would not 
incur substantial new costs. The commenter did not provide evidence or 
examples of why a first of the month coverage effective date would 
cause adverse selection, nor have we received information from issuers 
that operate in State Exchanges that such coverage effective dates 
cause adverse selection. In addition, we believe the benefit of 
reducing coverage gaps among consumers outweighs any speculative harm.
    Comment: One commenter stated that health insurance issuers may 
have operational concerns regarding State Exchanges that collect 
premium payments from enrollees on behalf of QHP issuers. The commenter 
stated that in these States, issuers sometimes face difficulty with 
data-sharing and determining if a consumer has made a binder payment 
for their coverage to become effective. As such, they are concerned 
that the shorter time until the effective date will not provide enough 
time to ensure a binder payment is paid prior to effectuating coverage.
    Response: Although we did not hear from any current State Exchanges 
that they would have difficulty in implementing this proposal, we will 
provide any State Exchange with the appropriate technical assistance to 
ensure that they are able to implement this proposal while also 
promptly providing issuers with updates to Exchange enrollment or 
enrollee data so as not to adversely affect effectuation of coverage. 
If issuers receive binder payment confirmations after the effective 
date required by this new provision, they would be permitted to 
effectuate enrollment after the effective date, with coverage beginning 
retroactively to the required effective date. This is consistent with 
the premium payment policy for Exchanges on the Federal platform at 
Sec.  155.400(e), which permits issuers to set binder payment deadlines 
after the coverage effective date.
    Comment: One commenter suggested that HHS require that this policy 
begin in the 2024 plan year, rather than the 2025 plan year, stating 
that consumers now would benefit from an earlier implementation date. 
Another commenter requested that HHS delay the required implementation 
of this policy until January 1, 2026, so that State Exchanges would 
have more time to implement any needed technical changes in their 
enrollment systems. Finally, a commenter urged HHS to assist QHPs in 
addressing any operational challenges that come with the alignment of 
effective coverage dates.
    Response: Because it will take time for the State Exchanges to 
update their enrollment systems to comply with this change, we do not 
believe it is appropriate to require State Exchanges to implement this 
policy before January

[[Page 26320]]

1, 2025, which is the date that many other provisions of this rule will 
go into effect. We believe that a January 1, 2025, effective date will 
give State Exchanges adequate time to make any system changes necessary 
to implement this rule. Additionally, we note that State Exchanges 
maintain the ability to offer an earlier coverage effective date under 
Sec.  155.420(b)(3)(i) (as currently exists and as proposed) if 
desired. We will continue to provide technical assistance to State 
Exchanges to ensure that they are able to effectively implement this 
policy in coordination with their issuers.
    Comment: One commenter suggested that we also permit Exchanges to 
provide an SEP when Medicaid ends before the end of the month and when 
a health provider leaves the QHP network mid-plan-year.
    Response: In the Notice of Benefit and Payment Parameters for 2024, 
we finalized a modification to 45 CFR 155.420(b)(2)(iv) to allow 
Exchanges to offer earlier coverage effective dates for consumers 
attesting to a future loss of Minimum Essential Coverage (MEC) under 
Sec.  155.420(d)(1). Specifically, we added language stating that if a 
consumer loses Medicaid or CHIP that is MEC, and a plan selection is 
made on or before the last day of the month preceding the loss of MEC, 
the Exchange must ensure that coverage is effective on the first day of 
the month in which the loss of MEC occurs.\239\ This policy change was 
intended to mitigate coverage gaps and allow for a more seamless 
transition between coverage when consumers lose MEC mid-month. With 
regard to the second comment, we appreciate the suggestion to permit 
Exchanges to provide an SEP when a health provider leaves the QHP 
network mid-plan-year but note that it is not within the scope of this 
rulemaking.
---------------------------------------------------------------------------

    \239\ We note that this modification is not limited to 
situations where a consumer loses Medicaid or CHIP. For more 
information, see 88 FR. 25740, 25827.
---------------------------------------------------------------------------

b. Monthly Special Enrollment Period for APTC-Eligible Qualified 
Individuals With a Projected Annual Household Income At or Below 150 
Percent of the Federal Poverty Level
    At Sec.  155.420, we proposed to amend paragraph (d)(16) to revise 
the parameters around the availability of a SEP for APTC-eligible 
qualified individuals with a projected annual household income at or 
below 150 percent of the Federal Poverty Level (FPL), hereinafter 
referred to as the ``150 percent FPL SEP.'' We proposed an amendment to 
the current text from ``no greater than'' to ``at or below'' for 
improved readability and understanding. Specifically, we proposed the 
removal of the limitation that this SEP is only available to a consumer 
whose applicable percentage, which is used to determine the amount of 
the consumer's premium not covered by APTC, is zero.
    As background, in part 3 of the 2022 Notice of Benefit and Payment 
Parameters (86 FR 53429 through 53432), we finalized, at the option of 
an Exchange, a monthly SEP for APTC-eligible qualified individuals with 
a projected annual household income at or below 150 percent of the FPL. 
We also finalized a provision stating that this SEP is available only 
during periods of time during which APTC is available such that the 
applicable taxpayers' applicable percentage is set at zero, such as 
during tax years 2021 through 2025, as provided by section 9661 of the 
ARP and extended by the IRA.\240\ We also amended Sec.  
147.104(b)(2)(i) to specify that issuers are not required to provide 
the SEP in the individual market with respect to coverage offered 
outside of an Exchange.
---------------------------------------------------------------------------

    \240\ Public Law 117-169.
---------------------------------------------------------------------------

    As a result of the enhanced financial assistance established by the 
ARP and extended by the IRA until December 31, 2025, many consumers 
with a projected annual household income at or below 150 percent of the 
FPL, have the opportunity to enroll in a much wider range of affordable 
coverage. Specifically, as a result of the legislative changes passed 
by Congress in the ARP and IRA, more consumers have access to Exchange 
and QHP coverage with zero-dollar premiums after financial subsidies, 
including more opportunities to enroll in zero-dollar silver-level 
plans with significant levels of CSRs. To provide these consumers--many 
of whom might have had difficulty enrolling during standard SEP 
timelines due to lack of awareness or other logistical difficulties--
with the chance to access this generous Exchange coverage, we finalized 
the 150 percent FPL SEP.
    We remain committed to ensuring that affordable Exchange coverage 
is available for individuals with lower household incomes and who are 
uninsured, and we believe that the availability of the 150 percent FPL 
SEP has made significant strides in ensuring that this population has 
real opportunities to enroll in free or extremely low-cost Exchange 
coverage.
    Executive Order (E.O.) 14070, signed on April 5, 2022 (which 
expanded upon E.O. 15009 signed on January 28, 2021), directs Federal 
agencies to identify ways to continue to expand the availability of 
affordable health care coverage, to improve the quality of coverage, to 
strengthen benefits, and to help more Americans enroll in quality 
health care coverage. To that end, this proposed change may further 
ensure continued improved access to affordable coverage for this 
population.
    Continuing to make this SEP available also may continue to help 
consumers who lose other MEC coverage, especially those disenrolling 
from Medicaid or CHIP coverage to regain health care coverage. We are 
aware of the challenges many consumers disenrolling from Medicaid or 
CHIP coverage have faced due to the end of the Medicaid continuous 
enrollment condition as of March 31, 2023. During this time period, we 
have observed, and expect to continue to observe, a higher than usual 
volume of individuals with lower household incomes transitioning from 
Medicaid or CHIP coverage to coverage through Exchanges due to the end 
of the Medicaid continuous enrollment condition. As discussed in our 
guidance released on January 27, 2023, consumers disenrolling from 
Medicaid or CHIP because of the Medicaid continuous enrollment 
condition are especially vulnerable and may face challenges with 
transitioning from Medicaid or CHIP into other forms of coverage, such 
as Exchange coverage.\241\ These challenges may include consumers' 
confusion as to why their Medicaid coverage is ending due to irregular 
or untimely communications from State Medicaid agencies about the 
termination of coverage or coverage options for individuals with lower 
household incomes. Due to these factors, consumers may be unable to 
make an informed decision about their coverage options within the 60-
day window provided by the SEPs at Sec.  155.420(c)(1) and (d)(1) or 
within the 90-day window provided at the option of the Exchange at 
Sec.  155.420(c)(6) beginning on January 1, 2024. Given our 
observations of these challenges, we believe that the existence of the 
150 percent FPL SEP provides an additional safety-net, particularly for 
consumers impacted by the Medicaid continuous enrollment condition, but 
also generally for those who have historically faced challenges

[[Page 26321]]

transitioning from Medicaid or CHIP into other coverage, like Exchange 
coverage.
---------------------------------------------------------------------------

    \241\ CMS. (2023, Jan. 27). Temporary Special Enrollment Period 
(SEP) for Consumers Losing Medicaid or the Children's Health 
Insurance Program (CHIP) Coverage Due to Unwinding of the Medicaid 
Continuous Enrollment Condition--Frequently Asked Questions (FAQ). 
CMS. https://www.cms.gov/technical-assistance-resources/temp-sep-unwinding-faq.pdf.
---------------------------------------------------------------------------

    Finally, our experience with the 150 percent FPL SEP suggests that 
the policy has been successful. Based on our analysis, between October 
2022 and August 2023, about 1.3 million consumers who reside in States 
with Exchanges on the Federal platform were APTC-eligible, had 
projected annual household incomes at or below 150 percent of the FPL, 
and enrolled in Exchange coverage under the 150 percent FPL SEP. In 
2022, 41.8 percent of enrollees on Exchanges on the Federal platform 
had a projected annual household income of less than 150 percent of the 
FPL, compared to 46.9 percent of Exchange enrollees in 2023, after the 
implementation of the 150 percent FPL SEP. We believe the current 150 
percent FPL SEP is one factor that significantly contributed to the 
increase in the enrollees on the Federal platform with a projected 
annual household income at or below 150 percent of the FPL.
    In previous rulemaking, we expressed concern about offering the 150 
percent FPL SEP when APTC does not always reduce the applicable 
percentage of a taxpayer with projected annual household income at or 
below 150 percent FPL to zero. We were also receptive to concerns 
raised by issuers that this SEP would impact the Exchange risk pool, 
lead to higher premiums, and impact the population with household 
incomes above 400 percent FPL with higher premium contributions as the 
APTC phases out. The possible increasing premiums also present a risk 
of financial hardship for consumers who purchase insurance off Exchange 
including those who are not eligible for APTC due to immigration 
status, or any other consumers who would purchase unsubsidized plans, 
or only receive small subsidies. At the time, we believed that the risk 
for adverse selection was mitigated because consumers would not have an 
incentive to drop their Exchange plans when healthy and resume coverage 
when sick using the 150 percent FPL SEP since they would be enrolled in 
zero-dollar premium plans due to the enhanced financial subsidies 
provided by the ARP and IRA. Previously, we estimated that the adverse 
selection risk may result in issuers increasing premiums by 
approximately 0.5 to 2 percent, and a corresponding increase in APTC 
outlays and decrease in income tax revenues of approximately $250 
million to $1 billion annually, when the enhanced APTC provisions of 
the ARP (and later extended by the IRA) are in effect. While it is 
challenging to predict the future nature of the Exchanges in 2026, we 
estimate that some adverse selection, though unknowable at this time, 
may occur once enhanced subsidies sunset on December 31, 2025, and may 
result in issuers increasing premiums. We acknowledge that there is a 
wide range of predictions for an increase to premiums due to the 
adverse selection risk associated with this proposed change and discuss 
this further in the regulatory impact analysis section of this rule.
    However, an analysis of the plans available to consumers in 2020, 
just before implementation of the enhanced subsidies, suggests that the 
risk of adverse selection we acknowledged may be lower than expected, 
and therefore, downstream impacts of that risk may be mitigated. When 
consumers with household incomes at or below 150 percent of the FPL are 
no longer eligible for enhanced subsidies, these consumers may still be 
eligible for low-cost silver or bronze plans with zero-dollar premiums 
after regular subsidies. In 2020, before the ARP provided enhanced 
financial assistance in the form of enhanced subsidies, about 900,000 
consumers were enrolled in bronze plans, which were fully subsidized by 
APTC and where the consumer portion of premium was zero dollars. 
Additionally, in 2020, 77 percent of the consumer population at or 
below 150 percent FPL had access to a zero-dollar bronze plan with 16 
percent of the same population having access to a zero-dollar silver 
plan in addition to the zero-dollar bronze plan. We believe that if the 
majority of consumers with income at or below 150 percent FPL would be 
eligible for a zero-dollar premium plan absent the enhanced subsidies 
provided under the ARP and IRA, then such consumers would be unlikely 
to use the proposed 150 percent FPL SEP in a way that caused adverse 
selection. In other words, we believe that the availability of these 
zero-dollar bronze plans for consumers at or below 150 percent FPL 
mitigates the risk pool impact this proposed change might cause in 
addition to mitigating downstream hardships for consumers who purchase 
insurance without subsidies or with only small subsidies.
    We sought comment on this proposal.
    After consideration of comments and for the reasons outlined in the 
proposed rule and our responses to comments, we are finalizing this 
provision as proposed to remove the requirement that the SEP only be 
available during periods of time when the applicable taxpayer's 
applicable percentage for purposes of calculating the premium 
assistance amount, as defined in section 36B(b)(3)(A) of the Code, is 
set at zero. We summarize and respond to public comments received on 
the proposal below.
    Comment: Many commenters agreed with the proposed removal of the 
limitation that this SEP is only available to a consumer whose 
applicable percentage, which is used to determine the amount of the 
consumer's premium not covered by APTC, is zero. Commenters agreed that 
this proposal reduces coverage gaps and promotes expanded access to 
affordable coverage, providing a needed benefit to those with the 
highest need for coverage. A few commenters stated that consistency of 
care is linked to improved health outcomes, particularly for cancer 
patients and survivors with limited incomes. One commenter specifically 
pointed out that the proposal helps promote equitable coverage. 
Additionally, several commenters believed that the availability of the 
150 percent FPL SEP would help consumers facing a loss of Medicaid or 
CHIP coverage transition into Exchange coverage. Finally, a commenter 
also stated that the proposal would protect consumers from future 
changes to tax credit policy.
    Response: We agree with commenters that the policy will benefit 
consumers by improving continuity of affordable coverage, which is 
vital for consumers with chronic health conditions, such as cancer, and 
especially benefits lower-income consumers. We also agree that the 
policy will help improve the transition from Medicaid and CHIP coverage 
to Exchange coverage for consumers facing a loss of Medicaid and CHIP 
coverage.
    Comment: One commenter supported the proposed policy, but expressed 
concern that administrative hurdles, such as confusing qualification 
criteria, enrollment deadlines, and a lack of available information, 
prevent consumers from utilizing the 150 percent FPL SEP.
    Response: We agree that the process for enrolling in coverage can 
be daunting, especially for lower-income consumers who may not be 
familiar with all of their options nor have the tools available to 
learn about them. We will continue to work with assisters, agents, 
brokers, and Navigators to educate consumers about this SEP and how to 
access it when applying for Exchange coverage.
    Comment: Several commenters supported the proposed policy but asked 
HHS to consider increasing the income limit to benefit a greater number

[[Page 26322]]

of consumers and to better align with Medicaid and CHIP income limits, 
citing a lack of plan options with affordable premiums for consumers 
with projected annual household incomes between 150 to 250 percent of 
FPL. A commenter also urged HHS to consider expanding the SEP to 
consumers with projected annual household incomes up to 250 percent FPL 
so that more consumers could benefit from it.
    Response: We acknowledge commenters' suggestion to make the 150 
percent FPL SEP available to consumers with projected annual household 
incomes up to 250 percent of the FPL and appreciate the goal of 
broadening the pool of consumers who can access Exchange coverage. 
However, broadening the annual household income limit of the 150 
percent FPL SEP may lead to adverse selection and cause unintended 
consequences, such as premium increases, for all Exchange enrollees 
with a projected annual household income above the SEP eligibility 
limit, particularly for those with a projected annual household income 
above the APTC eligibility limit (as any premium increases would not be 
offset by APTC). Thus, we believe that designing the SEP to target 
consumers with the lowest income--those with a projected annual 
household income at or below 150 percent FPL--allows for the greatest 
impact on the portion of the population that is generally vulnerable, 
as they are most likely to churn between Medicaid, CHIP and Exchange 
coverage, or experience gaps in coverage due to seasonal or temporary 
unemployment, if they have access to other coverage at all. Those who 
do not have access to other coverage may not seek out Exchange coverage 
for fear of the inability to pay, especially because their income tends 
to fluctuate. While consumers losing Medicaid, CHIP, or employer-
sponsored coverage are eligible for an SEP under Sec.  155.420(d)(1), 
consumers might be unaware that a loss of Medicaid or CHIP coverage is 
a qualifying life event and they may not report that loss of coverage 
to an Exchange and remain uninsured for potentially long periods of 
time until the next annual Open Enrollment period. The 150 percent FPL 
SEP provides an additional safety net for these vulnerable populations 
who often have lower health literacy and more frequent life stressors 
than other populations that would prevent them from enrolling in 
coverage when otherwise eligible. In addition, consumers with the 
lowest incomes are most likely to be eligible for zero-dollar plan 
options through the Exchange (if they are not eligible for Medicaid or 
CHIP), which may reduce the risk for adverse selection. Because the 
majority of otherwise eligible consumers with household incomes at or 
below 150 percent FPL would be eligible for a zero-dollar premium plan 
absent the enhanced subsidies provided under the ARP and IRA, then such 
consumers would be unlikely to use the proposed 150 percent FPL SEP in 
a way that causes adverse selection. In other words, the availability 
of zero-dollar bronze plans for consumers with household incomes at or 
below 150 percent FPL mitigates the risk pool impact of this policy in 
addition to mitigating downstream hardships for consumers who purchase 
insurance without subsidies or with only small subsidies.
    Comment: A few commenters supported the proposed policy but asked 
HHS to consider requiring State Exchanges to adopt the SEP instead of 
allowing it to be elective, citing benefits such as a reduced number of 
uninsured consumers and decreased racial disparities in coverage.
    Response: We believe in promoting health equity and reducing 
disparities when possible and appreciate commenters' suggestions that 
State Exchanges be required to adopt the 150 percent FPL SEP. However, 
we believe continuing to allow the adoption of the 150 percent FPL SEP 
to be elective for State Exchanges is the correct approach at this time 
because many States with State Exchanges have expanded Medicaid to 
cover individuals with current monthly household income up to 138 
percent FPL, allowing a greater number of consumers to enroll in 
Medicaid, and thus have access to affordable coverage. Because of this, 
many States with State Exchanges have had less of a need to provide an 
Exchange enrollment pathway for consumers with projected annual 
household income below 150 percent FPL. We will continue to evaluate 
this policy and whether it would be beneficial to require State 
Exchanges to adopt the 150 percent FPL SEP in the future.
    Comment: One neutral commenter acknowledged the improved 
readability of the proposed policy's change from ``no greater than'' to 
``at or below'' 150 percent FPL.
    Response: We thank the commenter for their response and agree the 
change in wording improves readability and understanding of which 
consumers are affected by the proposed policy change.
    Comment: A commenter who neither supported nor opposed the proposed 
policy requested that HHS take additional time to evaluate the impact 
on premiums before finalizing the proposed policy change. The commenter 
cited concerns about adverse plan selection and impacts on the risk 
pool following the implementation of the proposal and recommended that 
HHS delay the proposal to gather additional data. Additionally, several 
commenters who were opposed to the proposed policy cited related 
concerns about the possible risk of ``anti-selection'' (a term we 
understand to refer to adverse selection) resulting in premium 
increases for consumers. A few commenters pointed out that implementing 
the policy change would encourage consumers to enroll in coverage only 
once they become sick or are in need of health care. Commenters pointed 
out that the resulting churn in and out of plans would ultimately harm 
the consumer, as it disrupts continuity of coverage. Commenters also 
expressed concerns that the policy as proposed would negatively impact 
the risk pool, disincentivize issuers from offering robust plan options 
given the challenges of managing the stability of the risk pool, and 
ultimately lead to narrower networks and limited consumer choice.
    Response: As discussed in the proposed rule, our analysis of the 
plans available to consumers in 2020, just before implementation of the 
enhanced subsidies, suggested the risk of adverse selection may be 
lower than expected. This analysis, conducted in 2020 before the ARP 
provided enhanced financial assistance in the form of enhanced 
subsidies, found that about 900,000 consumers were enrolled in bronze 
plans, which were fully subsidized by APTC and where the consumer 
portion of the premium was zero dollars (referred to as zero-dollar 
bronze plans). Additionally, in 2020, 77 percent of Exchange consumers 
with projected annual household incomes at or below 150 percent FPL had 
access to a zero-dollar bronze plan with 16 percent of the same 
population having access to a zero-dollar silver plan in addition to 
the zero-dollar bronze plan. We believe that if the majority of 
consumers with projected annual household income at or below 150 
percent FPL would be eligible for a zero-dollar plan absent the 
enhanced subsidies provided under the ARP and IRA, then such consumers 
would be unlikely to use the proposed 150 percent FPL SEP in a way that 
caused adverse selection because they would have no incentive to 
disenroll from a zero-dollar plan when healthy. In other words, we 
believe that the availability of these zero-dollar bronze

[[Page 26323]]

plans for consumers with projected annual household incomes at or below 
150 percent FPL mitigates the risk pool impact of this change and the 
downstream hardships for consumers who purchase insurance without, or 
with limited, subsidies who would bear the cost of rising premiums. 
While there is a risk of adverse selection by the minority of consumers 
with projected annual household income at or below 150 percent FPL who 
would not be eligible for a zero-dollar plan, such adverse selection is 
projected to increase premiums by only 3 to 4 percent absent IRA 
subsidies, and therefore the benefits of this policy in increased 
access to coverage for low-income consumers outweighs the risk of 
premium increases for higher income consumers.
    Given that the risks of premium increases and adverse selection are 
challenging to predict, we will work to ensure that any effects of 
these risks are minimal by continuing to promote strong enrollment on 
the Exchanges through outreach and advertising efforts.
    Comment: A few commenters cautioned against the increased frequency 
and availability of SEPs, and overall eligibility enforcement, stating 
that the 150 percent FPL SEP currently exists alongside too many other 
similar SEPs, such as the Medicaid Unwinding SEP and the Loss of MEC 
SEP.
    Response: We acknowledge and understand commenters' concerns that 
increasing the availability and frequency of SEPs makes it harder for 
Exchanges to enforce eligibility, and that too many similar SEPs exist 
concurrently. The policy goal of the 150 percent FPL SEP is to ensure 
that lower-income consumers are able to enroll in affordable Exchange 
coverage without remaining uninsured for potentially long periods of 
time by having to wait to enroll in coverage during the annual Open 
Enrollment period. As stated above, consumers with annual household 
income at or below 150 percent FPL are likely to not have access to 
other coverage, such as employer-sponsored coverage. Such consumers 
would generally not be eligible for other SEPs, such as the Newly 
Eligible for APTC or CSRs SEP (Sec.  155.420(d)(6)(i-ii)), which 
applies only to those currently enrolled in coverage, or the loss of 
minimum essential coverage SEP (Sec.  155.420(d)(1)), which would 
require them to have already been enrolled in minimum essential 
coverage such as Medicaid or CHIP (but not short-term limited duration 
plans). Additionally, consumers with annual household income at or 
below 150 percent FPL may be unlikely to seek out Exchange coverage 
during the annual open enrollment period due to low health literacy or 
a fear of the inability to pay, especially because their incomes tend 
to fluctuate. Therefore, for this population, the existence of the 150 
percent FPL SEP provides an additional pathway into Exchange coverage 
that otherwise would be unavailable.
    Comment: One commenter urged HHS not to finalize the proposed 
policy, stating it is unlawful. The commenter urged HHS instead to 
repeal the 150 percent FPL SEP policy.
    Response: We do not agree with commenters that the 150 percent FPL 
SEP is unlawful. As discussed in prior rulemaking, section 1311(c) of 
the ACA requires the Secretary to establish the minimum uniform 
enrollment periods across all Exchanges; and section 1321(a) of the ACA 
provides broad authority for the Secretary to issue regulations setting 
standards to implement the statutory requirements related to Exchanges, 
QHPs, and other standards under title I of the ACA.\242\
---------------------------------------------------------------------------

    \242\ 86 FR 53438
---------------------------------------------------------------------------

18. Termination of Exchange Enrollment or Coverage (Sec.  155.430)
    In the HHS Notice of Benefit and Payment Parameters for 2025 
proposed rule (88 FR 82510, 82584), we proposed to add Sec.  
155.430(b)(1)(iv)(D) to permit enrollees on Exchanges using the Federal 
platform to retroactively terminate their enrollment in a QHP through 
the Exchange \243\ when the enrollee enrolls in Medicare Parts A or B 
(including enrollment in Parts A or B through a Medicare Advantage 
plan) \244\ retroactively effective to the day before the date Medicare 
coverage begins. We also proposed making implementation of this 
proposal optional for State Exchanges. We are finalizing this proposal 
with three modifications: (1) we are limiting retroactive termination 
of QHP coverage to no earlier than the later of (a) the day before the 
first day of coverage under Medicare Parts A or B, and (b) the day that 
is 6 months before retroactive termination of QHP coverage is 
requested; (2) we are not permitting retroactive termination under 
Sec.  155.430(b)(i)(iv)(D) of stand-alone dental plans (SADPs); and (3) 
we are allowing HHS to elect whether to implement this provision for 
Exchanges using the Federal platform. We are also finalizing the 
proposal to be optional for State Exchanges.
---------------------------------------------------------------------------

    \243\ When an enrollee retroactively terminates QHP coverage, 
State law generally requires that the premiums paid in the months 
for which coverage is retroactively terminated be refunded by the 
QHP issuer.
    \244\ References throughout this provision to Medicare Parts A 
and B include Part C Medicare Advantage plans, which provide Parts A 
and B benefits.
---------------------------------------------------------------------------

    Currently, we do not permit enrollees in Exchanges on the Federal 
platform to retroactively terminate QHP coverage due to retroactive 
enrollment in other coverage, including Medicare. When coverage is 
retroactively terminated, claims submitted during the period of 
terminated coverage will be reversed by the QHP issuer and become the 
responsibility of the enrollee, who must ensure claims are submitted by 
the health provider to the new insurance provider, if coverage is 
effective retroactively.\245\ State law would generally require that 
QHP issuers refund the enrollee any premiums paid during the months in 
which coverage is retroactively terminated.
---------------------------------------------------------------------------

    \245\ Providers are generally required to submit claims to 
Medicare no later than 12 months after the date of service. However, 
in situations where Medicare Part A or B entitlement did not exist 
at the time service was furnished, or the beneficiary receives 
notice of Medicare Part A or B entitlement after the date of 
service, the 12-month limit may be extended for 6 months following 
the month in which the beneficiary receives notice of Medicare Part 
A or Part B entitlement. CMS. (rev. 2023, Jan. 19). Medicare Claims 
Processing Manual, 100-04, Chapter 1, Section 70.7.2 ``Retroactive 
Medicare Entitlement.'' https://www.cms.gov/regulations-and-guidance/guidance/manuals/downloads/clm104c01.pdf.
---------------------------------------------------------------------------

    Generally, consumers who become eligible for Medicare once they 
turn 65 can enroll prospectively, and those who are enrolled in 
Exchange coverage can normally terminate coverage prospectively so that 
there is no overlap between the two. In accordance with Sec.  
155.430(d)(2)(iii), Exchange enrollees may request same-day or 
prospective termination of coverage,\246\ and Exchange communications 
instruct enrollees to terminate coverage once they learn they will be 
enrolled in other coverage to avoid an overlap. Exchange enrollees 
approaching their 65th birthday also receive communications from the 
Exchange advising them that they will be ineligible for APTC if they 
enroll in Medicare and instructing them to terminate Exchange coverage 
if they do not wish to have an overlap between the two. However, there 
are scenarios in which a consumer may retroactively enroll in Medicare 
Parts A or B coverage. For example, consumers can become eligible for 
retroactive Medicare Parts A and B due to retroactive eligibility for 
SSDI benefits, in which

[[Page 26324]]

case the consumer may enroll in Medicare Parts A and B beginning with 
the 25th month of SSDI entitlement (that is, receipt of the SSDI 
benefit). If the SSA determines the consumer to be eligible more than 
25 months back, the consumer will receive Medicare Part A automatically 
beginning with the 25th month of SSDI entitlement and will have the 
option of enrolling in Part B Medicare retroactive to the 25th month of 
SSDI entitlement (though they also have the choice to enroll in Part B 
prospectively). In addition, when a consumer has not been automatically 
enrolled in Medicare Part A and applies for Medicare Part A after their 
65th birthday, their entitlement to Part A begins (that is, when 
coverage starts) up to 6 months prior to the date of the application 
but no sooner than the consumer's 65th birthday.
---------------------------------------------------------------------------

    \246\ Although this regulation permits QHP enrollees to request 
prospective terminations, limitations in operations in the Exchanges 
on the Federal platform limit the ability of one enrollee in an 
enrollment group to end their coverage prospectively when the other 
enrollees in the group intend to remain enrolled.
---------------------------------------------------------------------------

    Because consumers who retroactively enroll in Medicare Parts A or B 
may not be able to avoid an overlap in coverage by prospectively 
terminating their Exchange coverage, we believe it is appropriate to 
allow them to retroactively terminate Exchange coverage. Allowing 
consumers to request retroactive terminations in this scenario ensures 
they can minimize an overlap between Exchange and Medicare coverage and 
avoid paying premium unnecessarily (if the consumer owes premium after 
the application of APTC). However, we note that consumers would not be 
required to request a retroactive termination and could maintain both 
Exchange and Medicare coverage if they wish. Consumers who enroll in 
Medicare retroactively are not categorically excluded from PTC 
eligibility for the period of retroactive coverage, and thus may not be 
required to repay APTC for the months of overlap when they file their 
taxes, in accordance with 26 CFR 1.36B-2(c)(2)(iv); however, a QHP 
enrollee receiving APTC who is voluntarily requesting and is granted a 
retroactive QHP termination relieves the government of subsidizing two 
forms of coverage, as the APTC is recouped for the terminated QHP 
coverage months.
    Although it is also possible for consumers to become retroactively 
eligible for Medicaid, and have an unavoidable overlap with Exchange 
coverage, we continue to believe it is appropriate to limit the 
applicability of this provision in the Exchanges on the Federal 
platform to Medicare. We previously allowed retroactive terminations of 
Exchange coverage due to enrollment in Medicaid, CHIP, and the BHP, but 
removed this option for the FFEs in the 2019 Payment Notice (83 FR 
16930). This option was retained for State Exchanges and SBE-FPs, which 
as previously mentioned are more closely integrated into their State-
administered Medicaid programs. In response to commenters who opposed 
this change, we noted that although consumers in these cases may wish 
to recoup premiums paid during the period of overlapping coverage, 
there is significant risk that providers who participate in the 
consumer's Exchange coverage do not participate in Medicaid, CHIP, or 
BHP, which would leave the consumer with unexpected out-of-pocket 
costs. However, because Medicare is accepted by many, if not most, 
providers, it is less likely that a retroactive QHP disenrollment would 
leave consumers responsible for claims incurred during the period of 
retroactive Medicare enrollment.
    We note that in the FFEs and SBE-FPs, caseworkers have system-based 
evidence of both QHP and Medicare eligibility dates and would be able 
to verify that an enrollee requesting retroactive termination is 
enrolled in Medicare and approve retroactive requests. This would 
ensure that enrollees cannot retroactively terminate their QHP coverage 
for other, unauthorized reasons such as low utilization of coverage, 
which could create an adverse selection risk. We also note that, 
similar to retroactive Medicaid enrollment, a consumer's retroactive 
enrollment in Medicare will not cause the consumer, when filing taxes 
for the year of coverage, to have to repay APTC for the months in which 
the consumer, due to the retroactive Medicare enrollment, is enrolled 
in both a QHP with APTC and Medicare. See 26 CFR 1.36B-2(c)(2)(iv).
    Because Medicare generally does not provide coverage for dental 
services, there is no overlap in services with an SADP when an enrollee 
retroactively enrolls in Medicare, as there is with a QHP, and we 
therefore clarify that requests for retroactive coverage under this 
provision are limited to QHPs. Allowing retroactive termination of 
SADPs would create a much greater risk of uncovered claims, since 
dental claims that were reversed by an issuer would likely not be 
covered under Medicare Parts A or B. However, we clarify that, due to 
the requirement that consumers must enroll in a QHP in order to enroll 
in an SADP, requests for retroactive termination of QHP coverage, which 
also involve prospective termination of the QHP, will result in 
prospective termination of SADP coverage.
    Finally, in recognition of the challenges associated with 
retroactively adjusting coverage for preceding years, we proposed to 
require that enrollees must request retroactive termination of coverage 
within 60 days of the date they retroactively enroll in Medicare (that 
is, the date the enrollment occurs, not the Medicare coverage effective 
date).
    We requested comments on this proposal. Specifically, we requested 
comment on whether the public benefits of this proposal to honor an 
enrollee's choice, recoup APTC for duplicative coverage, and protect 
the individual market risk pool outweighs the risk that an enrollee 
would be left with uncovered claims for the overlapping period. We also 
requested comment on the best way to ensure that enrollees have the 
necessary information to make an informed decision about whether to 
retroactively terminate coverage. In the proposed rule we noted that if 
this proposal is finalized, we intended to monitor the impact to 
minimize harm to consumers. We also sought comment on whether this 
provision should be mandatory for State Exchanges, rather than 
optional, and if so, how State Exchanges would verify retroactive 
Medicare enrollment dates.
    After consideration of comments and for the reasons outlined in the 
proposed rule and in our responses to comments, we are finalizing the 
proposal to permit enrollees on Exchanges using the Federal platform 
and in State Exchanges to retroactively terminate their enrollment in a 
QHP through the Exchange when the enrollee enrolls in Medicare Parts A 
or B retroactively with the following modifications: (1) we are making 
explicit that our reference to enrollment in Medicare Parts A or B 
includes enrollment through a Medicare Advantage plan; (2) retroactive 
termination of QHP coverage under this provision is limited to earlier 
than the later of (a) the day before the first day of coverage under 
Medicare Part A or B or a Medicare Advantage plan, and (b) the day that 
is 6 months before retroactive termination of QHP coverage is 
requested; (3) we are not permitting retroactive terminations for 
SAPDs; and (4) we are allowing HHS to elect whether to implement this 
provision for Exchanges using the Federal platform.
    As noted in the proposed rule (88 FR 82585), Exchanges on the 
Federal platform have system-based evidence of both QHP and Medicare 
eligibility dates and can verify Medicare enrollment. In addition, as 
noted in our response to commenters, we intend to explore ways to 
ensure that consumers are aware of the consequences of choosing to 
retroactively terminate coverage and are able to make an informed 
decision. Finalizing that this policy is at the option of the Exchanges 
on the Federal platform provides time to ensure these

[[Page 26325]]

processes are in place prior to effectuation of this provision. We also 
are finalizing the proposal to make implementation of this proposal 
optional for State Exchanges. Prior to implementation, we intend to 
provide advance notice to issuers and other interested parties through 
interested party webinars and published guidance such as the Federally-
facilitated Exchange Enrollment Manual. We summarize and respond to 
public comments received on the proposal below.
    Comment: Several commenters expressed support for the proposal, 
stating that it would be beneficial for consumers by allowing them to 
recoup premiums and avoid coordination of benefits issues, and would 
also decrease administrative burden on Exchanges and save the Federal 
Government money in recouped APTC. A few commenters indicated that this 
flexibility is especially important for certain groups of enrollees, 
such as those with disabilities and consumers who must pay premiums for 
Medicare Part A, for whom the ability to recoup QHP premiums is 
especially beneficial. Two State Exchange commenters stated that they 
had implemented this policy and had improved the consumer experience. 
An additional State Exchange and State Department of Insurance argued 
that this policy would give State Exchanges the flexibility to improve 
the consumer experience. One commenter stated that this proposal was 
important because consumers on the FFEs often have difficulty getting 
the correct termination date when transitioning to off-Exchange 
coverage such as Medicare.
    Response: We agree that these changes will benefit consumers by 
allowing them to recoup premiums for Exchange coverage that overlaps 
with retroactive enrollment in Medicare and will benefit the Exchanges 
by allowing the government to recoup APTC for the period of retroactive 
termination. We also agree that these changes may be especially 
beneficial to certain groups of enrollees, such as those with 
disabilities, for whom recouping premium and avoiding coordination-of-
benefit issues is particularly important. As noted by some commenters, 
it will also give State Exchanges the ability to improve the consumer 
experience by allowing retroactive terminations when desired by the 
enrollee. Lastly, although this proposal will enhance the consumer 
experience by enabling consumers to request retroactive termination of 
coverage when they retroactively enroll in Medicare, this proposal 
would not apply to consumers who become eligible for Medicare 
prospectively, and thus, is unlikely to impact the experience of most 
enrollees transitioning from Exchange to Medicare coverage.\247\ We 
will continue to explore ways to improve the consumer experience for 
enrollees transitioning from Exchange to other coverage, including 
Medicare.
---------------------------------------------------------------------------

    \247\ Enrollees who attempt to end Exchange coverage 
prospectively but receive an incorrect termination due to a 
technical error may already be allowed to retroactively terminate 
coverage under Sec.  155.430(b)(1)(iv)(A).
---------------------------------------------------------------------------

    Comment: A few commenters opposed the proposal, stating that it 
would lead to confusion among enrollees because claims for services 
provided during the retroactive termination period would not be 
covered, and could lead to providers going unpaid if the service is not 
covered by Medicare or is furnished by a provider who does not 
participate in Medicare or Medicare Advantage. Several other 
commenters, while not opposing the proposal, expressed concerns that 
enrollees would not fully understand the implications of retroactively 
terminating coverage, including the reversal of claims by the QHP 
issuer and the impact on APTC. A few additional commenters stated that 
if payment rates for services were lower under Medicare than the QHP 
issuer, providers may attempt to bill enrollees for the difference. A 
few other commenters stated that this proposal could create problems 
regarding out-of-network claims implicated under the No Surprises Act, 
which would be subject to independent dispute resolution. One commenter 
requested that if the proposal is finalized, HHS create guidance 
materials for consumers to ensure they understand the potential 
benefits and drawbacks of retroactively terminating coverage in this 
scenario, including potential responsibility for claims reversed by the 
QHP issuer, and the fact that this scenario does not implicate APTC 
reconciliation.
    Response: We believe it is important to minimize confusion among 
consumers who retroactively enroll in Medicare about the consequences 
of a decision to retroactively terminate Exchange coverage, and we 
intend to explore ways to ensure that enrollees have the necessary 
information to make an informed decision. In addition, we intend to 
closely monitor the impact of this provision after implementation and 
may make changes in the future if necessary to minimize harm to 
consumers, such as providing additional information on the factors 
consumers should consider before making the decision to retroactively 
terminate QHP coverage. As noted elsewhere, because Medicare is 
accepted by many, if not most, providers, we expect that claims made 
during the period of retroactive enrollment will be covered by the 
Medicare Fee-For-Service (FFS) program if the individual enrolls in the 
FFS program. However, there may be cases in which claims are not 
covered by Medicare or a Medicare Advantage plan and become the 
responsibility of the consumer. We intend to explore ways to ensure 
consumers are aware of this potential outcome so they can make informed 
decisions. We emphasize that retroactively terminating Exchange 
coverage is at the option of the consumer, and consumers who 
retroactively enroll in Medicare could choose to maintain QHP coverage.
    Regarding the potential for Medicare beneficiaries \248\ to be 
billed directly by providers and suppliers \249\ when Medicare's 
payment rates are lower than those of the QHP issuer, we note there are 
several Medicare regulations that prohibit providers and suppliers from 
directly billing beneficiaries for amounts other than the applicable 
Medicare deductible and coinsurance.\250\ In addition, in cases where a 
provider is not contracted with a Medicare Advantage plan, the provider 
would still be required to accept the amount they would have received 
under traditional Medicare as payment in full, and would be prohibited 
from billing the enrollee for the difference between the QHP and 
Medicare Advantage plan rates. Where providers are contracted with a 
Medicare Advantage plan, the provider is typically prohibited by the 
terms of their contract from balance billing the enrollee. Thus, in 
general, we anticipate that enrollees will not be balance billed, even 
when there is a difference between the payment rates of the old and new 
plans. As noted above, we will explore ways to ensure consumers are 
able to make an informed decision. In addition, as noted in the 
preamble to this provision, Medicare permits providers to submit claims 
more than 12 months after the date of service when an enrollee 
retroactively enrolls in Medicare, which minimizes the risk that 
providers will not be paid for claims for services provided during the 
retroactive period. Finally, regarding the No Surprises Act, we note 
that in the event

[[Page 26326]]

QHP coverage is retroactively terminated pursuant to Sec.  
155.430(b)(1)(iv)(D), any claims for items or services furnished during 
the retroactive period would be ineligible for the independent dispute 
resolution under the No Surprises Act because the item or service would 
no longer be furnished with respect to a group health plan or health 
insurance issuer offering group or individual health insurance 
coverage.\251\
---------------------------------------------------------------------------

    \248\ The term ``beneficiaries'' is used here to align with 
Medicare regulations, which generally use this term rather than the 
term ``enrollee.''
    \249\ 42 CFR 400.202 defines the terms ``provider'' and 
``supplier,'' the latter of which includes physicians.
    \250\ See 42 CFR 424.55, 414.48, and 489.21, and part 489, 
subpart C.
    \251\ See section 2799A-1(c)(1)(A) of the PHS Act.
---------------------------------------------------------------------------

    Comment: A few commenters opposed the proposal, stating that it 
could increase the administrative burden on issuers, who would be 
required to recoup claim payments and reconcile enrollment information 
with the FFEs, and impact issuers' risk adjustment and payment 
integrity operations. One of these commenters also suggested that the 
proposed policy would ultimately lead to allowing retroactive 
terminations of QHP coverage for retroactive Medicaid enrollment. A few 
commenters also expressed concern that the proposal did not limit the 
number of months for which an enrollee can request retroactive 
terminations. Some of these commenters requested that retroactive 
terminations be limited to 6 months, even in cases where the consumer's 
Medicare coverage began more than 6 months retroactively, to limit the 
administrative burden on issuers to recoup claims and refund premiums. 
One of these commenters also stated that a 6-month limit would align 
with the 6-month extension to the 12-month limit to submitting claims 
to Medicare after the date of service.
    Response: Although we recognize that QHP issuers may, in some 
cases, have difficulty recovering claims payments once coverage is 
retroactively terminated, they are generally entitled to do so. 
However, we agree that, because recovery of claims may be especially 
difficult for longer periods of retroactive termination, it is 
appropriate to place a limit on retroactive QHP terminations and are 
finalizing in this policy that requests for retroactive termination of 
QHP coverage are limited to no earlier than the later of (a) the day 
before the first day of coverage under Medicare Part A or B, and (b) 
the day that is 6 months before retroactive termination of QHP coverage 
is requested. One common retroactive enrollment scenario occurs when 
consumers first enroll in Medicare Part A or B after their 65th 
birthday, and whose entitlement to Part A starts up to 6 months prior 
to the date of enrollment (but no sooner than the consumer's 65th 
birthday). In this case a 6-month limit on requests for retroactive 
coverage would still allow these consumers to retroactively terminate 
QHP coverage back to the date of Medicare entitlement if the 
retroactive termination was requested on the same day as the Medicare 
enrollment. Although other consumers, such as those who enroll in 
Medicare retroactively due to SSDI entitlement, may not be able to 
retroactively terminate QHP coverage back to the date of Medicare 
entitlement if it occurs more than 6 months before the request for QHP 
retroactive termination, these consumers will still be able to receive 
up to 6 months of relief from paying double premiums. We believe this 
limit appropriately balances granting enrollees retroactive termination 
of coverage when desired, while not excessively burdening issuers, who 
must attempt to recoup claims payments whenever coverage is 
retroactively terminated.
    Although providers must generally submit claims to Medicare no 
later than 12 months after the date of service, in certain situations 
where Medicare Part A or B entitlement did not exist at the time 
service was furnished and the beneficiary receives notice of 
retroactive Medicare Part A or B entitlement after the date of service, 
the 12-month limit may be extended through the last day of the 6th 
calendar month following the month in which the beneficiary receives 
notice of Medicare Part A or Part B entitlement.\252\ Thus, this 6-
month limit on retroactive QHP terminations is not necessary to ensure 
that providers are able to resubmit claims to Medicare and receive 
payment, and the risk that providers will not be paid for claims for 
services provided during the retroactive period is minimized.
---------------------------------------------------------------------------

    \252\ See 42 CFR 424.44
---------------------------------------------------------------------------

    For the comment raising potential concerns about impacts to risk 
adjustment from retroactive termination of coverage, we note that the 
EDGE server data collection requirements have always mandated that 
issuers of risk adjustment covered plans provide the most recent 
enrollment data for the applicable benefit year.\253\ This most recent 
enrollment data would include any retroactive changes in enrollment, 
and will have the same impact on an issuer's risk adjustment data 
submission whether the retroactive enrollment changes are initiated by 
the issuer, Exchange, or enrollee.
---------------------------------------------------------------------------

    \253\ 45 CFR 153.710. See the EDGE Server Business Rules (ESBR) 
Version 24.0 (December 2023). https://regtap.cms.gov/reg_librarye.php?i=3765.
---------------------------------------------------------------------------

    Comment: A few commenters argued that allowing retroactive 
terminations in this scenario could increase the risk of adverse 
selection and lead to higher premiums for enrollees.
    Response: We do not believe that implementation of this provision 
is likely to increase the risk of adverse selection or lead to higher 
premiums for enrollees. As we discussed in the preamble to this 
provision, we have the ability to verify Medicare enrollment and ensure 
that retroactive termination of coverage is limited to those who are 
enrolled in Medicare, and not consumers seeking retroactive termination 
due to low utilization of coverage, which could create an adverse 
selection risk. Although consumers with greater numbers of claims may 
be less likely to retroactively terminate QHP coverage, we note that in 
general the population of consumers who are eligible for Medicare 
already tend to have a high number of medical expenses and claims, and 
we do not expect that this policy will increase the risk of adverse 
selection or increase premiums. Lastly, we expect the population of 
enrollees who request retroactive termination of QHP coverage under 
this provision to be a small percentage of the overall enrolled 
population, and thus we do not expect it to have a noticeable impact on 
the overall Exchange, including the risk pool.
    Comment: Several commenters, while not expressing support for or 
opposition to the proposal, expressed concern that it would be 
difficult for QHP issuers to recoup payments for services provided 
during the retroactive termination period, especially pharmaceutical, 
emergency room, and out-of-country claims, which may not be possible to 
recoup. Another commenter requested that, if the proposal is finalized, 
HHS consider reimbursing health plans at the commercial rate for any 
pharmaceutical expenses incurred during the retroactive termination 
period. Lastly, one commenter questioned how pharmaceutical claims 
would be handled for the retroactive termination period if the consumer 
did not enroll in Medicare Part D.
    Response: Although we recognize that QHP issuers may, in some 
cases, have difficulty recovering claims payments once coverage is 
retroactively terminated, they are generally entitled to do so. As 
noted in a previous response, to limit the burden on issuers to recoup 
claims payments, we are also finalizing this proposal to limit 
retroactive termination of QHP coverage to no more than 6 months from 
the date that retroactive termination is requested.

[[Page 26327]]

    Furthermore, we also note that issuers must, in certain 
circumstances, recoup payment for medical or pharmaceutical claims, 
under the retroactive terminations allowed by current regulation. 
Because the number of consumers who retroactively enroll in Medicare 
and elect to retroactively terminate QHP coverage is limited, we do not 
expect this provision to significantly increase the number of claims 
for which issuers must recoup payment. Although it may be difficult for 
issuers to recoup payment for certain types of claims, such as 
pharmaceutical claims, we do not believe it is appropriate to reimburse 
issuers for these unrecoverable claims, nor is there authorization for 
us to do so. We note that issuers are, generally, still entitled to 
seek reimbursement from providers for claims that are reversed. In 
addition, we expect that consumers who retroactively enroll in 
traditional Medicare Parts A or B, but not a stand-alone Part D plan, 
will evaluate whether retroactively terminating QHP coverage is 
appropriate, given the likelihood that the costs for any pharmaceutical 
claims will become the consumer's responsibility. We also note that 
some Medicare Advantage plans include Part D prescription drug 
benefits, and enrollees in these Medicare Advantage plans may be able 
to have these claims resubmitted by the provider to the new plan. As 
noted elsewhere, we intend to explore ways to convey this information 
to consumers.
    Comment: A few commenters recommended requiring State Exchanges to 
adopt this proposal, one of whom stated that all Medicare enrollees, 
regardless of their State of residence, should have this option 
available to them. Several commenters recommended making this proposal 
optional for State Exchanges, a few of whom argued that States were 
best positioned to evaluate their insurance markets and determine 
whether, and how, to implement this proposal. One State Exchange 
commenter indicated that it allows consumers who enroll in Medicare 
Parts A or B up to 6 months to request retroactive termination of QHP 
coverage and requested that HHS allow States to exceed the 60-day 
requirement proposed in the rule. Another State Exchange commenter 
noted that implementation of this proposal would require updates to 
enrollment and eligibility systems and manual verification of Medicare 
eligibility, and therefore may impose financial or operational burdens 
on issuers, who would be required to reverse claims and refund 
premiums. This commenter also requested that, if State Exchanges are 
required to implement the proposal, that the effective date be delayed 
so State Exchanges have additional time to implement this policy.
    Response: Based on the comments we received from State Exchanges, 
which indicate that States have adopted different policies with regard 
to allowing consumers who retroactively enroll in Medicare to 
retroactively terminate QHP coverage, we believe it is appropriate to 
make adoption of this provision optional for State Exchanges. We agree 
with commenters who argued that States are best positioned to determine 
how to implement this proposal, given the difficulties of explaining to 
consumers how to decide whether to retroactively terminate QHP 
coverage, and the need to update enrollment and eligibility systems. In 
addition, State Exchanges may not have access to the same systems-based 
evidence of Medicare enrollment as the Exchanges on the Federal 
platform, which may make verification of retroactive Medicare 
enrollment more difficult. Because we are finalizing this rule to make 
implementation optional for State Exchanges and for HHS with respect to 
Exchanges that use the Federal platform, we do not believe it is 
necessary to delay the effective date of this provision.
    Comment: A few commenters expressed support for the proposal and 
requested that it also be applied to enrollees who retroactively enroll 
in Medicaid or CHIP. Some of these commenters indicated that this was 
especially important given the ongoing process of Medicaid unwinding 
and the number of consumers being inappropriately disenrolled, in 
addition to the need to reinstate consumers who successfully challenge 
a denial of Medicaid eligibility and where there are delays in 
processing Medicaid applications. One of these commenters also 
requested that CMS publish data on the number of children enrolled in 
QHPs who are retroactively enrolled in Medicaid and CHIP, and that CMS 
issue guidance to States on how consumers who were inappropriately 
disenrolled from Medicaid or CHIP can be reimbursed for expenses.
    Response: We recognize that consumers who are retroactively 
enrolled in other government programs such as Medicaid, CHIP, or the 
BHP, may also wish to retroactively terminate QHP coverage to eliminate 
an overlap in coverage and recoup QHP premiums. However, as we stated 
in the proposed rule and above, we do not believe it is appropriate to 
extend this provision to these enrollees because providers who 
participate in the consumer's Exchange coverage may not participate in 
Medicaid, CHIP, or BHP, increasing the risk that the consumer would be 
left with unexpected out-of-pocket costs. Because Medicare is accepted 
by many, if not most, providers, enrollees who retroactively enroll in 
Medicare and terminate Exchange coverage are less likely to become 
solely responsible for reversed claims. The comments regarding 
publication of Medicaid and CHIP enrollment data and reimbursement for 
consumers who are inappropriately disenrolled are outside the scope of 
this proposal, and we have not included substantive responses in this 
final rule.
    Comment: One commenter expressed support for the proposal and 
requested that CMS allow all QHP enrollees who retroactively enroll in 
Medicare to retroactively terminate coverage, regardless of whether the 
Medicare enrollment was prospective or retroactive, or at least allow 
States to implement this. This commenter stated that it is especially 
important given the difficulty many FFE consumers have with the process 
of transitioning to off-Exchange coverage, where it is necessary to 
call the Call Center on the day the new coverage begins to end FFE 
coverage. Another commenter, who opposed the proposal, recommended that 
HHS allow ``pre-terminations'' for enrollees who become eligible for 
Medicare, so that they do not have to call the Marketplace Call Center 
to terminate QHP coverage on the day Medicare coverage begins.
    Response: We recognize that consumers who are transitioning to off-
Exchange coverage such as Medicare may, at times, have difficulty 
ending QHP coverage on the appropriate date. We are working to improve 
this process in the Exchanges on the Federal platform so that all 
enrollees have the option to terminate coverage prospectively when 
transitioning to off-Exchange coverage such as Medicare. However, we do 
not believe it is appropriate to extend this provision to all QHP 
enrollees who transition to Medicare. As we note in the preamble to 
this provision, consumers generally have the opportunity to enroll in 
Medicare prospectively, and Exchange enrollees approaching their 65th 
birthday receive communications from the Exchange advising them that 
they will be ineligible for APTC if they enroll in Medicare and 
instructing them to terminate Exchange coverage if they do not wish to 
have an overlap between the two. Furthermore, we note that many 
enrollees in Exchanges on the Federal

[[Page 26328]]

platform already have the ability to prospectively terminate coverage 
either online through their HealthCare.gov account or by calling the 
Marketplace Call Center.\254\ Lastly, we note that consumers who 
attempt to end Exchange coverage and are given an incorrect coverage 
termination date due to a technical error may already receive 
retroactive terminations to correct the error, per Sec.  
155.430(b)(1)(iv)(A). We will continue to explore ways in which we can 
improve the consumer experience for those who are transitioning from 
Exchange to Medicare coverage.
---------------------------------------------------------------------------

    \254\ As noted by commenters, limitations in operations in the 
Exchanges on the Federal platform prevent one enrollee in an 
enrollment group from ending coverage prospectively when the other 
enrollees in the group intend to remain enrolled.
---------------------------------------------------------------------------

    Comment: Several commenters requested that HHS clarify or provide 
guidance on certain aspects of this proposal. A few commenters 
requested that HHS clarify whether issuers would have to refund APTC 
and premium payments for the months of retroactive coverage that are 
terminated. One of these commenters also asked HHS to provide guidance 
to issuers on how to handle changes in cost-sharing for consumers for 
the period of retroactive coverage termination. A third commenter 
requested guidance on how the proposal would impact the Medicare 
requirement to timely file claims within 12 months of the date of 
service. Several commenters asked that HHS provide operational guidance 
to issuers on how retroactive terminations under this provision should 
be handled and recommended that HHS promote alignment between the 
Exchanges and Medicare to ensure seamless transitions for consumers. 
Lastly, one commenter requested guidance on whether issuers would be 
liable for claims made during the 60-day window available to consumers 
to decide whether to retroactively terminate coverage.
    Response: As with other retroactive terminations, issuers would be 
required to refund APTC to the government when an enrollee requests 
retroactive termination of coverage due to retroactive Medicare 
enrollment, and State law generally requires that issuers refund 
premiums as well. Once coverage is retroactively terminated, enrollees 
are responsible for contacting providers to ensure that any claims made 
during the retroactive period are resubmitted to Medicare, and 
differences in cost-sharing become the responsibility of enrollees, 
providers, and Medicare, as applicable. Although providers must 
generally submit claims to Medicare no later than 12 months after the 
date of service, in certain situations where Medicare Part A or B 
entitlement did not exist at the time service was furnished and the 
beneficiary receives notice of retroactive Medicare Part A or B 
entitlement after the date of service, the 12-month limit may be 
extended through the last day of the 6th calendar month following the 
month in which the beneficiary receives notice of Medicare Part A or 
Part B entitlement.\255\ We also intend to provide guidance to issuers 
on how to process these retroactive terminations of coverage. As noted 
elsewhere in our response to comments, we intend to continue to work to 
improve the consumer experience for enrollees transitioning from 
Exchanges on the Federal platform to Medicare coverage. Lastly, with 
regard to the 60-day window, we note that this window is merely the 
amount of time consumers have to request a retroactive termination of 
coverage once they retroactively enroll in Medicare (the 60 days is 
from the date the consumer enrolls, not the effective date of 
coverage). Issuers are only responsible for claims to the extent that 
the enrollee remains in coverage, and if coverage is retroactively 
terminated, the issuer is generally entitled to recover payment for 
claims made during the period of retroactivity.
---------------------------------------------------------------------------

    \255\ See 42 CFR 424.44.
---------------------------------------------------------------------------

    Comment: One commenter requested that HHS clarify that the proposal 
would not apply to SADPs, since Medicare Parts A and B generally do not 
provide dental benefits. This would ensure that SADP issuers are not 
required to recoup claims payments or refund premiums, and that 
enrollees must still terminate their SADP prospectively.
    Response: As noted in the preamble to this provision, because 
Medicare generally does not provide coverage for dental services 
(although Medicare Advantage plans may include dental benefits as 
supplemental benefits), there is generally no overlap in coverage with 
an SADP when an enrollee retroactively enrolls in Medicare, as there is 
with a QHP. Therefore, we agree that it is appropriate to limit 
application of this provision to retroactive termination of QHP 
coverage. We clarify in this final rule that requests for retroactive 
coverage under this provision are limited to QHPs, and we have 
finalized this proposal to prevent retroactive termination of SADP 
coverage when a consumer retroactively enrolls in Medicare. Allowing 
retroactive termination of SADPs would create a greater risk of 
uncovered claims, since dental claims that were reversed by an issuer 
would likely not be covered under Medicare Parts A or B (although they 
may be covered as a supplemental benefit under a Medicare Advantage 
plan). However, we clarify that, on Exchanges on the Federal platform, 
due to the operational requirement that consumers must enroll in a QHP 
in order to enroll in an SADP, requests for retroactive termination of 
QHP coverage will result in prospective termination of SADP coverage.
19. Establishment of Exchange Network Adequacy Standards (Sec.  
155.1050)
    In the HHS Notice of Benefit and Payment Parameters for 2025 
proposed rule (88 FR 82510, 82585), we proposed to require that State 
Exchanges and SBE-FPs establish and impose quantitative time and 
distance QHP network adequacy standards that are at least as stringent 
as the FFEs' time and distance standards established for QHPs under 
Sec.  156.230. We also proposed that State Exchanges and SBE-FPs be 
required to conduct quantitative network adequacy reviews prior to 
certifying any plan as a QHP, consistent with the reviews conducted by 
the FFEs under Sec.  156.230. We further proposed to require State 
Exchanges and SBE-FPs permit issuers that are unable to meet the 
specified time and distance network adequacy standards to participate 
in a justification process after submitting their initial network 
adequacy data to account for variances and potentially earn QHP 
certification. In addition, we proposed a framework for granting State 
Exchanges and SBE-FPs an exception to the proposed quantitative network 
adequacy standards and review requirements if we determine that the 
Exchange applies and enforces quantitative network adequacy standards 
that are different from the FFEs' but ensure a level of access to 
providers that is as great as that ensured by the FFEs' network 
adequacy standards established for QHPs under Sec.  156.230. Finally, 
we proposed to mandate that State Exchanges and SBE-FPs require all 
issuers seeking QHP certification to submit information to the State 
Exchange or SBE-FP about whether network providers offer telehealth 
services.
    Understanding that some State Exchanges or SBE-FPs may need to 
promulgate regulations to comply with the proposed provisions requiring 
State Exchanges and SBE-FPs to impose quantitative network adequacy 
standards and conduct quantitative network adequacy reviews, as well as 
the requirement related to QHP issuer submission of telehealth 
information, we proposed that these provisions would be effective for 
plan years

[[Page 26329]]

beginning on or after January 1, 2025, to accommodate the time it may 
take for a State Exchange or SBE-FP to come into compliance. We stated 
in the proposed rule that we are of the view that strong network 
adequacy time and distance standards across all Exchanges would enhance 
consumer access to quality, affordable care through the Exchanges. We 
refer readers to the proposed rule (88 FR 82586 through 82587) for a 
detailed background discussion of HHS' network adequacy policy and the 
network adequacy proposals.
a. Network Adequacy Standards and Reviews Across Exchanges
    In the proposed rule (88 FR 82587), we stated that network adequacy 
is a key factor affecting consumers' access to care. We explained that 
while the FFEs impose uniform network adequacy standards across the 
States they serve that require QHP issuers to meet quantitative 
metrics, a similarly uniform network adequacy standard does not exist 
for States served by State Exchanges and SBE-FPs. Indeed, we further 
explained that these circumstances prompted the National Association of 
Insurance Commissioners to develop the NAIC Health Benefit Plan Network 
Access and Adequacy Model Act (Model Act).\256\ The Model Act includes 
recommendations for qualitative network adequacy standards to which 
States could hold their issuers accountable and that require submission 
of access plans. We noted, however, that the Model Act does not specify 
what constitutes network adequacy, and, currently, only a few State 
Exchanges and SBE-FPs have adopted the full Model Act, resulting in the 
lack of a strong floor for network adequacy standards among State 
Exchanges and SBE-FPs.
---------------------------------------------------------------------------

    \256\ Health Benefit Plan Network Access and Adequacy Model Act. 
(2015, 4th Quarter). https://www.nh.gov/insurance/legal/documents/naic_model_act_network_adequacy.pdf.
---------------------------------------------------------------------------

    We noted in the proposed rule (88 FR 82587) that State Exchanges 
and SBE-FPs currently have a mix of network adequacy policies in place, 
and approximately 25 percent of those fail to impose any quantitative 
standard. Quantitative network adequacy standards can be monitored 
relatively easily and applied objectively and may include standards 
that measure provider-to-enrollee ratios, time and distance, or 
appointment wait times.\257\ On the other hand, a qualitative approach 
to network adequacy typically articulates a broad, general standard of 
adequacy and typically grants regulators or insurers discretion to 
determine how to measure compliance.\258\ State regulators using this 
approach may require issuers to simply articulate how they determine 
and measure adequacy in their networks.\259\ Once regulators approve an 
issuer's network adequacy plan using this approach, they then typically 
let issuers self-monitor their own compliance.\260\ As opposed to 
conducting routine audits or requiring periodic reports of compliance, 
State regulators usually rely on consumer complaints to highlight 
situations that might require investigation.\261\
---------------------------------------------------------------------------

    \257\ Hall, Ginsburg. (2017, Sep.). A Better Approach to 
Regulating Provider Network Adequacy. https://www.brookings.edu/wp-content/uploads/2017/09/regulatory-options-for-provider-network-adequacy.pdf.
    \258\ Id.
    \259\ Id.
    \260\ Id.
    \261\ Id.
---------------------------------------------------------------------------

    We stated in the proposed rule that, based on our experience 
conducting network adequacy reviews and regulating QHPs, as well as 
feedback from interested parties, including the many commenters who 
requested in the 2023 Payment Notice (87 FR 27334) that HHS extend 
Federal network adequacy standards to State Exchanges in future 
rulemaking, we are now of the view that no matter the State in which a 
QHP is offered, some quantitative analysis is necessary for an Exchange 
to objectively monitor network adequacy and determine whether a QHP 
provides enrollees in that State with access to an adequate network of 
providers.
    Moreover, we stated that the proliferation in recent years of QHP 
issuers with narrower provider networks raises several consumer 
protection concerns. QHPs with narrower networks may lack access to 
specific provider specialties in-network, resulting in significant out-
of-pocket expenses for consumers who must seek care out-of-network or 
resulting in consumers forgoing care to avoid these expenses. We noted 
that we have also been made aware, through communications with 
interested parties, of issues faced by consumers where in-network 
emergency physicians and mental health providers are in limited supply 
or, in the case of in-network emergency physicians, not available at 
in-network hospitals. Additionally, we stated that the proliferation of 
narrower networks risks consumers being enrolled in plans whose 
networks do not have sufficient capacity to serve them or whose 
providers are too geographically dispersed to be reasonably accessible.
    Therefore, we proposed (88 FR 82587) to establish a national floor 
of quantitative network adequacy standards and network adequacy 
reviews. We stated in the proposed rule that although a number of State 
Exchanges and SBE-FPs have taken meaningful steps towards ensuring the 
adequacy of QHP networks, we are of the view that every Exchange should 
apply quantitative network adequacy standards and conduct a thorough 
review and analysis of issuer compliance with these standards to 
effectively evaluate the adequacy of QHP networks in order to ensure 
that all consumers, regardless of which State they live in, have timely 
access to providers to manage their health care needs.
b. Proposals Related to State Exchange and SBE-FP Network Adequacy 
Standards and Reviews
i. Quantitative Network Adequacy Time and Distance Standards
    For plan years beginning on or after January 1, 2025 and future 
plan years, we proposed that State Exchanges and SBE-FPs must (1) 
establish and impose quantitative time and distance network adequacy 
standards for QHPs that are at least as stringent as standards for QHPs 
participating on the FFEs under Sec.  156.230; and (2) conduct reviews 
of a plan's compliance with those quantitative network adequacy 
standards prior to certifying any plan as a QHP, consistent with the 
manner in which the FFEs review the network adequacy of plans under 
Sec.  156.230. For purposes of this proposed policy, we stated in the 
proposed rule that ``at least as stringent as'' means time and distance 
standards that use a specialty list that includes at least the same 
specialties as our provider specialty lists and time and distance 
parameters that are at least as short as our parameters. We explained 
that States would be permitted to implement network adequacy standards 
that are more stringent than those performed by the FFEs under Sec.  
156.230. In other words, States could use a specialty list that is 
broader than our specialty lists, but it must include all the provider 
specialties included in our lists. Similarly, we explained that the 
time and distance parameters could also be narrower than our 
parameters, meaning they could require shorter time and/or distances, 
but they cannot be less demanding than our time and distance 
parameters.
    In the proposed rule, we stated that quantitative time and distance 
standards help strengthen QHP enrollees' timely access to a variety of 
providers to meet their health care needs, which in turn helps ensure 
that enrollees can receive

[[Page 26330]]

health care services without unreasonable delay. Additionally, we 
stated that quantitative time and distance standards, when varied by 
county type, provide a useful assessment of whether QHPs provide 
reasonable access to care and a more comprehensive evaluation of the 
adequacy of QHPs' networks.
    In the 2023 Payment Notice (87 FR 27322), we adopted time and 
distance standards that the FFEs would use to assess whether plans to 
be certified as QHPs in the FFEs meet network adequacy standards. The 
proposed provider specialty lists for time and distance standards for 
PY 2023 were informed by prior HHS network adequacy requirements, 
consultation with interested parties, and other Federal and State 
health care programs, such as Medicare Advantage and Medicaid. The 
provider specialty lists that were finalized for PY 2023 covered more 
provider types than previously evaluated under FFE standards so that 
QHP networks would be robust, comprehensive, and responsive to QHP 
enrollees' needs. In the proposed rule (88 FR 82588), we stated that we 
believe these provider specialty lists promote access to a variety of 
provider types and, as a result, strengthen consumer access to health 
care services without unreasonable delay. To establish a national floor 
for quantitative network adequacy standards, we proposed that the 
provider specialty list that State Exchanges and SBE-FPs use must 
include, at a minimum, the providers in the provider specialty lists 
for the FFEs that were applicable to PY 2023. Those lists are included 
in the preamble of this final rule, in Tables 9 and 10.
    Consistent with the standards for the FFEs, and to strengthen QHP 
enrollees' timely access to a variety of providers to meet their health 
care needs, we proposed that State Exchanges and SBE-FPs' time and 
distance standards would be calculated at the county level and vary by 
county designation. We proposed that State Exchanges and SBE-FPs would 
be required to use a county type designation method that is based on 
the population size and density parameters of individual counties. We 
further stated that under our proposal, the time and distance standards 
State Exchanges and SBE-FPs would establish and impose would apply to 
the provider specialty lists contained in the proposed rule (Tables 9 
and 10 in the preamble of this final rule). We explained that to count 
towards meeting the time and distance standards, individual and 
facility providers listed in Tables 9 and 10 would have to be 
appropriately licensed, accredited, or certified to provide services in 
their State, as applicable, and would need to have in-person services 
available.

     Table--Individual Provider Specialty List for Time and Distance
                                Standards
------------------------------------------------------------------------
                       Individual specialty types
-------------------------------------------------------------------------
Allergy and Immunology
Cardiology
Cardiothoracic Surgery
Chiropractor
Dental
Dermatology
Emergency Medicine
Endocrinology
ENT/Otolaryngology
Gastroenterology
General Surgery
Gynecology, OB/GYN
Infectious Diseases
Nephrology
Neurology
Neurosurgery
Occupational Therapy
Oncology--Medical, Surgical
Oncology--Radiation
Ophthalmology
Orthopedic Surgery
Outpatient Clinical Behavioral Health (Licensed, accredited, or
 certified professionals)
Physical Medicine and Rehabilitation
Physical Therapy
Plastic Surgery
Podiatry
Primary Care--Adult
Primary Care--Pediatric
Psychiatry
Pulmonology
Rheumatology
Speech Therapy
Urology
Vascular Surgery
------------------------------------------------------------------------


    Table 10--Facility Specialty List for Time and Distance Standards
------------------------------------------------------------------------
                        Facility specialty types
-------------------------------------------------------------------------
Acute Inpatient Hospitals (Must have Emergency services available 24/7)
Cardiac Catheterization Services
Cardiac Surgery Program
Critical Care Services--Intensive Care Units (ICU)
Diagnostic Radiology (Free-standing; hospital outpatient; ambulatory
 health facilities with Diagnostic Radiology)
Inpatient or Residential Behavioral Health Facility Services
Mammography
Outpatient Infusion/Chemotherapy
Skilled Nursing Facilities
Surgical Services (Outpatient or ASC)
Urgent Care
------------------------------------------------------------------------

    We stated in the proposed rule that the county-specific time and 
distance parameters that QHPs would be required to meet would be 
detailed in future guidance, namely, the annual CMS Letter to Issuers 
in the Federally-facilitated Exchanges. We stated that we would 
consider industry standards in developing these standards.
ii. Quantitative Network Adequacy Reviews
    For plan years beginning on or after January 1, 2025, we proposed 
(88 FR 82590) that State Exchanges and SBE-FPs be required to conduct 
quantitative network adequacy reviews prior to QHP certification, and 
that they conduct them consistent with network adequacy reviews 
conducted by the FFEs under Sec.  156.230. Specifically, we proposed 
that State Exchanges and SBE-FPs would be required to conduct, prior to 
QHP certification, quantitative network adequacy reviews to evaluate 
compliance with requirements under Sec.  156.230(a)(1)(ii) and (iii), 
and (a)(2)(i)(A), while providing QHP certification applicants the 
flexibilities described under Sec.  156.230(a)(2)(ii) and (a)(3) and 
(4). We stated in the proposed rule that under this proposal, State 
Exchanges and SBE-FPs would be prohibited from accepting an issuer's 
attestation as the only means for plan compliance with network adequacy 
standards. We further proposed that State Exchanges and SBE-FPs would 
make available to SADP applicants the limited exception available to 
SADPs under Sec.  156.230(a)(4) pursuant to which SADPs may not be 
required to meet FFE network adequacy standards under Sec.  
156.230(a)(4), for the same reasons we made this exception available in 
the FFEs in the 2024 Payment Notice (88 FR 25878 through 25879). This 
exception is not available to medical QHP issuers.

[[Page 26331]]

iii. Quantitative Network Adequacy Review Justification Process
    In the proposed rule (88 FR 82590), we acknowledged that State-
specific challenges may necessitate exceptions, and so we proposed to 
require State Exchanges and SBE-FPs to permit issuers that are unable 
to meet the specified standards to participate in a justification 
process after submitting their initial data to account for variances, 
consistent with the processes specified under Sec.  156.230(a)(2)(ii) 
and (a)(3) and (4). We noted that State-specific challenges could 
include barriers beyond an issuer's control, such as provider supply 
shortages or topographic barriers.
    We stated in the proposed rule that the issuer would include this 
justification as part of its QHP application and describe 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. We further stated that the issuer would 
be required to provide information as requested by the State Exchange 
or SBE-FP to support this justification. We also explained that State 
Exchanges and SBE-FPs would be required to review the issuer's 
justification to determine whether making such health plan available 
through the Exchange is in the interests of qualified individuals in 
the State or States in which such Exchange operates as specified under 
Sec.  156.230(a)(3). We further explained that in making this 
determination, the factors State Exchanges and SBE-FPs could consider 
include whether the exception is reasonable based on circumstances such 
as the local availability of providers and variables reflected in local 
patterns of care. We stated that if the State Exchange or SBE-FP 
determines that making such health plan available through its Exchange 
is in the interests of qualified individuals in the State or States in 
which such Exchange operates, it could then certify the plan as a QHP.
iv. Exception Process for State Exchanges and SBE-FPs
    In the proposed rule (88 FR 82590), we stated that we are aware 
that some States Exchanges employ robust, quantitative network adequacy 
standards that differ from those used by the FFEs, but still ensure 
that QHPs provide consumers with reasonable, timely access to 
practitioners and facilities to manage their health care needs, 
consistent with the ultimate aim of these proposals. Accordingly, we 
proposed a framework for granting exceptions to the requirements that 
State Exchanges and SBE-FPs establish and impose network adequacy time 
and distance standards for QHPs that are at least as stringent as the 
standards applicable to QHPs in FFEs and conduct quantitative network 
adequacy reviews that are consistent with those carried out by the FFEs 
under Sec.  156.230. We proposed that HHS could grant State Exchanges 
and SBE-FPs an exception if it determines that the Exchange applies and 
enforces quantitative network adequacy standards that are different 
from the FFEs' but ensure reasonable access as defined under Sec.  
156.230. We also proposed that the exception would be available only to 
State Exchanges and SBE-FPs that conduct quantitative reviews of 
network adequacy prior to certifying plans as QHPs. We further proposed 
that Exchanges seeking to employ alternative network adequacy standards 
would be required to submit an exception request, in a form and manner 
specified by HHS, and to support their exception request with evidence-
based data demonstrating that such standards ensure access as defined 
under Sec.  156.230.
    For example, we explained that if a State were to provide 
quantitative evidence that their network adequacy time and distance 
standards that measure access by service types provide consumers with 
equal access to providers as the Federal network adequacy standards 
under Sec.  156.230 that measure access by provider types, we may grant 
the respective State's request for an exception from measuring access 
by provider types. Additionally, we explained that if a State were to 
use different county type designations than the five county type 
designations that we use to assess QHP time and distance standards at 
the county level (that is, Large Metro, Metro, Micro, Rural, CEAC), we 
would consider the respective State's request for an exemption from 
using the same five county type designations only if the State were to 
provide evidence that their alternative county type designations 
provide consumers with equal access to providers as the Federal network 
adequacy standards under Sec.  156.230. We stated that alternative 
quantitative network adequacy standards that we would review for 
potentially qualifying for the exemption must be supported by evidence-
based data, demonstrating that such standards provide enrollees with a 
level of access to providers that is equal to or greater than that 
ensured by the FFE network adequacy standards under Sec.  156.230.
    Although we proposed to establish minimum standards related to 
network adequacy in the proposed rule, we solicited comment on how 
States may be able to develop a combination of data-driven quantitative 
and qualitative standards, developed with input from interested 
parties, to assess network adequacy. In the 2020 Medicaid Program; 
Medicaid and Children's Health Insurance Program (CHIP) Managed Care 
final rule (85 FR 72754, 72802), we provided States the flexibility to 
develop quantitative network adequacy standards for determining network 
adequacy. In that rule, we noted that in some situations, time and 
distance may not be the most effective type of standard for determining 
network adequacy and that some States have found that the time and 
distance analysis produces results that may not accurately reflect 
provider availability. For example, a State that has a heavy reliance 
on telehealth in certain areas of the State may find that a health care 
provider-to-enrollee ratio is more useful in measuring meaningful 
access to all services without unreasonable delay, as the time it would 
take the enrollee, and the distance the enrollee would have to travel, 
to access the provider in-person could be well beyond applicable time 
and distance standards, but the enrollee may still be able to easily 
and quickly access many different providers on a virtual basis (85 FR 
72802). In the proposed rule, we sought comment on how we should 
administer the process for Exchanges to apply for these exceptions, 
including the appropriate timelines, and the data that would be 
required to be submitted as part of the exception request. We also 
sought comment on how we should evaluate the provider access offered by 
QHP issuers in a State that requests an exception to establish and 
impose quantitative network adequacy standards that are different from 
the FFEs', whether and how to measure the access provided by those 
different standards over time, and how long an approved exemption 
should last.
    In the proposed rule, we stated that to ensure compliance with 
these proposed quantitative time and distance QHP network adequacy 
standards and review requirements, we would coordinate with State 
Exchanges and SBE-FPs to provide technical assistance to support their 
compliance with the requirements of this policy and work with them 
should it be necessary to remedy any gaps in compliance. However, we 
stated that if a State Exchange or SBE-FP fails to comply with these 
standards, we

[[Page 26332]]

could seek to take remedial action under our authorities related to 
Exchange program integrity.
c. Proposal Related to QHP Reporting on Telehealth Services
    We proposed (88 FR 82591) to require State Exchanges and SBE-FPs to 
require that all issuers seeking certification of plans to be offered 
as QHPs submit information to the respective State Exchanges or SBE-FPs 
about whether network providers offer telehealth services. We proposed 
that this requirement would be applicable beginning with the QHP 
certification cycle for PY 2025. We stated in the proposed rule that 
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. We also stated that this information 
could be relevant to State Exchange and SBE-FP analysis of whether a 
QHP meets network adequacy standards. We noted that this proposal is 
not intended to suggest that telehealth services would be counted in 
place of in-person service access for the purpose of State Exchange and 
SBE-FP issuers meeting time and distance network adequacy standards for 
PY 2025. We explained that while we acknowledge the growing importance 
of telehealth, we want to ensure that telehealth services do not reduce 
the availability of in-person care.
    We explained that for the purpose of this proposal, telehealth 
encompasses professional consultations, office visits, and office 
psychiatry services delivered through technology-based methods, 
including virtual check-ins, remote evaluation of pre-recorded patient 
data, and inter-professional internet consultations. We noted that, 
currently, for issuers in FFEs to comply with telehealth reporting 
standards, issuers must indicate whether each provider offers 
telehealth with the options ``Yes,'' ``No,'' or ``Requested information 
from the provider, awaiting their response.'' We proposed that State 
Exchanges and SBE-FPs would be required to impose this requirement on 
issuers when issuers submit provider information.
    We sought comment on this proposal, including comments on how we 
might incorporate telehealth availability into network adequacy 
standards in future plan years.
d. Additional Network Adequacy Standards
    To reduce burden on State Exchanges and SBE-FPs that are not yet 
conducting quantitative network adequacy reviews, we did not propose 
that State Exchanges and SBE-FPs enforce appointment wait time 
standards or that State Exchanges and SBE-FPs ensure that the provider 
network of each QHP meets applicable standards specified in Sec.  
156.230(b) through (e). However, we sought comment to inform any 
potential future enforcement of appointment wait time standards as well 
as the standards specified in Sec.  156.230(b) through (e) and stated 
that we looked forward to capturing a wide range of perspectives on 
these topics from various interested parties. We stated that we were 
especially interested in comments about how State Exchanges and SBE-FPs 
may enforce quantitative network adequacy standards for appointment 
wait times, as well as the impact enforcing these standards may have on 
issuers and consumers.
    We also sought comment on our proposal for State Exchanges and SBE-
FPs to establish and impose quantitative time and distance QHP network 
adequacy standards that are at least as stringent as the FFEs' time and 
distance standards established for QHPs under Sec.  156.230 and to 
conduct quantitative network adequacy reviews, prior to QHP 
certification, that are consistent with the reviews conducted by the 
FFEs under Sec.  156.230, including comment on whether we should amend 
Sec.  156.230 in addition to Sec.  155.1050 to directly apply the same 
standards applicable to issuers on FFEs to issuers in State Exchanges 
and SBE-FPs for plan years beginning on or after January 1, 2025.
    After consideration of comments and for the reasons outlined in the 
proposed rule and our responses to comments, we are finalizing these 
proposals with a clarification to the exception process and a 
modification to require implementation for plan years beginning on or 
after January 1, 2026.
    First, under Sec.  155.1050(a)(2)(i)(A), we are finalizing that for 
plan years beginning on or after January 1, 2026, State Exchanges and 
SBE-FPs must establish and impose quantitative time and distance 
network adequacy standards for QHPs that are at least as stringent as 
standards for QHPs participating on the FFEs under Sec.  
156.230(a)(2)(i)(A).
    Second, we are finalizing that, for plan years beginning on or 
after January 1, 2026, State Exchanges and SBE-FPs must conduct 
quantitative network adequacy reviews prior to certifying any plan as a 
QHP, consistent with the reviews conducted by the FFEs under Sec.  
156.230. Specifically, we are finalizing at Sec.  155.1050(a)(2)(i)(B) 
that, for plan years beginning on or after January 1, 2026, State 
Exchanges and SBE-FPs must conduct network adequacy reviews to evaluate 
a plan's compliance with network adequacy standards under Sec.  
156.230(a)(1)(ii), (a)(1)(iii), and (a)(2)(i)(A) prior to certifying 
any plan as a QHP, while providing QHP certification applicants the 
flexibilities described under Sec.  156.230(a)(2)(ii) and (a)(3) and 
(4).
    Third, we are finalizing Sec.  155.1050(a)(2)(ii) to provide that, 
for plan years beginning on or after January 1, 2026, HHS may grant an 
exception to the requirements described under Sec.  155.1050(a)(2)(i) 
to a State Exchange or SBE-FP that demonstrates with evidence-based 
data, in a form and manner specified by HHS, that (1) the Exchange 
applies and enforces alternate quantitative network adequacy standards 
that are reasonably calculated to ensure a level of access to providers 
that is as great as that ensured by the Federal network adequacy 
standards established for QHPs under Sec.  156.230(a)(1)(iii), 
(a)(2)(i)(A), and (a)(4); and (2) the Exchange evaluates whether plans 
comply with applicable network adequacy standards prior to certifying 
any plan as a QHP. In this final rule, for this exception process, we 
are clarifying that, for (1) above, the Exchange will need to 
demonstrate that it applies and enforces alternate quantitative network 
adequacy standards that are reasonably calculated to ensure a level of 
access to providers that is as great as that ensured by the Federal 
network adequacy standards established for QHPs under Sec.  
156.230(a)(1)(iii), (a)(2)(i)(A), and (a)(4), and not Sec.  156.230 
generally, to reinforce that issuers on the State Exchanges and SBE-FPs 
do not need to comply with the appointment wait time standards under 
Sec.  156.230(a)(2)(i)(B) under this policy.
    Lastly, we are finalizing Sec.  155.1050(a)(2)(i)(C) to provide 
that, for plan years beginning on or after January 1, 2026, State 
Exchanges and SBE-FPs must require that all issuers seeking 
certification of a plan as a QHP submit information to the Exchange 
reporting whether or not network providers offer telehealth services.
    In preparation for PY 2026, we will begin communicating and 
coordinating with State Exchanges and SBE-FPs through the provision of 
technical assistance. Specifically, during PYs 2024 and 2025, we will 
work closely with State Exchanges and SBE-FPs on their plans to comply 
with these network adequacy requirements for plan years beginning on or 
after January 1, 2026.

[[Page 26333]]

    We summarize and respond below to public comments received on these 
proposals.
    Comment: Many commenters expressed support for the proposal that 
State Exchanges and SBE-FPs: (1) establish and impose quantitative time 
and distance network adequacy standards for QHPs that are at least as 
stringent as standards for QHPs participating on the FFEs under Sec.  
156.230(a)(2)(i)(A); and (2) conduct reviews of a plan's compliance 
with those quantitative network adequacy standards prior to certifying 
any plan as a QHP, consistent with the manner in which the FFEs review 
the network adequacy of plans under Sec.  156.230.
    Response: We appreciate the commenters' support for this proposal.
    Comment: Many commenters expressed general support for the creation 
of a Federal floor for network adequacy standards or standardization of 
network adequacy standards across States. Commenters indicated that the 
imposition of standardized quantitative time and distance network 
adequacy requirements across States, particularly in States that do not 
currently impose quantitative time and distance network adequacy 
requirements or that impose requirements that are less stringent than 
the FFEs', is valuable because it increases access to providers and 
services. Commenters stated that the imposition of these requirements 
will do so by for example, decreasing disparities in access across 
States, and requiring States that have not implemented quantitative 
network adequacy standards to do so. One commenter also stated that 
``the establishment of stringent network adequacy standards is critical 
in ensuring continual access to high-quality dental care and 
incentivizing fair negotiations between insurers and dental providers 
during the network contracting process.'' Some of these commenters 
suggested alternatives to the proposed approach such as suggesting that 
the floor be qualitative in nature, that it be methods-based and not 
metrics-based, and that CMS work with State Exchanges and SBE-FPs to 
harmonize standards across States rather than extending the FFE network 
adequacy standards as a national floor.
    Response: We appreciate the support for our proposals and agree 
with the benefits raised by commenters. We are finalizing these 
policies as proposed with a modification to the implementation date and 
a clarification to the exception process, as previously discussed. 
While we appreciate commenters suggesting a qualitative approach or a 
methods-based one, which we believe may refer to approaches that impose 
standards that only require States or issuers to have processes in 
place to ensure network adequacy, we believe quantitative network 
adequacy standards, unlike qualitative or other methods-based 
approaches, can be monitored relatively easily and applied objectively. 
By contrast, qualitative or other methods-based approaches to network 
adequacy typically articulate a broad, general standard of adequacy and 
grant regulators or insurers discretion to determine how to measure 
compliance. State regulators using these approaches may require issuers 
to attest to meeting the network adequacy standards or allow the 
issuers to self-monitor compliance with the standards in a different 
way. As opposed to conducting routine audits or requiring periodic 
reports of compliance, State regulators using these approaches usually 
also rely on consumer complaints to highlight situations that might 
require investigation. Based on our experience conducting network 
adequacy reviews and regulating QHPs, as well as feedback from 
interested parties, we are of the view that no matter the State in 
which a QHP is offered, some quantitative analysis is necessary for an 
Exchange to objectively monitor network adequacy and determine whether 
a QHP can provide enrollees access to an adequate network of providers.
    Additionally, harmonizing network adequacy standards across States 
would prevent States from enforcing quantitative network adequacy 
standards that are more stringent than the FFEs' standards or from 
using the exception process under Sec.  155.1050(a)(2)(ii) to enforce 
standards that they determined are in the best interest of their 
consumers. We are of the view that setting the FFEs' quantitative time 
and distance network adequacy standards as a national floor strikes an 
appropriate balance of providing States with these important 
flexibilities while also ensuring that all consumers, regardless of 
which State they live in, have timely access to providers to manage 
their health care needs.
    Comment: Many commenters offered recommendations about additional 
provider and facility specialty types that should be subject to the 
time and distance standards, such as academic cancer centers, essential 
community hospitals, substance use disorder treatment providers, and 
reproductive health providers, as well as recommendations about changes 
to the time and distance metrics such as changes to the number of 
minutes/miles associated with time and distance standards for certain 
specialties.
    Response: We are not inclined to add additional provider types to 
the individual and facility provider specialty lists for time and 
distance standards at this time. The provider specialty lists we 
proposed are the same lists we finalized for FFE issuers in the 2023 
Payment Notice (87 FR 27325). Those specialty lists were informed by 
prior HHS network adequacy requirements, consultation with interested 
parties, and other Federal and State health care programs, such as 
Medicare Advantage and Medicaid, and those lists covered more provider 
specialty types than previously evaluated under FFE standards so that 
QHP networks would be robust, comprehensive, and responsive to QHP 
enrollees' needs. We continue to believe that those provider specialty 
lists promote access to a variety of provider types and, as a result, 
strengthen consumer access to health care services without unreasonable 
delay. Until we have more experience with the impact of the specialty 
lists, we finalize in this rule on QHP issuers in State Exchanges and 
SBE-FPs, adding additional providers to the specialty lists would be 
premature and may impose burdens on QHP issuers that we have not fully 
evaluated. Therefore, at this time, we do not believe that it is 
appropriate to include additional provider types in these specialty 
lists.
    Our time and distance metrics for network adequacy are based on 
Medicare Advantage standards and were designed with careful 
consideration of other network adequacy standards, including those of 
individual States, accrediting entities, and Federal health care 
programs. Until we can more fully assess the impact of the time and 
distance standards, we finalize in this rule on QHP issuers in State 
Exchanges and SBE-FPs, we believe that modifying those standards would 
also be premature and may impose burdens on QHP issuers that we have 
not fully evaluated. We will further research commenters' recommended 
changes to our time and distance metrics as well as their implications 
and may consider them in future rulemaking.
    Comment: Many commenters also opposed the proposal that State 
Exchanges and SBE-FPs (1) establish and impose quantitative time and 
distance network adequacy standards for QHPs that are at least as 
stringent as standards for QHPs participating on the FFEs under Sec.  
156.230(a)(2)(i)(A); and (2) conduct reviews of a plan's compliance 
with those quantitative network

[[Page 26334]]

adequacy standards prior to certifying any plan as a QHP, consistent 
with the manner in which the FFEs review the network adequacy of plans 
under Sec.  156.230. Commenters stated that States are best informed 
about local context factors that should be considered in network 
adequacy standards and reviews such as provider shortages, provider 
quality, innovative delivery methods, and geographic constraints. 
Commenters also noted that the proposal has the potential for creating 
conflicting or duplicative regulations and increasing administrative 
burden on States and issuers.
    Response: For the reasons explained in the proposed rule (88 FR 
82587 through 82588), we continue to believe that requiring State 
Exchanges and SBE-FPs to establish and impose quantitative time and 
distance network adequacy standards for QHPs that are at least as 
stringent as the FFEs' and conduct reviews of plan compliance with 
those quantitative network adequacy standards consistent with the 
manner in which the FFEs review plan network adequacy will create an 
effective national baseline for network adequacy standards and help 
provide consumers, regardless of which State they live in, with 
reasonable, timely access to providers and facilities to manage their 
health care needs.
    We acknowledge commenters' concerns that our network adequacy 
proposal may create conflicting or duplicative regulations and increase 
administrative burden on States Exchanges, SBE-FPs, and their issuers. 
We believe that finalizing these proposals with a modification to 
require implementation for plan years beginning on or after January 1, 
2026, will provide States an opportunity to revise their regulations to 
ensure there are no conflicting or duplicative regulations. This 
modification may also lessen the administrative burden of this policy 
on State Exchanges, SBE-FPs, and their issuers by providing them more 
time to come into compliance with these new requirements.
    In the proposed rule (88 FR 82590), we acknowledged that State-
specific factors, such as provider supply shortages, topographic 
barriers, or other barriers beyond an issuer's control, may necessitate 
exceptions to these requirements, and this network adequacy policy 
permits State Exchanges and SBE-FPs to consider those factors as they 
conduct network adequacy reviews prior to plan certification. 
Specifically, this final rule extends flexibility to State Exchanges 
and SBE-FPs to permit issuers that are unable to meet the specified 
standards to participate in a justification process after submitting 
their initial data to account for variances, consistent with the 
processes specified under Sec.  156.230(a)(2)(ii) and (a)(3) and (4). 
The issuer would include this justification as part of its QHP 
application and describe 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. State 
Exchanges and SBE-FPs will be required to review the issuer's 
justification to determine whether making such health plan available 
through the Exchange is in the interests of qualified individuals in 
the State or States in which such Exchange operates as specified under 
Sec.  156.230(a)(3). In making this determination, the factors State 
Exchanges and SBE-FPs could consider include local context factors that 
the commenters reference and may envision, such as whether the 
exception is reasonable based on circumstances such as the local 
availability of providers and variables reflected in local patterns of 
care. If the State Exchange or SBE-FP determines that making such 
health plan available through its Exchange is in the interests of 
qualified individuals in the State or States in which such Exchange 
operates, it could then certify the plan as a QHP.
    Comment: Several commenters urged CMS to delay implementation of 
the proposed network adequacy standards to allow States sufficient time 
to assess whether their network adequacy standards comply with the 
proposed requirements or need modification, and for issuers offering 
QHPs through State Exchanges and SBE-FPs to modify their networks to 
comply with the new national floor for network adequacy standards.
    Response: In the proposed rule, we proposed that the new network 
adequacy standards that State Exchanges and SBE-FPs must establish and 
impose would be applicable for plan years beginning on or after January 
1, 2025. We understand, however, the desire expressed by some 
commenters to delay the implementation of this proposal, and we 
acknowledge that compliance with the network adequacy standards 
finalized in this rule may require States to review and modify their 
network adequacy standards and processes. In response to these 
concerns, CMS is finalizing that the new network adequacy standards for 
State Exchanges and SBE-FPs will apply to plan years beginning on or 
after January 1, 2026. In preparation for PY 2026, we will begin 
communicating and coordinating with State Exchanges and SBE-FPs through 
the provision of technical assistance. Specifically, during PYs 2024 
and 2025, we will work closely with State Exchanges and SBE-FPs on 
their plans to comply with these network adequacy requirements for plan 
years beginning on or after January 1, 2026.
    Comment: Several commenters requested clarification about whether 
the proposed network adequacy policies would apply when it is the State 
Department of Insurance, and not the State Exchange or SBE-FP, 
conducting the network adequacy reviews.
    Response: When establishing a State Exchange or SBE-FP through the 
Exchange Blueprint approval process under Sec.  155.105, a State must 
attest to its capacity to ensure QHPs' compliance with market reform 
rules, applicable regulations, and guidance, as well as its capacity to 
ensure QHPs' ongoing compliance with QHP certification 
requirements.\262\ As part of this process, a State must inform CMS 
that network adequacy activities will be completed by the Exchange or 
an Exchange's designee through contract, agreement, or other 
arrangement. Regardless of whether a State intends to designate some 
entity other than the Exchange to perform network adequacy activities, 
under Sec.  155.1050(a), Exchanges are ultimately responsible for 
ensuring QHP network adequacy. This proposal does not alter a State's 
ability to designate an entity other than the Exchange to perform 
network adequacy reviews, nor does it alter any existing agreements a 
State Exchange or an SBE-FP may have entered into with State regulatory 
entities, including State Departments of Insurance, to perform network 
adequacy reviews or other QHP certification functions. We clarify that 
the State Exchanges and SBE-FPs may continue current relationships with 
entities they have designated to undertake QHP certification functions 
under their approved Exchange Blueprint, including network adequacy 
reviews, and that all network adequacy reviews, including reviews 
conducted by an Exchange's designee, must meet the requirements of the 
network adequacy policies finalized in this rule under new Sec.  
155.1050(a)(2).
---------------------------------------------------------------------------

    \262\ Blueprint for Approval of State-Based Health Insurance 
Exchanges, section III, part C. 4.0. https://www.cms.gov/cciio/resources/fact-sheets-and-faqs/downloads/cms-blueprint-application.pdf.
---------------------------------------------------------------------------

    Comment: Most commenters were supportive of the proposal to make a 
justification process available for issuers in State Exchanges and SBE-
FPs that

[[Page 26335]]

cannot meet the FFEs' time and distance standards and urged CMS to work 
with State Exchanges and SBE-FPs to closely scrutinize submitted 
justifications and ensure that issuers' justifications would only be 
accepted if truly valid.
    Response: We appreciate the commenters' feedback. This final rule 
requires State Exchanges and SBE-FPs to review the issuer's 
justification to determine whether making such health plan available 
through the Exchange is in the interests of qualified individuals in 
the State or States in which such Exchange operates as specified under 
Sec.  156.230(a)(3). In making this determination, the factors State 
Exchanges and SBE-FPs could consider include State-specific factors, 
such as provider supply shortages, topographic barriers, or other 
barriers beyond an issuer's control. Upon publication of this rule, we 
will begin communicating and coordinating with State Exchanges and SBE-
FPs through technical assistance, in preparation for PY 2026, including 
on best practices to review and approve or deny issuer-submitted 
justifications.
    Comment: Several commenters opposed the limited exception for SADPs 
because they believe that SADPs should be held accountable for access 
to dental providers in the same manner as medical QHPs.
    Response: We acknowledge the commenters' concerns. In the 2024 
Payment Notice (88 FR 25875), we finalized a limited exception to the 
provider network requirement for SADP issuers that sell plans in areas 
where it is prohibitively difficult for the issuer to establish a 
network of dental providers; this exception is not applicable to 
medical QHP issuers at this time.\263\ Under this exception, an area is 
considered ``prohibitively difficult'' for an SADP issuer to establish 
a network of dental providers based on attestations from State 
Departments of Insurance in States with at least 80% of their counties 
classified as CEAC, that at least one of the following factors exists 
in the area of concern: a significant shortage of dental providers, a 
significant number of dental providers unwilling to contract with 
Exchange issuers, or significant geographic limitations impacting 
consumer access to dental providers. We are extending the limited SADP 
exception to SADP issuers on State Exchanges and SBE-FPs to ensure that 
consumers residing in all States where it is prohibitively difficult 
for the issuer to establish a network of dental providers have access 
to dental plans. As we explained in the 2024 Payment Notice, this 
limited exception follows logically from how the requirements in 
sections 1311(c)(1)(B) and (C) of the ACA that plans ensure a 
sufficient choice of providers apply in the unique SADP context. If 
creating a network of dental providers is prohibitively difficult for 
SADPs in certain areas in State Exchange or SBE-FP States, it is 
foreseeable that there may be some areas where SADPs could not be 
Exchange-certified, which then risks there being no SADPs in that area 
and thus no choice of dental providers through SADPs at all. Thus, in 
this limited context, requiring that SADP issuers in State Exchanges 
and SBE-FPs establish a dental provider network would defeat the 
purpose of section 1311(c)(1)(B) and (C) the ACA to ensure that 
enrollees have a sufficient choice of providers.
---------------------------------------------------------------------------

    \263\ See Sec.  156.230(a)(4).
---------------------------------------------------------------------------

    Comment: Most commenters supported the availability of an exception 
process for State Exchanges and SBE-FPs and urged CMS to review these 
exception requests quickly and to clearly identify the criteria for 
acceptance.
    Response: We appreciate the commenters' support for the exception 
process. Upon publication of this rule, we will begin communicating and 
coordinating with State Exchanges and SBE-FPs through technical 
assistance in preparation for PY 2026. In reviewing exception requests, 
we will seek to determine whether the State has the requisite 
statutory, regulatory, and/or sub-regulatory authority to review all 
QHPs applying for QHP certification in the State for network adequacy 
as well as the requisite authority to review all QHPs for compliance 
with time and distance standards using the same specialty lists as 
detailed in the 2023 Payment Notice (87 FR 27324 through 27326) (set 
forth at Tables 9 and 10 of this preamble to this final rule).
    We will also seek to determine whether the State conducts 
quantitative reviews of time and distance standards for QHP network 
adequacy using issuer-submitted data for all plans applying for QHP 
certification and whether the State's quantitative review of time and 
distance standards for QHP network adequacy includes parameters that 
are at least as short as those listed in the 2023 Letter to Issuers 
\264\ for the specialty types listed in Tables 9 and 10 of this 
preamble to this final rule. Lastly, we will seek to determine whether 
the State's quantitative review of time and distance standards occurs 
prior to plan certification and whether the review includes a 
justification process for plans that do not meet the network adequacy 
standards.
---------------------------------------------------------------------------

    \264\ 2023 Letter to Issuers in the Federally-facilitated 
Exchanges: https://www.cms.gov/files/document/2023-draft-letter-issuers-508.pdf.
---------------------------------------------------------------------------

    Before PY 2026, we will also review the information provided by 
State Exchanges and SBE-FPs to support their exception request. This 
information may include materials such as guidance documents or 
templates that describe the State's methodology for reviewing issuer-
submitted quantitative data to assess compliance with QHP network 
adequacy standards, information about the frequency and timeline for 
network adequacy reviews for QHP issuers in the State, information 
regarding the State's justification process for issuers not yet meeting 
the network adequacy standards, and information regarding any 
compliance review processes the State utilizes to follow up with 
issuers that complete the justification process.
    Comment: Many commenters expressed support for the proposal to 
require collection of information about which providers offer 
telehealth services and one commenter recommended that issuers be 
required to ensure that a percentage of care available in their network 
is available via telehealth services.
    Response: We appreciate the support from these commenters. In the 
proposed rule, we noted that this proposal is not intended to suggest 
that telehealth services would be counted in place of in-person service 
access for the purpose of meeting network adequacy time and distance 
standards for PY 2025. While we acknowledge the growing importance of 
telehealth, we want to ensure that telehealth services do not reduce 
the availability of in-person care. More research would be needed 
before we could analyze whether counting telehealth is appropriate for 
purposes of a QHP meeting network adequacy time and distance standards.
    Comment: A few commenters expressed opposition to the collection of 
information about which providers offer telehealth services indicating 
that the proposed rule underestimated the burden of this proposal, and 
that the information would not capture the availability of telehealth 
services.
    Response: We believe that the telehealth reporting standards, 
pursuant to which issuers in State Exchanges and SBE-FPs must indicate 
whether each network provider offers telehealth services with the 
options ``Yes,'' ``No,'' or ``Requested information from the provider, 
awaiting their response,'' would not require extensive administrative 
time to gather. Approximately half of the parent companies of issuers 
on the State Exchanges and over two thirds of the

[[Page 26336]]

parent companies of issuers on SBE-FPs offer Medicare Advantage plans, 
and Medicare Advantage offers a telehealth credit for network adequacy. 
Therefore, many more issuers on State Exchanges and SBE-FPs likely 
already have access to this information. We also believe that 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 directories. For these reasons, we estimate that any 
additional burden resulting from the requirement that QHP issuers 
report whether each network provider is furnishing telehealth services 
would be minimal.
    We stated in the proposed rule (88 FR 82591, 82638 through 82639) 
that this data would be for informational purposes, would be intended 
to help inform the future development of telehealth standards, and 
would not be displayed to consumers. We believe that the above-
described telehealth reporting standards support these objectives by 
providing State Exchanges and SBE-FPs with a general picture regarding 
the availability of telehealth services in their State. Additionally, 
at this time, since this data will not be displayed to consumers, it is 
not necessary for State Exchanges and SBE-FPs to collect more granular 
telehealth data from their issuers.
    Comment: One commenter recommended delaying collection of 
telehealth information to allow the development of more efficient ways 
for issuers to collect that information from providers.
    Response: We acknowledge this concern and will require compliance 
with this network adequacy requirement for plan years beginning on or 
after January 1, 2026. Upon publication of this rule, we will begin 
communicating and coordinating with State Exchanges and SBE-FPs through 
technical assistance in preparation for PY 2026. Notably, we collect 
the same telehealth information from QHP issuers in the FFEs, and all 
those issuers have successfully submitted it each plan year.
    Comment: Many commenters recommended that CMS extend the FFEs' 
appointment wait time standards to State Exchanges and SBE-FPs, citing 
that it would further provide consumers with reasonable, timely access 
to practitioners and facilities to manage their health care needs. Many 
commenters also sought information on appointment wait time standards 
and operations, such as the use of secret shopper surveys to assess 
compliance with these standards.
    Response: As we explained in the proposed rule (88 FR 82591), to 
reduce burden on State Exchanges and SBE-FPs that are not yet 
conducting quantitative network adequacy reviews, we did not propose, 
at this time, that State Exchanges and SBE-FPs enforce appointment wait 
time standards or that State Exchanges and SBE-FPs ensure that the 
provider network of each QHP meets applicable standards specified in 
Sec.  156.230(b) through (e). We will monitor the implementation of 
these network adequacy standards in State Exchanges and SBE-FPs and 
consider whether applying the FFEs' appointment wait time standards to 
issuers in State Exchanges and SBE-FPs in future plan years is 
warranted. Additional information about appointment wait time standards 
will appear in the 2025 Letter to Issuers and will only apply to 
issuers in the FFEs in PY 2025.
    We thank commenters for their feedback on these issues and will 
take their comments into consideration in future rulemaking.

E. 45 CFR 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 2025 Benefit Year (Sec.  
156.50)
    In the HHS Notice of Benefit and Payment Parameters for 2025 
proposed rule (88 FR 82510, 82591), for the 2025 benefit year, we 
proposed to retain the 2024 benefit year FFE user fee rate of 2.2 
percent of total monthly premiums and an SBE-FP user fee rate of 1.8 
percent of the total monthly premiums.
    Section 1311(d)(5)(A) of the ACA permits an Exchange to charge 
assessments or user fees on participating health insurance issuers as a 
means of generating funding to support its operations. If a State does 
not elect to operate an Exchange or does not have an approved Exchange, 
section 1321(c)(1) of the ACA directs HHS to operate an Exchange within 
the State. Accordingly, in Sec.  156.50(c), we state that a 
participating issuer offering a plan through an FFE or SBE-FP must 
remit a user fee to HHS each month that is equal to the product of the 
annual user fee rate specified in the annual HHS notice of benefit and 
payment parameters for FFEs and SBE-FPs for the applicable benefit year 
and the monthly premium charged by the issuer for each policy where 
enrollment is through an FFE or SBE-FP. OMB Circular A-25 established 
Federal policy regarding user fees and what the fees can be used 
for.\265\ OMB Circular A-25 provides 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.
---------------------------------------------------------------------------

    \265\ See Circular No. A-25 Revised. https://www.whitehouse.gov/wp-content/uploads/2017/11/Circular-025.pdf.
---------------------------------------------------------------------------

a. FFE User Fee Rates for the 2025 Benefit Year
    Based on estimated costs, enrollment (including anticipated 
establishment of SBE-FPs or shifts to State Exchanges in certain States 
in which FFEs or SBE-FPs currently are operating), and premiums for the 
2025 benefit year, we proposed a 2025 user fee rate for all 
participating FFE issuers of 2.2 percent of total monthly premiums.
    Section 156.50(c)(1) provides that, to support the functions of 
FFEs, an issuer offering a plan through an FFE 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 FFE. Issuers seeking to participate in an FFE 
in the 2025 benefit year will receive two special benefits not 
available to issuers offering plans in State Exchanges: (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 2025 benefit year, issuers 
participating in an FFE will receive special benefits from the 
following Federal activities:
     Provision of consumer assistance tools;
     Consumer outreach and education;
     Management of a Navigator program;
     Regulation of agents and brokers;
     Eligibility determinations;
     Enrollment processes; and
     Certification processes for QHPs (including ongoing 
compliance verification, recertification, and decertification).
    Activities performed by the Federal Government that do not provide 
issuers participating in an FFE with a special benefit are not covered 
by the FFE user fee. We expect that the user fee rates we finalize 
provide adequate funding for each of the special benefits issuers 
participating in an FFE receive. For a description of how estimates for 
costs are developed and a full description of how the proposed 2025 
benefit year FFE

[[Page 26337]]

user fee rate was developed see the proposed rule (88 FR 82591 through 
82592).
    We noted in the proposed rule that if any events significantly 
changed our estimates around costs, premiums, or enrollment projections 
between the proposed rule and the final rule, we may modify the FFE and 
SBE-FP user fee rates that were proposed.
b. SBE-FP User Fee Rates for the 2025 Benefit Year
    We proposed to charge issuers offering QHPs through an SBE-FP a 
user fee rate of 1.8 percent of the monthly premium charged by the 
issuer for each policy under plans offered through an SBE-FP for the 
2025 benefit year.
    In Sec.  156.50(c)(2), we specify that an issuer offering a plan 
through an SBE-FP must remit a user fee to HHS, in the timeframe and 
manner established by HHS, equal to the product of the 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. We expect that the user fee rates we finalize will provide 
adequate funding for each of the special benefits issuers participating 
in an SBE-FP will receive. See the proposed rule (88 FR 82592 through 
82593) for a full description of how the user fee rate for SBE-FPs is 
calculated, special benefits to issuers using the SBE-FP, and how the 
proposed 2025 benefit year SBE-FP user fee rate was developed.
    As previously mentioned in this section, we also noted in the 
proposed rule that if any events significantly change our estimates 
around costs, premiums, or enrollment projections between the proposed 
rule and the final rule, we may modify the FFE and SBE-FP rates that 
were proposed.
    We sought comment on the proposed 2025 FFE and SBE-FP user fee 
rates.
    After the proposed rule was published, we revised our enrollment 
projections as a result of newly available data based on the 2024 Open 
Enrollment (OE) that occurred between November 2023 and January 2024. 
In particular, during the 2024 OE cycle, there were more plan 
selections than expected, which resulted in an increase in our 
enrollment projections.\266\ After consideration of comments and for 
the reasons outlined in the proposed rule and our responses to comments 
below, and as a result of our revised enrollment projections, we are 
finalizing for the 2025 benefit year a user fee rate for all issuers 
offering QHPs through an FEE of 1.5 percent of the monthly premium 
charged by the issuer for each policy under plans where enrollment is 
through an FFE and a user fee rate for all issuers offering QHPs 
through an SBE-FP of 1.2 percent of the monthly premium charged by the 
issuer for each policy under plans where enrollment is through an SBE-
FP. We note that we establish FFE and SBE-FP user fee rates annually 
using the latest data and assumptions available at the time to 
calculate our projections around costs, premiums, and enrollment. 
Furthermore, FFE and SBE-FP user fee rates in future years will be 
recalculated using the latest data available at the time, and will take 
into consideration any changing assumptions, such as any change in the 
status of the enhanced premium tax credits established by the ARP and 
extended by the IRA which are currently expected to expire at the end 
of the 2025 benefit year.
---------------------------------------------------------------------------

    \266\ For additional information, see https://www.cms.gov/newsroom/fact-sheets/marketplace-2024-open-enrollment-period-report-final-national-snapshot.
---------------------------------------------------------------------------

    Comment: Several commenters supported our proposal to retain FFE 
and SBE-FP user fee rates at 2.2 percent and 1.8 percent, respectively, 
of total monthly premiums for benefit year 2025. Other commenters 
disagreed with the proposed user fee rates and requested that HHS 
increase the user fee rates. Several of these commenters requested that 
HHS increase the user fee rates to improve Exchange functions and 
requested that HHS increase funding for education and outreach, 
assisters, and HealthCare.gov.
    Response: Due to revising our projections between the proposed and 
final rules based on newly available data, we are finalizing a lower 
FFE user fee rate at 1.5 of total monthly premiums and a lower SBE-FP 
user fee rate at 1.2 percent of total monthly premiums for the 2025 
benefit year. We revised our enrollment projections based on newly 
available data as the result of the 2024 OE. During this OE period, 
there were more plan selections than we projected when calculating the 
proposed 2025 user fee rates, which resulted in an increase in our 
enrollment projections. As we discussed in the proposed rule (88 FR 
82591 through 82593), 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 2025 benefit year and are not solely a reflection of 
the total expenses estimated to operate and maintain the FFE, Federal 
platform, and SBE-FP operations. We note that the amount collected 
under these user fee rates will ensure adequate funding for all user 
fee eligible Exchange and Federal platform functions.
    Accordingly, we are finalizing user fee rates of 1.5 percent of 
monthly premiums charged by issuers for each policy under plans offered 
through an FFE and 1.2 percent of monthly premiums charged by issuers 
for each policy under plans offered through an SBE-FP. We will continue 
to calculate the FFE and SBE-FP user fee rate annually in a manner that 
ensures sufficient funding for operations, ensuring that consumers' 
needs are met and consumer education and outreach, assisters, and 
HealthCare.gov are appropriately funded.
    We will also continue to examine cost estimates for the special 
benefits provided to issuers offering QHPs on the FFEs and SBE-FPs and 
will continue to establish user fee rates that are reasonable and 
necessary to fully fund user fee eligible Exchange operation costs.
    Comment: A few commenters stated that HHS should adopt a PMPM user 
fee structure, stating that administrative costs do not track with 
premium changes and a PMPM user fee would avoid higher fee amounts 
based solely on premium increases.
    Response: We 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. We note that we propose and finalize user fee rates each 
benefit year and can adjust the user fee rates to avoid higher fee 
amounts based solely on premium increases. Therefore, should 
administrative costs not trend with premium changes, we do not believe 
that such a trend would necessarily justify a PMPM user fee cost 
structure. Additionally, in accordance with Circular A-25,\267\ issuers 
are charged the user fee in exchange for receiving special benefits 
beyond those that accrue to the general public. Setting the user fee as 
a percent of premium ensures that the user fee generally aligns with 
the business generated by the issuer as a result of participation in an 
FFE or the Federal platform. However, we will continue to engage with 
interested parties regarding how the FFE and SBE-FP user fee policies 
can best support consumer access to affordable, quality health 
insurance coverage

[[Page 26338]]

through the Exchanges that use the Federal platform.
---------------------------------------------------------------------------

    \267\ See Circular No. A-25 Revised. https://www.whitehouse.gov/wp-content/uploads/2017/11/Circular-025.pdf.
---------------------------------------------------------------------------

    Comment: One commenter appreciated the increased transparency 
around user fees, and encouraged additional transparency in the 
methodology used to set the user fee rates, as well as how user fees 
support HHS' policy goals for the Exchanges. The same commenter 
recommended greater transparency in how the user fee rates are 
determined and requested enumerated costs of providing Federal 
eligibility and enrollment platform service and infrastructure to each 
State.
    Response: We provided additional information in the 2024 Payment 
Notice proposed rule (87 FR 78272 through 78274) explaining the impact 
of stable contract cost estimates, the enhanced PTC subsidies in 
section 9661of the ARP being extended in section 12001 of the IRA 
through the 2025 benefit year, anticipated effects of the IRA on 
enrollment, and States transitioning from FFEs or SBE-FPs to State 
Exchanges, as well as the enrollment impacts of section 1332 State 
innovation waivers. This methodology was also used to develop the 2025 
benefit year FFE and SBE-FP user fee rates. Additionally, we note that 
while there are certain functions that HHS has historically allocated 
to individual entities, most costs are not currently mapped to usage by 
State or individual transaction. 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 in the proposed rule, 
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 States, 
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.
2. State Selection of EHB-Benchmark Plans for Plan Years Beginning On 
or After January 1, 2026 (Sec.  156.111)
    In the HHS Notice of Benefit and Payment Parameters for 2025 
proposed rule (88 FR 82510, 82593), we proposed to revise the standards 
for the State selection of EHB-benchmark plans at Sec.  156.111 for 
benefit years beginning on or after January 1, 2027, to: consolidate 
the options for States to change EHB-benchmark plans at Sec.  
156.111(a); revise the scope of benefit requirements at Sec.  
156.111(b)(2); and amend Sec.  156.111(e)(3) to require States to 
submit a formulary drug list as part of its application to change EHB-
benchmark plans only if the State is seeking to change its prescription 
drug EHB. We refer readers to the proposed rule (88 FR 82593) for a 
discussion of the statutory and regulatory background relating to these 
proposals.
    As we explained in the proposed rule, nine States have changed 
their EHB-benchmark plans since 2018 by complying with the requirements 
at Sec.  156.111.\268\ We stated in the proposed rule that based on 
interactions with these States and feedback received in response to the 
EHB RFI,\269\ we understand that certain aspects of the process to 
change EHB-benchmark plans may impose unanticipated difficulty on and 
create confusion for States. We stated that we understand there are 
concerns that the typicality standard, as implemented, is a burdensome 
way to ensure a State's EHB-benchmark plan selection is equal in scope 
to a typical employer plan. In addition, we stated that, in limiting 
EHB-benchmark plan selections, we understand that the generosity 
standard may also impede the ability of States to select an EHB-
benchmark that is equal in scope to the benefits provided under a 
typical employer plan in the State, which we understand States often 
find have become more generous over time. We further stated that we 
understand that requiring States to submit a formulary drug list to HHS 
as part of the documentation required under Sec.  156.111(e) can be 
particularly onerous when a State is not seeking to change its 
prescription drug EHBs. We refer readers to the proposed rule (88 FR 
82593 through 82597) for further discussion or our proposals and 
related rationale.
---------------------------------------------------------------------------

    \268\ For more information on the changes States have made to 
their EHB-benchmark plans, see https://www.cms.gov/CCIIO/Resources/Data-Resources/ehb.
    \269\ For example, see https://www.regulations.gov/comment/CMS-2022-0186-0270; https://www.regulations.gov/comment/CMS-2022-0186-0412; and https://www.regulations.gov/comment/CMS-2022-0186-0559.
---------------------------------------------------------------------------

    As a result of that feedback, we proposed changes to Sec.  156.111, 
as discussed in the following subsections. We also sought comment on 
the effective date of these changes.
    After consideration of comments and for the reasons outlined in our 
response to comments, we are changing the effective date of the changes 
we are finalizing to 156.111 (as further discussed in the sections 
below). Specifically, we are finalizing the proposed revisions to Sec.  
156.111 so that they will be effective for benefit years beginning on 
or after January 1, 2026, rather than benefit years beginning on or 
after January 1, 2027, as was proposed.
    Comment: Many commenters noted that the proposed amendments to 
Sec.  156.111 would first impact plans for benefit years beginning on 
or after January 1, 2027, which is later than the proposed effective 
dates for other amendments to regulations pertaining to the EHB 
(Sec. Sec.  155.170(a)(2) and 156.122(a)(3)(i)(E)). Commenters 
requested aligning the effective dates across these proposals so that 
the revisions to Sec.  156.111 would become effective at the same time 
to minimize confusion. Some commenters requested that CMS finalize an 
earlier effective date than 2027 so that States that are considering 
submitting applications to change EHB-benchmark plans in 2024, for 
effectiveness starting with benefit years beginning on or after January 
1, 2026, may utilize the proposed flexibilities a year earlier in order 
to provide consumers with improved EHBs a year earlier.
    Response: We are persuaded by commenters that suggested finalizing 
an earlier effective date for the revisions to Sec.  156.111. We agree 
with commenters that an earlier effective date may allow States to take 
advantage of changes to Sec.  156.111 a year earlier, so that consumers 
may in turn realize improvements to their State's EHB-benchmark plan a 
year earlier, which we expect to result in improved health outcomes. We 
had proposed the original January 1, 2027 effective date with the 
understanding that a later effective date would reduce burden and 
confusion for States that might be preparing applications for 
submission on May 1, 2024 that would take effect for benefit years 
beginning on or after January 1, 2026. We did not want to finalize an 
effective date that may materially disrupt those applications. However, 
having reviewed and considered comments, we are now persuaded that an 
earlier effective date would not cause material disruption to these 
applications. Indeed, it appears that States interested in submitting 
applications to change EHB-benchmark plans by May 1, 2024 prefer the 
finalization of an earlier effective date. We understand that States 
intending to submit an application by May 1, 2024, have already started 
that process and have made assumptions based on the policy in current 
Sec.  156.111. We are

[[Page 26339]]

sympathetic to these concerns and note that nothing in the revised 
Sec.  156.111 finalized in this rule prohibits such States from 
submitting an application by May 1, 2024.
    Therefore, we are finalizing the proposed revisions to Sec.  
156.111 so that they will be effective for benefit years beginning on 
or after January 1, 2026. We are otherwise finalizing the revisions to 
Sec.  156.111 as proposed, as described in the sections that follow.
a. Consolidating the State EHB-Benchmark Plan Options
    We proposed to consolidate the choices for States to change their 
EHB-benchmark plan by revising Sec.  156.111(a) to add a new paragraph 
(a)(2) which would simply state that, subject to paragraphs (b), (c), 
(d), and (e) of Sec.  156.111, for plan years beginning on or after 
January 1, 2027, a State may change its EHB-benchmark plan by selecting 
a set of benefits that would become the State's EHB-benchmark plan. We 
stated that the language at current Sec.  156.111(a) would be 
redesignated as Sec.  156.111(a)(1) and would be revised to provide 
that this paragraph applies to plan years beginning on or after January 
1, 2020 through December 31, 2026. Further, we stated that the language 
currently at Sec.  156.111(a)(1) through (3) would be redesignated as 
Sec.  156.111(a)(1)(i) through (iii).
    Under 42 CFR 440.347, Medicaid ABPs authorized under section 1937 
of the Act are required to meet EHB standards. Similarly, under 42 CFR 
600.405, in States that elect to operate a BHP, the standard health 
plans must meet EHB standards. We explained in the proposed rule that 
the changes to State EHB-benchmark plan options would also be 
applicable to States when choosing an EHB-benchmark plan used to define 
EHBs in a Medicaid ABP or BHP standard health plan.
    We sought comment on the proposal to consolidate State EHB-
benchmark plan options under Sec.  156.111(a).
    After consideration of comments and for the reasons outlined in the 
proposed rule and our responses to comments, we are finalizing this 
provision as proposed, though for the reasons described earlier, we are 
finalizing this change for plan years beginning on or after January 1, 
2026, rather than for plan years beginning on or after January 1, 2027, 
as was proposed. We summarize and respond to public comments received 
on the proposed consolidation of State EHB-benchmark plan options under 
Sec.  156.111(a) below.
    Comment: Many commenters supported the proposal to consolidate 
State EHB-benchmark plan update options at Sec.  156.111(a), citing 
their belief that this simplification would reduce confusion and burden 
(for example, cost and time) for States seeking to update their EHB-
benchmark plans. In turn, commenters also noted that enabling States to 
more easily and, perhaps therefore more frequently, update their EHB-
benchmark plans could result in expanded coverage for, among other 
things, maternity care, substance use disorder care, obesity care, and 
chronic disease management. Finally, commenters also suggested that, if 
States can more easily and frequently update their EHB-benchmark plans 
as a result, in part, of the proposed consolidation, EHB-benchmark 
plans may more closely align to currently available typical employer 
plans, consistent with the statutory linkage between EHB-benchmark 
plans and typical employer plans.
    Response: As noted earlier in this final rule, CMS has previously 
received feedback from State regulators suggesting that the current 
EHB-benchmark plan update process can be confusing and burdensome. We 
proposed to consolidate the options for EHB-benchmark plan updates at 
Sec.  156.111(a) with this feedback in mind and appreciate commenters' 
indication that they see this policy as achieving the goals of making 
the EHB-benchmark plan update process easier to understand and 
undertake.
    Comment: Several commenters opposed the proposal to consolidate 
State EHB-benchmark plan update options at Sec.  156.111(a). However, 
commenters opposing the proposed consolidation spoke about their 
opposition to the proposed changes to the EHB-benchmark plan update 
process more generally--they did not raise specific concerns regarding 
consolidation. For example, one opposing commenter stated that the 
current EHB-benchmark plan update process is working well and strikes 
an effective balance between ensuring consumers have access to needed 
coverage, while also allowing States to make updates responsive to the 
needs of their constituents. Thus, the commenter did not believe the 
proposed updates, including to Sec.  156.111(a), should be finalized as 
proposed, but did not identify any specific legal or operational issues 
that might result from the proposed consolidation.
    Response: While we appreciate this feedback, we do not agree that 
the current EHB-benchmark plan update process is adequately 
streamlined, given the feedback discussed earlier from States 
indicating that the current requirements are both difficult to 
understand and cumbersome to implement.
b. Scope of Benefit Requirements
    We proposed to revise the scope of benefit requirements at Sec.  
156.111(b)(2) for plan years beginning on or after January 1, 2027, 
with corresponding proposed revisions to the actuarial requirements at 
Sec.  156.111(e)(2). Specifically, we proposed at Sec.  
156.111(b)(2)(ii) that a State's new EHB-benchmark plan would be 
required to provide a scope of benefits that is equal to the scope of 
benefits of a typical employer plan in the State, and that the scope of 
benefits of a typical employer plan in the State would be defined as 
any scope of benefits that is as or more generous than the scope of 
benefits in the State's least generous typical employer plan 
(supplemented by the State as necessary to provide coverage within each 
EHB category at Sec.  156.110(a)), and as or less generous than the 
scope of benefits in the most generous typical employer plan in the 
State (supplemented by the State as necessary to provide coverage 
within each EHB category at Sec.  156.110(a)), among the typical 
employer plans currently defined at Sec.  156.111(b)(2)(i)(A) and (B). 
We proposed to remove the generosity standard currently at Sec.  
156.111(b)(2)(ii). We also proposed a technical clarification to the 
language regarding supplementation at Sec.  156.111(b)(2)(i), which 
currently states that a State's new EHB-benchmark plan must ``provide a 
scope of benefits equal to, or greater than, to the extent any 
supplementation is required to provide coverage within each EHB 
category at Sec.  156.110(a), the scope of benefits provided under a 
typical employer plan'' (emphasis added), to state that a State's EHB-
benchmark plan must provide a scope of benefits equal to the scope of 
benefits provided under a typical employer plan (supplemented by the 
State as necessary to provide coverage within each EHB category at 
Sec.  156.110(a)).
    Under 42 CFR 440.347, Medicaid ABPs authorized under section 1937 
of the Act are required to meet EHB standards. Under 42 CFR 600.405, in 
States that elect to operate a BHP, the standard health plans are 
required to meet EHB standards. We explained in the proposed rule that 
the changes to State EHB-benchmark plan requirements would also be 
applicable to States when choosing an EHB-benchmark plan used to define 
EHBs in a Medicaid ABP or a BHP standard health plan.

[[Page 26340]]

    We sought comment on the proposals to revise the typicality 
standard at Sec.  156.111(b)(2)(i), remove the generosity standard at 
Sec.  156.111(b)(2)(ii), make corresponding edits to Sec.  
156.111(e)(2), and make a technical revision to the language regarding 
supplementation at Sec.  156.111(b)(2)(i).
    After consideration of comments and for the reasons outlined in the 
proposed rule and our responses to comments, we are finalizing this 
provision as proposed though, for the reasons described earlier, we are 
finalizing these changes for plan years beginning on or after January 
1, 2026, rather than for plan years beginning on or after January 1, 
2027. We summarize and respond to public comments received on these 
proposals below.
    Comment: A majority of commenters supported the proposal to amend 
the typicality standard at Sec.  156.111(b)(2)(i). These commenters 
affirmed that moving from a typicality standard under which States must 
identify a typical employer plan option that exactly matches the value 
of their proposed EHB-benchmark plan to an approach that sets a lower 
and upper boundary on the value of a typical employer plan will reduce 
the time and cost for assessing the value of individual typical 
employer plan options. Moreover, commenters expressed their belief that 
a range-based approach to typicality will provide States with 
additional flexibility to design innovative, responsive EHB-benchmark 
plans without the artificial constraint of matching with exact 
precision the value of a specific typical employer plan option.
    Commenters indicated that the decreased burden and increased 
flexibility provided by the updates to the typicality standard will 
incentivize States to contemplate EHB-benchmark plan updates more 
frequently to keep pace with both the needs of their consumers and the 
evolving scope of benefits typically provided by employer plans. 
Commenters noted this is a particularly desirable outcome, given that 
only nine States have updated their EHB-benchmark plans to date, and 
many of those changes have been modest.
    Commenters noted that, in light of the reduced costs and time 
States must allocate to update their EHB-benchmark plan under the 
proposed change, States may consequently be able to devote more of 
their attention and energy towards assessing the most optimal package 
of benefits to provide under their new EHB-benchmark plan, including 
through more robust public engagement efforts.
    Response: We appreciate these commenters' confirmation of our 
assertion that the revised typicality standard will be conceptually and 
operationally more straightforward and less burdensome. We share 
commenters' interest in supporting States to contemplate EHB-benchmark 
plan updates as often as may be necessary to best meet the needs of 
their consumers, without needing to satisfy unnecessary or excessively 
burdensome typicality requirements.
    Comment: A few commenters opposed the proposed updates to the 
typicality standard under at Sec.  156.111(b)(2)(i). Commenters 
indicated their concern that the proposed changes could threaten the 
connection between the statutory requirements for typicality set forth 
by the ACA and the regulatory framework implementing these 
requirements. Commenters also expressed that a more flexible approach 
to typicality could expose the Federal Government to increased costs to 
the extent EHB-benchmark plans are more frequently updated with 
additional benefits. Commenters noted that such changes would 
necessitate greater Federal outlays in the form of additional Federal 
expenditure on subsidization of plan premiums through APTCs.
    Response: We do not agree that the adjustments proposed to the 
typicality standard would erode the implementation of the ACA 
typicality requirement in the EHB-benchmark plan update process. We 
believe that the new typicality standards will strike an appropriate 
balance between easing State burden and ensuring that the scope of 
benefits considered EHB stays closely aligned to the scope of benefits 
typically provided by employers. Specifically, the typicality standard 
has previously required that States identify a single typical employer 
plan option offering an equivalent scope of benefits to the scope of 
the proposed EHB-benchmark plan, which has required States to: (1) 
analyze many typical employer plan benefit offerings until a match is 
identified (which could require both significant time and cost to the 
State), and/or (2) require States to offer a set of benefits as EHB 
that they believe is not as well suited to the needs of their 
population in order to achieve an exact scope of benefits that matches 
the scope of benefits offered by one specific typical employer plan, 
rather than, for example, selecting an EHB-benchmark plan that offers a 
scope of benefits that is greater than that offered by one typical 
employer plan, but not as great as the next-most-generous typical 
employer plan. Under the amended typicality standard, States may need 
to only assess the value of two typical employer plans: the least 
generous and the most generous. This means that States can avoid 
additional time and cost for actuarial assessment. And, once States 
have identified the least and most generous typical employer plan 
options, they then have the flexibility to select an EHB-benchmark plan 
with a scope of benefits that falls anywhere along the continuum 
between the scope of the least and most generous plans. Further, we 
reiterate that the revised typicality standard maintains both a floor 
and a ceiling on the generosity of benefits considered EHB, which 
serves to ensure States can, at most, increase the scope of benefits 
provided by their EHB-benchmark plan to match, or be more generous 
than, to the extent supplementation is required to provide coverage 
within each EHB category at Sec.  156.110(a), the scope of benefits 
provided by the most generous typical employer plan. As such, Federal 
expenditures in the form of APTC are constrained to increase, at most, 
only as much as typical employer plans are also increasingly generous 
over time, which has always been the case under the typicality standard 
at Sec.  156.111.
    Comment: A majority of commenters also supported the removal of the 
generosity standard at Sec.  156.111(b)(2)(ii), explaining that 
removing the generosity standard will make the EHB-benchmark plan 
update process easier to understand, less burdensome to execute, and 
more adaptable to the needs of each State's population. Commenters also 
explained that the elimination of the generosity standard will ensure 
that States can better incorporate in EHB-benchmark plans any changes 
to the scope of benefits in typical employer plans since 2017.
    Commenters noted that, with the updates to the typicality standard 
and the elimination of the generosity standard, the scope of benefits 
provided by the most generous typical employer plan can now reflect the 
scope of benefits provided by the most generous large group typical 
employer plan. Commenters indicated that large group plans are more 
generous than the other plan options available for use in a State's 
typicality analysis, such that the updates to these policies taken 
together will provide States the opportunity to provide a potentially 
more generous package of EHB through their EHB-benchmark plan than they 
could previously.
    Commenters suggested that by eliminating the generosity standard, 
States can better incorporate benefits

[[Page 26341]]

that consider the health care needs of diverse segments of the 
population as EHB. Commenters note this is of particular importance 
given the evolution of new approaches to address gaps in care for 
members of marginalized communities and those who have traditionally 
experienced inequitable health outcomes.
    Several commenters opposed the proposed removal of the generosity 
standard at Sec.  156.111(b)(2)(ii). These commenters suggested that 
removing the generosity standard could allow the scope of benefits in 
EHB-benchmark plans to outpace the scope of benefits provided by 
typical employer plans. Further, some commenters asserted, without the 
generosity standard, there would be no constraints on how generous a 
State could elect to make its EHB-benchmark plan and allow a State to 
manipulate the EHB-selection process to impermissibly expand the scope 
of benefits beyond what the ACA intended. Specifically, a few 
commenters expressed concern that, in conjunction with the proposed 
change at Sec.  155.170 with regard to State-mandated benefits included 
in the EHB-benchmark plan, removing any constraint on EHB-benchmark 
plan generosity would enable States to subvert the requirement to 
defray the costs of mandated benefits, simply by adding all existing 
and future mandated benefits to their benchmark plan. Commenters 
expressed concerns about coverage becoming potentially unaffordable for 
consumers and costly for the Federal Government, in the form of 
increased APTCs.
    Response: In the proposed rule (88 FR 82596), we acknowledged that 
the proposed removal of the generosity standard would also establish an 
upper bound for State EHB-benchmark plan selections that better tracks 
with the scope of benefits in typical employer plans as they change 
over time. We agree with commenters that larger group plans tend to be 
more representative of typical employer plans as they change over time, 
especially given that since small group health plans are required to 
provide the EHB, it may be less appropriate to rely on the scope of 
benefits in small group plans to assess the benefits typically provided 
in employer plans. Evidence also suggests that the generosity of larger 
group employer plans has moderately increased since the passage of the 
ACA. We also believe that, in conjunction with the more flexible range-
based approach to typicality, a higher available upper bound for EHB-
benchmark plan generosity will allow States greater flexibility to 
ensure EHB-benchmark plans reflect evolving standards of care and are 
well-positioned to address long-standing health disparities.
    We disagree with commenters' assertion that removing the generosity 
standard will jeopardize the connection between the EHB-benchmark plan 
update process and the ACA's typicality requirement. The typicality 
standard, which this rule amends but does not eliminate, ensures that 
EHB-benchmark plans cannot offer a scope of benefits that is more 
generous than the scope of benefits provided by the most generous 
typical employer plan available for comparison, except to the extent 
supplementation is required to provide coverage within each EHB 
category at Sec.  156.110(a). As such, we believe that commenters' 
concern about affordability are largely disproportionate to the 
meaningful but modest increases the proposed changes represent to the 
range of plan generosity available to States when seeking to update 
their EHB-benchmark plans.
    Nevertheless, we understand commenters' concerns that the 
amendments to Sec. Sec.  155.170 and 156.111 could technically allow 
States to game the scope of benefits of the available typical employer 
plans in the State by mandating the coverage of benefits in large group 
market plans in the State. While we recognize this as a technical 
possibility available to States, we are not concerned that will in 
occur in practice. Based on our experience working with States and 
their selection of EHB, we understand that States are already motivated 
to minimize the cost impacts of additional benefit coverage in all 
markets, and thus do not believe it likely that States would impose 
benefit mandates on their large group markets solely to manipulate the 
typical employer plans available for comparison when seeking to change 
their EHB-benchmark plan. For those States that do enact benefit 
mandates on large group markets, our expectation is that States do so 
in order to improve the coverage of benefits in such plans to 
accommodate changes in medical evidence and scientific advancement, and 
not to specifically subvert Federal guidelines for changing EHB-
benchmark plans. This is especially the case given that, in our 
experience, State legislatures typically enact mandated benefits on 
large group market plans with little consideration for their impact on 
EHB. In any event, commenters did not provide any insight on how one 
might distinguish between a State mandate on large group market plans 
designed to improve coverage in such plans and a mandate designed to 
allow the State to game the scope of benefits of the available typical 
employer plans in the State.
    We believe that States understand that it is implicit that 
applications must be submitted in good faith, and that States may not 
submit applications in good faith if a State mandates the coverage of 
specific benefits in large group market plans with the specific intent 
to manipulate the scope of benefits of the available typical employer 
plans. We are likely to suspect that a State may be gaming its typical 
employer plans if it enacts a mandate for the coverage of specific 
benefits in large group market plans and soon thereafter seeks to add 
similar benefits to its EHB-benchmark plan by utilizing a large group 
market plan that is impacted by the State's mandate as the most 
generous typical employer plan. We caution States that attempt to 
update EHB-benchmark plans in this manner that, pursuant to Sec.  
156.111(b)(2)(ii)(B)(1) and (4) as finalized in this rule, a large 
group typical employer plan must, among other things, belong to a 
product that has at least 10 percent of the total enrollment of the 
five largest large group health insurance products in the State and be 
from a plan year beginning after December 31, 2013. We interpret that 
these provisions work together to mean that, while a State can select a 
recent large group market plan as a typical employer plan, enough time 
must pass between the effective date of the coverage of all large group 
market plans in the State for the State to make a determination that 
the selected plan's product has at least 10 percent of total enrollment 
of the five largest large group health insurance products in the State. 
This means a State cannot select a large group plan with an effective 
date that begins in the first months of the year that the State submits 
an application to change EHB-benchmark in May. Thus, from a timing 
perspective, States are not able to select a large group typical 
employer plan that is effective in the same year or that may be 
effective in a year following the year the State submits an EHB-
benchmark plan application. Given this operational constraint, at this 
time, we do not believe it is necessary to propose a cooldown period 
that would prevent a State from using a large group market plan that is 
impacted by a State's recent benefit mandate as the most generous 
typical employer plan, but will consider such a cooldown period for 
potential future rulemaking if necessary. In addition, we clarify the 
interaction between the amendments to Sec.  156.111 and the amendment 
to Sec.  156.122 that

[[Page 26342]]

codifies that prescription drugs in excess of those covered by a 
State's EHB-benchmark plan are considered EHB. As explained in the 
proposed rule and in the preamble of this final rule addressing Sec.  
156.122, when the amendment to Sec.  155.170 is read in conjunction 
with the proposed amendment to Sec.  156.122, any prescription drug 
that an issuer covers in excess of the State's EHB-benchmark plan is 
EHB unless there is a State mandate requiring such coverage. 
Accordingly, a State that mandates the coverage of prescription drugs 
in excess of a State's EHB-benchmark plan cannot consider coverage of 
the excess drugs as EHB for purposes of completing the actuarial 
analyses required under Sec.  156.111(e).
    Comment: One commenter asserted that any changes to a State's EHB-
benchmark plan should also apply to the process by which a State 
selects a benchmark plan used to determine EHBs in a Medicaid ABP or a 
standard health plan in the BHP.
    Response: In accordance with implementing Medicaid regulations 
found at 42 CFR 440.347, ABPs must contain EHB coverage in accordance 
with the requirements set forth at 45 CFR part 156. Similarly, BHP 
regulations at 42 CFR 600.405, require standard health plan coverage to 
include, at a minimum, EHB as described under Sec. Sec.  156.110 and 
156.122 regarding prescription drugs. Therefore, the amendments to 
Sec.  156.111 will impact how States define EHBs that apply to the ABPs 
and the BHP, as we explained in the proposed rule.
c. Drug Formularies
    We proposed to revise Sec.  156.111(e)(3) to require States to 
submit a formulary drug list as part of their documentation provided to 
change EHB-benchmark plans only if the State is seeking to change its 
prescription drug EHB. Currently, we require States to submit a 
formulary drug list if the State is selecting its EHB-benchmark plan 
using the option at current Sec.  156.111(a)(3), even if the State is 
not seeking to change its prescription drug EHB. We stated in the 
proposed rule that we understand that creation and submission of this 
formulary drug list creates a significant amount of burden for the 
State. Since we can carry over the State's existing prescription drug 
EHB, as defined under Sec.  156.122, without substantial input from the 
State if the State is not seeking to change its prescription drug EHB, 
we proposed to revise Sec.  156.111(e)(3) as specified to reduce the 
burden on States.
    We sought comment on this proposal.
    After consideration of comments and for the reasons outlined in the 
proposed rule and our responses to comments, we are finalizing this 
provision as proposed though, for the reasons described earlier, we are 
finalizing this change for plan years beginning on or after January 1, 
2026, rather than for plan years beginning on or after January 1, 2027, 
as was proposed. We summarize and respond to public comments received 
on this proposal below.
    Comment: Several commenters supported the proposal to require 
States to submit formulary drug lists as part of an EHB-benchmark plan 
update application only if the State is seeking to adjust its 
prescription drug EHB. Commenters indicated that requiring such 
submission even in the absence of any intended prescription drug EHB 
changes was unnecessarily burdensome and created an additional hurdle 
for States seeking to update their EHB-benchmark plans. Conversely, 
commenters suggested that removing this requirement except in cases 
where States are seeking to change their prescription drug EHB would 
facilitate easier and more frequent EHB-benchmark plan updates.
    Response: We agree with commenters' assessment that requiring a 
formulary drug list even in cases where States are not seeking to 
change their prescription drug EHB is unnecessary, and a poor use of a 
State's resources. We also agree that reducing the barriers for States 
seeking to update their EHB-benchmark plans, in this way and others, 
may enable States to take up more frequent EHB-benchmark plan updates.
    Comment: A few commenters opposed the proposal to require formulary 
drug lists only in cases where States seek to change their prescription 
drug EHB. However, these commenters did not articulate a specific 
objection to this proposal. Rather, for example, some of these 
commenters more generally asked that CMS retain the prior policy while 
also seeking to provide detailed assistance to support States as they 
endeavor to update their EHB-benchmark plans.
    Response: We continue to believe, as was affirmed by supporting 
commenters, that requiring States to submit a formulary drug list even 
when they do not seek changes to their prescription drug EHB creates 
burdens that can be removed without negative impact to the 
comprehensiveness of an EHB-benchmark plan application. As such, we 
believe that removing this requirement will reduce the cost and time 
needed for States to apply to update their EHB-benchmark plans while 
maintaining rigorous standards for the quality of such applications.
3. Provision of EHB (Sec.  156.115)
    In the HHS Notice of Benefit and Payment Parameters for 2025 
proposed rule (88 FR 82510, 82597), we proposed to remove the 
regulatory prohibition at Sec.  156.115(d) on issuers from including 
routine non-pediatric dental services as an EHB.
    In the EHB Rule, we finalized at Sec.  156.115(d) that issuers of a 
plan offering EHB may not include, among other services and benefits, 
routine non-pediatric dental services as an EHB, even if the State's 
current EHB-benchmark plan includes such services as covered benefits. 
Section 1302(b)(2) of the ACA directs the Secretary, in defining the 
EHB, to ensure that they are equal in scope to the benefits provided 
under a typical employer plan. In the proposed EHB Rule (77 FR 70644), 
in support of the prohibition at Sec.  156.115(d), we stated that 
routine non-pediatric dental services are not typically included in the 
medical plans offered by employers and are often provided as excepted 
benefits by the employer. In the proposed rule, we explained that we 
now believe a more natural reading of Section 1302(b)(2) of the ACA is 
one that considers all the benefits typically covered by employers. 
This means EHB should be equal in scope to the benefits provided under 
a typical employer plan, regardless of whether such benefit is 
historically considered a non-excepted ``health benefit'' or whether 
such benefit is ``typically covered'' by an employer's major medical 
plan. Given that oral health has a significant impact on overall health 
and quality of life,\270\ and several commenters on the EHB RFI \271\ 
advocated for non-pediatric dental EHB coverage, we proposed 
specifically to remove the regulatory prohibition on issuers from 
including routine non-pediatric dental services as an EHB. We sought 
comment on whether similar changes should be proposed with regard to 
routine non-pediatric eye exam services and long-term/custodial nursing 
home care benefits as well.
---------------------------------------------------------------------------

    \270\ Spanemberg, J.C., Cardoso, J.A., Slob, E.M.G.B, & 
L[oacute]pez-L[oacute]pez, J. (2019). Quality of life related to 
oral health and its impact in adults. Journal of Stomatology, Oral 
and Maxillofacial Surgery, 120(3), 234-239. https://doi.org/10.1016/j.jormas.2019.02.004.
    \271\ For example, see https://www.regulations.gov/comment/CMS-2022-0186-0567; https://www.regulations.gov/comment/CMS-2022-0186-0586; and https://www.regulations.gov/comment/CMS-2022-0186-0626.
---------------------------------------------------------------------------

    In the proposed rule, we stated it appears that routine non-
pediatric dental services are commonly covered

[[Page 26343]]

as an employer-sponsored or other job-based benefit to a degree that 
warrants removing the prohibition on their provision as an EHB. We 
cited various sources to support this assertion, including KFF's 2019 
Employer Health Benefits Survey results, which indicated that among 
firms offering health benefits in 2019, 59 percent of small firms (3-
199 workers) and 92 percent of large firms (200 or more workers) 
offered a dental insurance program to their workers separate from the 
health plan(s).\272\ We solicited comment on this understanding of the 
inclusion of routine non-pediatric dental services in employer-
sponsored or other job-based benefits.\273\ Additionally, we stated 
that we believe prohibiting the inclusion of routine non-pediatric 
dental services as an EHB on the basis that they are not often covered 
by typical employer plans is a more restrictive reading of section 
1302(b)(2) of the ACA than is warranted by a plain reading of the 
statute. Section 1302(b)(2) of the ACA states that, in defining the 
EHB, the Secretary shall ensure that the scope of the EHB is equal to 
the scope of benefits provided under a typical employer plan, as 
determined by the Secretary and as informed by a survey by the 
Secretary of Labor of employer-sponsored or other job-based coverage to 
determine the benefits typically covered by employers. We explained 
that in considering the benefits typically covered by employers, this 
statutory section does not require the Secretary to consider only those 
benefits provided in major medical plans. We further stated that it 
also does not require the Secretary to consider only those benefits 
that are strictly ``health benefits,'' if such a term excludes coverage 
of routine non-pediatric dental services. Therefore, we stated that we 
no longer believe the prohibition on non-pediatric dental services as 
an EHB is warranted. Accordingly, we proposed to remove the regulatory 
prohibition on including routine non-pediatric dental services as an 
EHB at Sec.  156.115(d).
---------------------------------------------------------------------------

    \272\ KFF (2019, September 25). 2019 Employer Health Benefits 
Survey. https://www.kff.org/report-section/ehbs-2019-section-2-health-benefits-offer-rates/#figure217.
    \273\ Section 156.115(d) also currently prohibits routine non-
pediatric eye exam services, long-term/custodial nursing home care 
benefits, and non-medically necessary orthodontia as EHB. We did not 
propose to remove the prohibition on including such services as EHB 
in the proposed rule; however, we solicited comment on the extent to 
which employer-sponsored or other job-based benefits provide 
coverage for these services.
---------------------------------------------------------------------------

    We explained in the proposed rule that removing the prohibition on 
issuers from including routine non-pediatric dental services as an EHB 
would remove regulatory and coverage barriers to expanding access to 
routine non-pediatric dental benefits for those plans that must cover 
EHB. We further stated that this would allow States to work to improve 
adult oral health and overall health outcomes, which are 
disproportionately low among marginalized communities such as people of 
color and people with low incomes.\274\ We refer readers to the 
proposed rule (88 FR 82597 through 82598) for further discussion of the 
impact of oral health on overall health and quality of life.
---------------------------------------------------------------------------

    \274\ Northridge, M.E., Kumar, A., & Kaur, R. (2020). 
Disparities in Access to Oral Health Care. Annual review of public 
health, 41, 513-535. https://doi.org/10.1146/annurev-publhealth-040119-094318.
---------------------------------------------------------------------------

    We explained in the proposed rule that this proposed policy would 
also align with CMS' Oral Health Cross Cutting Initiative, which aims 
to implement policy changes and consider opportunities through existing 
authorities to expand access to oral health coverage.\275\ 
Additionally, we stated that it would align with the request of several 
commenters on the EHB RFI (87 FR 74097) for us to remove regulatory and 
coverage barriers to expanding access to routine non-pediatric dental 
care.
---------------------------------------------------------------------------

    \275\ CMS. (n.d.) Strategic Plan Cross-Cutting Initiatives. 
https://www.cms.gov/files/document/strategic-plan-overview-fact-sheet.pdf.
---------------------------------------------------------------------------

    In the proposed rule, we emphasized that the removal of this 
prohibition would not, by itself, mean that routine non-pediatric 
dental services would be an EHB, even in States with an EHB-benchmark 
plan that currently describes routine non-pediatric dental services as 
a non-EHB covered benefit. We stressed that this proposal would not 
require any State to add such services as an EHB, nor would we consider 
any existing language regarding routine non-pediatric dental services 
in any State's current EHB-benchmark plan to have the effect of adding 
such services as an EHB. We stated that under this proposal, a State 
seeking to provide any routine non-pediatric dental services as an EHB 
would be required to update its EHB-benchmark plan to include such 
services as an EHB pursuant to Sec.  156.111. We explained that if a 
State does not update its EHB-benchmark plan to add coverage of routine 
non-pediatric dental services as an EHB, then such services would not 
be an EHB, even if the current EHB-benchmark plan document includes 
routine non-pediatric dental services.
    We explained in the proposed rule that under this proposal, we 
would expect States, in determining whether it is appropriate to update 
their EHB-benchmark plan to add routine non-pediatric dental services 
as an EHB, to weigh the advantages of expanded dental services against 
the challenges of providing such services. We refer readers to the 
proposed rule (88 FR 82598) for further discussion.
    We noted that while section 1302(b)(4)(F) of the ACA permits a 
medical QHP sold on the Exchange to omit coverage of pediatric dental 
EHB services if a SADP is offered through an Exchange,\276\ there is no 
statutory basis to extend this exception to routine non-pediatric 
dental services. Thus, we stated that plans subject to an EHB-benchmark 
plan that includes routine non-pediatric dental services as an EHB may 
not omit such coverage on the basis that a SADP already provides such 
coverage through an Exchange.
---------------------------------------------------------------------------

    \276\ See section 1311(d)(2)(B)(ii) of the ACA for more 
information on offering SADP benefits.
---------------------------------------------------------------------------

    We explained that this proposal, if finalized, may impact plans 
that are not directly subject to the EHB requirements, such as self-
insured group health plans and fully-insured group health plans in the 
large group market, that are required to comply with the annual 
limitation on cost sharing and restrictions on annual or lifetime 
dollar limits in accordance with applicable regulations with respect to 
such EHBs.\277\ We further explained that if a State updates its EHB-
benchmark plan to add coverage of routine non-pediatric dental services 
as an EHB and the sponsor of a self-insured group health plan or fully-
insured group health plan in the large group market selects that EHB-
benchmark plan, any routine non-pediatric dental services covered by 
such a group health plan would generally be subject to the limitation 
on cost sharing and restrictions on annual or lifetime dollar limits. 
However, we stated that if the sponsors of such plans offer coverage of 
routine non-pediatric dental services through an excepted benefit under 
26 CFR 54.9831-1(c)(3), 29 CFR 2590.732(c)(3), and 45 CFR 
146.145(b)(3), including a limited-scope dental plan, that benefit is 
generally excepted from complying with the group market reforms, 
including the limitation on cost sharing and restrictions on annual or 
lifetime dollar limits.
---------------------------------------------------------------------------

    \277\ See parallel requirements to Sec.  147.126 at 26 CFR 
54.9815-2711, and 29 CFR 2590.715-2711. Additionally, section 
2707(b) of the PHS Act, as added by the ACA, was incorporated by 
reference into section 9815 of the Internal Revenue Code and section 
715 of ERISA.
---------------------------------------------------------------------------

    Additionally, under 42 CFR 440.347, Medicaid ABPs authorized under 
section 1937 of the Act are required to

[[Page 26344]]

meet EHB standards. Under 42 CFR 600.405, in States that elect to 
operate a BHP, the standard health plans are required to meet EHB 
standards. We explained that under this proposal, States would be 
permitted to include routine non-pediatric dental services as EHB for 
purposes of their ABPs or BHP standard health plans.
    We sought comment on the proposal to revise Sec.  156.115(d) to 
remove the regulatory prohibition on issuers from including routine 
non-pediatric dental services as an EHB, and whether other impacts 
should be considered, including the impact this proposal would have, if 
finalized, on health insurance coverage in the individual, small group, 
and large group markets, as well as self-insured plans.
    After consideration of comments and for the reasons outlined in the 
proposed rule and our responses to comments, we are finalizing this 
provision, as proposed, to remove the regulatory prohibition at Sec.  
156.115(d) on issuers from including routine non-pediatric dental 
services as an EHB. We also finalize that the changes at Sec.  
156.115(d) will be effective beginning with PY 2027. Pursuant to this 
effective date, if a State wants to add a routine non-pediatric dental 
benefit to its EHB-benchmark plan, the earliest it can do so is with 
the calendar year 2025 submission cycle, for applications due to CMS on 
or before May 7, 2025. Therefore, if CMS approves the application, then 
the changes would be effective in the State for plan years beginning on 
or after January 1, 2027. Further, we acknowledge that the annual 
limitation on cost-sharing for Exchange-certified stand-alone dental 
plans (SADPs), which is updated and published annually in the Letter to 
Issuers, is applicable to only to those services that are EHB and only 
to SADPs. We summarize and respond to public comments received on the 
proposed policy below.
    Comment: A majority of commenters supported this proposal. Many of 
these commenters supported the proposal in part because of the 
important role oral health plays in overall health and/or quality of 
life. In particular, several commenters noted the important impact oral 
health has on chronic conditions including but not limited to diabetes, 
HIV/AIDS, and cancer. Several commenters also mentioned the importance 
of preventive care. A few commenters mentioned the connection between 
oral health and mental health. A few commenters also mentioned the 
importance of treating the ``whole member.''
    Response: We strongly agree with the commenters that oral health 
has a significant impact on overall health and quality of life.\278\ We 
prioritize the development and implementation of policies that promote 
the health and wellbeing of enrollees and will continue to direct our 
efforts towards improving overall health and quality of life. We also 
agree with commenters that it is crucial to treat the ``whole member,'' 
highlighting the importance of whole person health \279\ and the need 
for medical-dental integration.\280\ We also recognize the importance 
of preventive oral health care, the connection between oral health and 
chronic disease management, and the connection between oral health and 
mental health.
---------------------------------------------------------------------------

    \278\ Spanemberg, J.C., Cardoso, J.A., Slob, E.M.G.B, & 
L[oacute]pez-L[oacute]pez, J. (2019). Quality of life related to 
oral health and its impact in adults. Journal of Stomatology, Oral 
and Maxillofacial Surgery, 120(3), 234-239. https://doi.org/10.1016/j.jormas.2019.02.004.
    \279\ https://www.nccih.nih.gov/health/whole-person-health-what-you-need-to-know.
    \280\ https://www.ncbi.nlm.nih.gov/pmc/articles/PMC6618181/.
---------------------------------------------------------------------------

    Comment: Many commenters supported this proposal because of its 
potential to improve oral health disparities and further health equity. 
More specifically, several commenters discussed the potential for 
improving low-income/economic disparities, rural disparities, racial 
disparities, and maternal health. On the other hand, one commenter 
disagreed that this proposal will lead to equitable access because of 
anticipated poor uptake by States.
    Response: We strongly agree with the commenters who stated that 
this proposed policy has the potential to improve oral health 
disparities and achieve health equity. As we stated in the proposed 
rule (88 FR 82598), this amendment allows States greater flexibility to 
add benefits to improve non-pediatric oral health and overall health 
outcomes, which are disproportionately low among marginalized 
communities such as people of color and people with low incomes. 
Therefore, this policy will promote health equity by addressing non-
pediatric oral health disparities and improving the health outcomes of 
vulnerable populations. We also agree with the specific oral health 
disparities that commenters highlighted--pertaining to economic 
disparities, rural disparities, racial disparities, and maternal 
health--which this policy can help address. We disagree with the 
comment that this policy will not lead to equitable access because of 
poor uptake by States, particularly in light of the other proposals 
finalized in this rule to alleviate State burden in assessing the 
defrayal of State-mandated benefits and to change EHB-benchmark plans. 
Additionally, given the feedback we have received from States and 
relevant stakeholders on the EHB RFI and proposed 2025 Payment Notice, 
we believe States will add routine non-pediatric dental benefits as an 
EHB, and this will help reduce oral health disparities and improve 
health equity within these States' populations. This final policy 
provides States the option to add coverage of non-pediatric dental 
benefits as EHB and removes a barrier to this coverage that previously 
existed.
    Comment: A few commenters requested to delay the finalization of 
this policy and requested the effective date be no sooner than PY 2027.
    Response: We did not directly specify an effective date for this 
policy in the proposed rule; therefore, by default these changes would 
have become effective 60 days after the publication of the final rule 
in the Federal Register. We sought comment on the impact of this 
policy, acknowledging that issuers would need sufficient lead time in 
order to successfully operationalize it, and sought comment on whether 
other impacts should be considered. We acknowledged this policy is a 
departure from the prior policy and that issuers in States that choose 
to update their EHB-benchmark plan to include non-pediatric dental 
services may need to establish new networks of dental providers and 
address other operational needs to implement this change. Taking into 
consideration the comments received, we are finalizing that the changes 
at Sec.  156.115(d) will be effective beginning with PY 2027. Pursuant 
to this effective date, a State seeking to add routine non-pediatric 
dental in PY 2027 would need to submit an EHB-benchmark plan 
application under Sec.  156.111 by the EHB-benchmark plan update 
deadline of May 7, 2025, which would then be effective in the State for 
plan years beginning on or after January 1, 2027. We are finalizing 
this date with a change in the regulation text to account for this 
effective date.
    We do not believe further delay of these changes is necessary. In 
PY 2024, approximately 9.9 percent of QHPs on the FFEs included 
coverage for some degree of routine non-pediatric dental services as 
non-EHB; thus, it is not unprecedented for health plans, including 
QHPs, to cover routine non-pediatric dental services as non-EHB. 
Accordingly, we expect that this experience will mitigate any 
operational challenges that States may face when adding such services 
as EHB.

[[Page 26345]]

    Further, State EHB-benchmark applications are due approximately 18 
months before any change in EHB would be realized in plans. Before 
these applications are due, States have typically devoted several 
months or years interacting with interested parties in the State to 
understand what changes should be made to the EHB-benchmark plans, and 
what the impact of those changes would be. Thus, we expect ample time 
for issuers to operationalize the provision of routine non-pediatric 
dental services as EHB. Given that the finalization of this amendment 
would only begin to impact coverage beginning on January 1, 2027 in 
those States that might submit EHB-benchmark plan applications during 
the calendar year 2025 cycle, there will be sufficient lead time to 
allow issuers to build the infrastructure necessary to administer the 
routine non-pediatric dental benefits that States add as EHB. If a 
State is considering adding routine non-pediatric dental benefits as an 
EHB but believes it would be beneficial to take more time to assess the 
potential cost, operational, and other implications of the policy for 
their State, the State can wait to add this benefit to their EHB-
benchmark plan until it is ready to do so.
    Comment: The majority of commenters agreed with our 
reinterpretation in the proposed rule of the typical employer plan 
provision at section 1302(b)(2) of the ACA as one that considers all 
the benefits typically covered by employers, regardless of whether such 
benefit is historically considered a ``health benefit'' or whether such 
benefit is ``typically covered'' by an employer's major medical plan 
or, for example, by a limited scope excepted benefits plan. As 
justification for their support of this reinterpretation, these 
commenters explained that the statutory text requires HHS to consider 
the benefits typically covered by employers in employer-sponsored 
coverage, without specifying whether that coverage is limited to the 
coverage provided in major medical plans. As a result, these commenters 
agreed that the previous interpretation was overly restrictive and 
unnecessarily denied access to basic and necessary services as EHB.
    However, several commenters disagreed with HHS's reinterpretation 
of this provision. These commenters asserted that the statutory text 
limits the EHB to those provided under a singular typical employer 
plan, and not all of the benefits provided by an employer under a 
combination of plans. Some of these commenters asserted that the ACA 
specifically excludes routine non-pediatric dental services, routine 
non-pediatric eye exam services, and long-term/custodial nursing home 
care benefits from consideration as EHB. In these commenters' view, 
HHS's reinterpretation would impermissibly allow for the inclusion of 
any employer benefit as EHB, including employee assistance programs, 
short-term disability, critical illness, group life, legal assistance, 
and 401(k) benefits. These commenters also explained that, except for 
pediatric oral and vision services, all of the EHB categories 
explicitly mentioned in statute refer to benefits that have 
historically been considered ``health benefits'' that are typically 
covered under major medical plans and not excepted benefit plans. One 
commenter asserted that HHS's reinterpretation would undermine 
statutory intent that the EHB be ``essential benefits'', as it would 
include benefits that employers do not deem necessary to include in 
their major medical plan, but instead offer as a ``voluntary add-on'' 
for those employees who may desire them. Additionally, some commenters 
asserted that the majority of employers actively decide to provide 
routine dental services through a standalone dental plan rather than 
through a major medical plan.
    Response: The ACA does not exclude routine non-pediatric dental 
services, routine non-pediatric eye exam services, and long-term/
custodial nursing home care benefits from consideration as EHB; only 
the existing regulation at Sec.  156.115(d), which this final rule now 
amends to remove the exclusion of routine non-pediatric dental 
services, prohibits health plans from covering such services as EHB. 
The statutory term ``a typical employer plan'' is ambiguous with regard 
to whether it references a single major medical plan, or the entire 
suite of benefits provided by the employer, and our updated 
interpretation is supported by the statutory directive for HHS to 
conduct a survey of employer-sponsored coverage to determine the 
benefits typically covered by employers without distinguishing whether 
this coverage is provided through one or more plans. Given this 
ambiguity, we do not agree with comments that the statutory text must 
be read to exclude coverage typically provided by employers through 
plans that are offered in addition to major medical coverage.
    We disagree with commenters that employer-sponsored dental benefits 
cannot be considered an EHB simply because of the manner of the 
contractual arrangements by which employers provide benefits to their 
employees. The impact of routine dental care on overall health and 
quality of life is not in question, nor is the fact that employers 
clearly view dental benefits as an essential part of the entire set of 
health benefits they provide for employees, given how many employers 
provide dental benefits to their employees.\281\ That employers happen 
to provide those dental benefits through a separate contractual 
agreement seems a tenuous justification for prohibiting States from 
allowing adults to access as EHB something that can be as basic and 
impactful to overall health as routine dental care.
---------------------------------------------------------------------------

    \281\ As these commenters pointed out, 91 percent of employers 
offer dental coverage that is separate from the coverage provided 
through their health plans. Source: Gary Claxton, Matthew Rae, 
Aubrey Winger, and Emma Wager, Employer Health Benefits: 2023, 
Kaiser Family Foundation, 2023, page 55 (https://files.kff.org/attachment/Employer-Health-Benefits-Survey-2023-Annual-Survey.pdf).
---------------------------------------------------------------------------

    Further, we disagree with those commenters that claimed that 
employers have a choice whether to provide routine dental services 
through their major medical plan or through a standalone dental plan. 
We understand that, in many cases, the benefits that employers may 
select to cover for employees is contingent on the decisions made by 
health insurance companies on what benefits they want to make available 
for the employer's selection.
    We are not persuaded by commenters that insist the intent of the 
statute requires HHS to define the EHB in accordance with ``benefits 
that have historically been considered a health benefit.'' Many of the 
core tenets that support our modern understanding of health insurance 
as providing coverage of items and services are less than a hundred 
years old, and there is no universally understood set of essential 
items and services; even the ACA's statutory text recognizes that HHS's 
definition of the EHB need not be limited to the enumerated categories 
of EHB (``. . . the Secretary shall define the essential health 
benefits, except that such benefits shall include at least the 
following general categories and the items and services covered within 
the categories . . .'' (emphasis added)).
    The availability of benefits in health plans is always evolving. As 
a very limited example, consider that the very first health plans in 
the 1920s and 1930s only provided coverage for hospitalization, and 
coverage for professional services began later in the 1930s.\282\ 
Psychiatric care first began to

[[Page 26346]]

be covered following World War II.\283\ Then, the first efforts to 
create parity between health benefits and mental health benefits began 
during President John F. Kennedy's administration with the requirement 
of the Federal Employees Health Benefits Program (FEHBP) to cover 
psychiatric illnesses at a level equivalent to general medical 
care.\284\ Benefits for the elderly, retired people, and those with 
disabilities or low-income became available through Medicare and 
Medicaid in the 1960s. Coverage for treatment of substance use 
disorders rose to prominence in the 1970s and 1980s. Medicare began 
covering hospice care in the early 1980s, the Emergency Medical 
Treatment and Active Labor Act (EMTALA) was passed in 1986, and 
Medicare Parts C and D were introduced in the early 2000s before the 
ACA was passed in 2010.\285\ These are just some of the examples of how 
benefits have expanded over the years, especially when such expansions 
have accounted for changes in medical evidence or scientific 
advancement. We therefore disagree with commenters' statement that 
there exists a set of ``benefits that have historically been considered 
a health benefit'' and disagree with commenters' concerns that it is 
unreasonable or unprecedented to now include routine non-pediatric 
dental care in this evolution.
---------------------------------------------------------------------------

    \282\ Institute of Medicine (US) Committee on Employment-Based 
Health Benefits; Field MJ, Shapiro HT, editors. Employment and 
Health Benefits: A Connection at Risk. Washington (DC): National 
Academies Press (US); 1993. 2, Origins and Evolution of Employment-
Based Health Benefits. Available from: https://www.ncbi.nlm.nih.gov/books/NBK235989/.
    \283\ https://www.ncbi.nlm.nih.gov/pmc/articles/PMC2950754/.
    \284\ Id.
    \285\ https://www.kff.org/wp-content/uploads/2011/03/5-02-13-history-of-health-reform.pdf.
---------------------------------------------------------------------------

    Regardless of how one interprets statutory text, one intent of the 
ACA with regard to the EHB is clear--that enrollees should have access 
to a minimum set of benefits that take into account the health care 
needs of diverse segments of the population.\286\ Given that routine 
dental services consist of relatively basic items and services rendered 
by licensed dentists and allied health professionals to improve the 
health of an individual, it is reasonable for a State to determine that 
the provision of such benefits among this minimum set of benefits as 
EHB is necessary to accommodate the health care needs of its 
population.
---------------------------------------------------------------------------

    \286\ See section 1302(b)(4)(C) of the ACA.
---------------------------------------------------------------------------

    We also note that commenters opposing the policy made no argument 
regarding the treatment of non-routine non-pediatric dental care, such 
as treatment for natural teeth or dental prostheses as a result of an 
injury, which are not currently prohibited as EHB by Sec.  156.115(d). 
Such non-routine dental benefits have long been included as EHB, given 
that they are among the covered benefits described in the vast majority 
of EHB-benchmark plans. Thus, it is hardly unprecedented for at least 
some non-pediatric dental benefits to be covered as EHB by health 
insurance plans.
    Comment: One commenter explained that HHS's reinterpretation of the 
typical employer plan provision conflicts with the typicality standard 
at Sec.  156.111(b)(2) that limits the plans available for the 
typicality analysis to major medical plans. This commenter also 
asserted that the proposal failed to grapple with the reliance 
interests engendered by the interpretation that the ``typical employer 
plan'' is a major medical plan.
    Response: In the 2019 Payment Notice, we added Sec.  156.111 to 
give States additional options for changing EHB-benchmark plans and 
implemented the typicality standard with an actuarial approach. As 
implemented, the typicality standard requires the State's proposed EHB-
benchmark plan to provide a scope of benefits equal to the scope of 
benefits provided under a typical employer plan, in accordance with 
section 1302(b)(2) of the ACA. At Sec.  156.111(b)(2) we selected as 
the specified examples of a typical employer plan: the selecting 
State's 10 base-benchmark plan options established at Sec.  156.100 and 
available for the selecting State's selection for the 2017 plan year, 
and a set of large group health insurance plans in the State, provided 
certain requirements are met under current Sec.  
156.111(b)(2)(i)(B)(1)-(4). In order for a State to select one of these 
large group health insurance plans as the typical employer plan for the 
typicality standard, the following requirements must be met: (1) the 
plan must have at least 10 percent of the total enrollment of the five 
largest large group health insurance products in the State; (2) the 
plan must provide minimum value, as defined under Sec.  156.145; (3) 
the plan's benefits must not be excepted benefits, as established under 
Sec.  146.145(b) and Sec.  148.220; and (4) the benefits in the plan 
must be from a plan year beginning after December 31, 2013.
    In the 2019 Payment Notice (83 FR 17012), we stated that ``a 
State's EHB-benchmark plan may not have the exact same benefits and 
limits as the typical employer plan the State identifies under this 
policy.'' However, this actuarial approach, which restricts the range 
of typical employer plans to which an EHB-benchmark plan can be 
compared, coupled with the requirement that the EHB-benchmark plan 
cover items and services in each of the 10 specified categories of EHB, 
assures that the scope of benefits of the EHB-benchmark plan is equal 
to that of a typical employer plan.
    Restricting the set of group health plans for the typicality 
standard to major medical plans merely establishes this actuarial 
benchmark for State EHB selections in a manner that balances State 
flexibility, ease of implementation, and a limitation on the range of 
what can be considered a typical employer plan.
    When we originally implemented Sec.  156.115(d) to prohibit issuers 
from covering routine non-pediatric dental services, routine non-
pediatric eye exam services, long-term/custodial nursing home care 
benefits, and non-medically necessary orthodontia as EHB, we did so 
based on a finding that ``they are not typically included in medical 
plans offered by a typical employer.'' However, this finding did not 
conclude that such benefits are never included in such plans. In 
addition, such a finding only justifies the prohibition of designating 
certain benefits as EHB; it does not prohibit a State from including 
such benefits in their typicality analysis, to the extent such benefits 
are present among the set of typical employer plans designated by HHS. 
Put another way, nothing in regulation prohibits a State from including 
the quantitative value of routine non-pediatric dental services, 
routine non-pediatric eye exam services, long-term/custodial nursing 
home care benefits, or non-medically necessary orthodontia in its 
typicality analysis. Rather, we simply did not include non-major-
medical benefits in the selected range of typical employer plans for 
ease of comparability.
    Comment: Many commenters supported this proposal because it 
promotes State flexibility. One commenter explained that they are 
supportive of proposals that offer additional flexibility to States and 
allow States to make decisions that best meet the needs of consumers. 
Another commenter explained that determining exactly which dental 
benefits should include EHB protections should be based on State needs 
and preferences. Several other commenters believed HHS should require 
all States to include routine non-pediatric dental benefits as an EHB, 
potentially in the ambulatory or preventive services EHB categories. 
These commenters argued that given HHS's interpretation of non-
pediatric dental services as commonly included as part of typical 
employer-sponsored plans, adding non-pediatric dental benefits as a 
required coverage category under EHB is the logical next step.

[[Page 26347]]

    Response: We agree with the commenters who mentioned that this 
proposal promotes State flexibility. This proposal aligns with CMS' 
State-based approach to EHB-benchmark plans and the ability for States 
to update them, in that, like any other benefit, States would have the 
option to add routine non-pediatric dental services as an EHB. We 
stress that the finalization of this proposal does not require any 
State to add such services as an EHB, nor would we consider any 
existing language regarding covered routine non-pediatric dental 
services in any State's current EHB-benchmark plan to have the effect 
of automatically adding such services as an EHB without further State 
action. We are therefore not adopting those commenters' suggestions to 
require the coverage of routine non-pediatric dental services as an 
EHB.
    Comment: Many commenters raised potential operational impacts 
associated with States adding routine non-pediatric dental as EHB. 
Several commenters expressed that such an addition would present 
operational difficulties, including establishing new administrative and 
IT capabilities, and developing networks of dental providers. A few 
commenters expressed concern over issues with Current Dental 
Terminology (CDT) codes (for example, issuers' lack of experience with 
or infrastructure working with CDT codes, which may lead to cost 
concerns, additional premiums, and an overall increase in health care 
spending). A few commenters also requested to delay the finalization of 
this policy and requested the effective date be no sooner than PY 2027. 
A few commenters expressed concern regarding the impact on stand-alone 
dental premiums sold on the Exchange if routine non-pediatric dental 
benefits were to be included in a State's EHB-benchmark plan, and 
potential disparities between dental plan premiums on- versus off-
Exchange. Moreover, many commenters questioned the impact this policy 
would have on other Federal provisions, including but not limited to 
provisions addressing: AV, MLR, network adequacy, APTC, and the premium 
adjustment percentage index (PAPI). One commenter suggested a separate 
dental MLR for dental EHB.
    Response: We acknowledge the operational concerns raised by 
commenters. As we stated in the proposed rule (88 FR 82598), we expect 
States to weigh the advantages of expanded dental services against the 
challenges of providing such services. We also acknowledged the need 
for States to consider that issuers may need to establish new networks 
of dental providers and that some plans may not currently have 
infrastructure or experience working with CDT codes. We agree that, for 
health plans that do not directly reimburse using dental codes, the 
transition to new coding would require investments in technology, 
staff, and internal expertise. We also agree this may lead to 
additional premiums and an overall increase in health care spending. 
However, as we emphasized in the proposed rule, a contract arrangement 
with issuers of stand-alone dental plans to administer these services 
is an option that issuers could pursue, which could mitigate some of 
the need to establish new administrative and IT capabilities. We 
emphasize that for States planning to update their EHB-benchmark plan 
to include routine non-pediatric dental benefits, it will be up to 
those States to work with issuers and other interested parties to 
determine to what extent operational challenges exist and whether it is 
feasible to overcome such challenges. In addition, any State 
considering the addition of such benefits should specifically seek 
feedback from interested parties on operational challenges as part of 
the public notice and an opportunity for public comment requirement at 
Sec.  156.111(c).
    We do not disagree with commenters that this policy may be 
disruptive to those issuers in States that add routine non-pediatric 
dental services as EHB; indeed, the intent of this policy was to effect 
a change in the availability of high-priority, high-impact, and 
relative low-cost benefits as EHB in order to improve the overall 
health of large segments of the population, and we cited several of 
these challenges in the proposed rule. We are sympathetic to the 
upfront costs that may be incurred by issuers to create the 
infrastructure necessary to administer routine dental benefits, or to 
contract with third parties to administer such a benefit on the health 
plan's behalf. However, we believe action is justified given the 
likelihood that it results in significant public health improvements. 
In addition, we expect States to take these burdens into account in 
determining whether to add routine non-pediatric dental services as 
EHB.
    We also do not agree with the commenters' concerns regarding this 
amendment's impact on stand-alone dental premiums sold on the Exchange 
if a State adds routine non-pediatric dental benefits as EHB, and 
potential disparities between dental plan premiums on- versus off-
Exchange. Under Sec. Sec.  146.145(b)(3) and 148.220(b)(1), limited-
scope dental plans are considered excepted benefits that are not 
required to provide the EHB. Thus, if a State adds routine non-
pediatric dental benefits as EHB, stand-alone dental plans are not 
required to cover such benefits, whether on- or off-Exchange.
    We also acknowledge the commenters that questioned the impact this 
policy will have on other Federal provisions, including but not limited 
to provisions addressing AV, MLR, network adequacy, APTC, and PAPI. 
This final provision will not affect these programs any differently 
than any other benefits that a State adds to its EHB-benchmark plan, 
since States that seek to add routine non-pediatric dental services 
will need to adhere to the same requirements for updating their EHB-
benchmark plans as they would for other benefits. We do encourage 
States adding routine non-pediatric dental services to ensure that 
issuers' networks include sufficient dental providers so that enrollees 
can access the benefit.
    Comment: A few commenters explained that the risk profile of adults 
seeking dental care poses challenges for issuers, including the 
potential for adverse selection. This commenter expressed that 
enrollees could delay care until they have coverage, seek care for 
expensive procedures, and then drop coverage when the work is complete.
    Response: We do not foresee that adverse selection will be a 
significant problem and would like to emphasize that the ACA has 
established means to help prevent unchecked adverse selection, 
including the risk adjustment program, premium subsidies, and limited 
enrollment windows. Specifically, enrollees must enroll during open 
enrollment or a special enrollment period. There is nothing specific or 
unique to dental coverage that would cause an enrollee to drop coverage 
midyear, other than possible pent-up demand for services due to the 
fact that coverage as EHB was previously not possible. However, based 
on prior experience under the ACA, and given that States will have to 
make difficult and careful decisions regarding which benefits to add 
given the regulatory requirements for EHB-benchmark plan updates, we do 
not believe that the addition of benefits will cause significant 
adverse selection. Additionally, adverse selection has not been a 
significant concern in prior EHB-benchmark plan applications.
    Comment: A few commenters argued that CMS should allow for 
standalone non-pediatric dental plans to provide benefits as EHB on the 
Exchanges.
    Response: Although we appreciate commenters' request to allow

[[Page 26348]]

standalone non-pediatric dental plans to provide benefits as EHB and to 
permit such plans on the Exchanges, as explained in the proposed rule, 
there is no statutory authority to do so. While section 1302(b)(4)(F) 
of the ACA permits a medical QHP sold on the Exchange to omit coverage 
of pediatric dental EHB services if an SADP is offered through an 
Exchange,\287\ there is no statutory basis to extend this exception to 
routine non-pediatric dental services. Non-pediatric dental services 
would fall under ambulatory patient services, Sec.  1302(b)(1)(A), and 
not pediatric services, Sec.  1302(b)(1)(J). Thus, plans subject to an 
EHB-benchmark plan that include routine non-pediatric dental services 
as an EHB may not omit such coverage on the basis that a standalone 
dental plan already provides such coverage through an Exchange.
---------------------------------------------------------------------------

    \287\ See section 1311(d)(2)(B)(ii) of the ACA for more 
information on offering SADP benefits.
---------------------------------------------------------------------------

    Comment: Many commenters noted cost impacts to consider when 
implementing this proposal. More specifically, many commenters 
expressed cost concerns, including the cost impacts the proposal could 
have on networks. Commenters noted this includes outsized impacts on 
small group health plans. These commenters explained that this proposal 
could result in issuers leaving the market. A few commenters expressed 
concerns over lack of cost controls if non-pediatric dental is an EHB. 
For example, these commenters expressed concern that no annual or 
lifetime coverage limits would apply to non-pediatric dental services 
if they were to be added as an EHB, which could drive up prices. One 
commenter noted that increased costs would have implications for QHPs 
in the individual and small group markets, including making it more 
difficult to offer standalone dental benefits at a price that is 
attractive to consumers, making QHPs with embedded dental benefits less 
affordable for consumers who do not qualify for a premium subsidy, and 
increasing the cost of Federal subsidies. Another commenter encouraged 
CMS to carefully weigh the benefit of expanded access to routine non-
pediatric dental benefits versus the impact increased premiums may have 
on coverage retention. On the other hand, a few commenters mentioned 
the positive impact this policy could have on reducing health care 
costs. A few commenters explained how routine dental care may yield 
downstream savings in overall health care expenditures given its 
potential to impede disease burden. Another commenter also explained 
how emergency room department visits are very costly, and how if oral 
health problems are diverted to local dentist offices, large savings 
would ensue.
    Response: We acknowledge the cost concerns raised by commenters, 
including the cost impacts it could have on networks. As we stated in 
the proposed rule (88 FR 82598), we expect States to weigh the 
advantages of expanded dental services against the challenges of 
providing such services. We also mentioned that States should consider 
the ability of plans to add such services as an EHB, which, as with 
pediatric oral care, may require plans to establish new networks of 
dental providers. Moreover, we mentioned that given the potential need 
for plans to establish new networks of dental providers, issuers could 
comply with this policy by contracting with issuers of standalone 
dental plans to administer these services, as long as it is seamless to 
the enrollee. This contracting arrangement would not be required, but 
it is permitted as an option. Furthermore, we agree with the commenters 
who stated that this policy would reduce health care costs by yielding 
downstream savings in overall health care expenditures and reducing 
costly emergency room department visits for dental care. We believe 
that the required public comment period that States must have when 
proposing to update their EHB-benchmark plans will become even more 
important considering this policy change. We also encourage States to 
work with issuers and other affected parties in their States before, 
during, and after applying to change their EHB-benchmark plan. Despite 
the prohibition on annual and lifetime dollar limits for benefits that 
are EHB and that States can choose how comprehensive the routine non-
pediatric dental EHB will be, we are not swayed that this final policy 
will significantly increase premiums, and consequently, meaningfully 
increase Federal outlays, given that States' ability to increase 
benefit generosity is limited pursuant to the policy finalized at Sec.  
156.111(b)(2)(i). As we finalized in this final rule at Sec.  
156.111(b)(2)(i), we are revising the typicality standard so that the 
scope of benefits of a typical employer plan in a State would be 
defined as any scope of benefits that is as or more generous than the 
scope of benefits in the State's least generous typical employer plan, 
and as or less generous than the scope of benefits in the State's most 
generous typical employer plan. Therefore, a State interested in adding 
routine non-pediatric dental services as an EHB may need to consider 
removing and/or adjusting other benefits to make room for the non-
pediatric dental services to fit into the scope of benefits within the 
State, to ensure the scope of benefits falls within the typicality 
range.
    Comment: A few commenters responded to our solicitation for comment 
on the potential impact of this proposed policy on health insurance 
coverage in the large group and self-insured markets and on 
grandfathered plans. A few of these commenters expressed concern over 
the unintended cost impacts this policy would have on these groups, 
given that the prohibition in PHS Act section 2711 on imposing annual 
and lifetime dollar limits on EHB also generally applies to self-
insured group health plans, large group market health plans, and 
grandfathered health plans. In particular, one commenter expressed 
concern that the proposal may have an outsized impact on employer-
sponsored coverage that may be subject to greater than anticipated 
costs, given such coverage is not subject to risk adjustment. Another 
commenter expressed concern that increasing costs for those employers 
that do choose to include non-pediatric dental benefits in their major 
medical plans is not a desirable result.
    Response: Self-insured group health plans, large group market 
health plans, and grandfathered group and individual health insurance 
coverage are not required to provide coverage of EHB. Accordingly, even 
where a State updates its EHB-benchmark plan to include routine non-
pediatric dental coverage as EHB, self-insured group health plans, 
large group market health insurance coverage, and grandfathered plans 
would not be required to cover such services. We also note that, as 
highlighted in the preamble to the proposed rule, if a sponsor of a 
self-insured group health plan, large group market health insurance 
coverage, or grandfathered plan offers coverage of routine non-
pediatric dental services through an excepted benefit under 26 CFR 
54.9831-1(c)(3), 29 CFR 2590.732(c)(3), and 45 CFR 146.145(b)(3), 
including a limited-scope dental plan, that benefit is generally 
excepted from complying with the group market reforms, including the 
annual limitation on cost sharing and restrictions on annual or 
lifetime dollar limits. Therefore, a self-insured group health plan, 
large group market health insurance coverage, or grandfathered plan may 
only be impacted by the finalization of this policy if it covers 
routine non-pediatric dental services. For the purpose of the 
prohibition in PHS Act section 2711 on imposing

[[Page 26349]]

annual and lifetime dollar limits on EHB, a plan or issuer that is not 
required to provide EHB must define EHB in a manner consistent with an 
EHB-benchmark plan selected by a State in accordance with Sec.  
156.111, including coverage of any additional required benefits that 
are considered EHB consistent with Sec.  155.170(a)(2).\288\ Therefore, 
a plan sponsor could select an EHB-benchmark plan in a State that has 
not chosen to update its EHB-benchmark plan to include routine non-
pediatric dental services as EHB.
---------------------------------------------------------------------------

    \288\ 26 CFR 54.9815-2711(c)(2), 29 CFR 2590.715-2711(c)(2), and 
45 CFR 147.126(c)(2).
---------------------------------------------------------------------------

    However, section 2707(b) of the PHS Act requires all non-
grandfathered group health plans, including non-grandfathered self-
insured and non-grandfathered insured small and large group market 
health plans, to limit cost sharing imposed by the plan on EHB in 
accordance with the annual limitation on cost sharing, and section 
2711(a)(1)(A) and (B) of the PHS Act generally prohibits all group 
health plans and group or individual health insurance coverage from 
establishing annual or lifetime dollar limits on the dollar value of 
EHB for any participant, beneficiary, or enrollee.\289\ Previous 
guidance has stated that the Departments interpret PHS Act section 
2707(b) as requiring all non-grandfathered group health plans to comply 
with the annual limitation on out-of-pocket maximums described in 
section 1302(c)(1) of the ACA,\290\ and that the Departments will 
consider self-insured group health plans or large group market health 
plans to have used a permissible definition of EHB under section 
1302(b) of the ACA if the definition is one that is authorized by the 
Secretary of HHS.\291\
---------------------------------------------------------------------------

    \289\ The provisions of PHS Act section 2711 apply to both 
grandfathered and non-grandfathered health plans, except the annual 
dollar limits prohibition does not apply to grandfathered individual 
health insurance coverage.
    \290\ FAQs Part XII, Q2 (February 20, 2013); see also the EHB 
Rule (78 FR 12835 through 12837).
    \291\ FAQs Part XVIII, Q2 (January 9, 2014); see also the 2019 
Payment Notice (83 FR 17013).
---------------------------------------------------------------------------

    Thus, for purposes of compliance with PHS Act sections 2707(b) and 
2711, as applicable, a self-insured group health plan, large group 
market health insurance coverage, or grandfathered plan that selects an 
EHB-benchmark plan from a State that has updated its EHB-benchmark plan 
pursuant to this finalized policy to include routine non-pediatric 
dental services as an EHB would be required to treat routine non-
pediatric dental services as EHB as they would with any other benefit 
that is an EHB in the selected benchmark plan. However, if the selected 
plan is from a State that has not updated its EHB-benchmark plan to 
include routine non-pediatric dental services as EHB, then those plans 
and issuers would not be required to treat routine non-pediatric dental 
services as EHB for purposes of complying with the annual limitation on 
cost sharing in PHS Act section 2707(b) or the prohibition in PHS Act 
section 2711 on imposing annual and lifetime dollar limits on EHB, as 
applicable, even if such benefits appear in the EHB-benchmark plan. As 
we stated in the proposed rule (88 FR 82598), we would not consider any 
existing language regarding routine non-pediatric dental services in 
any State's current EHB-benchmark plan to have the effect of adding 
such services as an EHB. Rather, States interested in covering routine 
non-pediatric dental services as EHB must proactively update their EHB-
benchmark plans pursuant to Sec.  156.111 to add such benefits.
    We acknowledge that this policy could impact non-grandfathered 
self-insured group health plans, and large group market health 
insurance coverage that cover routine non-pediatric dental benefits 
with respect to their compliance with the annual limitation on cost 
sharing and this policy could impact all such plans, as well as 
grandfathered health plans, with respect to the prohibition on annual 
or lifetime dollar limits; however, we believe the advantages of this 
policy outweigh the disadvantages. Particularly, we believe the 
advantages--including improving access to routine non-pediatric dental 
care, reducing oral health disparities, improving health equity, and 
improving overall health and quality of life in these markets--are 
worth the potential cost or operational impacts to health plans.
    Comment: Several commenters agreed with the proposal to remove the 
prohibition on including routine non-pediatric dental services as EHB. 
These commenters noted that the proposal would also apply to Medicaid 
ABPs and BHP standard health plans.
    Response: We appreciate these comments and agree with their 
understanding of the applicability of this amendment to Medicaid ABPs 
and BHP standard health plans.
    Comment: Several commenters responded to our solicitation for 
comment on whether similar changes should be proposed regarding the 
removal of the prohibition at Sec.  156.115(d) on issuers from 
including routine non-pediatric eye exam services and long-term/
custodial nursing home care benefits. Several commenters also responded 
to our solicitation for comment on our updated understanding on the 
inclusion of routine non-pediatric dental services in employer-
sponsored or other job-based benefits. As we stated in the proposed 
rule (88 FR 82597), our updated understanding is that routine non-
pediatric dental services are commonly covered as an employer-sponsored 
or other job-based benefit to a degree that warrants removing the 
prohibition on their provision as an EHB.
    Response: For the reasons described in this section, we are 
finalizing removing routine non-pediatric dental services from the list 
of benefits at Sec.  156.115(d) that a plan cannot include as EHB. As 
for the remaining list of benefits in Sec.  156.115(d), we appreciate 
these comments and will continue to consider them for potential future 
rulemaking.
4. Prescription Drug Benefits (Sec.  156.122)
    In the HHS Notice of Benefit and Payment Parameters for 2025 
proposed rule (88 FR 82510, 82599), we proposed revisions to certain 
EHB prescription drug benefit requirements at Sec.  156.122, and 
requested comments on a possible future policy proposal, as further 
discussed below.
a. Classifying the Prescription Drug EHB
    In the proposed rule, we requested information to confirm or 
further expand our understanding of the risks and benefits associated 
with replacing the reference to the USP MMG with a reference to the USP 
DC as a means of classifying the drugs required to be covered as EHB 
under Sec.  156.122(a)(1). We thank commenters for their feedback and 
will take these comments into consideration if we pursue potential 
updates for future benefit years through notice and comment rulemaking.
b. Coverage of Prescription Drugs as EHB
    We proposed to amend Sec.  156.122 to codify that prescription 
drugs in excess of those covered by a State's EHB-benchmark plan are 
considered EHB. We stated that, as a result, they would be subject to 
the annual limitation on cost sharing and the restriction on annual and 
lifetime dollar limits, unless the coverage of the drug is mandated by 
State action and is in addition to EHB pursuant to Sec.  155.170, in 
which case the drug would not be considered EHB. When Sec.  155.170 is 
read in conjunction with the proposed amendment to Sec.  156.122, this 
means that any prescription drug that an issuer voluntarily covers in 
excess of the minimum number of drugs required to be covered under the 
State's EHB-benchmark plan is EHB unless there is

[[Page 26350]]

a State mandate requiring such coverage.
    In the EHB Rule (78 FR 12845), in response to commenter concerns 
regarding how plans must address new prescription drugs that come onto 
the market during the course of a plan year pursuant to Sec.  156.122, 
we stated that while plans must offer at least the greater of one drug 
for each USP category and class or the number of drugs in the EHB-
benchmark plan, plans are permitted to go beyond the number of drugs 
offered by the EHB-benchmark plan without exceeding EHB. We clarified 
in the preamble of the 2016 Payment Notice (80 FR 10749) in a 
discussion of requirements related to Sec.  156.122(c) that this meant 
that if the plan is covering drugs beyond the number of drugs covered 
by the EHB-benchmark, all prescription drugs in excess of the drug 
count standard at Sec.  156.122(a) are considered EHB, such that they 
are subject to EHB protections and must count towards the annual 
limitation on cost sharing.
    In the proposed rule, we stated that we believed that this policy 
as noted in both the EHB Rule and preamble of the 2016 Payment Notice 
was clearly understood by issuers until we received comments in 
response to the EHB RFI that included a significant number of requests 
from interested parties to clarify this policy in rulemaking. In 
addition, a small number of commenters in response to the EHB RFI noted 
concerns regarding some plans that have stated that some prescription 
drugs in excess of the drug count standard at Sec.  156.122(a) are not 
EHB and have developed programs to provide some drugs as ``non-EHB,'' 
outside of the terms of the rest of the coverage. We sought comment 
regarding how widespread these practices are.
    To resolve these concerns, we proposed to amend Sec.  156.122 to 
add paragraph (f), which would explicitly state that prescription drugs 
in excess of the EHB-benchmark plan are considered EHB. We stated that, 
to the extent that a health plan covers prescription drugs, in any 
circumstance, in excess of the EHB-benchmark plan, these drugs would be 
considered an EHB and would be required to count towards the annual 
limitation on cost sharing. We explained that this policy would apply 
unless the coverage of the drug is mandated by State action and is in 
addition to EHB pursuant to Sec.  155.170, in which case the drug would 
not be considered EHB.
    We noted that we had been made aware of a few plans within the 
individual and small group markets that have either developed or are 
offering programs that provide some drugs as ``non-EHB.'' We stated 
that, as we had only recently begun receiving comments from interested 
parties regarding this issue, we did not believe that there are a large 
number of plans that offer these types of programs; however, we sought 
comment regarding how widespread these programs are.
    We sought comment on this proposal.
    After consideration of comments and for the reasons outlined in the 
proposed rule and our responses to comments, we are finalizing this 
provision with a technical edit to the regulation text to clarify the 
entire scope of cost-sharing requirements that apply to these 
prescription drugs. In the proposed rule, we proposed that the 
prescription drugs in excess of those covered by a State's EHB-
benchmark plan are considered EHB, and thus subject to both the annual 
limitation on cost sharing and the restriction on annual and lifetime 
dollar limits. The proposed regulation text at Sec.  156.122(f), 
however, referenced the annual limitation on cost sharing at Sec.  
156.130 as the only applicable cost-sharing requirement. We are 
finalizing the regulation text to reflect that prescription drugs in 
excess of those covered by a State's EHB-benchmark plan are considered 
EHB, and thus subject to both the annual limitation on cost sharing and 
the restriction on annual and lifetime dollar limits.
    We summarize and respond below to public comments received on the 
proposal to amend Sec.  156.122 to codify that prescription drugs in 
excess of those covered by a State's EHB-benchmark plan are considered 
EHB such that they are subject to EHB protections, including the annual 
limitation on cost sharing and the restriction on annual and lifetime 
dollar limits, unless the coverage of the drug is mandated by State 
action and is in addition to EHB (in which case the drug would not be 
considered EHB). We also point readers to the preamble discussion above 
of Sec.  155.170 regarding defrayal of State-mandated benefits, in 
which we clarified that a covered benefit in a State's EHB-benchmark 
plan is considered an EHB even if mandated by State action after 2011.
    Comment: A majority of commenters supported the proposal to amend 
Sec.  156.122 to codify that prescription drugs in excess of those 
covered by a State's EHB-benchmark plan are EHB. Several of these 
commenters expressed concern with any drugs being designated as ``non-
EHB'' and noted that this was in conflict with HHS' longstanding policy 
that covered prescription drugs in excess of the minimum drug count 
standard at Sec.  156.122(a)(1) are still EHB. A few commenters 
believed that the proposed rule did not explicitly state that issuers 
cannot designate certain drugs as ``non-EHB'' and encouraged HHS to 
further clarify that drugs cannot be classified as such and be in 
compliance with the regulation. Some commenters expressed concern that 
copay maximizers \292\ and alternative funding programs \293\ are 
working with issuers and PBMs to designate drugs as ``non-EHB,'' and 
when a drug is no longer a covered benefit and EHB, even if it is 
theoretically available through a copay maximizer or alternative 
funding program, consumers lose State and Federal protections such as 
the annual limitation on cost sharing, the restriction on annual and 
lifetime dollar limits, and protection against exposure to 
discriminatory benefit designs. Some commenters also noted that these 
copay maximizers and alternative funding programs argue that specialty 
drugs are not required to be covered under the ACA, and that all 
specialty drugs can therefore be excluded.
---------------------------------------------------------------------------

    \292\ With a copayment maximizer, select drugs are categorized 
as non-EHBs, allowing plans to exclude drug manufacturer assistance 
payments from counting toward the patient's deductible and out-of-
pocket limitation. Zuckerman AD, Schneider MP, Dusetzina SB. Health 
Insurer Strategies to Reduce Specialty Drug Spending--Copayment 
Adjustment and Alternative Funding Programs. JAMA Intern Med. 
2023;183(7):635-636. Doi:10.1001/jamainternmed.2023.1829.
    \293\ Under alternative funding programs, payers exclude some or 
all specialty drugs, such as some used for cancer, arthritis, 
psoriasis, and hemophilia, from their defined benefit. Patients are 
then referred to a third-party organization contracted by the plan's 
PBM to identify alternative funding options to obtain these excluded 
drugs, typically manufacturer patient assistance programs or other 
charitable assistance. When patients fail to meet the established 
criteria for manufacturer assistance, PBMs may reconsider drug 
coverage or, in some circumstances, source the medication from a 
pharmacy outside the U.S. at a lower cost. As a result, patients may 
face delays in starting a medication or may not be able to obtain 
the drug at all. Id.
---------------------------------------------------------------------------

    In response to our request for comment regarding how widespread 
programs to provide some drugs as non-EHB are, a few commenters noted 
that these types of programs have been identified more frequently in 
self-insured group health plans and large group market health plans.
    Response: We are finalizing this proposal to amend Sec.  156.122 as 
proposed. As stated in this rule, given the prevalence of these 
programs, we are concerned that consumers lose important protections if 
a covered drug is no longer considered EHB. The impacts of these 
practices, including additional out-of-pocket costs and loss of 
consumer protections, justify the finalization of this policy.

[[Page 26351]]

    We first stated that prescription drugs in excess of the minimum 
drug count do not exceed EHB in the EHB Rule (78 FR 12845), which was 
finalized over a decade ago, and we made clear in the 2016 Payment 
Notice (80 FR 10817) that ``if the plan is covering drugs beyond the 
number of drugs covered by the benchmark, all of these drugs are EHB 
and must count towards the annual limitation on cost sharing.'' In the 
proposed rule, we proposed to codify that, to the extent that a health 
plan covers prescription drugs, in any circumstance, in excess of the 
EHB-benchmark plan, these drugs would be considered EHB and would be 
required to count towards the annual limitation on cost sharing, unless 
the coverage of the drug is mandated by State action and is in addition 
to EHB pursuant to Sec.  155.170, in which case the drug would not be 
considered EHB. Consequently, we now clarify that this interpretation 
means that issuers subject to the requirement to cover EHB will be 
considered to be failing to provide EHB if they do not treat those 
drugs as EHB, including by subjecting them to the annual limitation on 
cost sharing, by not applying annual or lifetime dollar limits, and by 
factoring them in the availability of APTCs, unless the drugs are 
mandated by State action. We agree with commenters' concerns that 
coverage is diminished if a drug is no longer considered EHB. For 
example, a plan might designate certain drugs as ``non-EHB,'' but 
indicate that the member can obtain coverage of such drugs so long as 
they enroll into a third-party program. If the member declines to 
enroll in the program or fills a prescription for a ``non-EHB'' drug 
outside of the program, they risk assuming responsibility for cost 
sharing that does not count towards the member's deductible or annual 
limitation on cost sharing.
    From an operational perspective, it is not apparent on what basis 
issuers make distinctions between covered drugs that are EHB and ``non-
EHB,'' including at what point certain drugs become ``too costly'' for 
the plan to consider them EHB. Further, it is not apparent that issuers 
are capable of readily explaining the rationale behind designations of 
``non-EHB'' for specific drugs to consumers in advance of their 
enrollment in the plan. Even if an issuer is capable of explaining that 
rationale and providing any amount of notice to affected consumers in 
advance of their enrollment, we believe it is unreasonable to expect 
enrollees to be able to understand the complicated impacts that getting 
coverage for specific ``non-EHB'' drugs would have on enrollee out-of-
pocket costs and consumer protections. This is especially true 
considering that those drugs most likely to be designated as ``non-
EHB'' are drugs that are more likely to be prescribed for members of 
particularly vulnerable segments of the population.\294\ The fact that 
the consumers that would be most affected by allowing drug coverage as 
``non-EHB'' would be most negatively impacted by additional out-of-
pocket costs and loss of consumer protections is further justification 
for the finalization of this policy.
---------------------------------------------------------------------------

    \294\ Assessment of racial and ethnic inequities in copay card 
utilization and enrollment in copay adjustment programs. J Manag 
Care Spec Pharm. 2023 Sep;29(9):1084-1092. Doi: 10.18553/jmcp.
---------------------------------------------------------------------------

    We also find uncompelling the argument that issuers may classify 
drugs as specialty drugs or apply another similar label and thus 
designate them as ``non-EHB.'' We have not defined ``specialty drug'' 
for the purposes of EHB and formulary standards; rather, issuers must 
meet the formulary requirements at Sec.  156.122. Accordingly, while 
the ACA does not explicitly identify specialty drugs within the 
category of prescription drugs that must be covered, the ACA also does 
not provide for a blanket exclusion from the EHB coverage requirement 
for such drugs, and therefore the requirements under Sec.  156.122 
apply to such drugs. Additionally, although EHB standards do not 
prohibit issuers from designating certain drugs as ``specialty'' drugs 
or tiering them as such if non-discriminatory, we believe it would be 
difficult, if not impossible, for an issuer to remove all drugs it 
currently deems ``specialty'' from the formulary and still be in 
compliance with Sec.  156.122.
    Comment: Some commenters stated that HHS lacks the statutory 
authority to include prescription drugs covered by plans in excess of 
those covered by a State's EHB-benchmark plan as EHB.
    Response: Section 1302(b)(1) authorizes HHS to define the EHB, 
including items and services within the prescription drug category at 
Sec.  1302(b)(1)(F). In this rule, we are exercising this authority to 
further define the prescription drugs that are considered EHB, which is 
clearly within HHS's statutory authority to define the EHB.
    Comment: Some commenters stated that the final rule should make 
clear whether this policy applies to large group market and self-funded 
plans and suggested that it should. Conversely, several commenters 
urged HHS to clarify that this policy, if adopted, would not apply to 
self-insured and large group market plans. These commenters expressed 
concern that if the rule is extended to large group market and self-
funded group health plans, it would be disruptive to formulary design, 
and plans may be forced to eliminate certain prescription drugs from 
their formularies due to increased plan costs. One commenter requested 
that if the policy were to apply to large group market and self-funded 
plans, the government provide a cost estimate to reflect the projected 
impact.
    Response: The proposed rule primarily addressed the application of 
this policy with respect to issuers of non-grandfathered individual and 
small group market plans subject to the requirement to provide EHB. We 
are finalizing this proposal as proposed. This final rule does not 
address the application of this policy to large group market health 
plans and self-insured group health plans. While health insurance 
issuers offering non-grandfathered coverage in the individual and small 
group market are required to cover EHBs, self-insured group health 
plans and large group market health plans are not required to cover any 
EHBs. However, to the extent self-insured group health plans and large 
group market health plans cover EHBs, such plans must comply with the 
annual limitation on cost sharing under PHS Act section 2707(b) and 
annual and lifetime limit prohibitions under PHS Act section 2711, as 
applicable, with respect to those benefits.\295\ HHS shares 
interpretative jurisdiction with the Department of Labor and the 
Department of the Treasury (collectively, the Departments) of the 
relevant requirements that are included in PHS Act sections 2707 and 
2711, which are adopted by reference into the Employee Retirement 
Income Security Act (ERISA) through section 715 of ERISA and into the 
Internal Revenue Code (Code) through section 9815 of the Code. The 
Departments understand the questions raised by commenters with respect 
to large group market health plans and self-insured group health plans 
and intend to address the applicability of this policy to those plans 
in future notice-and-comment

[[Page 26352]]

rulemaking. Specifically, the Departments intend to propose rulemaking 
that would align the standards applicable to large group market health 
plans and self-insured group health plans with those applicable to 
individual and small group market plans, so that all group health plans 
and health insurance coverage subject to sections 2711 and 2707(b) of 
the PHS Act, as applicable, would be required to treat prescription 
drugs covered by the plan or coverage in excess of the applicable EHB-
benchmark plan as EHB for purposes of the prohibition of lifetime and 
annual limits and the annual limitation on cost sharing, which would 
further strengthen the consumer protections in the ACA.
---------------------------------------------------------------------------

    \295\ The provisions of PHS Act section 2707(b) apply to all 
non-grandfathered group health plans, including non-grandfathered 
self-insured and non-grandfathered insured small and large group 
market plans. The provisions of PHS Act section 2711 apply to both 
non-grandfathered and grandfathered group health plans and group or 
individual health insurance coverage, except the annual limits 
prohibition does not apply to grandfathered individual health 
insurance coverage.
---------------------------------------------------------------------------

    Comment: A few commenters asserted that the proposal may impact the 
viability of copay maximizer programs, which could cause enrollee cost 
sharing and plan premiums to increase, particularly for cost sharing 
related to specialty drugs. One commenter stated that these programs 
maximize the value of coupons to benefit the patient, taxpayers, and 
plan sponsors, and bring manufacturers to the table to negotiate on 
fair prices, particularly for self-insured plans, and urged HHS to 
consider this proposed policy change in the context of the broader 
policy debates related to manufacturers' use of copay coupons and copay 
assistance programs.
    Response: As noted above, this policy was first stated in the EHB 
Rule in 2013 and addressed again in the 2016 Payment Notice and so we 
disagree that codification of a long-standing policy should cause 
significant changes for plans in the individual and small group 
markets. We will consider copay maximizer programs, as relevant, in any 
subsequent policy making about drug manufacturer assistance programs.
    Comment: Some commenters noted that the policy may impact issuers' 
ability to manage prescription drug costs, which may lead to increased 
premiums and cost sharing. Commenters suggested that HHS consider 
whether the risk adjustment methodology appropriately supports this 
policy, and whether issuers may need additional benefit design 
flexibilities or other assistance to help contain costs. One commenter 
encouraged HHS to carefully consider how this policy change may 
inappropriately benefit manufacturers by encouraging them to increase 
list prices for certain drugs.
    Response: We encourage issuers to continue to exceed minimum drug 
count requirements and remind them of P&T committee obligations at 
Sec.  156.122(a)(3)(iii). Based on our review of formularies as part of 
QHP certification and as part of the form review for direct enforcement 
States, it is our understanding that issuers routinely exceed minimum 
requirements when developing formularies. We expect P&T committees to 
exercise sound decision-making and balance cost considerations with 
consumer needs. We share commenters' concerns about the increasing cost 
of prescription drugs in general. Therefore, we hope that drug 
manufacturers will negotiate with issuers and PBMs so that additional 
drugs can be included in formularies. Additionally, since this policy 
does not change the current treatment of prescription drugs in the 
individual and small group markets, codifying this policy will not 
impact the risk adjustment methodology.
    Comment: Some commenters recommended that HHS monitor unintended 
consequences of this policy, if finalized as proposed, such as a 
potential decrease in the breadth of formularies beyond what is 
required by current regulation.
    Response: We intend to monitor the breadth of formularies and will 
consider whether further regulation is warranted. However, we also note 
that this policy has been in place since at least the 2016 Payment 
Notice, so this is not a new interpretation. As noted in the proposed 
rule, we do not believe that the designation of drugs as ``non-EHB'' is 
currently pervasive in the individual and small group markets. Further, 
this provision is intended to operate in tandem with the other 
regulatory requirements at Sec.  156.122, which impose other standards 
for prescription drug coverage. In particular, we highlight the 
requirements at Sec.  156.122(a)(3)(iii), which place requirements on 
P&T committees to, among other things, ensure that formularies cover a 
range of drugs across a broad distribution of therapeutic categories 
and classes and provide appropriate access to drugs that are included 
in broadly accepted treatment guidelines and that are indicative of 
general best practices at the time.
    Comment: One commenter requested clarification on how the proposed 
amendment to ``Additional Required Benefits (45 CFR 155.170)'' will 
impact the proposed amendment to Sec.  156.122. The commenter noted 
that, as proposed, it appears there would be an exception to the 
codification in Sec.  156.122 that prescription drugs in excess of the 
EHB-benchmark plan are considered EHB if a drug is mandated by State 
action and considered in addition to EHB pursuant to the defrayal 
standards at Sec.  155.170. The commenter stated that this outcome 
appears to conflict with the proposed amendment to Sec.  155.170(a)(2) 
which would provide that drug benefits covered in a State's EHB-
benchmark plan would not be considered in addition to EHB and maintain 
its status as EHB.
    Response: Pursuant to the finalized policy at Sec.  155.170, any 
prescription drug that is covered in a State's EHB-benchmark plan is 
EHB, even if there is a State mandate requiring that specific drug to 
be covered. When read in conjunction with our clarification at Sec.  
156.122, this means that any prescription drug that an issuer 
voluntarily covers in excess of the State's EHB-benchmark plan is EHB 
unless there is a State mandate requiring such coverage.
c. Pharmacy and Therapeutics Committee Standards
    For plan years beginning on or after January 1, 2026, we proposed 
to amend Sec.  156.122 to provide that the P&T committee must include a 
consumer representative.
    In the 2016 Payment Notice (80 FR 10749), we required plans 
providing EHB to establish P&T committees to review and update plan 
formularies in conjunction with the USP MMG. At Sec.  156.122(a)(3)(i), 
we require P&T committees to: (a) have members that represent a 
sufficient number of clinical specialties to adequately meet the needs 
of enrollees; (b) consist of a majority of individuals who are 
practicing physicians, practicing pharmacists, and other practicing 
health care professionals who are licensed to prescribe drugs; (c) 
prohibit any member with a conflict of interest with respect to the 
issuer or a pharmaceutical manufacturer from voting on any matters for 
which the conflict exists; and (d) require at least 20 percent of its 
membership to have no conflict of interest with respect to the issuer 
and any pharmaceutical manufacturer.
    We noted in the proposed rule that many of the P&T committee 
requirements are also found in the Principles of a Sound Drug Formulary 
System, which was first developed in September 1999 by a coalition of 
national organizations representing health care professionals, 
government, and business leaders and later adopted in 2000 by the 
Academy of Managed Care Pharmacy (AMCP), Alliance of Community Health 
Plans, American Medical Association, American Society of Health-Systems 
Pharmacists, Department of Veterans Affairs, Pharmacy Benefits 
Management Strategic Healthcare Group, National

[[Page 26353]]

Business Coalition on Health, and U.S. Pharmacopeia.\296\ We further 
noted that since that time, best practices for P&T committees have 
matured throughout the health care system. In 2019, AMCP convened a 
group of thought leaders, clinicians, academics, patient advocacy 
organizations, payer organizations, and members of the pharmaceutical 
industry to consider P&T committee best practices in today's evolving 
health care system.\297\ Specifically, the group provided perspectives 
on: (a) P&T committee composition and relevant interested parties, (b) 
evaluation of emerging evidence for formulary decisions and 
recommendations around training of P&T committee members, and (c) 
characteristics and best practices of successful committees.
---------------------------------------------------------------------------

    \296\ Hawkins, B., ed. (2011). Principles of a sound drug 
formulary system. Best Practices for Hospital and Health System 
Pharmacy: Positions and Guidance Documents of ASHP. American Society 
of Health-System Pharmacists. https://www.ashp.org/-/media/assets/policy-guidelines/docs/endorsed-documents/endorsed-documents-principles-sound-drug-formulary-system.pdf.
    \297\ AMCP Partnership Forum: Principles for Sound Pharmacy and 
Therapeutics (P&T) Committee Practices: What's Next? (2020). J Manag 
Care Spec Pharm, 26(1), 48-53. https://doi.org/10.18553/jmcp.2020.26.1.48.
---------------------------------------------------------------------------

    While a P&T committee is usually composed of actively practicing 
physicians, pharmacists, and other health care professionals, forum 
participants stated that a well-structured committee should also 
include patient representation since it provides additional insight 
into the patient perspective regarding the practical use of therapies 
and effects on quality-of-life outcomes, which can be a helpful 
component of the formulary evaluation process. Additionally, 
participants noted that the patient perspective should be considered a 
key voice in formulary decisions as they are directly affected by P&T 
committee decisions and can assist the committee in better 
understanding the value of different treatments and medications for 
patients.
    We stated in the proposed rule that while we are aware that the 
inclusion of consumers in the P&T committee process is not common, it 
has been observed in different health care systems. We noted that one 
example of this practice includes the Uniform Formulary Beneficiary 
Advisory Panel (UFBAP), which provides independent advice and 
recommendation on the development of the TRICARE Uniform 
formulary.\298\ Members of the UFBAP include nongovernmental 
organizations and associations that represent the views and interests 
of a large number of eligible covered beneficiaries, contractors 
responsible for the TRICARE retail pharmacy program, contractors 
responsible for the national mail-order pharmacy program, and TRICARE 
network providers. We further noted additional examples of States that 
include clinicians such as physicians, pharmacists, and other 
specialists along with consumer or patient representatives as members 
of their respective P&T committees, including Pennsylvania,\299\ 
Connecticut,\300\ and New York.\301\
---------------------------------------------------------------------------

    \298\ Charter: Uniform Formulary Beneficiary Advisory Panel. 
https://health.mil/Military-Health-Topics/Access-Cost-Quality-and-Safety/Pharmacy-Operations/BAP.
    \299\ The Pennsylvania Department of Human Services Pharmacy and 
Therapeutics Committee. See https://www.dhs.pa.gov/about/DHS-Information/Pages/Stakeholders/Pharmacy-Committee.aspx.
    \300\ The Connecticut Medical Assistance Program Pharmaceutical 
and Therapeutics Committee. See https://www.cga.ct.gov/current/pub/chap_319v.htm#sec_17b-274d and https://www.ctdssmap.com/CTPortal/Portals/0/StaticContent/Publications/CT_PT_COMMITTEE_BYLAWS_v2.pdf.
    \301\ New York State Department of Health Drug Utilization 
Review (DUR). See https://www.health.ny.gov/health_care/medicaid/program/dur/docs/board_membership.pdf.
---------------------------------------------------------------------------

    We explained in the proposed rule that P&T committee decisions have 
the power to impact a consumer's overall quality of life and encompass 
important elements of care and cost for the consumer. Therefore, we 
proposed to add paragraph (a)(3)(i)(E) to Sec.  156.122 to update P&T 
membership standards to require the P&T committee to include a consumer 
representative as part of its membership for plan years beginning on or 
after January 1, 2026. In addition, we proposed to specify at Sec.  
156.122(a)(3)(E)(1) through (4) membership standards for consumer 
representatives. Specifically, we stated that the consumer 
representative would be required to represent the consumer perspective 
as a member of the P&T committee and would be required to have an 
affiliation with and/or demonstrate active participation in consumer or 
community-based organizations. We stated that some examples of these 
types of organizations include those that are representative of a 
community, or significant segments of a community, that provide 
educational or related direct services to individuals in the community, 
and organizations that protect consumer rights via advocacy, research, 
or outreach efforts. We explained that as a P&T committee member, the 
consumer representative would assume responsibility for highlighting 
and addressing any potential risks and benefits to consumers that could 
result from P&T committee actions. In addition, we explained that an 
affiliation with and/or active participation in a consumer or 
community-based organization would provide the consumer representative 
with the necessary background to represent consumers' perspectives. We 
further stated that if the proposed rule were finalized as proposed, 
issuers would also be required to select a consumer representative who 
has experience in the analysis and interpretation of complex data and 
is able to understand its public health significance, bearing in mind 
that one of the duties as a member of a P&T committee would include 
thoughtful consideration of clinical criteria, such as drug safety and 
efficacy data, when making a recommendation about products under 
review. We further stated that this individual would also be required 
to have no fiduciary obligation to a health facility or other health 
agency and no material financial interest in the rendering of health 
care services. We explained that this conflict-of-interest standard is 
intended to ensure that, as a member of the P&T committee, the consumer 
representative is free from financial interests or other relationships 
that could compromise the objectivity of committee members as they 
perform their duties. We also noted that nothing in this proposal would 
prevent the P&T committee from defining additional membership standards 
pertaining to the position of consumer representative.
    We stated in the proposed rule that we believe the proposed 
addition of Sec.  156.122(a)(3)(i)(E) would ensure that the consumer 
experience with a disease or condition is considered in the design of 
formulary benefits. We explained that consumer representatives would 
offer insights into real consumer experiences unknown to P&T 
committees, which would educate the committee on consumer challenges 
related to medication use and assist the committee in exploring 
solutions to these challenges during the formulary development process. 
We also noted that broader inclusion of perspectives on the P&T 
committee would align with other groups, including the AMCP.
    We sought comment on these proposals. We stated that the consumer 
representative, as a member of the P&T committee, would be subject to 
the conflict-of-interest standards as specified in Sec.  156.122(a)(3); 
however, we stated we were interested in comments regarding whether we 
should further define additional membership standards for the consumer 
representative. In particular, we sought comments on the qualifications 
necessary to serve as a consumer representative on a P&T committee, to

[[Page 26354]]

include if the representative should have a clinical background, have 
served as a representative of organizations with a regional or 
Statewide constituency, or have been involved in activities related to 
health care consumer advocacy, including issues affecting individual 
and small group market enrollees. We also sought comment on whether the 
current conflict-of-interest provision is sufficient as applied to this 
proposed role, or whether the consumer representative role should be 
subject to additional conflict-of-interest standards. We sought comment 
on whether a consumer representative should have a background for more 
than one condition or disease to sufficiently represent the concerns of 
a diverse population. Additionally, we sought comment on the number of 
consumer representatives who should be included on a committee and if 
that number should be directly proportional to the size of the 
committee. We also recognized that a requirement to develop additional 
P&T committee standards, solicit for applicants for this new position, 
and provide any necessary training to new members would require lead 
time for States, issuers, and pharmacy benefit managers to implement 
and we sought comment on the proposed timing for implementation.
    After consideration of comments and for the reasons outlined in the 
proposed rule and our responses to comments, we are finalizing this 
provision with the following modifications: (1) we are making a change 
to Sec.  156.122(a)(3)(i)(E) introductory text, Sec.  
156.122(a)(3)(i)(E)(1), and Sec.  156.122(a)(3)(i)(E)(2) to replace 
``consumer'' with ``patient''; (2) we are amending Sec.  
156.122(a)(3)(i)(E) introductory text to include the term ``at minimum 
one'' to reflect that at least one patient representative is required, 
and that additional patient representatives may serve on a P&T 
committee; (3) we are modifying Sec.  156.122(a)(3)(i)(E)(2) to broaden 
the experience requirement to serve as a patient representative by 
requiring that the patient representative have relevant experience or 
participation in patient or community-based organizations; (4) we are 
modifying Sec.  156.122(a)(3)(i)(E)(3) to broaden the clinical 
requirement to serve as a patient representative by requiring that the 
patient representative be able to demonstrate the ability to integrate 
data interpretations with practical patient considerations; (5) we are 
adding Sec.  156.122(a)(3)(i)(E)(5) to reflect an education requirement 
to serve as a patient representative in which the patient 
representative is required to have a broad understanding of one or more 
conditions or diseases, associated treatment options, and research; and 
(6) we are adding Sec.  156.122(a)(3)(i)(E)(6) to require the patient 
representative to disclose financial interests on their conflict-of-
interest statements. Disclosed financial interests must include all 
interests with any entity that would benefit from decisions regarding 
plan formularies as well as specific information about these financial 
interests, such as the nature of the relationship and the value of the 
financial interest. We summarize and respond below to public comments 
received on the proposal to amend Sec.  156.122 to provide that the P&T 
committee must include a consumer representative.
    Comment: Two commenters encouraged CMS to amend the language of 
Sec.  156.122(a)(3)(i)(E) to use the term ``patient representative'' as 
opposed to ``consumer representative.'' Both commenters noted that 
patient-centered approaches aim to ensure clinical care meets patients' 
needs and preferences, which is different from a consumer orientation, 
which calls on patients to be prudent purchasers of medical care.
    Response: We agree that the term ``consumer representative'' may 
not accurately represent the full scope of the insight that such a 
representative offers to a P&T committee and may not be primarily 
associated with a patient-centered role. We acknowledge that the use of 
the term ``consumer'' to some, may be more closely associated with 
purchases and consumption. However, we believe the proposed rule was 
clear in our intention that the term ``consumer representative'' did 
not limit the scope of this representative's role to only ``consumer'' 
concerns. As discussed in the preamble, this representative will serve 
on a P&T committee to provide additional insight into the patient 
perspective regarding the practical use of therapies and effect on 
quality-of-life outcomes as part of the formulary evaluation process 
and assist the committee in better understanding the value of different 
treatments and medications for patients. We also did not intend to 
require the representative and the P&T committee to make overly 
technical distinctions between ``consumer'' and ``patient'' concerns, 
when both are necessary for this representative to ensure that the 
experience of people with a given disease or condition is considered in 
the design of formulary benefits which should help the committee better 
understand the challenges of those impacted related to medication use 
as well as assist the committee in exploring solutions to these 
challenges during the formulary development process. Nevertheless, we 
agree with commenters that the term ``patient representative'' is a 
more appropriate term in this context. As such, we are finalizing this 
proposal with a change to replace ``consumer'' with ``patient'' at 
Sec.  156.122(a)(3)(i)(E) introductory text and Sec.  
156.122(a)(3)(i)(E)(1) and (2).
    Comment: We received many comments in response to our request for 
comments (88 FR 82602) regarding whether we should further define 
additional membership standards for the patient representative in this 
rule, including what qualifications and conflict-of-interest standards 
may be necessary to effectively implement the proposal. One commenter 
urged CMS to require that the patient representative have clinical 
experience. One commenter noted that while a clinical background should 
be encouraged, it should not be required, as it could exclude highly 
qualified patient representatives who have other expertise to 
contribute, such as from experience in public or community health, 
health care policy development, or administration. Additionally, one 
commenter noted that limiting the position to only those with a 
clinical background may negatively impact the value of adding patients' 
voices to these committees. Two commenters recommended that the patient 
representative have a background in one or more conditions or diseases. 
Conversely, several commenters argued that the addition of a member 
without medical and scientific training to offer meaningful input on 
committee decisions would significantly and negatively impact the 
scientific rigor of P&T committee discussions, which are aimed to 
develop prescription drug formularies.
    Finally, a few commenters recommended that the patient 
representative should function in an advisory or non-voting capacity. 
Two commenters suggested that patient representatives serving on the 
P&T committees must have clinical experience to have voting rights. One 
commenter recommended that patient representatives meet existing P&T 
committee membership criteria or be barred from voting rights.
    Response: First, we are finalizing our proposal with modification 
to include an additional standard at Sec.  156.122 (a)(3)(i)(E)(5) to 
require the patient representative to have a broad understanding of one 
or more conditions or diseases, associated treatment options, and 
research. In the proposed rule, we specifically sought

[[Page 26355]]

comment on what the qualifications may be necessary to serve as a 
patient representative on a P&T committee, including whether the 
representative should have a clinical background and whether the 
patient representative should have a background for more than one 
condition or disease to sufficiently represent the concerns of a 
diverse population. Although we agree with commenters that while a 
clinical background can be beneficial for a patient representative, 
this need not be a regulatory requirement for the patient 
representative, as their role on the committee is to provide insights 
from a patient perspective and not necessarily with a clinical 
background. Additionally, we do not agree that the addition of a 
patient representative to a P&T committee will hinder the quality of 
scientific exchange that occurs between members of the committee. The 
addition of a patient representative is meant to enhance the 
committee's ability to make well-informed decisions by incorporating 
the perspectives and experiences of the individuals directly affected 
by pharmaceutical and therapeutic choices. The inclusion of this member 
role will promote transparency, accountability, and a more patient-
centered approach to health care.
    However, we agree with commenters that noted that a patient 
representative should have background knowledge related to more than 
one condition or disease to sufficiently represent the concerns of a 
diverse population. Background knowledge of a given condition or 
disease can include but is not limited to information about the causes, 
symptoms, risk factors, diagnostic methods, available treatments, and 
potential outcomes associated with a specific medical condition or 
disease. The addition of the standard at Sec.  156.122(a)(3)(i)(E)(5) 
will ensure that the patient representative is able to effectively 
communicate and collaborate with other clinically focused committee 
members as a result of the requirement that they have a foundational 
knowledge related to the treatment and management of a more than one 
condition or disease while also representing the needs and experiences 
of patients.
    We disagree that patient representatives should function in an 
advisory role or non-voting capacity or that the voting rights of a 
patient representative be dependent upon clinical experience. Unlike 
members of the P&T committee who serve in a clinical capacity, such as 
the physician, pharmacist, or nurse, the patient representative is 
included as a member of the P&T committee to serve in a non-clinical 
capacity to offer insight into real patient experiences that P&T 
committees may be unaware of that would help the committee better 
understand patient challenges related to medication use as well as 
assist them in exploring solutions to these challenges during the 
formulary development process. Additionally, in States where P&T 
committees already include patient representatives, such as 
Pennsylvania, Connecticut, and New York, which include clinicians along 
with consumer or patient representatives, voting rights are extended to 
all members. We are not aware of States that require P&T committees to 
include patient representatives where those members are not afforded 
voting privileges. These examples demonstrate to us that, once a 
qualified candidate has been identified to serve as a patient 
representative and becomes a member of the P&T committee, this member 
should be granted voting privileges like all other committee members 
who meet member requirements and fulfill the duties associated with 
their role.
    Comment: A few commenters recommended that the number of patient 
representatives should be proportional to the size of the P&T 
committee, to help ensure adequate patient representation. Conversely, 
a few commenters recommended that, if finalized, the requirement should 
be to include only one patient representative on the P&T committee.
    Response: We appreciate the commenters' suggestions, but we will 
not revise the regulatory text to require additional patient 
representatives at this time because we want to ensure that plans are 
able to successfully identify and incorporate at least one patient 
representative on their P&T committees without inflicting undue burden 
on issuers to implement this new requirement. We are finalizing a non-
substantive revision to specify that a health plan must include ``at 
minimum one'' patient representative to allow health plans the ability 
to use additional patient representatives at their option. We will 
continue to monitor this requirement and may consider increasing the 
number of patient representatives required on a P&T committee in the 
future.
    Comment: In the proposed rule, we noted that we were interested in 
comments regarding whether the current conflict-of-interest provision 
at Sec.  156.122(a)(3) is sufficient as applied to the proposed role, 
or whether the patient representative role should be subject to 
additional conflict-of-interest standards. We received several comments 
regarding how we should further define this membership standard in this 
rule. Several commenters stated that patient representatives attached 
to a patient or consumer advocacy organization may pose conflict-of-
interest concerns as this could be an avenue for individuals 
affiliated, either explicitly or otherwise, with pharmaceutical 
manufacturers to gain representation on a P&T committee. Additionally, 
a few commenters recommended that CMS strengthen provisions to ensure 
that an individual has no link (direct or indirect) to a drug 
manufacturer. One commenter recommended that HHS collaborate with 
patient organizations and other interested parties to develop 
additional standards to appropriately safeguard against potential 
conflicts of interest and encouraged HHS to review resources from the 
NHC on best practices for integrating the patient voice into health 
care decision making.
    Response: We acknowledge that the requirement that the patient 
representative have relevant experience or participation in patient or 
community-based organizations could result in financial conflicts of 
interest if, for example, the community-based organization the patient 
representative is affiliated with has a financial or material 
arrangement with pharmaceutical manufacturers. Additionally, we 
reiterate that the patient representative serves on the P&T committee 
to help the committee better understand the challenges of those 
impacted related to medication use as well as assist the committee in 
exploring solutions to these challenges during the formulary 
development process and should not be considered a role to be used by 
pharmaceutical manufacturers to gain representation on the P&T 
committee resulting in the prioritization of access over appropriate 
clinical evidence. We agree with commenters that the conflict-of-
interest standards should include safeguards from inappropriate direct 
or indirect pharmaceutical manufacturer influence on P&T committee 
decisions and, as such, we are finalizing a new conflict-of-interest 
standard at Sec.  156.122(a)(3)(i)(E)(6) that will require the patient 
representative to disclose financial interests on their conflict-of-
interest statements. Disclosed financial interests must include all 
interests with any entity that would benefit from decisions regarding 
plan formularies as well as specific information about these financial 
interests, such as the nature of

[[Page 26356]]

the relationship and the value of the financial interest.\302\
---------------------------------------------------------------------------

    \302\ Department of Health and Human Services. Office of 
Inspector General. Gaps in Oversight of Conflicts of Interest In 
Medicare Prescription Drug Decisions. March 2013. https://oig.hhs.gov/oei/reports/oei-05-10-00450.pdf.
---------------------------------------------------------------------------

    Finally, we appreciate the suggestion to collaborate with patient 
organizations and interested parties to enhance standards and address 
potential conflicts of interest. We may consider developing additional 
standards to be applied to patient representatives on the P&T committee 
in the future and will consider such collaboration.
    Comment: Several commenters recommended that CMS encourage 
alternative mechanisms for patient engagement with P&T committees, such 
as requiring annual training sessions for P&T committees that discuss 
the patient perspective, allowing existing members to attest to a 
consumer interest, requiring P&T committees to publish a plain language 
summary of the principles used to establish a formulary, or requiring 
issuers to hold consumer forums to capture patient feedback that can be 
shared with clinical teams.
    Response: We do not believe that the alternative mechanisms 
suggested by commenters for patient engagement with P&T committees 
would be as effective as the addition of a patient representative to 
serve as a member of the P&T committee. The addition of this member to 
the P&T committee will offer the opportunity for members to be 
consistently engaged at every meeting in the discussion of topics 
related to patient experiences, patient challenges related to 
medication access and use, as well as exploring solutions to these 
challenges during the formulary benefit design process.
    Comment: A few commenters expressed concerns that the criteria set 
forth for the patient representative in the proposed regulation are too 
stringent and will limit the ability of plans and issuers to recruit a 
qualified consumer representative if required to do so. One commenter 
noted that the requirement for a patient representative to have an 
affiliation with or participation in a consumer group should not be a 
strict standard given the difficulty that issuers may encounter 
identifying qualifying patient representatives. This same commenter 
also noted that it may be difficult to find patient representatives who 
are working or participating in consumer or community-based 
organizations that have sufficient experience to analyze, interpret, 
and understand the public health impact of complex scientific data. 
Additionally, the commenter recommended amending the criteria to 
reflect the demands of the role to listen to interpretations of the 
data and be thoughtful in marrying those interpretations with the 
practical considerations that impact consumers. A few commenters 
recommended that HHS consider an exceptions process from meeting this 
standard for an issuer that makes a good faith effort but is unable to 
find a qualified consumer representative. Two commenters recommended 
that HHS allow adequate time for implementation of this policy, if 
finalized, for plans and issuers to locate and onboard new consumer 
representatives without delaying pressing P&T meetings and approvals.
    Response: In general, we agree with commenters that requiring that 
the patient representative have an affiliation with and/or demonstrate 
active participation in consumer or community-based organizations is 
restrictive. We did not intend for this requirement to limit the 
ability of issuers to recruit a qualified patient representative. As 
noted in the preamble, we believe the inclusion of a patient 
representative on the P&T committee is necessary to ensure that the 
patient experience with a disease or condition is considered in the 
design of formulary benefits. While an affiliation with and/or the 
ability to demonstrate active participation in consumer or community-
based organizations may be an ideal path for a candidate to have 
obtained the necessary experience to serve as a patient representative, 
we acknowledge that the relevant experience necessary to serve as a 
patient representative can also be obtained from working in roles that 
directly impact or support patient care and well-being. This could 
include positions in health care administration, patient advocacy, 
nursing, medical social work, or roles focused on improving patient 
experience and outcomes. We are amending Sec.  156.122(a)(3)(i)(E)(2) 
to state that the patient representative must have relevant experience 
or participation in patient or community-based organizations. We 
believe that broadening the background experience necessary to serve as 
a patient representative will expand the pool of qualified candidates 
when searching for a patient representative to serve on the P&T 
committee which should further reduce any barriers for issuers to meet 
this requirement.
    Further, we agree with commenters that requiring the patient 
representative to have experience in the analysis and interpretation of 
complex data and be able to understand its public health significance 
is also restrictive. The background requirement as proposed may not 
easily be identified in candidates who only have relevant experience or 
participation in patient or community-based organizations unless they 
have additional background experience in interdisciplinary fields such 
as epidemiology, biostatistics, or data science where they would have 
gained the expertise needed to analyze and interpret complex data with 
a focus on public health significance. While this level of experience 
could be beneficial, we agree that it should not be a prerequisite for 
serving as a patient representative on a P&T committee considering that 
this member will serve in a non-clinical capacity to provide additional 
insight into the patient perspective regarding the practical use of 
therapies and effect on quality-of-life outcomes. We acknowledge that 
the proposed requirements may not accurately reflect the practical 
demands of the role and therefore may hinder issuer recruitment of 
qualified candidates to serve as a patient representative on the P&T 
committee, which was not our intent. However, we believe the patient 
representative should be able to demonstrate the ability to attentively 
consider data interpretations and thoughtfully integrate them with 
practical considerations affecting patients in order to help them 
contribute meaningfully to P&T committee member discussions and to 
assist the committee in better understanding the value of different 
treatments and medications for patients. Therefore, we are amending 
Sec.  156.122(a)(3)(i)(E)(3) to require that the patient representative 
be able to demonstrate the ability to integrate data interpretations 
with practical patient considerations. We believe broadening this 
requirement will help to further assist issuers in identifying 
qualified candidates to serve as patient representatives.
    In response to comments, we considered the establishment of an 
exception process should a health plan make a good faith effort and is 
unable to find a qualified candidate to serve as a patient 
representative. However, we are concerned that if we allow an exception 
process, this may incentivize some issuers to identify loopholes to 
obtain an exception to the rule and not make a meaningful attempt to 
comply with the requirements set forth to seek out a qualified 
candidate to serve as a patient representative on the P&T committee. 
Not implementing an exception process ensures consistent application of 
the policy, minimizes potential loopholes, and maintains a

[[Page 26357]]

clear and standardized approach for all issuers.
    As noted above, we are finalizing this policy with modifications to 
broaden certain requirements to further assist issuers in identifying 
qualified candidates to serve as patient representatives. We recognize 
the challenges that plans and issuers may encounter while recruiting a 
qualified candidate to serve as a patient representative. However, 
several States currently include at least one patient representative as 
a member of their P&T committee which indicates that these committees 
were able to identify qualified candidates who are willing to serve in 
this role. We encourage issuers to reach out to their State should they 
experience challenges while making a good faith effort to identify a 
qualified candidate to serve as a patient representative and comply 
with this new requirement, as the State is responsible for the 
oversight and enforcement of the P&T committee standards.
    Comment: One commenter encouraged CMS to consider including 
additional flexibility to account for the possibility that health plan 
P&T committees already include patient representatives. The commenter 
also recommended that CMS allow for the flexibility to combine consumer 
representative positions under State requirements that may already be 
in place so that one or more consumer advocates can advocate for both 
Medicaid and commercial health plan members.
    Response: We do not believe that the requirement for health plans 
in the non-grandfathered individual and small group market to include a 
patient representative materially conflicts with any existing State 
requirements on these markets. No commenter identified any existing 
State requirements related to similar P&T committee membership 
standards, which comports with our own research of any potential 
conflicts in this space. Thus, we do not believe it is necessary to 
revise the proposal to accommodate any such potential conflicts. To the 
extent any may exist, we expect to work closely with any State 
regulators and provide technical assistance to affected health plans to 
ensure that P&T committee membership standards come into compliance 
with this rule with minimal burden. In addition, to the extent a health 
plan in these markets currently voluntarily has a patient 
representative on its P&T committees, we expect such health plans to 
ensure that any existing patient representatives meet the minimum 
membership standards imposed by this rule.
    Comment: One commenter recommended that CMS maintain the ability 
for issuers to include additional standards for consumer 
representatives noting that issuers should have the flexibility to 
establish criteria to demonstrate the individual's ability to 
participate on the P&T committee and standards to handle conflicts of 
interests.
    Response: As noted in the proposed rule, nothing in this proposal 
would prevent the P&T committee from defining additional membership 
standards pertaining to the position of patient representative.
5. Publication of the 2025 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 (86 FR 24238), 
we publish the premium adjustment percentage, the required contribution 
percentage, and maximum annual limitations on cost sharing and reduced 
maximum annual limitation on cost sharing in guidance annually starting 
with the 2023 benefit year. We note that these parameters are not 
included in this rulemaking, as we did not propose to change the 
methodology for these parameters for the 2025 benefit year. Instead, on 
November 15, 2023, we published these 2025 benefit year parameters in 
guidance in accordance our 2022 Payment Notice regulations.\303\
---------------------------------------------------------------------------

    \303\ https://www.cms.gov/files/document/2025-papi-parameters-guidance-2023-11-15.pdf.
---------------------------------------------------------------------------

6. Standardized Plan Options (Sec.  156.201)
    In the HHS Notice of Benefit and Payment Parameters for 2025 
proposed rule (88 FR 82510, 82603), HHS proposed to exercise its 
authority under sections 1311(c)(1) and 1321(a)(1)(B) of the ACA to 
make minor updates to the standardized plan options for PY 2025. 
Section 1311(c)(1) of the ACA directs the Secretary to establish 
criteria for the certification of health plans as QHPs. Section 
1321(a)(1)(B) of the ACA directs the Secretary to issue regulations 
that set standards for meeting the requirements of title I of the ACA 
for, among other things, the offering of QHPs through such Exchanges.
    Specifically, we proposed to make minor updates to the plan designs 
for PY 2025 to ensure these plans have AVs within the permissible de 
minimis range for each metal level. We proposed to otherwise maintain 
continuity regarding the approach to standardized plan options 
finalized in the 2023 and 2024 Payment Notices. Our proposed updates to 
plan designs for PY 2025 were detailed in Tables 12 and 13 in the 
proposed rule. We did not propose to amend Sec.  156.201. We refer 
readers to the proposed rule (88 FR 82603 through 82604) for background 
discussion regarding our proposed approach to standardized plan 
options, and to the preambles of the 2023 and 2024 Payment Notices 
discussing Sec.  156.201 (87 FR 27310 through 27322 and 88 FR 25847 
through 25855, respectively) for a detailed discussion regarding the 
approaches to standardized plan options finalized in those Payment 
Notices.
    We proposed this approach for several reasons. In the proposed rule 
(88 FR 82604), we explained that we intended to continue to require FFE 
and SBE-FP issuers to offer standardized plan options in large part due 
to continued plan proliferation, which has only increased since the 
standardized plan option requirements were finalized in the 2023 
Payment Notice. We stated that, in light of this continued plan 
proliferation, it is increasingly important to continue to attempt to 
streamline and simplify the plan selection process for consumers on the 
Exchanges. We explained that we believe these standardized plan options 
continue to play a meaningful role in that simplification by reducing 
the number of variables that consumers must consider when selecting a 
plan option, making it easier for consumers to compare available plan 
options.
    More specifically, we stated that with these standardized plan 
options, consumers continue to be able to more easily consider 
meaningful factors, such as networks, formularies, and premiums, when 
selecting a plan. We stated that we further believe these standardized 
plan options include several distinctive features, such as enhanced 
pre-deductible coverage for several benefit categories and copayments 
instead of coinsurance rates for a greater number of benefit 
categories, that will continue to play an important role in reducing 
barriers to access, combatting discriminatory benefit designs, and 
advancing health equity.
    We explained that including enhanced pre-deductible coverage for 
these benefit categories (specifically, primary care visits, specialist 
visits, speech therapy, occupational and physical therapy, and generic 
drugs at all metal levels, with an increasing number of benefit 
categories exempt at

[[Page 26358]]

higher metal levels) ensures consumers are more easily able to access 
these services without first meeting their deductibles. Additionally, 
we explained that using copayments instead of coinsurance rates for a 
greater number of benefit categories reduces the risk of unexpected 
financial expenses sometimes associated with coinsurance rates.
    Furthermore, we proposed to maintain a high degree of continuity 
with many aspects of the standardized plan option policy finalized in 
the 2024 Payment Notice to reduce the risk of disruption for all 
involved interested parties, including issuers, agents, brokers, 
States, and enrollees. We stated that we believe making major 
departures from the methodology used to create the standardized plan 
options finalized in the 2023 and 2024 Payment Notices could result in 
drastic changes in these plan designs that may create undue burden for 
interested parties. For example, we noted that if the standardized plan 
options that we create vary significantly from year to year, those 
enrolled in these plans could experience unexpected financial harm if 
the cost sharing for services they rely upon differs substantially from 
the previous year. We stated that we ultimately believe consistency in 
standardized plan options is important to allow issuers and enrollees 
to become accustomed to these plan designs.
    We sought comment on our proposed approach to standardized plan 
options for PY 2025. Additionally, we sought comment on requiring 
issuers offering QHPs in individual market State Exchanges to offer, in 
a future plan year, some version of standardized plan options, while 
not necessarily subjecting them to the full scope of standardized plan 
option requirements applicable to issuers offering QHPs through the 
FFEs or SBE-FPs under Sec.  156.201.
    In particular, we sought comment on requiring issuers offering QHPs 
in individual market State Exchanges that are not already required to 
offer standardized plan options under State requirements to offer some 
version of standardized plan options, even if these plan designs differ 
from the requirements of those included in the applicable Payment 
Notice for that plan year. We also sought comment on requiring States 
that intend to transition their Exchange model type from an FFE or SBE-
FP to a State Exchange to require their issuers to offer standardized 
plan options as one condition of this transition. As such, we stated 
that we were particularly interested in comments from individual market 
State Exchanges that do not currently require QHP issuers to offer 
standardized plan options, States with an FFE or SBE-FP Exchange model 
type that intend to transition their Exchange model type to a State 
Exchange, and issuers offering QHPs through such Exchanges.
    We explained that while we recognize that State Exchanges are 
generally best positioned to set the requirements that serve the 
nuances of their respective individual markets, we underscored the 
benefits of offering at least some version of standardized plan 
options, which we discussed in greater detail in the preamble 
discussion of Sec.  156.201 in the 2023 Payment Notice (87 FR 27316). 
We also explained that we believe the fact that over half of all State 
Exchanges currently require issuers to offer standardized plan options 
in one form or another suggests that they, too, see value in 
standardized plan options.

           Table 11--2025 Standardized Options Set One (For All FFE and SBE-FP Issuers, Excluding Issuers in Delaware, Louisiana, and Oregon)
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                 Expanded     Standard    Silver 73    Silver 87    Silver 94
                                                                  Bronze       Silver        CSR          CSR          CSR          Gold       Platinum
--------------------------------------------------------------------------------------------------------------------------------------------------------
Actuarial Value..............................................       63.81%       70.01%       73.09%       87.33%       94.14%       78.06%       88.04%
Deductible...................................................       $7,500       $5,000       $3,000         $500           $0       $1,500           $0
Maximum Out-of-Pocket Limitation.............................       $9,200       $8,000       $6,400       $3,000       $2,000       $7,800       $4,300
Emergency Room Services......................................          50%          40%          40%          30%        * 25%          25%       * $100
Inpatient Hospital Services (Including Mental Health &                 50%          40%          40%          30%        * 25%          25%       * $350
 Substance Use Disorder).....................................
Primary Care Visit...........................................        * $50        * $40        * $40        * $20         * $0        * $30        * $10
Urgent Care..................................................        * $75        * $60        * $60        * $30         * $5        * $45        * $15
Specialist Visit.............................................       * $100        * $80        * $80        * $40        * $10        * $60        * $20
Mental Health & Substance Use Disorder Outpatient Office             * $50        * $40        * $40        * $20         * $0        * $30        * $10
 Visit.......................................................
Imaging (CT/PET Scans, MRIs).................................          50%          40%          40%          30%        * 25%          25%       * $100
Speech Therapy...............................................        * $50        * $40        * $40        * $20         * $0        * $30        * $10
Occupational, Physical Therapy...............................        * $50        * $40        * $40        * $20         * $0        * $30        * $10
Laboratory Services..........................................          50%          40%          40%          30%        * 25%          25%        * $30
X-rays/Diagnostic Imaging....................................          50%          40%          40%          30%        * 25%          25%        * $30
Skilled Nursing Facility.....................................          50%          40%          40%          30%        * 25%          25%       * $150
Outpatient Facility Fee (Ambulatory Surgery Center)..........          50%          40%          40%          30%        * 25%          25%       * $150
Outpatient Surgery Physician & Services......................          50%          40%          40%          30%        * 25%          25%       * $150
Generic Drugs................................................        * $25        * $20        * $20        * $10         * $0        * $15         * $5
Preferred Brand Drugs........................................          $50        * $40        * $40        * $20        * $15        * $30        * $10
Non-Preferred Brand Drugs....................................         $100          $80          $80          $60        * $50        * $60        * $50
Specialty Drugs..............................................         $500         $350         $350         $250       * $150       * $250       * $150
--------------------------------------------------------------------------------------------------------------------------------------------------------
* Benefit category not subject to the deductible.


                                   Table 12--2025 Standardized Options Set Two (For Issuers in Delaware and Louisiana)
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                 Expanded     Standard    Silver 73    Silver 87    Silver 94
                                                                  bronze       silver        CSR          CSR          CSR          Gold       Platinum
--------------------------------------------------------------------------------------------------------------------------------------------------------
Actuarial Value..............................................       63.81%       70.01%       73.10%       87.36%       94.37%       78.10%       88.07%
Deductible...................................................       $7,500       $5,000       $3,000         $500           $0       $1,500           $0
Maximum Out-of-Pocket Limitation.............................       $9,200       $8,000       $6,400       $3,000       $2,000       $7,800       $4,300
Emergency Room Services......................................          50%          40%          40%          30%        * 25%          25%       * $100
Inpatient Hospital Services (Including Mental Health &                 50%          40%          40%          30%        * 25%          25%       * $350
 Substance Use Disorder).....................................
Primary Care Visit...........................................        * $50        * $40        * $40        * $20         * $0        * $30        * $10
Urgent Care..................................................        * $75        * $60        * $60        * $30         * $5        * $45        * $15

[[Page 26359]]

 
Specialist Visit.............................................       * $100        * $80        * $80        * $40        * $10        * $60        * $20
Mental Health & Substance Use Disorder Outpatient Office             * $50        * $40        * $40        * $20         * $0        * $30        * $10
 Visit.......................................................
Imaging (CT/PET Scans, MRIs).................................          50%          40%          40%          30%        * 25%          25%       * $100
Speech Therapy...............................................        * $50        * $40        * $40        * $20         * $0        * $30        * $10
Occupational, Physical Therapy...............................        * $50        * $40        * $40        * $20         * $0        * $30        * $10
Laboratory Services..........................................          50%          40%          40%          30%        * 25%          25%        * $30
X-rays/Diagnostic Imaging....................................          50%          40%          40%          30%        * 25%          25%        * $30
Skilled Nursing Facility.....................................          50%          40%          40%          30%        * 25%          25%       * $150
Outpatient Facility Fee (Ambulatory Surgery Center)..........          50%          40%          40%          30%        * 25%          25%       * $150
Outpatient Surgery Physician & Services......................          50%          40%          40%          30%        * 25%          25%       * $150
Generic Drugs................................................        * $25        * $20        * $20        * $10         * $0        * $15         * $5
Preferred Brand Drugs........................................          $50        * $40        * $40        * $20         * $5        * $30        * $10
Non-Preferred Brand Drugs....................................         $100          $80          $80          $60        * $10        * $60        * $50
Specialty Drugs..............................................         $150         $125         $125         $100        * $20       * $100        * $75
--------------------------------------------------------------------------------------------------------------------------------------------------------
* Benefit category not subject to the deductible.

    After consideration of comments and for the reasons outlined in the 
proposed rule and our responses to comments, we are finalizing our 
proposed approach with respect to standardized plan options, as 
proposed. Our finalized plan designs for PY 2025 are detailed in Tables 
11 and 12 of this final rule and reflect no changes to the plan designs 
in Tables 12 and 13 of the proposed rule. We summarize and respond to 
public comments received on the proposed approach to standardized plan 
options below.
    Comment: Many commenters supported continuing to require FFE and 
SBE-FP QHP issuers to offer standardized plan options. These commenters 
explained that with continued plan proliferation, the risk persists 
that consumers may experience plan choice overload as they attempt to 
navigate the plan selection process. Commenters explained that these 
standardized plan options continue to play an important role in 
streamlining the plan selection process by reducing the number of 
variables consumers must consider when selecting a plan that best fits 
their unique health care needs.
    In particular, commenters explained that standardizing the cost 
sharing parameters for these plans allows consumers to focus on other 
important plan attributes, such as networks, formularies, quality 
ratings, and premiums, when selecting a plan. This in turn allows 
consumers to ensure the health plan they ultimately select has a 
network that includes providers important to them, a formulary that 
includes critical prescription drug coverage, and quality ratings that 
meet consumers' desired standards. Commenters further explained that 
promoting informed decision-making reduces the risk of plan choice 
overload, suboptimal plan selection, and unexpected financial harm for 
those consumers least able to afford it.
    Several commenters also supported the continuation of differential 
display of these standardized plan options on HealthCare.gov to further 
facilitate the plan selection process. These commenters explained that 
continuing to differentially display these plans would help make it 
easier for consumers to make meaningful comparisons of available plan 
options. Several commenters also recommended making ``additional 
enhancements'' to choice architecture and the user experience on 
HealthCare.gov to further streamline consumer decision-making.
    Response: We agree that standardized plan options continue to serve 
as one important facet of HHS' multifaceted strategy of reducing the 
rate of plan proliferation, the risk of plan choice overload, the 
frequency of suboptimal plan selection, and incidences of unexpected 
financial harm for consumers. We believe that continuing to require 
issuers to offer these standardized plan options, reducing the non-
standardized plan option limit, introducing the non-standardized plan 
option limit exceptions process (which is described in more detail in 
section III.E.7 of the preamble of this final rule), continuing to 
differentially display these standardized plan options on 
HealthCare.gov, and enhancing choice architecture and the user 
experience on HealthCare.gov represent a comprehensive approach to 
improving Exchange coverage.
    Regarding the comments recommending that we make ``additional 
enhancements'' to choice architecture and the user experience on 
HealthCare.gov to further streamline consumer decision-making, the 
commenters did not specify, and we are unsure, what they mean by 
``additional enhancements.'' However, as noted earlier, we agree that 
enhancing choice architecture and the user experience on HealthCare.gov 
will help improve Exchange coverage, including by streamlining consumer 
decision-making, and we will consider additional ways to do so in the 
future.
    Comment: Several commenters opposed continuing to require issuers 
to offer these standardized plan options. These commenters explained 
that continuing to subject issuers to these requirements inhibits 
issuer innovation in plan designs. These commenters explained that 
issuers are most familiar with the unique health care needs of their 
enrollees and that they should therefore be given the leeway to design 
plans that meet these needs. Several of these commenters also 
recommended the cessation of the differential display of these 
standardized plan options, explaining that these plans should not be 
given preferential treatment over non-standardized plan options.
    Response: We disagree that continuing to require issuers in the 
FFEs and SBE-FPs to offer standardized plan options will inhibit issuer 
innovation in plan design, even with the reduction in the non-
standardized plan option limit described in more detail in section 
III.E.7 of the preamble to this final rule. This is because, in PY 2025 
and subsequent plan years, issuers will be permitted to offer two non-
standardized plan options per product type, metal level, inclusion of 
dental and/or vision benefit coverage, and service area, as well as 
additional non-standardized plan options per product network type, 
metal level, inclusion of dental and/or vision benefit coverage, and 
service area, so long as these additional plans substantially benefit 
consumers with chronic and high-cost conditions and meet the other 
criteria for the exceptions process finalized in this rule, as

[[Page 26360]]

explained in more detail in section III.E.7 of the preamble to this 
final rule.
    We believe the fact that issuers continue to be permitted to offer 
these non-standardized plan options ensures that consumers will 
continue to have access to a sufficiently broad range of plan designs 
that meet their diverse needs and that issuers can continue to offer 
innovative plan designs. We further believe that continuing to require 
issuers to offer standardized plan options, reducing the non-
standardized plan option limit, and introducing an exceptions process 
for this limit strikes an appropriate balance between limiting the risk 
of plan choice overload while simultaneously continuing to permit 
issuers a sufficient degree of flexibility to offer innovative plan 
designs.
    Further, we reiterate that issuers are not limited in the number of 
standardized plan options they may offer, meaning issuers continue to 
retain the ability to offer standardized plan options with different 
benefit packages, networks, and formulary variations, so long as they 
conform to the required cost sharing parameters for these plans.
    Finally, differential display of these standardized plan options on 
HealthCare.gov does not result in the preferential display of 
standardized plan options over non-standardized plan options, and we 
believe that this differential display strikes an appropriate balance 
between facilitating the plan selection process while still allowing 
consumers the opportunity to consider all available non-standardized 
plan options. The form of differential display currently employed on 
HealthCare.gov distinguishes standardized plan options from non-
standardized plan options by assigning standardized plan options a 
visual icon and a corresponding label. That form of differential 
display also permits consumers to filter all available plan choices to 
see only standardized plan options. However, consumers must actively 
choose to employ this filter.
    Furthermore, this form of differential display does not elevate 
standardized plan options to the top of the sorting feature over non-
standardized plan options such that they would always be the first 
plans that consumers see regardless of premium, as would be done if 
standardized plan options were preferentially displayed. Thus, although 
standardized plan options are distinguished from non-standardized plan 
options, the form of differential display currently employed on 
HealthCare.gov allows consumers to easily see and compare all available 
plan options, including non-standardized plan options.
    Comment: Many commenters supported our approach to the design of 
these standardized plan options for PY 2025. Specifically, commenters 
supported maintaining a high degree of continuity in these plan designs 
year over year to reduce the risk of unnecessary disruption for 
enrollees and issuers. Commenters explained that drastically modifying 
the plan designs from year to year could result in avoidable financial 
harm if the cost sharing for benefits that consumers depend upon 
increases unexpectedly, which may result in consumers forgoing 
obtaining medical care and, consequently, experiencing poorer health 
outcomes.
    Response: We agree that maintaining a high degree of continuity in 
our standardized plan options from year to year is desirable for 
several reasons. Specifically, we agree that having consistent year-to-
year plan designs allows enrollees to become better acquainted with 
these plans, increasing both consumer understanding and financial 
certainty. We also agree that drastically modifying the plan designs 
from year to year could result in avoidable financial harm if the cost 
sharing for benefits that consumers depend upon increases unexpectedly, 
which could also result in consumers forgoing obtaining medical care. 
Although we believe that, today, the benefits that may arise from 
making major modifications to these plan designs are outweighed by the 
risk that doing so could result in undue burden for issuers and 
enrollees, we may consider making major modifications to the design of 
these standardized plan options in future rulemakings if our assessment 
changes.
    Comment: Several commenters made specific recommendations regarding 
particular aspects of the standardized plan options. Specifically, 
several of these commenters recommended lowering the maximum out-of-
pocket values in these plan designs. We clarify that in this context, a 
plan's ``maximum out-of-pocket'' value refers to the plan's specific 
annual limitation on cost sharing value. These commenters explained 
that a high maximum out-of-pocket limitation on cost sharing places 
unreasonable burden on consumers with chronic and high-cost conditions. 
These commenters also explained that lowering the maximum out-of-pocket 
limitation on cost sharing values for these plans would advance health 
equity by reducing the amount that consumers from disadvantaged 
populations, whom commenters explained are disproportionately affected 
by chronic and high-cost conditions, must pay for the treatment of 
these conditions.
    Several commenters also recommended lowering the deductibles and 
expanding pre-deductible coverage to include additional benefit 
categories. These commenters explained that high deductibles often act 
as an obstacle that prevents consumers from obtaining the health care 
they need. These commenters further explained that lowering the 
deductibles for these plans and expanding pre-deductible coverage would 
reduce barriers to access to health care, reducing the risk of 
consumers forgoing obtaining medical care and, consequently, 
experiencing poorer health outcomes.
    Several commenters supported the decision to continue including 
copayments instead of coinsurance rates for a range of benefit 
categories within these plan designs. Several of these commenters 
recommended expanding the use of copayments to apply to a greater 
number of benefit categories. These commenters explained that utilizing 
copayments instead of coinsurance rates increases financial certainty 
for consumers when they obtain the health care they need. Other 
commenters recommended standardizing the cost-sharing parameters for 
additional benefit categories not already standardized within these 
plan designs to further enhance plan comparability and reduce financial 
uncertainty. Several commenters recommended including health savings 
account (HSA)-compliant high-deductible health plan (HDHP) designs in 
each of these sets of standardized plan options.
    Response: We acknowledge that high maximum out-of-pocket limitation 
on cost sharing values, high deductibles, and limited pre-deductible 
coverage can sometimes act as barriers that prevent consumers, 
including those with chronic and high-cost conditions, from obtaining 
the health care they need. We also acknowledge that coinsurance rates 
can potentially increase consumer uncertainty regarding how much 
particular services may cost.
    However, due to AV constraints arising from the permissible de 
minimis range restriction for each metal level in accordance with Sec.  
156.140(c)(2), we are unable to substantially lower the maximum out-of-
pocket limitation or deductible values, expand pre-deductible coverage 
to include additional benefits, or include copayments as the form of 
cost sharing for a broader range of benefit categories without a 
corresponding increase in the

[[Page 26361]]

AV of each plan. Making some combination of these modifications would 
increase the generosity of these plans, potentially to the point of 
each plan's AV exceeding the permissible de minimis range for its 
respective metal level. Furthermore, even if making some combination of 
these changes resulted in an AV within the permissible de minimis range 
for each metal level, there would still be a corresponding increase in 
premiums that would render these plans costlier for consumers and 
potentially uncompetitive.
    Finally, we note that although it may be possible to make some 
combination of these modifications to these plan designs while 
maintaining an AV near the floor of the de minimis range for each metal 
level, doing so would require a corresponding increase in cost sharing 
for other benefits or subjecting additional benefits to the deductible 
to offset this increase in generosity. Since the benefits that we have 
exempted from the deductible as well as the benefits for which we have 
reduced cost sharing are some of the most frequently utilized benefits, 
we believe that the disadvantages of subjecting these benefits to the 
deductible or increasing the cost sharing for these benefits would 
outweigh the benefit that may arise from exempting other benefits from 
the deductible or reducing cost sharing for other benefits. Those 
disadvantages include risks that these plans would become uncompetitive 
and that consumers would forego obtaining medical services covered by 
these frequently utilized benefits which would be newly subject to the 
deductible or have increased cost sharing.
    We also note that we are not standardizing the cost sharing for 
additional benefit categories beyond those already included in these 
plan designs since EHB-benchmark plans vary significantly by State, and 
we do not wish to standardize the cost sharing for benefits that 
issuers may not be required to offer in particular States. We also note 
that we have not included an HSA-eligible HDHP in these sets of plan 
designs due to decreased enrollment in these plans in the last several 
plan years, which suggests they may be less competitive and in-demand 
than traditional health insurance plans.
    We thus declined to include HSA-eligible HDHPs in these sets of 
plan designs because our approach is to design standardized plan 
options that reflect the most popular QHPs offered through the 
Exchanges (87 FR 27319). We also declined to include an HSA-eligible 
HDHP in these sets of plan designs because we have not included these 
types of plans in the sets of standardized plan options for PY 2023 or 
PY 2024, and we want to maintain a high degree of continuity with the 
standardized plan option policies and designs finalized in the 2023 and 
2024 Payment Notices. However, we note that QHP issuers in the FFEs and 
SBE-FPs continue to be permitted to offer HSA-eligible HDHPs as non-
standardized plan options, if so desired.
    Comment: Many commenters supported expanding the requirement for 
issuers to offer standardized plan options to also apply to State 
Exchange issuers in a future plan year. Several of these commenters 
supported requiring all State Exchange issuers to offer some version of 
standardized plan options--including those issuers that are offering 
QHPs through already-established State Exchanges and are not currently 
subject to such a requirement. Other commenters supported requiring 
States that intend to transition their Exchange model type from an FFE 
or SBE-FP to a State Exchange to require their issuers to offer 
standardized plan options as a condition of that transition, while 
exempting issuers that are currently offering QHPs through State 
Exchanges and are not currently subject to such a requirement.
    Many commenters pointed to the fact that many State Exchange 
issuers are already required to offer standardized plan options, which 
commenters argued demonstrates the utility of standardized plan 
options. These commenters further explained that the benefits of 
standardized plan options should not be limited to consumers purchasing 
health insurance coverage through FFEs and SBE-FPs--and instead, that 
these benefits should also be extended to consumers purchasing health 
insurance coverage through State Exchanges. Several of these commenters 
explained that the trend of plan proliferation that has been present in 
the FFEs and SBE-FPs for several years has also been present in many 
State Exchanges. These commenters thus explained that HHS should employ 
the same measures to address plan proliferation in State Exchanges that 
it utilizes in the FFEs and SBE-FPs.
    Conversely, many commenters opposed requiring State Exchange 
issuers to offer some version of standardized plan options in a future 
plan year. Some of these commenters opposed expanding this requirement 
to all State Exchange issuers, while others only opposed expanding this 
requirement to State Exchange issuers not already subject to such a 
requirement. Other commenters only opposed expanding this requirement 
to State Exchange issuers as a condition of a State transitioning its 
Exchange model type from an FFE or SBE-FP to a State Exchange in a 
future plan year.
    These commenters explained that expanding this requirement to apply 
to State Exchange issuers would unnecessarily constrain a State's 
flexibility in operating its Exchange. These commenters highlighted the 
importance of the flexibility inherent to the State Exchange model type 
as one of the primary factors that motivates States to pursue this 
model type. These commenters further explained that requiring State 
Exchange issuers to offer some version of standardized plan options 
would make it more difficult for issuers to tailor health plans to meet 
the unique needs of each State's population. These commenters also 
explained that State regulators' and issuers' experience with and 
insight into their respective individual markets makes them uniquely 
suited to determine whether standardized plan options fit the health 
care coverage needs of their consumers.
    Response: We acknowledge the potential advantages and disadvantages 
of expanding the requirement that QHP issuers offer standardized plan 
options to State Exchange issuers, including the advantages and 
disadvantages of expanding this requirement to all State Exchange 
issuers not already subject to such a requirement, as well as the 
advantages and disadvantages of expanding this requirement only to 
issuers that offer QHPs through an Exchange that transitions from an 
FFE or SBE-FP to a State Exchange in a future plan year.
    Consistent with our rationale for not expanding the requirement 
that QHP issuers offer standardized plan options to State Exchange 
issuers in the 2023 Payment Notice (87 FR 27311), we continue to 
believe that expanding this requirement to State Exchange issuers would 
unnecessarily constrain a State's flexibility in operating its 
Exchange. We further continue to believe that State Exchanges' 
experience with and insight into their respective individual markets 
makes them uniquely suited to determine whether standardized plan 
options fit the health care coverage needs of their consumers and, if 
so, how those plans should be designed. 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

[[Page 26362]]

discriminatory benefit designs, and advancing health equity.
    We note that we will consider the potential advantages and 
disadvantages of expanding the requirement that QHP issuers offer 
standardized plan options to State Exchange issuers, including the 
advantages and disadvantages of expanding this requirement to all State 
Exchange issuers not already subject to such a requirement, as well as 
the advantages and disadvantages of expanding this requirement only to 
issuers that offer QHPs through an Exchange that transitions from an 
FFE or SBE-FP to a State Exchange in a future plan year. These 
considerations may inform our approach in any future rulemaking 
regarding standardized plan options.
7. Non-Standardized Plan Option Limits (Sec.  156.202)
    In the HHS Notice of Benefit and Payment Parameters for 2025 
proposed rule (88 FR 82510, 82606), HHS proposed to exercise its 
authority under sections 1311(c)(1) and 1321(a)(1)(B) of the ACA to 
amend Sec.  156.202 by adding paragraphs (d) and (e) to introduce an 
exceptions process that would allow issuers to offer additional non-
standardized plan options per product network type, metal level, 
inclusion of dental and/or vision benefit coverage, and service area 
for PY 2025 and subsequent plan years, if issuers demonstrate that 
these additional non-standardized plans have specific design features 
that would substantially benefit consumers with chronic and high-cost 
conditions. Section 1311(c)(1) of the ACA directs the Secretary to 
establish criteria for the certification of health plans as QHPs. 
Section 1321(a)(1)(B) of the ACA directs the Secretary to issue 
regulations that set standards for meeting the requirements of title I 
of the ACA for, among other things, the offering of QHPs through such 
Exchanges.
    In the 2024 Payment Notice (88 FR 25855 through 25865), we 
finalized requirements limiting the number of non-standardized plan 
options that issuers of QHPs can offer through Exchanges on the Federal 
platform (including SBE-FPs) to four non-standardized plan options per 
product network type (as described in the definition of ``product'' at 
Sec.  144.103), metal level (excluding catastrophic plans), inclusion 
of dental and/or vision benefit coverage, and service area for PY 2024, 
and two for PY 2025 and subsequent plan years. In the 2025 Payment 
Notice proposed rule, we did not propose to amend these non-
standardized plan option limits at Sec.  156.202(a) through (b).
    In the 2024 Payment Notice, we explained that we phased in this 
limit over 2 plan years (instead of adopting the limit of two in PY 
2024) primarily to decrease the risk of disruption for both issuers and 
enrollees and to provide increased flexibility to issuers. We explained 
that many commenters supported adopting a more gradual approach in 
which the number of non-standardized plan options that issuers can 
offer is incrementally decreased over a span of 2 plan years, instead 
of adopting a limit of two for PY 2024. We referred readers to the 
preamble of the 2024 Payment Notice discussing Sec.  156.202 (88 FR 
25855 through 25865) for more detailed discussion of our approach to 
non-standardized plan option limits for PY 2024 and related background.
    As a result of the limit on the number of non-standardized plan 
options that issuers can offer through the Exchanges being reduced from 
four in PY 2024 to two in PY 2025, in the proposed rule (88 FR 82607), 
we estimated (based on then-current PY 2024 plan offering data) that 
the weighted average number of non-standardized plan options available 
to each consumer would be reduced from 67.3 in PY 2024 to approximately 
41.7 in PY 2025. We also estimated that the weighted average total 
number of plans, including both standardized and non-standardized plan 
options, available to each consumer would be reduced from 91.8 in PY 
2024 to approximately 66.2 in PY 2025.\304\
---------------------------------------------------------------------------

    \304\ The weighted average total number of plans available to 
each consumer was 107.8 in PY 2022, prior to the introduction of 
standardized plan option requirements, and 113.6 in PY 2023, the 
first year that standardized plan option requirements were 
introduced.
---------------------------------------------------------------------------

    Furthermore, in the proposed rule, we estimated that approximately 
28,275 of the total 109,229 non-standardized plan option plan-county 
combinations \305\ (25.9 percent) would be discontinued as a result of 
this limit in PY 2025. Relatedly, based on trended enrollment data from 
PY 2023 (which we relied on for purposes of this estimate because PY 
2024 enrollment data was unavailable when we finalized the proposed 
rule), we estimated that approximately 1.78 million of the 14.94 
million enrollees on the FFEs and SBE-FPs (11.9 percent) would be 
affected by these discontinuations in PY 2025.
---------------------------------------------------------------------------

    \305\ Plan-county combinations are the count of unique plan ID 
and FIPS code combinations. This measure was used because a single 
plan may be available in multiple counties, and specific limits on 
non-standardized plan options or specific dollar deductible 
difference thresholds may have different impacts on one county where 
there are four plans of the same product network type and metal 
level versus another county where there are only two plans of the 
same product network type and metal level, for example.
---------------------------------------------------------------------------

    However, based on updated PY 2024 plan offering and enrollment 
data, we now estimate that the weighted average number of non-
standardized plan options available to each consumer will be reduced 
from 71.4 in PY 2024 to approximately 48.5 in PY 2025. Additionally, we 
estimate that the weighted average total number of plans, including 
standardized and non-standardized plan options, available to each 
consumer will be reduced from 99.5 in PY 2024 to approximately 76.6 in 
PY 2025.
    Furthermore, based on this updated data, we estimate that 
approximately 27,660 of the total 87,620 non-standardized plan option 
plan-county combinations (31.6 percent) will be discontinued as a 
result of this limit in PY 2025. Relatedly, we estimate that 
approximately 1.43 million of the 16.34 million enrollees on the FFEs 
and SBE-FPs (8.7 percent) will be affected by these discontinuations in 
PY 2025.
    In the proposed rule (88 FR 82607), we proposed an exceptions 
process at new Sec.  156.202(d) and (e) that would permit FFE and SBE-
FP issuers to offer more than two non-standardized plan options per 
product network type, metal level, inclusion of dental and/or vision 
benefit coverage, and service area for PY 2025 and subsequent plan 
years, if issuers demonstrate that these additional non-standardized 
plans beyond the limit at Sec.  156.202(b) have specific design 
features that would substantially benefit consumers with chronic and 
high-cost conditions. We further proposed that issuers would not be 
limited in the number of exceptions permitted per product network type, 
metal level, inclusion of dental and/or vision benefit coverage, and 
service area, so long as they meet specified criteria.
    Specifically, we stated in the proposed rule that pursuant to 
proposed Sec.  156.202(d), issuers would be permitted to offer more 
than two non-standardized plan options if these additional plans' cost 
sharing for benefits pertaining to the treatment of chronic and high-
cost conditions (including benefits in the form of prescription drugs, 
if pertaining to the treatment of the condition(s)) is at least 25 
percent lower, as applied without restriction in scope throughout the 
plan year, than the cost sharing for the same corresponding benefits in 
an issuer's other non-standardized plan option offerings in the same 
product network type, metal level, and service area.

[[Page 26363]]

    We stated that the reduction could not be limited to a part of the 
year, or an otherwise limited scope of benefits. Instead, we stated 
that issuers would be required to apply the reduced cost sharing for 
these benefits any time the covered item or service is furnished. For 
example, we explained that an issuer could not reduce cost sharing for 
the first three office visits or drug fills and then increase it for 
remaining visits or drug fills. Furthermore, we stated that issuers 
would be prohibited from conditioning reduced cost sharing for these 
benefits on a particular diagnosis. That is, we stated that although 
the benefit design would have reduced cost sharing to address one or 
more articulated conditions, the reduced cost sharing must be available 
to all enrolled in the plan who receive the service(s) covered by the 
benefit.
    We explained in the proposed rule that no other plan design 
features (such as the inclusion of additional benefit coverage, 
different provider networks, different formularies, or reduced cost 
sharing for benefits provided through the telehealth modality) would be 
evaluated under this exceptions process, meaning no other differences 
in plan design features would allow issuers to be excepted from the 
limit to the number of non-standardized plan options offered per 
product network type, metal level, inclusion of dental and/or vision 
benefit coverage, and service area.
    Additionally, we stated in the proposed rule that, as part of this 
exceptions process, issuers would be required, under proposed Sec.  
156.202(e), to submit a written justification in a form and manner and 
at a time prescribed by HHS that provides additional details and 
explains how the particular plan design the issuer desires to offer 
above the non-standardized plan option limit of two satisfies the 
proposed standards for receiving an exception to this limit--namely, 
how the particular plan would substantially benefit consumers with 
chronic and high-cost conditions. We noted that we would provide 
issuers with a justification form upon publication of the final rule 
and when the QHP templates for the applicable plan year are released.
    We proposed that this justification form would ask the issuer to 
(1) identify the specific condition(s) for which cost sharing is 
reduced, (2) explain which benefits would have reduced annual enrollee 
cost sharing (as opposed to reduced cost sharing for a limited number 
of visits) for the treatment of the specified condition(s) by 25 
percent or more relative to the cost sharing for the same corresponding 
benefits in an issuer's other non-standardized plan offerings in the 
same product network type, metal level, and service area, and (3) 
explain how the reduced cost sharing for these services pertains to 
clinically indicated guidelines for treatment of the specified chronic 
and high-cost condition(s).
    Additionally, we stated that to allow the Exchange adequate time to 
review these justification forms, issuers would need to submit their 
QHP application in a form and manner and at a time specified by us. We 
further stated that we anticipated requesting that issuers submit QHP 
applications for non-standardized plan options that exceed the two-plan 
limit by the QHP certification Early Bird deadline.
    We proposed to allow exceptions only for plans that meet the 
previously described requirements for benefits pertaining to the 
treatment of conditions that are chronic and high-cost in nature. We 
clarified that, for purposes of this standard, chronic conditions are 
those that have an average duration of one year or more and require 
ongoing medical attention or limit activities of daily living, or 
both.\306\ We also clarified that, for purposes of this standard, high-
cost conditions are those that account for a disproportionately high 
portion of total Federal health expenditures. We noted that the four 
chronic and high-cost conditions included in the prescription drug 
adverse tiering for PY 2025 (specifically, hepatitis C virus, HIV, 
multiple sclerosis, and rheumatoid arthritis) are examples of 
conditions that we would consider to be chronic and high-cost in nature 
for purposes of this standard.
---------------------------------------------------------------------------

    \306\ National Center for Chronic Disease Prevention and Health 
Promotion. About Chronic Diseases, July 21, 2022, https://www.cdc.gov/chronicdisease/about/index.htm.
---------------------------------------------------------------------------

    However, for purposes of this standard, we clarified that we would 
also consider additional conditions to be chronic and high-cost in 
nature. We stated that additional representative examples of conditions 
that we would consider to be chronic and high-cost in nature for 
purposes of this proposal include Alzheimer's disease, kidney disease, 
osteoporosis, heart disease, diabetes, and all kinds of cancer. We 
further stated that examples of conditions that we would not consider 
chronic and high-cost in nature would be those that are generally acute 
in nature, including bronchitis, the flu, pneumonia, strep throat, and 
respiratory infections.
    We proposed this approach for several reasons. Considering that 
chronic and high-cost conditions (including the examples previously 
discussed) affect a comparatively low number of consumers, we stated 
that we anticipated that a significant portion of the non-standardized 
plan options that may be discontinued due to having comparatively lower 
rates of enrollment among each issuer's portfolio of offerings could 
potentially be those that have plan design features that benefit 
consumers with these chronic and high-cost conditions (such as plans 
with some combination of enhanced pre-deductible coverage for relevant 
services, reduced cost sharing for relevant benefits, lower maximum 
out-of-pocket limitations, lower deductibles, more comprehensive 
provider networks with more specialized providers, more generous 
formularies with more specialized medications, higher AVs, and higher 
premiums).
    We explained in the proposed rule (88 FR 82608) that even with 
comparatively lower rates of enrollment, these non-standardized plan 
options can still fulfill an important role in addressing chronic and 
high-cost conditions, which are responsible for a disproportionate 
amount of health care expenditures.\307\ Thus, we stated that this 
proposed exceptions process could play an important role in enhancing 
the quality of life for those affected by these conditions, combatting 
health disparities, advancing health equity, and reducing health care 
expenditures. We further stated that introducing such an exceptions 
process while also reducing the non-standardized plan option limit to 
two for PY 2025 would balance the dual aims of reducing the risk of 
plan choice overload while simultaneously ensuring that truly 
innovative plan designs that may benefit consumers with chronic and 
high-cost conditions can continue to be offered.
---------------------------------------------------------------------------

    \307\ Waters, H, & Graf, M. (2018). The Cost of Chronic Disease 
in the U.S. Milken Institute. https://milkeninstitute.org/sites/default/files/reports-pdf/ChronicDiseases-HighRes-FINAL2.pdf.
---------------------------------------------------------------------------

    We stated in the proposed rule that not limiting the number of 
permitted exceptions per issuer, product network type, metal level, 
inclusion of dental and/or vision benefit coverage, and service area 
(instead of allowing exceptions for only two such plans, for example) 
would ensure that issuers are not restricted in the number of 
innovative plans they can offer. We noted that this would in turn help 
ensure that a greater portion of consumers with chronic and high-cost 
conditions have access to plans that reduce barriers to access to care 
for

[[Page 26364]]

services critical to the treatment of their conditions.
    We further stated in the proposed rule (88 FR 82608), that although 
issuers would not be limited in the number of exceptions they may be 
granted under this proposal, we anticipated that most issuers would 
determine that the burden of creating and certifying additional non-
standardized plans intended to benefit a comparatively small population 
of consumers would outweigh the benefit of doing so. We noted that we 
also previously solicited comments on innovative plan designs, such as 
in the 2024 Payment Notice proposed rule.
    We stated that in response to this comment solicitation, we 
received only two examples of plan designs that commenters considered 
to be innovative in nature: plan designs that have reduced cost sharing 
for benefits provided through telehealth, and plan designs that have 
reduced cost sharing for services and medications related to the 
treatment of diabetes (such as in the form of insulin). We clarified 
that the former example (reduced cost sharing for benefits provided 
through the telehealth) would not qualify for this exceptions process, 
while the latter example (reduced cost sharing for benefits related to 
the treatment of diabetes) could potentially qualify for this 
exceptions process, if the specified criteria are met.
    Regardless, we stated that given that we only received two examples 
of plan designs that particular issuers considered to be innovative in 
nature, we did not anticipate that issuers would seek to have a 
substantial number of non-standardized plan options excepted from the 
non-standardized plan option limit. As a result, we explained that we 
did not anticipate this proposal would result in an increased risk of 
plan choice overload for consumers interested in plans with better 
benefits for qualifying conditions.
    We stated in the proposed rule (88 FR 82608), that permitting 
exceptions solely based on whether a non-standardized plan option has 
reduced cost sharing of 25 percent or more for benefits pertaining to 
the treatment of chronic and high-cost conditions, as opposed to 
considering other factors (such as specialized networks, specialized 
formularies, or specialized benefit packages), is appropriate since the 
current standardized plan option requirements do not limit issuers in 
the number of standardized plan options they can offer per product 
network type, metal level, or service area.
    However, we noted that standardized plan option requirements do not 
permit issuers to deviate from the specified cost sharing parameters 
for standardized plan options--meaning issuers would not be able to 
offer standardized plan options with reduced cost sharing of 25 percent 
or more for the treatment of specific conditions if the benefit 
category's cost sharing does not comply with the specified standards. 
Thus, we noted that under the current standardized plan option 
framework, issuers already have the flexibility to offer specialized 
provider networks, formularies, and benefit packages (including those 
that decrease barriers to access for the treatment of chronic and high-
cost conditions--such as by including additional specialized providers, 
prescription drugs, or benefits) as standardized plan options.
    We further stated that the cost sharing difference threshold of 25 
percent or more is appropriate since we have observed that cost sharing 
differences below this threshold represent normal variation within a 
particular metal level, while differences at or above this threshold 
are more often associated with cost sharing differences between 
different metal levels. We do not believe that a difference in a cost 
sharing amount that is of the same magnitude as normal variation within 
a particular metal level (specifically, less than 25 percent) would 
warrant being excepted from the non-standardized plan option limit.
    We noted that under this proposed exceptions process, if additional 
plans were permitted to be offered in excess of the limit of two non-
standardized plan options, in accordance with the guaranteed 
availability requirements at Sec.  147.104(a), these plans would also 
be required to be made available on the same basis to consumers without 
these chronic and high-cost conditions. Further, we emphasized that 
these plans would be prohibited from discriminating in accordance with 
the nondiscrimination requirements at Sec. Sec.  147.104(e), 156.125, 
and 156.200(e).\308\ We noted that to meet these non-discrimination 
requirements, these plans would be required to apply preferential cost 
sharing to all enrolled in the plan, without regard to diagnosis.
---------------------------------------------------------------------------

    \308\ The nondiscrimination requirements at Sec.  147.104(e) 
apply to health insurance issuers offering non-grandfathered group 
or individual health insurance coverage, and their officials, 
employees, agents, and representatives. The nondiscrimination 
requirements at Sec.  156.200(e) apply to QHPs in the individual and 
small-group markets, and the nondiscrimination requirements at Sec.  
156.125(b) apply to issuers providing EHB.
---------------------------------------------------------------------------

    Furthermore, although we acknowledged that non-standardized plan 
options excepted under this proposal would primarily benefit consumers 
with chronic and high-cost conditions, we stated that a sufficiently 
satisfactory range of both non-standardized and standardized plan 
options currently exist that are primarily intended for consumers 
without chronic and high-cost conditions. As a result, we explained 
that were not concerned that any risk of discrimination created by this 
exceptions process would negatively impact consumers, including but not 
limited to consumers with chronic and high-cost conditions.
    We sought comment on this proposed approach. Specifically, we 
sought comment on the proposed exceptions process, and whether there 
should be any exceptions at all to the limit on the number of non-
standardized plan options that issuers can offer through the Exchanges. 
In addition, we noted that we were particularly interested in comments 
on the following topics: whether exceptions should be permitted only 
for a specific set of chronic and high-cost conditions as opposed to 
any chronic and high-cost condition; whether there are other plan 
attributes we should consider outside of sufficiently differentiated 
cost sharing, such as the inclusion of alternative payment models or 
sufficiently differentiated benefits, networks, or formularies; the 
specific difference threshold for these cost-sharing amounts, including 
whether a threshold higher or lower than 25 percent would be more 
appropriate; the specific components of the justification form that 
issuers would be required to submit; the deadline for issuers to submit 
the materials necessary for us to consider whether non-standardized 
plan options should be excepted from the limit; and whether we should 
require that non-standardized plan options excepted from the limit be 
visually differentiated from other non-standardized plan options not 
excepted from the limit--such as by differentially displaying these 
excepted plans on HealthCare.gov, or by requiring these excepted plans 
to adopt a particular plan marketing name that accurately conveys how 
these plans would substantially benefit consumers with chronic and 
high-cost conditions (for example, by requiring that an excepted plan 
that reduces cost sharing for the treatment of diabetes have a 
corresponding plan marketing name related to diabetes).
    We also sought comment on other ways to balance the dual aims of 
reducing the risk of plan choice overload while simultaneously ensuring 
that truly innovative plan designs that

[[Page 26365]]

may benefit consumers with chronic and high-cost conditions can 
continue to be offered. Specifically, we sought comment on whether we 
should limit the number of exceptions available such that issuers are 
only permitted to offer one or several additional plans pursuant to the 
proposed exceptions process above the limit of two non-standardized 
plans--as opposed to not limiting the number of exceptions permitted 
per product network type, metal level, inclusion of dental and/or 
vision benefit coverage, and service area.
    After consideration of comments and for the reasons outlined in the 
proposed rule and our responses to comments, we are finalizing this 
provision with the following modifications. In particular, we are 
finalizing at new Sec.  156.202(d)(1) that a 25 percent reduction in 
cost sharing for benefits pertaining to the treatment of chronic and 
high-cost conditions will be evaluated at the level of total out-of-
pocket costs for the treatment of the chronic and high-cost condition 
for a population of enrollees with the relevant chronic and high-cost 
condition.
    In addition, we are moving the requirement that the reduction in 
cost sharing must not be limited to a part of the year, or an otherwise 
limited scope of benefits, from Sec.  156.202(d) in the proposed 
regulation text to Sec.  156.202(d)(2) in the final regulation text. We 
are also moving the requirement that the reduction in cost sharing for 
these benefits cannot be conditioned on a consumer having a particular 
diagnosis from Sec.  156.202(d) in the proposed regulation text to 
Sec.  156.202(d)(3) in the final regulation text.
    We are also finalizing at new Sec.  156.202(d)(4) that the required 
reduction in cost sharing only applies to the standard variant of the 
plan for which an issuer seeks an exception, and not to the income-
based cost-sharing reduction plan variations required by Sec.  
156.420(a), nor to the zero and limited cost-sharing plan variations 
required by Sec.  156.420(b). In addition, we are finalizing at new 
Sec.  156.202(d)(5) that issuers are limited to one exception per 
product network type, metal level, inclusion of dental and/or vision 
benefit coverage, and service area, for each chronic and high-cost 
condition. We are also moving the requirement that the chronic and 
high-cost conditions that may qualify an issuer for this exception will 
be determined by HHS from Sec.  156.202(d) in the proposed regulation 
text to Sec.  156.202(d)(6) in the final regulation text.
    Furthermore, we are modifying the regulation text describing 
requirements related to the written justification issuers will be 
required to submit to utilize this exceptions process at Sec.  
156.202(e)(1) through (3), to more accurately reflect how the reduction 
in cost sharing will be evaluated under this exceptions process. 
Finally, we are adding a requirement at Sec.  156.202(e)(4) for issuers 
to submit a corresponding actuarial memorandum demonstrating the 
underlying actuarial assumptions made in the design of the plan the 
issuer is requesting to except, which includes a confirmatory actuarial 
opinion. These modifications are discussed in greater detail later in 
this section.
    In addition, we note that we no longer anticipate requesting that 
issuers submit exception requests and accompanying justification forms 
by the QHP certification Early Bird deadline. Instead, we anticipate 
that the exception request and justification form submission deadline 
for issuers seeking to utilize this exceptions process will be the 
initial submission deadline for QHP certification applications, 
aligning the exception request deadline with the submission deadlines 
for QHP certification applications for standardized and non-
standardized plan option offerings.
    We also clarify that the example included in the 2024 Payment 
Notice that illustrated issuer flexibility to vary the inclusion of 
dental and/or vision benefit coverage in accordance with Sec.  
156.202(c) under the non-standardized plan option limits at Sec.  
156.202(a) through (b) failed to distinguish between the adult and 
pediatric dental benefit coverage categories.
    In the 2024 Payment Notice (88 FR 25858), we stated that for PY 
2025, for example, an issuer will be permitted to offer two non-
standardized gold HMOs with no additional dental or vision benefit 
coverage, two non-standardized gold HMOs with additional dental benefit 
coverage, two non-standardized gold HMOs with additional vision benefit 
coverage, and two non-standardized gold HMOs with additional dental and 
vision benefit coverage, as well as two non-standardized gold PPOs with 
no additional dental or vision benefit coverage, two non-standardized 
gold PPOs with additional dental benefit coverage, two non-standardized 
gold PPOs with additional vision benefit coverage, and two non-
standardized gold PPOs with additional dental and vision benefit 
coverage, in the same service area.
    However, in PY 2024, issuers had the ability to vary the inclusion 
of dental and/or vision benefit coverage (including varying the 
inclusion of the distinct adult and pediatric dental benefit coverage 
categories), such that issuers could offer plans in the manner 
reflected in Table 13, instead of in the more limited manner reflected 
in the incomplete example in the 2024 Payment Notice.
    We affirm that issuers continue to retain this flexibility for PY 
2025. Thus, under the non-standardized plan option limit of two for PY 
2025, if an issuer desires to offer the theoretical maximum number of 
plans, and if that issuer varies the inclusion of dental and/or vision 
benefit coverage in these plans in accordance with the flexibility 
provided for at Sec.  156.202(c)(1) through (3), that issuer could 
offer a theoretical maximum of 16 plans in a given product network 
type, metal level, and service area in the manner demonstrated in Table 
13. Furthermore, if an issuer offers QHPs with two product network 
types (for example, HMO and PPO), that issuer could offer a theoretical 
maximum of 32 plans in a given metal level and service area in the 
manner demonstrated in Table 13.

   Table 13--Issuer Flexibility Under the Non-Standardized Plan Option Limit of Two for PY 2025 and Subsequent
                                                      Years
----------------------------------------------------------------------------------------------------------------
                                                          Cost sharing                  Pediatric
               Plan                     Network type        structure   Adult dental     dental     Adult vision
----------------------------------------------------------------------------------------------------------------
1.................................  HMO.................            A   ............  ............  ............
2.................................  HMO.................            A              Cov............  ............
3.................................  HMO.................            A   ............             Cov............
4.................................  HMO.................            A   ............  ............             Covered
5.................................  HMO.................            A   ............             Covered       Covered
6.................................  HMO.................            A              Cov............             Covered

[[Page 26366]]

 
7.................................  HMO.................            A              Covered       Cov............
8.................................  HMO.................            A              Covered       Covered       Covered
9.................................  HMO.................            B   ............  ............  ............
10................................  HMO.................            B              Cov............  ............
11................................  HMO.................            B   ............             Cov............
12................................  HMO.................            B   ............  ............             Covered
13................................  HMO.................            B   ............             Covered       Covered
14................................  HMO.................            B              Cov............             Covered
15................................  HMO.................            B              Covered       Cov............
16................................  HMO.................            B              Covered       Covered       Covered
17................................  PPO.................             C  ............  ............  ............
18................................  PPO.................             C             Cov............  ............
19................................  PPO.................             C  ............             Cov............
20................................  PPO.................             C  ............  ............             Covered
21................................  PPO.................             C  ............             Covered       Covered
22................................  PPO.................             C             Cov............             Covered
23................................  PPO.................             C             Covered       Cov............
24................................  PPO.................             C             Covered       Covered       Covered
25................................  PPO.................            D   ............  ............  ............
26................................  PPO.................            D              Cov............  ............
27................................  PPO.................            D   ............             Cov............
28................................  PPO.................            D   ............  ............             Covered
29................................  PPO.................            D   ............             Covered       Covered
30................................  PPO.................            D              Cov............             Covered
31................................  PPO.................            D              Covered       Cov............
32................................  PPO.................            D              Covered       Covered       Covered
----------------------------------------------------------------------------------------------------------------

    Below, we summarize and respond to public comments received on the 
proposed non-standardized plan option limit exceptions process and the 
related issues we sought comment on.
    Comment: Many commenters supported introducing an exceptions 
process that would allow issuers to offer non-standardized plan options 
exceeding the limit of two if the specified requirements are met. 
Several commenters explained that reducing the non-standardized plan 
option limit from four in PY 2024 to two in PY 2025 will cause issuers 
to discontinue plans with lower enrollment, which would likely be plans 
with designs that are attractive to a smaller number of enrollees that 
have relatively less common and high-cost health care needs. Commenters 
thus explained that many of the plans that would likely be discontinued 
would be those that benefit consumers with chronic and high-cost 
conditions. As such, commenters explained that permitting issuers to 
offer additional non-standardized plan options that provide targeted 
coverage specifically for medically complex populations with chronic 
and high-cost conditions supports health equity and allows for more 
targeted innovation by issuers, while still achieving the reduction in 
plan proliferation HHS has sought.
    Many of these commenters noted that individuals with chronic and 
high-cost conditions are especially price-sensitive, and that, relative 
to the average enrollee, these individuals often encounter 
significantly higher out-of-pocket costs associated with the higher 
rates of utilization of the services related to treatment of these 
conditions. Commenters thus explained that plans reducing cost sharing 
for these services would allow consumers to more easily obtain the 
medical care they need, resulting in improved patient outcomes. 
Commenters further explained that this exceptions process could play an 
important role in advancing health equity by reducing cost sharing for 
conditions that disproportionately affect disadvantaged populations. 
Commenters specifically cited diabetes, COPD, HIV, hepatitis C, and 
rheumatoid arthritis as chronic and high-cost conditions that could be 
effectively targeted by issuers under this exceptions process.
    Conversely, many commenters opposed introducing an exceptions 
process. Several of these commenters explained that introducing an 
exceptions process that would allow issuers to exceed the non-
standardized plan option limit would contradict the action HHS has 
taken to reduce the rate of plan proliferation. Additionally, many 
commenters explained that prioritizing the treatment of chronic and 
high-cost conditions does not necessarily require HHS to permit issuers 
to offer additional non-standardized plans above the non-standardized 
plan option limit. They explained that plans could still be designed to 
include specialized benefits and cost sharing for those with chronic 
and high-cost health conditions within the non-standardized plan option 
limit.
    Many commenters also explained that plans designed specifically to 
reduce cost sharing for services pertaining to the treatment of chronic 
and high-cost conditions are likely to involve trade-offs in the form 
of increasing cost sharing for other services. Commenters noted that 
consumers with chronic and high-cost conditions are still likely to 
experience other health needs and may be unlikely to realize a net 
benefit from the excepted plan if that plan precludes them from 
appropriately generous cost sharing for a broader set of services.
    Response: We acknowledge that reducing the non-standardized plan 
option limit from four in PY 2024 to two in PY 2025 will cause issuers 
to discontinue plans, which will likely be those plans with lower rates 
of enrollment. We also acknowledge that these discontinued plans will 
likely be those with designs that are attractive to a smaller number of 
enrollees that have relatively less common and high-cost health care 
needs.

[[Page 26367]]

    However, we agree that reducing the non-standardized plan option 
limit while simultaneously introducing a targeted exceptions process 
that will allow issuers to offer additional non-standardized plan 
options that substantially benefit consumers with chronic and high-cost 
conditions, including consumers who have relatively less common and 
high-cost health care needs, strikes an appropriate balance between 
reducing plan proliferation and the risk of plan choice overload while 
still permitting issuers a sufficient degree of flexibility to innovate 
as well as a sufficiently ensure a diverse range of plan offerings for 
consumers to select from.
    We also agree that reducing cost sharing for benefits that pertain 
to the treatment of chronic and high-cost conditions will significantly 
reduce the total out-of-pocket costs for consumers with these 
conditions. We further agree that this reduction in out-of-pocket costs 
will allow consumers to more easily obtain the medical care they need, 
resulting in improved health outcomes. We also agree that improving 
health outcomes for consumers with chronic and high-cost conditions 
that disproportionately affect disadvantaged populations--including 
diabetes, COPD, HIV, hepatitis C, and rheumatoid arthritis--would 
advance health equity. Accordingly, we believe that the risk that these 
types of plans will be discontinued as a result of the reduction in the 
non-standardized plan option limit from four in PY 2024 to two in PY 
2025 is sufficiently mitigated by the targeted exceptions process we 
are finalizing in this rule.
    We also believe the criteria that we have set forth in the 
exceptions process finalized in this rule, such as requiring issuers to 
demonstrate that the additional plans' cost sharing for benefits 
pertaining to the treatment of chronic and high-cost conditions is at 
least 25 percent lower than the cost sharing for the same corresponding 
benefits in an issuer's other non-standardized plan option offerings in 
the same product network type, metal level, and service area, ensures 
that any excepted plans will be meaningfully different from other non-
standardized plan options. We also believe these criteria will ensure 
that this exceptions process will not be utilized as a means to simply 
offer duplicative non-standardized plan options similar to existing 
plan offerings. Furthermore, in the last several plan years, the 
majority of FFE and SBE-FP issuers have not offered plans that would 
have been eligible for this exceptions process.
    Although it is our hope that issuers will take advantage of this 
exceptions process as a means of advancing health equity, we also 
anticipate that issuers will carefully consider applying for such 
exceptions in general, particularly given the stringent requirements of 
the exceptions process. Furthermore, we note, in particular, that under 
Sec.  156.202(d)(5), issuers are limited to one exception per product 
network type, metal level, inclusion of dental and/or vision benefit 
coverage, and service area, for each chronic and high-cost condition. 
Thus, we believe there will be a very limited increase in the number of 
non-standardized plan options as a result of this exceptions process, 
and that the risk of the exceptions process causing a meaningful 
increase in plan proliferation is very low.
    We also recognize the importance of plans designed specifically to 
improve cost sharing for services pertaining to the treatment of 
chronic and high-cost conditions, and we acknowledge the trade-offs 
that will likely be required for issuers to create and maintain these 
plans--namely, increased cost sharing for other services. We also 
acknowledge that plans could still technically be designed to include 
specialized benefits and cost sharing for those with chronic and high-
cost health conditions within the non-standardized plan option limit.
    However, we note that the plans that will likely be discontinued as 
a result of the reduction in the non-standardized plan option limit for 
PY 2025 and subsequent years will be those tailored to appeal to a 
smaller segment of the population--such as those with chronic and high-
cost conditions. Thus, we believe this targeted exceptions process will 
effectively counterbalance the impact that the reduction of this limit 
may have on these types of plans and the consumers who rely on them. 
Consumers without the chronic and high-cost conditions targeted by 
plans that are likely to be discontinued can continue to select among 
the many available plans that have broader appeal.
    Comment: Several commenters recommended limiting the number of 
exceptions that each issuer may be permitted under this process. These 
commenters explained that the intent of the non-standardized plan 
option limit is to mitigate the risk of uncontrolled plan proliferation 
that leads to consumer confusion, and that to not limit the number of 
potential exceptions each issuer may receive would counteract this 
intent. Relatedly, many commenters expressed concern that the number of 
non-standardized plan options in PY 2025 could exceed the number of 
non-standardized plan options in PY 2024 without a limit on the number 
of exceptions.
    Conversely, several commenters opposed limiting the number of 
potential exceptions. These commenters stated that limiting the number 
of potential exceptions permitted for each issuer would unnecessarily 
restrict issuer innovation and may harm consumers who have a 
comparatively less common chronic and high-cost condition that issuers 
may choose to not target with this exceptions process, which could 
hinder efforts to advance health equity.
    Response: In the proposed rule (88 FR 82609), we proposed that 
issuers would not be limited in the number of excepted plans they could 
offer but solicited comment on the utility of limiting the number of 
potential exceptions. We considered such a limitation at the time of 
the proposed rulemaking.
    Upon consideration of comments, we share commenters' concerns that 
permitting an unlimited number of exceptions for each issuer runs 
counter to our goal of reducing the risk of plan proliferation, a non-
standardized plan option policy goal we explained in the proposed rule 
(88 FR 82608). Without a limit on the number of exceptions permitted, 
issuers could choose to submit multiple exception requests for non-
standardized plan options that reduce cost sharing for benefits 
pertaining to the treatment of the same chronic and high-cost 
condition--with minor or no differences between the benefits with 
reduced cost sharing, or with minor or no difference in the amount that 
cost sharing is reduced for these benefits.
    For example, without a limit on the number of exceptions permitted, 
issuers could submit exception requests for two identical non-
standardized plan options that reduce cost sharing for benefits 
pertaining to the treatment of diabetes--each of which reduce cost 
sharing for the same benefits by the same amount. We do not believe it 
would be in consumers' interest to permit issuers to offer both of 
these plans due to their duplicative nature. Specifically, we believe 
that permitting issuers to offer both of these plans creates 
significant risk of plan choice overload, which, as we noted in the 
proposed rule (88 FR 82608), we want to minimize. However, we also 
agree that limiting the total number of exceptions could harm consumers 
who have a comparatively less common chronic and high-cost condition 
that issuers may choose to not target with this exceptions process,

[[Page 26368]]

which would hinder efforts to advance health equity.
    To balance these concerns, at Sec.  156.202(d)(5), we are limiting 
issuers to one exception per chronic and high-cost condition, in each 
product network type, metal level, inclusion of dental and/or vision 
benefit coverage, and service area. Under this limitation, one 
exception would be permitted for each separate non-standardized plan 
option that reduces cost sharing for benefits pertaining to the 
treatment of a different chronic and high-cost condition--so long as 
the specified requirements are met.
    For example, if an issuer submits exception requests for three 
separate plans in a given product network type, metal level, inclusion 
of dental and/or vision benefit coverage, and service area (such as one 
plan that reduces cost sharing for benefits pertaining to the treatment 
of diabetes, one plan that reduces cost sharing for benefits pertaining 
to the treatment of COPD, and one plan that reduces cost sharing for 
benefits pertaining to the treatment of hepatitis C), we would permit 
exceptions for each of these plans, assuming these plans meet all other 
certification and exception requirements.
    However, under this limitation, multiple exceptions will not be 
permitted for separate plans that reduce cost sharing for benefits 
pertaining to the treatment of the same chronic and high-cost 
condition, regardless of whether these benefits with reduced cost 
sharing vary between the separate plans. Thus, under this limitation, 
for example, if an issuer submits two exception requests for two 
separate plans that have reduced cost sharing for benefits pertaining 
to the treatment of diabetes (and both plans reduce cost sharing for 
insulin), only one exception would be permitted. Similarly, if an 
issuer submits exception requests for two separate plans with reduced 
cost sharing for different benefits pertaining to the treatment of 
diabetes (with one plan reducing cost sharing for insulin, and the 
other reducing cost sharing for diabetic foot care, diabetic retinal 
exam, and diabetic lab testing), the issuer would be permitted only one 
exception.
    We believe adopting this approach will ensure that issuers do not 
offer duplicative exceptions plans with only minor differences in cost 
sharing, and that the exceptions process will instead encourage issuers 
to focus on reducing cost sharing for the most impactful benefits 
pertaining to the treatment of particular chronic and high-cost 
conditions. We believe that these exceptions will be an important way 
for issuers to further health equity and address pressing health needs 
in their service areas, and we believe that this limit will encourage 
issuers to focus their time and efforts on creating the strongest plan 
designs for these conditions as possible. We also believe this limit is 
congruent with existing market trends and will not impede issuers' 
ability to use non-standardized plan options to develop and offer the 
full desired scope of innovative plan designs.
    Comment: Several commenters requested further clarification on the 
particular chronic and high-cost conditions eligible for consideration 
under this exceptions process.
    Response: Similar to our stance in the proposed rule (88 FR 82608), 
we clarify that, for purposes of this standard, high-cost conditions 
are those that account for a disproportionately high portion of total 
Federal health expenditures. We note that the four chronic and high-
cost conditions included in the prescription drug adverse tiering 
review for PY 2025 (specifically, hepatitis C virus, HIV, multiple 
sclerosis, and rheumatoid arthritis) are examples of conditions that we 
would consider to be chronic and high-cost in nature for purposes of 
this standard.
    However, we note that we would also consider additional conditions 
to be chronic and high cost in nature for purposes of this standard. As 
we explained in the proposed rule (88 FR 82608), additional 
representative examples of conditions that we would consider to be 
chronic and high cost in nature include, but are not limited to, 
Alzheimer's disease, kidney disease, osteoporosis, heart disease, 
diabetes, and all kinds of cancer. Examples of conditions that we would 
not consider chronic and high cost in nature for purposes of this 
standard would be those that are generally acute in nature, including 
bronchitis, the flu, pneumonia, strep throat, and respiratory 
infections.
    Comment: Several commenters recommended expanding the criteria 
considered in the exceptions process. Many commenters explained that 
the criteria included in the proposed exceptions process fail to 
consider the impact of different variations of benefit packages, 
provider networks, formularies, and the inclusion of telehealth 
services on the accessibility of services for individuals with chronic 
and high-cost conditions.
    Several commenters thus recommended modifying the exceptions 
process to consider product ID, network ID instead of product network 
type, formulary ID, and inclusion of telehealth services. One commenter 
recommended expanding the exceptions process criteria to allow issuers 
to offer plan design options with benefits tailored to address 
documented health disparities in underserved communities (such as non-
standardized plan options that include benefits designed to improve 
access to ``critical services,'' enhance the quality of care for 
``critical services,'' and/or lower out-of-pocket costs for ``critical 
services,'' as well as provide access to wellness programs and promote 
native-language inclusivity to increase engagement and health 
literacy).
    Response: While we agree that different benefit packages, provider 
networks, formularies, and the inclusion of telehealth services are all 
important factors that pertain to the treatment of chronic and high-
cost conditions, we believe restricting eligibility for this exceptions 
process based solely on a reduction in cost sharing for benefits 
pertaining to the treatment of chronic and high-cost conditions is the 
most appropriate approach. We believe the inclusion of those additional 
factors would compromise how precisely tailored the current standard is 
in ensuring that excepted plans indeed target the unique health care 
needs of consumers with high-cost and chronic conditions.
    Specifically, considering these criteria in determining eligibility 
for an exception would allow issuers to slightly vary included provider 
IDs, formulary IDs, and the inclusion of telehealth services, which 
could result in these plans having a different product IDs, network 
IDs, formulary IDs and telehealth benefits while still failing to 
provide meaningfully different coverage between excepted plans. We do 
not believe that including one different provider in a plan's network, 
for example, should result in that plan being permitted an exception on 
that basis alone. We believe such an approach would weigh against our 
goals of reducing plan proliferation and choice overload (88 FR 82608).
    In response to the commenter who recommended incorporating 
additional criteria to allow issuers to better address health 
disparities documented in underserved communities, we note that we 
continue to believe that the criteria that we will consider under Sec.  
156.202(d) in determining whether to grant an exception will help 
ensure that non-standardized plan options offered pursuant to this 
exceptions process are well-designed to address health disparities in 
underserved communities. As we explained in the proposed rule (88 FR 
82608), we believe this

[[Page 26369]]

exceptions process could play an important role in combatting health 
disparities and supporting health equity. Furthermore, since we did not 
restrict the chronic and high-cost conditions potentially eligible for 
this exceptions process to a discrete list of conditions, we believe 
issuers will have sufficient flexibility to address health disparities 
in underserved communities through the exceptions process.
    Relatedly, we believe that since members of underserved communities 
suffer from the type of chronic and high-cost conditions that may 
qualify an issuer for an exception at greater rates than the general 
population, and since this exceptions process permits issuers to offer 
innovative non-standardized plan options that include substantially 
reduced cost sharing for services related to treatment of those 
conditions, we believe the criteria considered under this exceptions 
process will improve this population's access to care and, 
subsequently, their health outcomes.
    Finally, we note that issuers are not limited in the number of 
standardized plan options they can offer. Given this flexibility, 
issuers are permitted to offer different standardized plan options with 
different product IDs, network IDs, and formulary IDs, so long as they 
conform to the required cost-sharing parameters for these plans.
    Comment: Many commenters noted the concern that permitting 
exceptions solely on the basis of a reduction in cost sharing for 
benefits pertaining to the treatment of chronic and high-cost 
conditions could significantly impact risk pools and risk adjustment 
transfers--such as by attracting a higher number of enrollees with 
chronic and high-cost conditions into these plans, leading to a 
corresponding increase in actuarial risk insufficiently considered in 
the current structure and operation of HHS-operated risk adjustment 
program.
    Response: We do not agree with commenters' concerns about the 
impact of these excepted plans on the risk pool and risk adjustment. 
First, issuers are not required to offer these excepted plans. Similar 
to what we explained in the proposed rule (88 FR 82608), we continue to 
anticipate that most issuers would determine that the burden of 
creating and certifying additional non-standardized plan options 
intended to benefit a comparatively small population of consumers would 
outweigh the benefit, meaning we do not anticipate a substantial number 
of exceptions requests. With a limited number of issuers requesting 
exceptions under this exceptions process, we anticipate a 
correspondingly limited impact on the risk pool. Second, these excepted 
plans are subject to the AV de minimis range requirements under 
Sec. Sec.  156.140, 156.200, and 156.400, meaning issuers are limited 
in the extent in which they can vary allowable cost sharing within 
these excepted plans.
    Third, if an issuer does choose to offer an excepted plan, we 
believe the current structure and operation of HHS-operated risk 
adjustment program \309\ accounts for the actuarial risk associated 
with enrollment in these plans. This is because the chronic and high-
cost conditions we anticipate issuers will target with this exception 
process are already accounted for in the HHS risk adjustment models 
under the hierarchical condition categories (HCCs) used in the models 
to assess an enrollee's actuarial risk,\310\ and subsequent plan 
liability.
---------------------------------------------------------------------------

    \309\ Since the 2017 benefit year, HHS has operated the risk 
adjustment program for the individual, small group, and merged 
markets in all 50 States and the District of Columbia.
    \310\ See Tables 1 through 6 of this final rule.
---------------------------------------------------------------------------

    For example, HCC 01 (HIV/AIDS), HCC 118 (Multiple Sclerosis), and 
multiple HCCs for diabetes related diagnoses, HCC 19 (Diabetes with 
Acute Complications), HCC 20 (Diabetes with Chronic Complications), HCC 
21 (Diabetes without Complication), and HCC 22 (Type 1 Diabetes 
Mellitus, add-on to Diabetes HCC 19-21) are payment HCCs that account 
for chronic and high-cost conditions targeted with this exceptions 
process. Therefore, we believe the current structure and operation of 
HHS-operated risk adjustment program sufficiently accounts for the risk 
that may arise from attracting a higher number of enrollees with 
chronic and high-cost conditions into these plans.
    Lastly, these excepted plans are limited to the individual markets, 
and the HHS risk adjustment models are national models that are used in 
all States where the HHS-operated risk adjustment program applicable to 
the individual, small group, and merged markets is operated. These 
models are intended to reflect the relative national average costs for 
HCCs and have not been developed to account for specific State or 
market specific variation in plan liability. We have found, based on 
our experience in modeling, that the nationwide dataset is often 
necessary to ensure that we have adequate sample size and stability in 
our risk adjustment models, including the models' factors and 
coefficients. If an issuer offers excepted non-standardized plan 
options that attract a higher number of enrollees with chronic and 
high-cost conditions, the issuer would receive credit for the increased 
actuarial risk as part the risk score and transfer calculations for the 
applicable benefit year.
    Comment: Several commenters supported maintaining the 25 percent 
reduction in cost sharing as the difference threshold for the proposed 
exceptions process. These commenters explained that reducing this cost 
sharing difference threshold below 25 percent would make it difficult 
for consumers with chronic and high-cost conditions to obtain 
meaningful benefit from enrolling in an excepted plan. These commenters 
also explained that reducing the cost sharing difference threshold 
would allow issuers to offer non-standardized plan options that are not 
meaningfully different from existing offerings, which runs counter to 
the goal of reducing the rate of plan proliferation.
    Conversely, several commenters expressed concern with the proposed 
cost sharing difference threshold. These commenters noted that it would 
be difficult to demonstrate a 25 percent reduction in cost sharing for 
benefits associated with the treatment of chronic and high-cost 
conditions while maintaining an AV for these plans within the 
permissible de minimis range for each metal level. Several commenters 
thus recommended reducing the cost sharing difference threshold, such 
as to 10 percent, to allow issuers to submit exception requests that 
more easily meet the required cost sharing difference threshold under 
the standard.
    Response: We agree that reducing the cost sharing difference 
threshold to less than 25 percent may make it difficult for consumers 
with chronic and high-cost conditions to obtain meaningful benefit from 
enrolling in an excepted plan. As we explained in the proposed rule (88 
FR 82608), we continue to believe that the cost sharing difference 
threshold of 25 percent or more is appropriate since we have observed 
that cost sharing differences below this threshold represent normal 
variation within a particular metal level, while differences at or 
above this threshold are more often associated with cost sharing 
differences between different metal levels.
    Altogether, we do not believe that a difference in a cost sharing 
amount that is of the same magnitude as normal variation within a 
particular metal level (specifically, less than 25 percent) would 
warrant being excepted from the non-standardized plan option limit. We 
further agree that reducing the cost sharing difference threshold to 
below 25 percent may allow issuers to utilize this exceptions process 
to offer non-

[[Page 26370]]

standardized plans that are not meaningfully different from existing 
non-standardized plan offerings, which runs counter to our goal of 
reducing the rate of plan proliferation.
    Finally, we note that it will be possible for issuers to reduce 
cost sharing for benefits pertaining to the treatment of a chronic and 
high-cost condition by at least 25 percent in these plans while 
maintaining AVs within the permissible de minimis range for each metal 
level, but doing so will require issuers to make deliberate and 
thoughtful decisions about their plan designs (such as prioritizing the 
benefits that will yield the greatest impact on cost sharing for the 
treatment of a given chronic and high-cost condition). We also believe 
that requiring issuers to make these deliberate and thoughtful 
decisions will increase the likelihood that non-standardized plan 
options offered under this exceptions process support our dual aims of 
ensuring that truly innovative plan designs that substantially benefit 
consumers with chronic and high-cost conditions continue to be offered 
and reducing the risk of plan choice overload.
    Comment: Many commenters expressed concerns about our statement in 
the proposed rule that we anticipated requesting that issuers submit 
QHP applications for non-standardized plan options that exceed the two-
plan limit by the QHP certification Early Bird deadline. These 
commenters cited difficulties incurred by issuers in designing plans 
that would comply with the requirements of this exceptions process in 
the time afforded between the publication of this final rule and the 
Early Bird submission deadline. Many commenters noted that constructing 
plans that would fulfill the exceptions process' criteria would require 
not only finalizing unique benefits coverage, including cost-sharing 
features, but would also require securing network agreements and 
conducting market reviews needed to bring the novel plan designs to 
market.
    Many commenters also noted that, historically, the Early Bird 
submission deadline does not offer issuers sufficient time to conduct 
all these activities while meeting the individual market filing 
deadlines imposed by their respective States. Commenters explained that 
imposing too early a submission deadline would substantially reduce the 
likelihood that issuers would apply for exceptions, resulting in fewer 
non-standardized plan options targeting chronic and high-cost 
conditions being submitted for possible inclusion above the limit.
    Several commenters also cited operational concerns related to 
interfacing with State Departments of Insurance that would make it 
difficult for issuers to be able to submit complete exception requests 
by the Early Bird deadline. In particular, many commenters noted that 
although it may be possible for issuers to submit exception requests by 
the Early Bird deadline, depending on the publication date of this 
final rule and related QHP certification materials, it would be 
difficult for State Departments of Insurance that transfer plan 
submission data to CMS on behalf of their respective issuers to do so 
prior to the Early Bird submission deadline.
    This is because issuers in some States are required to first submit 
plan data to their State Department of Insurance before the State 
Department of Insurance transfers the plan submission data to CMS. This 
process may take several weeks to complete from beginning to end, which 
would effectively require issuers to submit complete plan portfolios--
including these exception requests--to their State Departments of 
Insurance several weeks in advance of the Early Bird deadline, possibly 
only several weeks after the Payment Notice is published. Accordingly, 
some commenters do not believe that it is feasible for State 
Departments of Insurance that transfer plan submission data to CMS on 
behalf of their respective issuers to do so prior to the Early Bird 
submission deadline.
    Several commenters suggested alternatives to requiring issuers to 
submit QHP applications for non-standardized plan options that exceed 
the two-plan limit by the QHP certification Early Bird deadline. One 
commenter recommended that exception requests be approved or rejected 
in concept by CMS prior to the formal submission of the complete QHP 
certification application by the Initial Application Deadline. The 
commenter suggested that this approach would mitigate any operational 
burden imposed on the issuer while reducing the risks associated with 
coordinating with State Departments of Insurance and managing varying 
filing deadlines (such as issuers being unable to submit complete plan 
portfolios and exception requests to their State Departments of 
Insurance in advance of the Early Bird deadline). The commenter stated 
this approach would also allow CMS to provide feedback on the proposed 
excepted plan, helping to circumvent any quality assurance challenges 
(such as issuers formally submitting exception requests that do not 
meet the requirements of the exceptions process).
    Response: We acknowledge the commenters' concerns with requesting 
that issuers submit QHP applications, including exception requests, for 
non-standardized plan options that exceed the two-plan limit by the QHP 
certification Early Bird deadline, and we agree with many of the points 
commenters made. Specifically, we agree that it would be difficult for 
issuers to compile a complete portfolio of plans, as well as related 
exception requests, only several weeks after the publication of the 
final rule in order to transfer this data to their State Departments of 
Insurance sufficiently in advance of the Early Bird deadline. We also 
agree that the Early Bird submission deadline may not offer issuers 
sufficient time to conduct all required activities while meeting the 
individual market filing deadlines imposed by their respective States.
    As such, we anticipate that the exception request submission 
deadline for issuers will be the Initial Application Deadline for QHP 
certification, aligning the exception request submission deadline with 
the Initial Application Deadline for QHP certification applications for 
standardized and non-standardized plan option offerings. We note that 
the Initial Application Deadline for QHP certification for each plan 
year will continue to be communicated in sub-regulatory guidance. We 
believe adopting this approach will permit issuers sufficient time to 
finalize unique benefits coverage and cost sharing, secure network 
agreements, and conduct market reviews necessary to bring these novel 
plan designs to the market in a feasible timeframe. We also believe 
that adopting this approach obviates the need for CMS to approve or 
reject exception request materials in advance of the deadline for 
submitting a complete QHP certification application.
    Comment: Several commenters suggested that interested parties 
should be given the opportunity to review and provide feedback on the 
application materials and justification forms.
    Response: We agree that providing interested parties the 
opportunity to review and provide feedback on the exception request 
form is critical to ensuring the success of the implementation of this 
exceptions process. As such, we note that interested parties had the 
opportunity to review these materials in the 60-day PRA package 
associated with this rule

[[Page 26371]]

(CMS-10878).\311\ We encourage interested parties to review any future 
iterations of such materials in subsequent PRA packages when they are 
published. Finally, we note that we intend to solicit feedback on these 
forms in future interested party listening sessions.
---------------------------------------------------------------------------

    \311\ https://www.cms.gov/medicare/regulations-guidance/legislation/paperwork-reduction-act-1995/pra-listing/cms-10878.
---------------------------------------------------------------------------

    Comment: Some commenters suggested that the proposed exceptions 
process be accompanied by additional functionalities on HealthCare.gov 
and DE entity non-Exchange websites to enable consumers to more easily 
identify non-standardized plan options that offer specialized cost 
sharing offerings intended to benefit the treatment of the 
corresponding chronic and high-cost conditions. Other commenters noted 
that differential display for non-standardized plan options that are 
offered pursuant to the exceptions process may confuse or overwhelm 
consumers with information that is not meaningful to them.
    One commenter recommended imposing restrictions on mentioning 
specific chronic and high-cost conditions in the plan marketing names 
of non-excepted plans. The commenter noted that currently available 
QHPs that are marketed as being uniquely relevant to a certain chronic 
and high-cost condition may not actually provide substantial benefits 
to individuals seeking treatment for that condition. The commenter 
suggested that some plans with references to diabetes in their planned 
marketing names may fail to substantially reduce cost sharing for 
benefits related to diabetes treatment, for example. The commenter 
stated that, therefore, issuers should not be permitted to display a 
plan marketing name that markets a non-excepted QHP as if it had been 
approved under this exceptions process.
    Response: We intend to explore the benefit and feasibility of 
requiring some form of visual differentiation of these excepted plans 
in the form of differential display on HealthCare.gov, in conjunction 
with our continued work on choice architecture. We will also consider 
whether any future differential display requirements related to 
excepted plans should also apply to DE entity non-Exchange websites. At 
this time, we are not finalizing any requirements for excepted or non-
excepted plans related to particular plan marketing names, since both 
excepted and non-excepted plans are already subject to the plan 
marketing name requirements at Sec.  156.225. We encourage issuers 
offering excepted plans to adopt plan marketing names that reflect the 
chronic and high-cost condition for which the plan offers substantially 
reduced cost sharing, if so desired.
    Comment: Several commenters requested clarification on the 
interaction between the reduction in cost sharing for benefits 
pertaining to the treatment of chronic and high-cost conditions, 
deductibles, and annual limitations on cost sharing. Several commenters 
also requested clarification of how a 25 percent reduction in cost 
sharing for benefits pertaining to the treatment of a chronic and high-
cost condition would be evaluated under this exceptions process.
    Response: We clarify that deductibles and annual limitations on 
cost sharing (as well as their interactions with copayments and 
coinsurance rates) will be considered when evaluating the 25 percent 
reduction in cost sharing for benefits pertaining to the treatment of 
chronic and high-cost conditions under this exceptions process. We 
believe that excluding deductibles and annual limitations on cost 
sharing from consideration when evaluating the difference in cost 
sharing for relevant benefits would make accurate comparisons between 
the in-limit non-standardized plan option the issuer is using as a 
baseline and the non-standardized plan option the issuer is requesting 
to be excepted more difficult, since the cost sharing type 
(specifically, coinsurance rate or copayment subject to or exempt from 
the deductible) for the same benefit may differ between plans.
    For example, without considering deductibles and annual limitations 
on cost sharing and their interactions with coinsurance rates and 
copayments when evaluating the 25 percent reduction in cost sharing for 
benefits pertaining to the treatment of chronic and high-cost 
conditions under this exceptions process, it would be difficult to 
assess whether the required reduction in cost sharing is achieved if 
the in-limit non-standardized plan option the issuer is using as a 
comparison has a coinsurance rate of 50 percent subject to the 
deductible as the form of cost sharing for a particular benefit, 
whereas the corresponding benefit in the non-standardized plan option 
the issuer requests to be excepted has a copayment of $30 exempt from 
the deductible as the form of cost sharing. It would similarly be 
difficult to assess whether the required reduction in cost sharing is 
achieved if the two plans have different deductibles and/or annual 
limitations on cost sharing.
    We also clarify that under new Sec.  156.202(d)(1), a 25 percent 
reduction in cost sharing for benefits pertaining to the treatment of a 
chronic and high-cost condition will not be evaluated at the individual 
benefit level, but will instead be evaluated at the level of total out-
of-pocket costs for the treatment of the particular chronic and high-
cost condition for a population of enrollees with that particular 
chronic and high-cost condition.
    This is because if we were to adopt an approach that evaluated this 
difference in cost sharing at the individual benefit level, issuers may 
reduce cost sharing for only one or several already relatively 
inexpensive or infrequently utilized benefits--which may technically 
meet the required difference in cost sharing threshold under the 
standard but may not actually meaningfully reduce cost sharing for 
enrollees with that chronic and high-cost condition. For example, if 
this difference in cost sharing were evaluated at the individual 
benefit category level, an issuer would be able to reduce cost sharing 
for a particular prescription drug used to treat a chronic and high-
cost condition from a $20 copay exempt from the deductible to a $15 
copay exempt from the deductible to meet the required cost sharing 
difference threshold under the standard. We do not believe this 
reduction in cost sharing would substantially benefit consumers with 
the relevant chronic and high-cost condition.
    Thus, we believe evaluating the required difference in cost sharing 
at the level of total out-of-pocket costs for the treatment of the 
chronic and high-cost condition for a population of enrollees with the 
relevant chronic and high-cost condition represents a more 
comprehensive and holistic approach in ensuring that excepted plans 
substantially benefit consumers with chronic and high-cost conditions. 
As we explained in the proposed rule (88 FR 82607), one of our goals 
with the proposed exceptions process is to ensure that excepted plans 
substantially benefit consumers with chronic and high-cost conditions.
    Consider the following hypothetical scenario as an illustration of 
how the 25 percent reduction in cost sharing for benefits pertaining to 
the treatment of a chronic and high-cost condition will be evaluated. 
In this scenario, an issuer desires to offer two non-standardized plan 
options per product network type, metal level, and inclusion of dental 
and/or vision benefit coverage. This issuer also desires to submit an 
exception request for an additional non-standardized plan option that 
reduces cost sharing for benefits pertaining to

[[Page 26372]]

the treatment of diabetes. As part of the request for the additional 
non-standardized plan option to be excepted, the issuer chooses one of 
its non-standardized plan options within the limit of two for PY 2025 
in the same product network type, metal level, inclusion of dental and/
or vision benefit coverage, and service area to serve as a point of 
comparison. The issuer will utilize one of these non-standardized plan 
options within the limit of two for PY 2025 as the comparison for 
evaluating whether the required 25 percent reduction in cost sharing is 
achieved relative to the plan the issuer is requesting to except from 
the non-standardized plan option limit.
    The cost sharing structure in the non-standardized plan option the 
issuer has chosen as the in-limit comparison includes a $40 copayment 
exempt from the deductible for each primary care visit, an $80 
copayment exempt from the deductible for each podiatrist specialist 
visit, an $80 copayment exempt from the deductible for each 
ophthalmologist specialist visit, and a 40 percent coinsurance rate 
exempt from the deductible for each utilization of laboratory services. 
The cost sharing structure in the non-standardized plan option that the 
issuer requests be excepted from the limit includes a $20 copayment 
exempt from the deductible for each primary care visit, a $70 copayment 
exempt from the deductible for each podiatrist visit, a $70 copayment 
exempt from the deductible for each ophthalmologist visit, and a 20 
percent coinsurance rate exempt from the deductible for each 
utilization of laboratory services, with the cost sharing for all other 
benefits remaining the same between both plans.
    Under this exceptions process, the 25 percent reduction in cost 
sharing for benefits pertaining to the treatment of a chronic and high-
cost condition will not be evaluated at the individual benefit category 
level (in this case, primary care visit, podiatrist specialist visit, 
ophthalmologist specialist visit, and laboratory services) between the 
in-limit non-standardized plan option the issuer is using as a point of 
comparison and the additional non-standardized plan option the issuer 
is requesting to have excepted from the limit. Rather, the required 
reduction in cost sharing will be evaluated at the level of total out-
of-pocket costs for a representative treatment scenario for the 
relevant chronic and high-cost condition. In this hypothetical 
scenario, for example, a representative treatment scenario for the 
treatment of diabetes is comprised of four primary care visits, one 
podiatrist specialist visit, one ophthalmologist specialist visit, and 
the utilization of laboratory services one time.
    Under the cost sharing structure in the non-standardized plan 
option the issuer has chosen as an in-limit point of comparison, this 
representative treatment scenario would result in the enrollee paying 
the $40 copayment exempt from the deductible for a primary care visit 
four times, amounting to $160; the $80 copayment exempt from the 
deductible for a podiatrist specialist visit one time; the $80 
copayment exempt from the deductible for an ophthalmologist specialist 
visit one time; and, assuming a total cost of $200 for each utilization 
of laboratory services and a coinsurance rate of 40 percent exempt from 
the deductible for this service, one utilization of laboratory services 
amounting to $80. Altogether, the total out-of-pocket costs for this 
representative treatment scenario under the cost-sharing structure in 
the non-standardized plan option the issuer has chosen as an in-limit 
point of comparison would amount to $400.
    Under the cost sharing structure in the non-standardized plan 
option that the issuer requests be excepted from the limit, the 
representative treatment scenario would result in the enrollee paying 
the $20 copayment exempt from the deductible for a primary care visit 
four times, amounting to $80; the $70 copayment exempt from the 
deductible for a podiatrist specialist visit one time; the $70 
copayment exempt from the deductible for an ophthalmologist specialist 
visit one time; and, assuming a total cost of laboratory services of 
$200 for each utilization of laboratory services and a coinsurance rate 
of 20 percent exempt from the deductible for this service, one 
utilization of laboratory services amounting to $40. Altogether, the 
total out-of-pocket costs for this representative treatment scenario 
under the cost-sharing structure in the non-standardized plan option 
the issuer is requesting to be excepted from the limit would amount to 
$260.
    Thus, although there is not necessarily a 25 percent reduction when 
comparing each individual benefit category between these two plans, the 
standard would still be satisfied, so long as the overall cost sharing 
(in the form of total out-of-pocket costs, which takes into 
consideration maximum out-of-pocket limitations and deductibles) for a 
population of enrollees with diabetes will still be reduced by at least 
25 percent under the excepted non-standardized plan option (which in 
this case would be $260) compared to the non-standardized plan option 
being used as an in-limit point of comparison (which in this case would 
be $400). We note that an issuer seeking to utilize this exceptions 
process must demonstrate underlying actuarial assumptions in the 
required actuarial memorandum (which includes corresponding actuarial 
attestation) as part of the exception request that we explain later in 
this section of this final rule.
    We are also making several changes to the requirements related to 
the written justification form that issuers will be required to submit 
to utilize this exceptions process at Sec.  156.202(e)(1) through (3), 
to more accurately reflect how the reduction in cost sharing will be 
evaluated under this exceptions process and ensure that excepted non-
standardized plan options have specific design features that will 
substantially benefit consumers with chronic and high-cost conditions, 
a goal we explained in the proposed rule (88 FR 82606). We also 
introduced new paragraph (4) to ensure that the form issuers submit 
adequately explains the underlying actuarial assumptions made in 
designing the proposed excepted plan.
    In particular, under proposed Sec.  156.202(e)(1), an issuer 
seeking to utilize this exception request process would have been 
required to identify the specific condition(s) for which cost sharing 
is reduced. However, under finalized Sec.  156.202(e)(1), an issuer 
seeking to utilize this exceptions request process must identify the 
specific chronic and high-cost condition that their additional non-
standardized plan option offers substantially reduced cost sharing for, 
in accordance with the definition of ``cost sharing'' at Sec.  156.20.
    We made this change to reflect the fact that each excepted non-
standardized plan option should be tailored to the treatment of one 
chronic and high-cost condition, since we believe it will be both 
difficult and impractical for issuers to reduce cost sharing for 
benefits pertaining to the treatment of two or more chronic and high-
cost conditions while maintaining AVs within the permissible de minimis 
range for each metal level within the same excepted plan design. This 
is because the required cost sharing reduction is 25 percent, and for 
an issuer to reduce the treatment-specific cost sharing for the 
treatment of two separate chronic and high-cost conditions within the 
same plan design would likely result in that plan having an AV 
exceeding the permissible de minimis range, or at least having an AV 
that would render the plan costly and uncompetitive at a minimum.
    Under proposed Sec.  156.202(e)(2), an issuer seeking to utilize 
this exception request would have been required to

[[Page 26373]]

explain which benefit(s) would have reduced annual enrollee cost 
sharing (as opposed to reduced cost sharing for a limited number of 
visits) for the treatment of the specified condition(s) relative to the 
same corresponding benefits in an issuer's other non-standardized plan 
offerings in the same product network type, metal level, and service 
area. However, this requirement would not have enabled accurate 
assessment of whether an excepted plan reduces cost sharing at the 
level of total out-of-pocket costs for the treatment of a particular 
chronic and high-cost condition, in accordance with Sec.  
156.202(d)(1).
    As such, under finalized Sec.  156.202(e)(2), an issuer seeking to 
utilize this exceptions process must identify which specific benefits 
in the Plans and Benefits Template are discounted to provide reduced 
treatment-specific cost sharing for individuals with the specified 
chronic and high-cost condition. These discounts must be relative to 
the treatment-specific cost sharing for the same corresponding benefits 
in the issuer's other non-standardized plan option offerings in the 
same product network type, metal level, inclusion of dental and/or 
vision benefit coverage, and service area.
    For the purposes of this standard, ``treatment specific cost 
sharing'' consists of the costs for obtaining services that pertain to 
the treatment of a particular chronic and high-cost disease--but not 
the costs for obtaining services that do not pertain to the treatment 
of the relevant condition. For example, costs for obtaining 
chemotherapy would not be considered treatment-specific cost sharing 
for a plan designed to address diabetes for the purposes of this 
standard. However, as an additional clarifying example, a primary care 
visit would pertain to the treatment of the diabetes to the extent that 
this visit entails the treatment of the relevant condition.
    We also clarified in this paragraph (e)(2) that the issuer must 
identify all services for which the benefits substantially reduce cost 
sharing in the Plans and Benefits Template. These benefits must 
encompass a complete list of relevant services pertaining to the 
treatment of the relevant condition. For example, if an issuer intends 
to offer a plan that is designed to address diabetes, the issuer should 
list only the benefits with reduced cost sharing for services 
pertaining to the treatment of diabetes. We made these modifications to 
ensure that the written justification that issuers will be required to 
submit as part of this exceptions process accurately explains how the 
excepted plan substantially reduces cost sharing at the level of total 
out-of-pocket costs for the treatment of a particular chronic and high-
cost condition, in accordance with Sec.  156.202(d)(1).
    Under proposed Sec.  156.202(e)(3), an issuer seeking to utilize 
this exceptions process would have been required to explain how the 
reduced cost sharing for these benefits pertain to clinically indicated 
guidelines for treatment of the specified chronic and high-cost 
condition(s). However, under finalized Sec.  156.202(e)(3), an issuer 
seeking to utilize this exceptions process must explain how the reduced 
cost sharing for these services pertains to clinically indicated 
guidelines and a representative treatment scenario for treatment of the 
specified chronic and high-cost condition. We also clarified in this 
paragraph that the issuer must include any relevant studies, 
guidelines, or supplementary documents to support the application, as 
applicable. In addition, we clarified in this paragraph that for 
purposes of this standard, a representative treatment scenario is an 
annual course of treatment for a chronic and high-cost condition (for 
example, osteoporosis, diabetes, cancer).
    We made this modification to ensure that each excepted non-
standardized plan option is tailored to the treatment of one chronic 
and high-cost condition. We also made this modification to ensure that 
issuers would not be able to simply reduce cost sharing for one already 
relatively inexpensive or relatively infrequently utilized service by 
25 percent or more to meet the standard, which could result in the plan 
failing to substantially benefit consumers with a chronic and high-cost 
condition. Instead, under the final requirement in this paragraph, 
issuers will be required to reduce cost sharing for a representative 
treatment scenario in order to reduce cost sharing for the treatment of 
that particular condition by 25 percent or more, which we believe 
ensures the plan would substantially benefit consumers with the 
relevant chronic and high-cost condition.
    We also finalized new Sec.  156.202(e)(4) requiring that issuers 
include a corresponding actuarial memorandum that explains the 
underlying actuarial assumptions made in the design of the plan the 
issuer is requesting to except. In this memorandum, an issuer must 
demonstrate how the benefits that are discounted to provide reduced 
treatment-specific cost sharing of at least 25 percent identified at 
Sec.  156.202(e)(2) for the treatment of the condition identified at 
Sec.  156.202(e)(1) under the excepted plan compare to the identified 
in-limit offering in the same product network type, metal level, 
inclusion of dental and/or vision coverage, and service area.
    We also clarified in this paragraph that this demonstration must 
specifically be in reference to the specific population that would be 
seeking treatment for the relevant condition and not the general 
population. We also clarified that this memorandum also must include an 
actuarial opinion confirming that this analysis was prepared in 
accordance with the appropriate Actuarial Standards of Practice and the 
profession's Code of Professional Conduct. We made these modifications 
to ensure issuers' exception requests accurately explain how the 
excepted plans substantially reduce cost sharing at the level of total 
cost sharing for the treatment of a particular chronic and high cost 
condition, which enables the assessment of whether the required 
difference in cost sharing is achieved in accordance with Sec.  
156.202(d)(1).
    Comment: Several commenters requested clarification of how the cost 
sharing difference threshold applies when there is no cost sharing for 
a benefit under the in-limit non-standardized plan option the issuer is 
comparing against. These commenters noted that it is impossible to 
reduce cost sharing for a benefit in the excepted non-standardized plan 
option if the in-limit non-standardized plan option being utilized as a 
comparison already offers that benefit at no cost. These commenters 
recommended requiring that any proposed excepted non-standardized plan 
options being compared to an in-limit non-standardized plan option that 
offers a given benefit at no cost to the consumer also offer that 
benefit at no cost to the consumer.
    Response: We acknowledge this concern, and we believe the approach 
we are adopting in which we evaluate the 25 percent reduction in cost 
sharing at the level of total out-of-pocket costs for benefits 
pertaining to the treatment of the particular chronic and high-cost 
condition for a population of enrollees with the particular chronic and 
high-cost condition--instead of evaluating the reduction in cost 
sharing at the individual benefit category level--sufficiently 
mitigates this concern.
    This modification avoids requirements on issuers that would be 
unworkable, such as requiring the issuer to further reduce the cost 
sharing for a particular benefit in the excepted non-standardized plan 
option when there is no cost sharing for the benefit in the in-limit 
non-standardized plan option. For

[[Page 26374]]

example, if there is no cost sharing for primary care visits in the in-
limit non-standardized plan option being utilized as a comparison, and 
there is similarly no cost sharing for primary care visits in the non-
standardized plan option the issuer is requesting to be excepted, it 
would be impossible for the issuer to further reduce cost sharing for 
this benefit category in the excepted plan. However, so long as the 
total out-of-pocket costs for benefits pertaining to the treatment of 
the particular chronic and high-cost condition are reduced by 25 
percent or more, the standard would be satisfied.
    Comment: Several commenters recommended that the cost sharing 
difference threshold only be applied to the standard variant of the 
plan for which the issuer is seeking an exception and not to the 
income-based cost sharing reduction (CSR) variants or American Indian 
(AI)/Alaska Native (AN) limited or zero cost share variants. The 
commenter noted that it would be difficult for issuers to design plans 
with the necessary reduction in cost sharing in these plan variants 
while maintaining AVs within the permissible de minimis ranges due to 
the restricted de minimis ranges for these plan variants.
    Response: We agree it would be difficult to reduce cost sharing by 
25 percent for benefits pertaining to the treatment of chronic and 
high-cost conditions in the more generous income-based CSR variants and 
the AI/AN limited or zero cost share variants of excepted plans, due to 
the restricted AV de minimis range of these plans. This is because 
under the definition of ``de minimis variation for a silver plan 
variation'' at Sec.  156.400, there is a -0 percentage point and +1 
percentage point allowable AV de minimis variation for these plans--
compared to a permissible AV de minimis variation of -2 percentage 
points and +2 percentage points for standard variants under Sec.  
156.140(c)(2), and a permissible AV de minimis range of -0 percentage 
points and +2 percentage points for individual market silver QHPs under 
Sec.  156.200(b)(3).
    Furthermore, since the AI/AN zero cost share variant at Sec.  
156.420(b)(1) eliminates cost sharing for all services, while the AI/AN 
limited cost share variant at Sec.  156.420(b)(2) eliminates cost 
sharing on any item or service that is an EHB furnished directly by the 
Indian Health Service, an Indian Tribe, Tribal Organization, or Urban 
Indian Organization (each as defined in 25 U.S.C. 1603), or through 
referral under contract health services, cost sharing cannot be further 
reduced.
    As such, we are finalizing at Sec.  156.202(d)(4) that the reduced 
cost sharing requirement that excepted plans must meet only applies to 
the standard variant of the plan for which the issuer is seeking 
exception, and not to the income-based CSR plan variations required by 
Sec.  156.420(a) or the zero and limited cost sharing plan variations 
required by Sec.  156.420(b). We are making this change to ensure that 
issuers can achieve the required reduction in cost sharing between the 
non-standardized plan option the issuer chooses as an in-limit 
comparison and the non-standardized plan option the issuer requests to 
be excepted.
    Comment: Several commenters requested additional clarification on 
how the proposed exceptions process would comply with existing guidance 
under the Paul Wellstone and Pete Domenici Mental Health Parity and 
Addiction Equity Act of 2008 (MHPAEA).
    Response: In general, MHPAEA and its implementing regulations apply 
to group health plans and health insurance issuers offering group or 
individual health insurance coverage that provide both medical and 
surgical benefits and mental health or substance use disorder benefits 
and require, in relevant part, that the financial requirements (such as 
coinsurance and copayments) 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 the same classification.\312\
---------------------------------------------------------------------------

    \312\ Section 9812 of the Code, section 712 of ERISA, and 
section 2726 of the PHS Act. 26 CFR 54.9812-1, 29 CFR 2590.712, and 
45 CFR 146.136 and 147.160.
---------------------------------------------------------------------------

    The regulations under MHPAEA set forth six classifications of 
benefits for applying the parity rules for financial requirements and 
treatment limitations.\313\ Under MHPAEA regulations, a type of 
financial requirement or quantitative treatment limitation is 
considered to apply to substantially all medical/surgical benefits in a 
classification if it applies to at least two-thirds of all medical/
surgical benefits in the classification. If a type of financial 
requirement or treatment limitation does not apply to at least two-
thirds of medical/surgical benefits in a classification, it cannot 
apply to mental health or substance use disorder benefits in that 
classification. If the type of requirement or limitation does apply to 
at least two-thirds of medical/surgical benefits in a classification, 
the predominant level that may be applied to mental health or substance 
use disorder benefits in the classification is the one that applies to 
more than one half of medical/surgical benefits within the 
classification subject to the financial requirement or treatment 
limitation.\314\ The determination of the portion of medical/surgical 
benefits subject to the financial requirement or treatment limitation 
is based on the dollar amount of all plan payments for medical/surgical 
benefits in the classification expected to be paid under the plan for 
the plan year.
---------------------------------------------------------------------------

    \313\ The six classifications of benefits are (1) inpatient, in-
network; (2) inpatient, out-of-network; (3) outpatient, in-network; 
(3) outpatient, out-of-network; (4) emergency care; and (6) 
prescriptions drugs. In addition, sub-classifications are permitted 
for office visits, separate from other outpatient services. 26 CFR 
54.9812-1(c)(2)(ii) and (c)(3)(iii); 29 CFR 2590.712(c)(2)(ii) and 
(c)(3)(iii); and 45 CFR 146.136(c)(2)(ii) and (c)(3)(iii).
    \314\ If no single level applies to more than one-half of 
medical/surgical benefits subject to a financial requirement or 
quantitative treatment limitation in a classification, the plan or 
issuer may combine levels until the combination of levels applies to 
more than one-half of medical/surgical benefits subject to the 
financial requirement or quantitative treatment limitation in the 
classification. The least restrictive level within the combination 
is considered the predominant level of that type in the 
classification. 26 CFR 54.9812-1(c)(3)(i)(B), 29 CFR 
2590.712(c)(3)(i)(B), and 45 CFR 146.136(c)(3)(i)(B).
---------------------------------------------------------------------------

    QHP issuers seeking to reduce cost sharing in non-standardized 
plans under the exceptions process will need to carefully evaluate 
whether and how designing a plan with reduced cost sharing for certain 
chronic or high-cost conditions can be achieved consistent with MHPAEA 
and its implementing regulations. Depending on the extent to which 
reducing cost sharing for medical/surgical benefits in a benefit 
classification (or any other design feature of the excepted plan) 
affects the results of the substantially all/predominant analysis under 
MHPAEA, the QHP issuer may not be permitted to impose the cost-sharing 
(or other unique) requirement on mental health or substance use 
disorder benefits in that classification, or may be required to reduce 
cost sharing for mental health and substance use disorder benefits in 
the classification, to ensure compliance with MHPAEA. Further, the 
issuer must comply in all other regards with applicable requirements 
under MHPAEA and its implementing regulations.
    Comment: Several commenters requested further clarification on how 
the excepted plan designs would be consistent with the 
nondiscrimination standards, including the EHB non-discrimination 
standards at Sec.  156.125.
    Response: As we explained in the proposed rule (88 FR 86208 through 
88

[[Page 26375]]

FR 86209), if additional plans are permitted to be offered exceeding 
the limit of two non-standardized plan options, in accordance with the 
guaranteed availability requirements at Sec.  147.104(a), these plans 
will also be required to be made available on the same basis to 
consumers without these chronic and high-cost conditions. Further, we 
emphasize that these plans will be prohibited from discriminating in 
accordance with the nondiscrimination requirements at Sec. Sec.  
147.104(e), 156.125, and 156.200(e). To meet these nondiscrimination 
requirements, these plans will be required to apply reductions in cost 
sharing to all enrolled in the plan, without regard to diagnosis. 
Furthermore, although we acknowledge that non-standardized plan options 
excepted under this proposal will primarily benefit consumers with 
chronic and high-cost conditions, we believe that a sufficiently 
satisfactory range of both non-standardized and standardized plan 
options currently exist that are primarily intended for consumers 
without chronic and high-cost conditions. As a result, we are not 
concerned that any risk of discrimination created by this exceptions 
process will negatively impact consumers, including but not limited to 
consumers with chronic and high-cost conditions.
    Comment: Several commenters requested clarification on how 
enrollees affected by plan discontinuations arising from the reduction 
of the non-standardized plan option limit at Sec.  156.202(b) will be 
re-enrolled into new plans.
    Response: Similar to what we explained in the 2024 Payment Notice 
(88 FR 25856), we will continue to utilize the existing discontinuation 
notices and process as well as the current re- enrollment hierarchy at 
Sec.  155.335(j) to ensure a seamless transition and continuity of 
coverage for enrollees affected by discontinuations.
8. CO-OP Loan Terms (Sec.  156.520)
    In the HHS Notice of Benefit and Payment Parameters for 2025 
proposed rule (88 FR 82510, 82609), we proposed to amend Sec.  
156.520(f) to enable CMS to approve requests by CO-OP borrowers to 
voluntarily terminate their loan agreement with CMS, and thereby cease 
to constitute a qualified non-profit health insurance issuer 
(QNHII),\315\ for the purpose of permitting the loan recipient to 
pursue innovative business plans that are not otherwise consistent with 
the governance requirements and business standards applicable to a CO-
OP borrower, provided certain conditions are met as described in this 
section.
---------------------------------------------------------------------------

    \315\ Section 1322 (c)(1)(B) of the ACA and 42 U.S.C. 
18042(c)(1)(B) define a QNHII.
---------------------------------------------------------------------------

    Section 1322 of the ACA requires a CO-OP loan recipient, or 
qualified nonprofit health insurance issuer (QNHII), to be, among other 
things, an entity ``substantially all of the activities of which 
consist of the issuance of qualified health plans in the individual and 
small group markets in each State in which it is licensed to issue such 
plans.'' \316\ This requirement is set forth in regulations which 
require that at least two-thirds of the policies or contracts for 
health insurance coverage issued by a CO-OP in each State in which it 
is licensed be qualified health plans offered in the individual and 
small group markets.\317\
---------------------------------------------------------------------------

    \316\ 42 U.S.C. 18042(c)(1)(B).
    \317\ See Sec.  156.515(c)(1).
---------------------------------------------------------------------------

    The ACA also mandates that a QNHII be subject to governance by ``a 
majority vote of its members.'' \318\ Accordingly, Sec.  156.515(b) 
imposes governance requirements for each CO-OP that include a 
requirement that the entity remain under member control, such that a 
majority of its directors are elected by a majority vote of the CO-OP's 
members. A CO-OP ``member'' is an individual covered by a health 
insurance policy issued by a CO-OP.\319\ A CO-OP's voting members 
consist of all persons covered by health insurance policies issued by 
the CO-OP who are 18 years of age or older.\320\
---------------------------------------------------------------------------

    \318\ ACA section 1322(c)(3)(A); 42 U.S.C. 18042(c)(3)(A).
    \319\ See Sec.  156.505.
    \320\ See Sec.  156.515(b)(1).
---------------------------------------------------------------------------

    Section 1322 of the ACA mandates that the Secretary require an 
entity receiving a CO-OP loan to enter into a loan agreement with the 
Secretary. The required loan agreement must obligate the borrower to 
``meet, and to continue to meet'' the requirements of a QNHII, and 
``any other requirements contained in the agreement.'' \321\ No more is 
specified concerning the required contents of the loan agreement.\322\ 
The requirement that a CO-OP be subject to a majority vote of its 
members is, accordingly, imposed by regulation, at Sec.  156.515(b), as 
well as the CO-OP loan agreement. Specifically, Section 18.2 of the CO-
OP loan agreement prohibits any ``[o]rganizational [c]hange . . . that 
would result in . . . implementing a governance structure that does not 
meet the governance standards codified at 45 CFR 156.515(b).''
---------------------------------------------------------------------------

    \321\ 42 U.S.C. 18042(b)(2)(C).
    \322\ 42 U.S.C. 18042(b)(2)(C)(iii) contains specific 
prohibitions, and concomitant penalty, that are not relevant here.
---------------------------------------------------------------------------

    We explained in the proposed rule that as a result of these 
requirements, a CO-OP cannot pursue new business arrangements that 
would impose a governance structure under which it is possible for a 
majority of directors to be elected by a majority vote of persons who 
are not covered by health insurance policies issued by the CO-OP. We 
further explained that a CO-OP also cannot enter into new business 
arrangements under which voting members need not be individuals covered 
by policies issued by the CO-OP. We stated that it is also not possible 
for a CO-OP to enter into a business plan under which potentially less 
than two-thirds of the company's activities may consist of issuing 
qualified health plans.
    In the proposed rule, we explained that the loan agreements 
currently in force only permit a CO-OP to initiate voluntary 
termination of its loan agreement on grounds that the loan recipient 
believes that it cannot create a viable and sustainable CO-OP.\323\ We 
noted that the inability to create a viable or sustainable CO-OP would 
consist of a failure to become or remain licensed as a health insurance 
company, a failure to qualify as a QHP issuer, or a failure to become 
or remain financially solvent. We explained that there is no avenue 
currently for a CO-OP to request to terminate its loan agreement for 
the purpose of pursuing new business ventures that involve a governance 
structure or business model inconsistent with CO-OP governance or 
operational standards.
---------------------------------------------------------------------------

    \323\ CO-OP loan agreement, section 16.1.1(a).
---------------------------------------------------------------------------

    We stated that, informed by 8 years of experience with business 
operations for the CO-OP program, we have become aware of opportunities 
that may be available to CO-OPs to terminate their loan agreement, 
cease to constitute a QNHII, and thus become able to pursue new 
opportunities that appear well-calculated to expand operations from 
regional areas within a State to Statewide operations, and also improve 
consumer access to other health insurance products, while remaining a 
non-profit, member-focused entity.
    We therefore proposed to amend Sec.  156.520(f) to add Sec.  
156.520(f)(2) which would enable CMS, in its sole discretion, to 
approve requests by CO-OP borrowers to voluntarily terminate their loan 
agreement with CMS, and thereby cease to constitute a QNHII, for the 
purpose of permitting the loan recipient to pursue innovative business 
plans that are not otherwise consistent

[[Page 26376]]

with the governance requirements and business standards of a CO-OP 
borrower, provided that (1) all outstanding CO-OP loans issued to the 
loan recipient are repaid in full prior to termination of the loan 
agreement, and (2) we believe granting the request would meaningfully 
enhance consumer access to quality, affordable, member-focused, non-
profit health care options in affected markets. We proposed to move the 
current regulation text at Sec.  156.520(f) to new Sec.  156.520(f)(1).
    As a general matter, we anticipated that plans could be deemed 
innovative and likely to enhance consumer access to quality, 
affordable, member-focused health care if they appear to be well-
calculated to lead directly to marketing non-profit, member-focused 
health plans in new regions of a State, or to offer health plans on a 
Statewide basis for the first time, or to expand operations into new 
States, or to enhance consumer access to new non-profit products that 
are not qualified health plans. We noted that these examples of 
innovative business plans are illustrative, and not exclusive.
    After consideration of comments, and for the reasons outlined in 
the proposed rule and our responses to comments below, we are 
finalizing this provision as proposed. We summarize and respond below 
to public comments received on the proposed amendments Sec.  
156.520(f).
    Comment: Three commenters expressed support for the proposal to 
revise CO-OP regulations to permit CO-OP loan recipients to seek 
voluntary termination for the purpose of pursuing business 
opportunities that would not otherwise be available to a CO-OP. The 
commenters believed the proposal, if finalized, would potentially 
benefit consumers by improving access to non-profit, member-focused 
health care options in affected markets. One commenter acknowledged the 
proposal but did not articulate any position.
    Response: We agree with commenters who believe the proposal could 
benefit consumers by making available potential business opportunities 
that can benefit consumers and are not otherwise feasible for a CO-OP 
to consider.
    Comment: One commenter expressed uncertainty as to whether the 
proposal could have significant impact, since only three CO-OPs remain 
in operation.
    Response: We acknowledge that three CO-OPs remain, operating across 
five States. Efforts to expand operations within a State, and to expand 
operations to new States, depend on several factors. While it is true 
that the population affected by the proposed regulation is limited in 
the near-term, its impact over time could be significant since it will 
remove certain obstacles to business opportunities that could 
ultimately impact many consumers by improving access to non-profit, 
member-focused health care options.
9. Conforming Amendment to Netting Regulation To Include Federal IDR 
Administrative Fees (Sec.  156.1215)
    In the HHS Notice of Benefit and Payment Parameters for 2025 
proposed rule (88 FR 82510, 82610), we proposed conforming amendments 
to the payment and collections process set forth at Sec.  156.1215 to 
align with the policies and regulations proposed in the Federal 
Independent Dispute Resolution Operations proposed rules (88 FR 75744). 
We proposed that the administrative fees for utilizing the No Surprises 
Act \324\ Federal IDR process charged to health insurance issuers that 
participate in financial programs under the ACA would be subject to 
netting as part of HHS' integrated monthly payment and collections 
cycle, assuming the policies related to HHS collection of the IDR 
administrative fees in the Federal Independent Dispute Resolution 
Operations proposed rules (88 FR 75744) are finalized.\325\
---------------------------------------------------------------------------

    \324\ The Consolidated Appropriations Act, 2021 (CAA) was 
enacted on December 27, 2020. Both title I, also known as the No 
Surprises Act, and title II (Transparency) of Division BB of the CAA 
amended chapter 100 of the Code, Part 7 of ERISA, and title XXVII of 
the PHS Act. Administrative fees are charged in accordance with 45 
CFR 149.510(d)(2), 26 CFR 54.9816-8T(d)(2), and 29 CFR 2590.716-
8(d)(2).
    \325\ We stated in the 2025 Payment Notice proposed rule (88 FR 
82610) that the effective date of any finalized proposal related to 
netting of amounts owed to the Federal Government from health 
insurance issuers for administrative fees for utilizing the No 
Surprises Act Federal IDR process would not be earlier than a time 
at which both the proposals related to the manner of administrative 
fee collection and netting proposed in the Federal Independent 
Dispute Resolution Operations proposed rule and the proposed 
amendments to Sec.  156.1215 in this proposed rule are finalized.
---------------------------------------------------------------------------

    To implement this policy, we proposed to amend Sec.  156.1215(b) to 
allow HHS to net payments owed to issuers and their affiliates \326\ 
operating under the same tax identification number (TIN) against 
amounts due to the Federal Government from the issuers and their 
affiliates operating under the same TIN for APTC, advance payments of 
and reconciliation of CSRs (as applicable), payment of FFE or SBE-FP 
user fees, HHS risk adjustment, reinsurance, and risk corridors 
payments and charges, and administrative fees from these issuers and 
their affiliates for utilizing the Federal IDR process in accordance 
with Sec.  149.510(d)(2). Additionally, we proposed to amend Sec.  
156.1215(c) to provide that any amount owed to the Federal Government 
by an issuer and its affiliates for unpaid administrative fees due to 
the Federal Government from these issuers and their affiliates for 
utilizing the Federal IDR process in accordance with Sec.  
149.510(d)(2), after HHS nets amounts owed by the Federal Government 
under these programs, would be the basis for calculating a debt owed to 
the Federal Government.
---------------------------------------------------------------------------

    \326\ ``Affiliate'' refers to any affiliated issuer that 
operates under the same taxpayer identification number as an issuer, 
such as when there are multiple Health Insurance Oversight System 
(HIOS) identifiers operating under the same taxpayer identification 
number. See the 2015 Payment Notice proposed rule (78 FR 72371).
---------------------------------------------------------------------------

    We sought comment on the proposed amendments to Sec.  156.1215(b) 
and (c).
    After consideration of comments and for the reasons outlined in the 
proposed rule and our responses to the comments, we are finalizing this 
provision as proposed. We summarize and respond below to public 
comments received on the proposed amendments to the payment and 
collections process at Sec.  156.1215(b) and (c).
    Comment: Some commenters opposed the proposal to allow HHS to net 
unpaid Federal IDR administrative fees with payments owed to issuers 
for certain other specified HHS ACA programs. Several of these 
commenters raised concerns regarding the proposal's impact on the 
current integrated payment and collections processes with a few of 
these commenters expressing concerns that modifying any payment and 
collections process prior to stabilizing the Federal IDR process could 
create substantial administrative burdens and unintended challenges for 
issuers. Additionally, some commenters expressed concern that without 
detailed accounting from HHS, netting would hinder issuers' ability to 
determine which disputes the administrative fee is being collected for 
and to which entities, who are involved in a dispute, the IDR 
administrative fee should be attributed. Finally, one commenter 
requested the netting process be delayed until issuers are required to 
pay the Federal IDR administrative fee directly to HHS.
    Response: We are finalizing amendments to the payment and 
collections process set forth at Sec.  156.1215 as proposed. We will 
not begin netting Federal IDR administrative fees until disputing 
parties are required to pay Federal IDR administrative fees directly to 
HHS, if the proposal in Federal Independent Dispute Resolution 
Operations proposed rules (88 FR 75744) is finalized.

[[Page 26377]]

    To further explain this netting process, HHS will include amounts 
owed to the Federal Government from issuers and their affiliates 
operating under the same TIN for administrative fees for utilizing the 
Federal IDR process in accordance with Sec.  149.510(d)(2) when netting 
payments owed to issuers and their affiliates operating under the same 
tax identification number against amounts due to the Federal Government 
from the issuers and their affiliates under the same taxpayer 
identification number for advance payments of the premium tax credit, 
advance payments of and reconciliation of cost-sharing reductions, 
payment of Federally-facilitated Exchange user fees, payment of State 
Exchanges utilizing the Federal platform user fees, and risk 
adjustment, reinsurance, and risk corridors payments and charges.
    As part of this netting policy, we will also provide that any 
amount owed to the Federal Government by an issuer and its affiliates 
for unpaid administrative fees due to the Federal Government from these 
issuers and their affiliates for utilizing the Federal IDR process in 
accordance with Sec.  149.510(d)(2), after HHS nets amounts owed by the 
Federal Government under these programs, would be the basis for 
calculating a debt owed to the Federal Government. Should the parallel 
related proposals related to the manner of the administrative fee 
collection and netting be finalized in the Federal Independent Dispute 
Resolution Operations proposed rules, we will work with issuers to 
prevent additional administrative burdens or unintended challenges for 
HHS and issuers in implementing this netting policy. Specifically, we 
intend to leverage our current integrated payment and collections 
process and reporting to simplify the implementation of this netting 
policy, to assist issuers in identifying debts owed through its current 
invoice process, and to keep issuers informed of updates to the 
integrated payment and collections processes.
    Comment: One commenter recommended that if HHS finalizes the 
proposal to allow HHS to net unpaid IDR administrative fees with other 
HHS program funds owed to issuers, issuers should be allowed to file a 
request for reconsideration to contest errors, application of the 
relevant methodology, or mathematical errors with respect to the amount 
of an IDR administrative fee by HHS.
    Response: We do not believe that additional dispute processes, such 
as the appeal process under Sec.  156.1220, are needed. If HHS were to 
directly collect IDR administrative fees, issuers will be able to 
dispute charges or raise issues, such as mathematical errors, under 
existing processes as provided in Sec.  30.12. Accordingly, all 
issuers' invoices for all programs identified under Sec.  156.1215 
provide instructions for how issuers can submit a written dispute of 
their invoices and request that HHS review the determination of the 
debt. Under this process, issuers have the right to inspect HHS records 
related to the invoice and present evidence that all or part of their 
debt is not past due or not legally enforceable. Once a written request 
presenting the evidence is submitted to HHS, we review the 
determination of the debt and work with issuers to resolve any issues 
or inconsistencies.

IV. Collection of Information Requirements

    Under the Paperwork Reduction F of 1995, we are required to provide 
60-day notice in the Federal Register and solicit public comment before 
a collection of information requirement is submitted to the Office of 
Management and Budget (OMB) for review and approval. To fairly evaluate 
whether an information collection should be approved by OMB, section 
3506(c)(2)(A) of the Paperwork Reduction Act of 1995 requires that we 
solicit comment on the following issues:
     The need for the information collection and its usefulness 
in carrying out the proper functions of the 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 these issues for the 
following sections of this document that contain information collection 
requirements (ICRs). The public comments and our responses appear in 
this section, and in the applicable ICR sections that follow.
    Comment: Regarding the Collection of Information requirements, one 
commenter stated that paperwork burden and information collection 
estimates concentrate on the design of products such as forms without 
also devoting attention to recordkeeping requirements, training, and 
legitimate private sector concerns over exposure to new enforcement 
actions. The commenter suggested that CMS can minimize these problems 
by ensuring adequate implementation periods, proposing major changes 
that start from a common and familiar knowledge base, soliciting 
feedback more often than annually, closely examining the ``regulatory 
sandbox'' concept, and designing and promulgating ``safe harbor'' 
guidance for entities.
    Response: We appreciate the commenter's general feedback on ways 
that HHS can continually improve the accuracy of its cost estimates. We 
emphasize that HHS adheres to the Administrative Procedure Act \327\ 
standards of notice and comment rulemaking and that HHS strives to 
estimate information collection burden as accurately as possible given 
the data available to inform its estimates, and incorporates feedback 
and input from interested parties, both through notice and comment 
rulemaking and informal feedback throughout the year.
---------------------------------------------------------------------------

    \327\ Public Law 79-404.
---------------------------------------------------------------------------

A. Wage Estimates

    To derive wage estimates, we generally use data from the Bureau of 
Labor Statistics to derive average labor costs (including a 100 percent 
increase for the cost of fringe benefits and overhead) for estimating 
the burden associated with the ICRs.\328\ Table 14 presents the median 
hourly wage, the cost of fringe benefits and overhead, and the adjusted 
hourly wage.
---------------------------------------------------------------------------

    \328\ See May 2022 Bureau of Labor Statistics, Occupational 
Employment Statistics, National Occupational Employment and Wage 
Estimates. https://www.bls.gov/oes/current/oes_stru.htm.
---------------------------------------------------------------------------

    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.

[[Page 26378]]



                            Table 14--Adjusted Hourly Wages Used in Burden Estimates
----------------------------------------------------------------------------------------------------------------
                                                                                      Fringe
                                                   Occupational    Median hourly   benefits and      Adjusted
                Occupation title                       code        wage ($/hr.)    overhead ($/   hourly wage ($/
                                                                                       hr.)            hr.)
----------------------------------------------------------------------------------------------------------------
Business Operations Specialist..................         13-1000          $36.56          $36.56          $73.12
Web and Digital Interface Designer..............         15-1255           40.02           40.02           80.04
Web Developer...................................         15-1254           37.78           37.78           75.56
Compliance Officer..............................         13-1041           34.47           34.47           68.94
Accountant and Auditor..........................         13-2011           37.50           37.50           75.00
Management Analyst..............................         13-1111           45.81           45.81           91.62
Chief Executive.................................         11-1011           91.12           91.12          182.24
Computer Systems Analyst........................         15-1211           49.15           49.15           98.30
Financial Examiners (State Government, excluding         13-2061           39.52           39.52           79.04
 schools and hospitals).........................
Actuary (Member of American Academy of                   15-2011           54.80           54.80          109.60
 Actuaries).....................................
General and Operations Manager..................         11-1021           47.16           47.16           94.32
General Internal Medicine Physician.............         29-1216          103.11          10.113          206.22
Computer Programmers............................         15-1251           47.02           47.02           94.04
----------------------------------------------------------------------------------------------------------------

B. ICRs Regarding Finalized Amendments to Normal Public Notice 
Requirements (31 CFR 33.112, 31 CFR 33.120 and 45 CFR Part 155.1312, 
and 45 CFR 155.1320)

    We are finalizing amendments to the section 1332 waiver 
implementing regulations to set forth flexibilities related to State 
public notice requirements and post-award public participation 
requirements. Current regulations at 31 CFR 33.112 and 45 CFR 155.1312 
specify State public notice and comment period and participation 
requirements for finalized section 1332 waiver requests, and 31 CFR 
33.116(b) and 45 CFR 155.1316(b) specify the public notice and comment 
period and approval requirements under the accompanying Federal 
process.
    However, this final rule does alter any of the requirements related 
to section 1332 waiver applications, compliance and monitoring, or 
evaluation in a way that would impose any additional costs or burdens 
for States seeking waiver approval or those States with approved waiver 
plans that have not already been captured in prior burden estimates. 
The Departments anticipate that implementing these provisions will not 
significantly change or decrease the associated burden currently 
approved under OMB control number: 0938-1389, expiration date: February 
29, 2024.
    We did not receive any comments on ICRs regarding the amendments to 
normal public notice requirements for section 1332 waivers.

C. ICRs Regarding Basic Health Program Regulations (42 CFR 600.320)

    We are finalizing requirements at 42 CFR 600.320(c)(1) through (3) 
that a State operating a BHP must establish a uniform method of 
determining the effective date of eligibility for enrollment in a 
standard health plan which follows: (1) the Exchange coverage effective 
date standards at 45 CFR 155.420(b)(1); (2) the Medicaid effective date 
standards at 42 CFR 435.915 exclusive of Sec.  435.915(a); or (3) an 
effective date of eligibility of the first day of the month following 
the month in which BHP eligibility is determined. We are also adding 42 
CFR 600.320(c)(4) which allows for a State to establish its own 
effective date of eligibility for enrollment policy subject to HHS 
approval. We note that only 42 CFR 600.320(c)(3) and (4) are newly 
finalized. The options under 42 CFR 600.320(c)(1) and (2) currently 
exist.
    We estimate that the policies under 42 CFR 600.320(c)(3) and (4) 
will have no impact on the information collection burden. We note that 
any cost would be incurred 100 percent by the State, as Federal BHP 
funds cannot be used for program administration.
    We sought comment on these assumptions.
    We did not receive any comments in response to the burden estimates 
for this policy change. We are finalizing these estimates as proposed.

D. ICRs Regarding Election To Operate an Exchange After 2014 (45 CFR 
155.106)

    We are finalizing amendments to Sec.  155.106(a)(2) to add new 
paragraphs (a)(2)(i) and (ii). Specifically, we are finalizing that as 
part of a State's activities for its establishment of a State Exchange, 
the State provide upon request, supplemental documentation to HHS 
detailing the State's implementation of its State Exchange 
functionality, including information regarding the State's ability to 
implement and comply with Federal requirements for operating an 
Exchange. Such supporting documentation would inform HHS's decision to 
approve or conditionally approve a State Exchange and could include, 
for example, materials demonstrating progress toward meeting State 
Exchange Blueprint application requirements, documentation that details 
a State's plans to implement and meet the Exchange functional 
requirements as laid out in the State Exchange Blueprint application, 
or plans to engage in consumer assistance programs and activities. 
Additionally, we are finalizing the requirement that when a State 
submits its State Exchange Blueprint application to HHS for approval, 
the State must provide the public with notice and a copy of its State 
Exchange Blueprint application. Further, at some point following a 
State's submission of its State Exchange Blueprint application to HHS, 
a State must conduct at least one public engagement (such as a townhall 
meeting or public hearing), in a timeline and manner considered 
effective by the State, with concurrence from HHS, at which interested 
parties can learn about the State's intent to establish a State 
Exchange and the State's progress toward executing that transition. We 
are also finalizing the requirement that while a State is in the 
process of establishing a State Exchange and until HHS has approved or 
conditionally approved the State Exchange Blueprint application, the 
State conduct periodic public engagements at which interested parties 
can continue to learn about the State's progress towards establishing a 
State Exchange, in a timeline and manner considered effective by the 
State, with concurrence from HHS. These finalized requirements will 
impact States that are considering, or are in the process of, 
establishing a State Exchange for PY 2025 and subsequent years. We 
anticipate minimal burden on these States, as we believe they will have 
sufficient time to plan for such public-facing State Exchange

[[Page 26379]]

engagements and activities if not already in their plans.
    We did not receive any comments in response to the burden estimates 
for this policy. We are finalizing these estimates as proposed.

E. ICRs Regarding Adding and Amending Language To Ensure Web-Brokers 
Operating in State Exchanges Meet Certain HHS Standards Applicable in 
the FFEs and SBE-FPs (45 CFR 155.220)

    We are finalizing amendments to Sec.  155.220 to apply to web-
brokers operating in State Exchanges, and consequently in State 
Exchanges, in both the Individual Market Exchanges and SHOPs, certain 
existing HHS standards governing web-brokers' use of non-Exchange 
websites to assist consumers with enrolling in QHPs and applying for 
APTC/CSRs in a manner that constitutes enrollment through the Exchange. 
The burden associated with these amendments includes costs for web-
brokers assisting consumers in State Exchanges to meet the requirements 
in finalized Sec.  155.220(n) and for State Exchanges related to the 
development and oversight of web-broker programs within their State. We 
anticipate that the same number of web-brokers operating in the 
Exchanges on the Federal platform (20) will also operate in the 5 State 
Exchanges and will be required to incur this burden for each of the 5 
State Exchanges they may operate in. We estimate the relevant costs 
based on current Federal costs. These estimates are described below.
    These amendments will impose burdens on web-brokers assisting 
consumers in State Exchanges for costs related to web-development to 
meet the finalized website display requirements to be extended to web-
brokers operating in these State Exchanges and costs associated with 
creating and submitting audit documentation for the applicable 
Exchange's review. We solicited feedback from State Exchanges regarding 
these burden estimates and the number of web-brokers expected to 
participate in State Exchanges pursuant to this proposal. Although we 
have allowed certain flexibility for State Exchanges to tailor their 
web-broker program and establish their own standards with respect to 
operational readiness demonstrations by their web-brokers, we expect 
the costs can be reasonably estimated based on the Federal costs as 
follows.
    We estimate it will take 5 hours for a Business Operations 
Specialist at an hourly rate of $73.12 to implement the standardized 
disclaimers required under Sec.  155.220(c)(3)(i)(A) and (G), along 
with 30 hours at an hourly rate of $80.04 for a Web and Digital 
Interface Designer to modify the website to implement the standardized 
disclaimers across 5 State Exchanges. Therefore, for the standardized 
disclaimers under Sec.  155.220(c)(3)(i)(A) and (G), we estimate each 
web-broker assisting consumers in State Exchanges will incur a cost of 
$2,766.80 (5 hours x $73.12 per hour + 30 hours x $80.04 per hour). We 
estimate a cumulative burden of $55,336 for the anticipated 20 web-
brokers operating across the State Exchanges ($2,766.80 x 20 web-
brokers). Additionally, finalized new paragraph Sec.  155.220(n)(1) 
allows State Exchanges the flexibility to add State-specific language 
to the standardized disclaimers, provided the additional language does 
not conflict with the HHS-provided standardized disclaimers. We 
solicited feedback from State Exchanges regarding how these 
flexibilities would impact these burden estimates.
    Additionally, we anticipate it will take up to 100 hours at an 
hourly rate of $80.04 for a Web and Digital Interface Designer to 
modify the website to implement and display the standardized QHP 
comparative information required under Sec.  155.220(c)(3)(i)(A) 
(including the quality ratings assigned by HHS and enrollee 
satisfaction survey) across 5 State Exchanges. Therefore, for the 
display of the QHP comparative information on web-broker non-Exchange 
websites, we estimate each web-broker operating in State Exchanges will 
incur a cost of $8,004 (100 hours x $80.04 per hour). We estimate a 
cumulative burden of $160,080 for the anticipated 20 web-brokers 
operating across the State Exchanges ($8,400 x 20 web-brokers).
    We anticipate it will take 25 hours for a Web and Digital Interface 
Designer at an hourly rate of $80.04 to modify the website to display 
the APTC and CSR eligibility information required under Sec.  
155.220(c)(3)(i)(I) across 5 State Exchanges. Therefore, for changes 
related to implementation of the HHS minimum web-broker standards 
related to display of consumer APTC and CSR eligibility information, we 
estimate each web-broker operating in States with State Exchanges will 
incur a cost of $2,001 (25 hours x $80.04). We therefore estimate a 
cumulative burden of $40,020 for the anticipated 20 web-brokers 
operating across the 5 State Exchanges ($2,001 x 20 web-brokers). 
Additionally, as discussed in the proposed rule (88 FR 82560), we allow 
State Exchanges flexibility in how consumer eligibility information for 
APTC or CSRs is displayed on websites by web-brokers in State 
Exchanges, at the discretion of the State Exchange on the display of 
that information. We solicited feedback from State Exchanges regarding 
how these flexibilities would impact these burden estimates.
    Finalized paragraph Sec.  155.220(c)(4)(iii) will extend certain 
downstream agent and broker requirements at Sec.  155.220(c)(4)(i) that 
currently apply to web-brokers in FFE and SBE-FP States and govern the 
use of the web-broker's non-Exchange website by other agents or brokers 
assisting Exchange consumers to also apply to web-brokers, and their 
downstream agents and brokers in State Exchanges, and consequently to 
these State Exchanges. Under the finalized provision, web-brokers that 
permit other agents or brokers, through a contract or other 
arrangement, to use the web-broker's non-Exchange website to help an 
applicant or enrollee complete a QHP selection or complete the Exchange 
eligibility application will be required to meet the standards at Sec.  
155.220(c)(4)(i)(A), (B), (D), and (F) when assisting consumers in 
States with State Exchanges. This includes extension of requirements 
for web-brokers to verify that any agent or broker accessing or using 
the website is licensed in the State in which the consumer is selecting 
the QHP and has completed training and registration and has signed all 
required agreements with the applicable State Exchange. It will also 
require web-brokers to terminate the agent or broker's access to its 
website if the applicable State Exchange determines the agent or broker 
is in violation of the provisions described in this section and/or if 
the applicable State Exchange terminates any required agreement with 
the agent or broker. In addition, it will also extend a requirement for 
web-brokers to provide State Exchanges with a list of agents and 
brokers who enter into such a contract or other arrangement to use the 
web-broker's non-Exchange website, in a form and manner to be specified 
by the State Exchanges similar to the requirement in Sec.  
155.220(c)(4)(i)(A) for web-brokers in FFE and SBE-FP States to report 
the same information to HHS. We understand that web-brokers who work 
with and allow other agents and brokers to use the web-brokers' non-
Exchange websites to assist Exchange consumers typically obtain and 
manage information on each of their downstream agents or brokers as 
part of an onboarding process. As a result, we expect web-brokers will 
already have the necessary data to provide a list to the applicable 
State Exchange of each of

[[Page 26380]]

the other agents or brokers that are allowed to use the web-brokers' 
non-Exchange websites to assist Exchange consumers. We estimate that it 
will take up to 240 hours at an hourly cost of $94.04 for a computer 
programmer to perform the necessary programming to comply with these 
requirements in Sec.  155.220(c)(4)(i)(A), (B), and (D), and 10 hours 
at an hourly cost of $73.12 for a Business Operations Specialist to 
develop a listing of affiliated third-party agents and brokers across 
all 5 State Exchanges. Therefore, for changes related to implementation 
of these HHS minimum web-broker standards related to downstream agents 
or brokers, we estimate each web-broker operating in State Exchanges 
will incur a cost of $23,300.80 per web-broker (($94.04 x 240 hours) + 
($73.12 x 10 hours)). We estimate a cumulative burden of $466,016 for 
an anticipated 20 web-brokers operating across the State Exchanges 
($23,300.80 x 20 web-brokers).
    We estimate it will take 95 hours for a Business Operations 
Specialist at an hourly rate of $73.12 to oversee and monitor 
compliance with the operational readiness requirements established by 
State Exchanges, as required by new Sec.  155.220(n)(2) across 5 State 
Exchanges. Therefore, for compliance requirements, we estimate each 
web-broker operating in States with State Exchanges will incur a cost 
of $6,946.40 (95 hours x $73.12) for the finalized operational 
readiness requirements. We estimate a cumulative burden of $138,928 for 
the anticipated 20 web-brokers operating across the 5 State Exchanges 
($6,946.40 x 20 web-brokers). These burden estimates are provided based 
on the estimates of the cost for DE entities to comply with the 
operational readiness requirements established by HHS. Finalized 
paragraph Sec.  155.220(n)(2) will allow State Exchanges to define and 
establish the form and manner for their web-brokers to establish 
operational readiness. Although we anticipate State Exchanges would 
establish requirements similar to the requirements for demonstrating 
operational readiness to operate in the FFE or SBE-FPs, we solicited 
feedback from State Exchanges regarding how well these burden estimates 
reflect their anticipated requirements.
    Therefore, we estimate each web-broker operating in all 5 State 
Exchanges will incur a one-time burden in PY 2025 of 505 hours at a 
cost of $43,019. We estimate a cumulative burden of 10,100 hours at an 
estimated cost of $860,380 for all 20 web-brokers operating across the 
5 State Exchanges. We sought comment on the number of State Exchanges 
that would be interested in establishing a web-broker program to allow 
web-brokers to host non-Exchange websites to assist Exchange consumers 
in their State and on the number of web-brokers interested in operating 
in those State Exchanges.
    Finalized paragraph 155.220(n) will require State Exchanges to 
comply with the HHS standards described above and in the preamble. 
Finalized paragraph 155.220(n)(1) will allow State Exchanges the 
flexibility to add State-specific language to the standardized 
disclaimers provided the additional language does not conflict with the 
HHS-provided standardized disclaimers and provides flexibility in how 
consumer eligibility information for APTC or CSRs is displayed on 
websites by web-brokers in State Exchanges, at the discretion of the 
State Exchange on the display of that information. Finalized paragraph 
(2) under this new section will also require State Exchanges to 
establish the form and manner for their web-brokers to demonstrate 
operational readiness, which may include submission or completion of 
the same items addressed in Sec.  155.220(c)(6)(i)-(v) to the State 
Exchanges, in the form and manner specified by the Exchange. The burden 
associated with these finalized changes includes costs for existing and 
future State Exchanges related to drafting new policy, updating 
standards, and potentially hiring additional staff to perform functions 
not currently being performed by the State Exchange, such as for 
drafting web-broker disclaimer language, drafting consumer-facing 
educational content, and engaging web-brokers in operational readiness, 
that will now incur new costs related to establishment of a web-broker 
program and ongoing monitoring of web-brokers to enforce the minimum 
HHS standards and any additional State-specific requirements.
    We estimate the relevant costs based on current Federal costs as 
follows. We estimate that 5 States will opt to host a web-broker 
program for their State Exchanges. We anticipate the total burden 
associated with the State Exchanges developing the associated policies 
and procedures, including providing web-brokers with examples and 
technical assistance (including technical implementation guidance such 
as providing the quality ratings assigned and enrollee satisfaction 
survey data) to be up to 528 hours per State. This assumes 480 hours 
for a GS-13, Step 5 employee at an hourly rate of $121.66 (the hourly 
wage rate for a GS-13, Step 5 employee in the Washington, DC area,\329\ 
doubled to account for fringe benefits and overhead) and 48 hours for a 
GS-15, Step 5 employee at an hourly rate of $169.10 (the hourly wage 
rate for a GS-15, Step 5 employee in the Washington, DC area,\330\ 
doubled to account for fringe benefits and overhead). In total, for the 
5 State Exchanges anticipated to participate, we estimate a burden of 
2,640 hours (5 State Exchanges x 528 hours per State Exchange) at a 
cost of $332,568 (2,400 hours x $121.66 + 240 x $169.10).
---------------------------------------------------------------------------

    \329\ OPM. (2023, January). Salary Table 2023-DCB Incorporating 
the 4.1% General Schedule Increase and a Locality Payment of 32.49% 
For the Locality Pay Area of Washington-Baltimore-Arlington, DC-MD-
VA-WV-PA Total Increase: 4.86%. https://www.opm.gov/policy-data-oversight/pay-leave/salaries-wages/salary-tables/pdf/2023/DCB_h.pdf.
    \330\ Id.
---------------------------------------------------------------------------

    We estimate it will take 40 hours each for the State Exchange 
equivalent of 2 GS-13, Step 5 employees at an hourly rate of $121.66 
(the hourly wage rate for a GS-13, Step 5 employee in the Washington, 
DC area,\331\ doubled to account for fringe benefits and overhead) to 
complete initial documentation review related to all web-broker 
requirements pursuant to this finalized policy, for a total cost to 
State governments of $9,732.80 (2 x 40 hours x $121.66) per State 
Exchange. We estimate it will take 8 hours for the equivalent of 1 GS-
15, Step 5 employee at an hourly rate of $169.10 (the hourly wage rate 
for a GS-15, Step 5 employee in the Washington, DC area,\332\ doubled 
to account for fringe benefits and overhead) to provide managerial 
review and oversight, for a total cost to State governments of 
$1,352.80 (1 x 8 hours x $169.10) per State Exchange. Additionally, we 
estimate the total burden for each State government for State contract 
and contractors ongoing reviews for oversight will include 1,087 hours 
at GS-12, Step 5 with an hourly rate of $102.30 (the hourly wage rate 
for a GS-12, Step 5 employee in the Washington, DC area,\333\ doubled 
to account for fringe benefits and overhead) and 2,305 hours at GS-13, 
Step 5 with an hourly rate of $121.66 (the hourly wage rate for a GS-
13, Step 5 employee in the Washington, DC area,\334\ doubled to account 
for fringe benefits and overhead), and the total burden across all 5 
States to be 16,960 hours. Therefore, we estimate a cost to each State 
governments of $469,225.60, with a total estimated cost to State 
governments of $2,346,128 (5 States x $469,225.60). We sought comment 
from

[[Page 26381]]

State Exchanges on these burden estimates.
---------------------------------------------------------------------------

    \331\ Id.
    \332\ Id.
    \333\ Id.
    \334\ Id.
---------------------------------------------------------------------------

    We recognize that some State Exchanges may utilize web-brokers 
already assisting consumers in the FFEs and SBE-FPs, and encourage 
State Exchanges to leverage web-broker operational readiness 
demonstrated to participate in the FFEs or SBE-FPs when possible, as to 
minimize the burdens on the State Exchanges and their web-brokers.
    After consideration of comments and for the reasons outlined in the 
proposed rule and our responses to comments, we are finalizing the 
burden estimates with modifications to the estimated burden hours for 
web-brokers to implement the requirements associated with this policy. 
We summarize and respond to public comments received regarding this 
provision below.
    Comment: One commenter suggested that the burden estimates could be 
substantially reduced if the State Exchanges leverage or choose to 
mirror the HHS requirements. This commenter noted concern that it is 
misleading to present a separate burden analysis for web-brokers and DE 
entities, as the majority of web-brokers are DE entities and the burden 
for complying with web-broker standards on top of EDE standards is 
minimal.
    Response: We appreciate the comment that the burden estimates could 
be substantially reduced if the State Exchanges leverage the HHS 
requirements. Although we agree with this comment, the flexibilities 
afforded to State Exchanges as part of this finalized policy, 
particularly with regards to implementation of web-broker programs and 
requirements, present the possibility of significant differences 
between web-broker programs in different States while also establishing 
baseline consumer protections across the State Exchanges. We formulated 
these burden estimates to account for a possible scenario of varied 
web-broker program requirements across State Exchanges. However, we 
encourage State Exchanges to leverage the HHS requirements and believe 
the implementation costs for both State Exchanges and web-brokers may 
be substantially reduced if the State Exchanges leverage the HHS 
requirements. However, the assumption that States can save money by 
mirroring HHS standards assumes that all entities participating have 
complied and met the HHS standards, as verified by HHS, and ignores the 
possibility that entities may participate in a given State's web-broker 
or DE entity program as a net new entity, with no experience or 
documented compliance at the Federal level. We carefully considered 
this commenter's feedback and reduced relevant burden estimates for 
requirements where we believe there is a high likelihood that State 
Exchanges will adopt the same requirements as the FFE. We disagree 
where the commenter suggested it is misleading to present a separate 
burden analysis for web-brokers and DE entities. Although the majority 
of DE entities are web-brokers, there exist some DE entities that are 
not web-brokers (for example, Issuer DE Technology Providers). For that 
reason, we believed it was important to provide a comprehensive burden 
estimate for participating in web-broker programs and DE entity 
programs. However, we acknowledge there is significant overlap between 
the requirements for web-brokers and DE entities, and, accordingly, 
have reduced the entity burden estimates for DE entities distinct from 
web-brokers. We note, however, given the State's requirements for a DE 
entity under Sec.  155.221 may require a different burden for an entity 
to implement and comply with compared to the State's requirements for a 
web-broker under Sec.  155.220.
    Comment: One supporting commenter provided comments related 
specifically to the portion of the burden estimate regarding costs for 
State Exchanges to implement web-broker programs. This commenter noted 
that the cost estimates for States to implement this finalized proposal 
are overstated and fail to incorporate the potential cost savings and 
additional user fee revenues that States could realize through 
utilization of web-brokers, including reduced burdens on State call 
centers and State Exchanges. The commenter expressed concern that the 
burden estimates were based on salary information for Washington, DC, 
citing higher salaries for that locality as compared to employees in 
the majority of State Exchanges. This commenter requested clarification 
for how the estimated hours for contractor oversight of State Exchanges 
were determined.
    Response: We acknowledge the concern that the burden estimates for 
State Exchanges to implement web-broker programs are overstated. As 
acknowledged above, this finalized policy provides flexibility to State 
Exchanges in their implementation of web-broker programs. These burden 
estimates account for the possibility that State Exchanges may 
implement web-broker programs differing from the FFE program. We 
encourage State Exchanges to leverage the HHS requirements when 
developing their web-broker programs and we anticipate that doing so 
would substantially reduce the burden for State Exchanges to develop 
and implement these programs. In addition, we acknowledge the comment 
that web-broker programs may provide additional user fee revenues and 
cost savings to State Exchanges associated with reduced burdens on 
State call centers and State Exchanges. Although we acknowledge that 
there could be cost savings associated with implementing web-broker 
programs in State Exchanges, we have not conducted a detailed analysis 
on the cost savings associated with the implementation of web-broker 
programs in the FFE and, therefore, cannot quantify the extent of any 
such savings. Furthermore, these estimates are specific to defining the 
oversight policies and procedures, and the implementation of such 
oversight for web-brokers and DE entities under Sec. Sec.  155.220 and 
155.221; these estimates are not intended to calculate the total cost--
or savings--for any given State to implement a web-broker or DE 
program, including the costs of developing and maintaining the 
technical infrastructure to maintain a web-broker and DE entity 
program. However, we do recognize the potential for savings and are 
open to feedback as we continue to work with our State partners on 
implementation of these programs. We acknowledge the concern regarding 
the use of Washington, DC, labor rates in calculating these burden 
estimates. In the absence of a national average pay scale, we 
acknowledge there will be variations in regional pay scales among State 
Exchanges, including some which may be higher or lower than the rates 
used to calculate these estimates. With regards to the estimates for 
contractor oversight of State Exchanges, we are clarifying that these 
estimates were calculated by mapping labor for the relevant 
requirements to GS categories based on the applicable FFE contractor 
support labor costs and hours for the applicable requirements and 
estimated number of entities. We acknowledge that any given State may 
experience a higher or lower cost for implementing these programs 
depending on the extent (that is, scope and frequency) of the State's 
oversight mechanisms, the scope of the State's specific requirements 
for these programs, and the general quality and compliance posture of 
web-brokers or DE entities intending to participate in the State.
    Comment: One supporting commenter provided comments related to the 
portion of the burden estimate regarding costs for web-brokers to 
operate in State Exchanges. Specifically, this commenter provided 
detailed feedback on the estimated burden hours based on their

[[Page 26382]]

experience as a web-broker operating in the FFEs. This included 
feedback on the burden associated with implementing Sec. Sec.  
155.220(c)(3)(i)(A), 155.220(c)(3)(i)(G), 155.220(c)(3)(i)(I), 
155.220(c)(4)(i)(A), 155.220(c)(4)(i)(B), 155.220(c)(4)(i)(D), and 
155.220(n)(2).
    Response: We appreciate the feedback on these burden estimates from 
a web-broker currently operating in the FFEs. We recognize the value of 
feedback from an entity with experience implementing the FFE program 
requirements and we carefully considered this feedback and have 
adjusted the burden estimates where applicable. In making these 
adjustments, we considered that the commenter has considerable 
experience operating in the FFE. As the commenter acknowledged, other 
web-brokers may have differing levels of technical expertise and 
capacity. We have accounted for the costs associated with implementing 
these requirements from the perspective of web-brokers with limited 
experience. However, we agree that the burden may be substantially 
lower for web-brokers with increased technical experience and capacity. 
In considering the feedback on these burden estimates, we note there 
were several assumptions made regarding the State Exchanges' provision 
of data to web-brokers (for example, the provision of QHP data and 
agent or broker registration data). These burden estimates account for 
a scenario where there may be variability between the format of data 
provided across State Exchanges. We encourage State Exchanges to 
leverage the data formats used in the FFEs and are committed to 
providing technical assistance to State Exchanges to facilitate such 
standardization.

F. ICRs Regarding Establishing Requirements for DE Entities Mandating 
HealthCare.gov Changes To Be Reflected on DE Entity Non-Exchange 
Websites Within a Notice Period Set by HHS (45 CFR 155.221(b))

    As discussed in the preamble of this finalized rule, we are 
finalizing without modification but with technical changes additional 
language to Sec.  155.221 requiring that, in FFE and SBE-FP States, 
would require DE entities to implement and prominently display website 
display changes made by HHS to HealthCare.gov by meeting standards 
communicated and defined by HHS within a time period set by HHS, unless 
HHS approves a deviation from those standards. within a time period 
specified by HHS, unless HHS approves a deviation.
    Based on our experience with operating the DE program on the FFEs 
and SBE-FPs over the past several years, we estimate that approximately 
three or fewer display changes will be required annually. We estimate 
that a total of 100 web-brokers and QHP issuers participating in DE in 
FFE and SBE-FP States will be required to comply with these 
requirements. These display changes may range from changes such as, but 
not limited to, relatively simple text-based updates to more complex 
display changes involving the website's backend display methodology or 
algorithms. We estimate approximately two simpler and one more complex 
display change annually. We estimate that it will take a Web and 
Digital Interface Designer 30 hours annually, at a cost of $80.04 per 
hour, to implement these changes, at a total annual cost of 
approximately $2,401.20 ($80.04 x 30 hours) per web-broker or QHP 
issuer. We therefore estimate a total annual burden of 3,000 hours (30 
x 100) at a cost of $240,120 (3,000 hours x $80.04 per hour) for all 
applicable web-brokers and QHP issuers.
    We recognize that system constraints may prevent DE entity non-
Exchange websites from precisely mirroring the HealthCare.gov display 
approach, and that DE entities may have an idea for implementation that 
does not meet the standards defined by HHS but would effectively 
communicate the same information to consumers. We are finalizing that 
DE entities assisting consumers in FFE and SBE-FPs that intend to 
deviate from the standards defined by HHS will be required to submit a 
deviation request. Those requests will be subject to review by HHS in 
advance of implementation of any alternative display approaches.
    Based on internal data, we estimate that 25 web-brokers and QHP 
issuers assisting consumers in FFE or SBE-FP States will submit a 
request to deviate from the standards defined by HHS annually. We 
estimate it will take a compliance officer approximately 3 hours 
annually, at a rate of $68.94 per hour, to prepare and submit the 
request to deviate from the communicated standards, including preparing 
the rationale explaining the request. We therefore estimate the total 
annual burden for all web-brokers and issuers in completing and 
submitting a request to deviate to be approximately $5,170.50 annually.
    We do not expect this finalized policy to impose a new burden on 
EDE entities, as EDE entities are already following the process 
outlined in this finalized policy through the change request processes 
described in the Third-Party Auditor Guidelines.
    Because the proposal to ensure DE entities assisting consumers in 
State Exchanges meet certain standards applicable in the FFEs and SBE-
FPs at new Sec.  155.221(j) was finalized, we estimate that DE entities 
may incur burden related to the website development needed to implement 
and prominently display changes made to State Exchange websites per the 
standards defined by the State Exchange. We anticipate that the web-
development costs cited above will apply for each DE entity assisting 
consumers in State Exchanges. As described in the preamble, there may 
be burden associated with maintaining DE environments tailored to each 
States Exchanges' display requirements. However, based on our 
experience conducting oversight of DE entity non-Exchange websites 
assisting consumers in FFEs and SBE-FPs, it is our understanding that 
DE entities are familiar with and capable of tailoring website displays 
based on specific criteria and, as such, we anticipate entities are 
capable of tailoring website displays to the requirements of the State 
the consumer is seeking assistance in. We anticipate a total annual 
burden of $247,358.70 for DE entities assisting consumers in States 
with State Exchanges associated with implementing display changes and 
submitting requests to deviate from the standards defined by the State 
Exchange across 5 State Exchanges, should the State Exchange elect to 
permit deviation requests. The total burden was calculated by 
multiplying the costs associated with implementing display changes 
among 20 DE entities expected to operate across 5 State Exchanges 
($2,401.20 x 5 State Exchanges x 20 DE entities) and adding this to the 
expected costs for 7 DE entities operating across 5 State Exchanges to 
submit requests to deviate from the standards defined by the State 
Exchanges ($206.82 x 5 State Exchanges x 7 DE entities). If the State 
Exchange permits deviation requests, those requests will be subject to 
review by the State Exchange in advance of implementation of any 
alternative website displays. We sought comment on the burden of this 
proposal on DE entities planning to operate in State Exchanges.
    After consideration of comments and for the reasons outlined in the 
proposed rule and our responses to comments, we are finalizing the 
burden estimates as proposed. We summarize and respond to public 
comment received regarding the requirements that HealthCare.gov or 
State Exchange website changes be implemented and prominently

[[Page 26383]]

displayed on DE entity non-Exchange websites within a time notice 
period set by HHS below.
    Comment: One commenter noted they believe this proposal will 
propose little to no additional burden on most DE entities because it 
is believed that many of the applicable entities may already be 
complying with the proposed standards.
    Response: We appreciate this comment and agree, as described above 
and in the proposed rule, that the majority of DE entities are already 
complying with the requirements associated with this policy because 
they are subject to the existing HHS-initiated change request practices 
outlined in the Third-Party Auditor Guidelines. However, we believe the 
provided burden estimates appropriately characterize the burden for the 
existing HHS-initiated change request process and for the expansion of 
this process to Classic DE entities and to DE entities operating in 
State Exchanges.

G. ICRs Regarding Ensuring DE Entities Operating in State Exchanges 
Meet Certain Standards Applicable in the FFEs and SBE-FPs (45 CFR 
155.221)

    We are finalizing amendments to Sec.  155.221 to apply to DE 
entities operating in State Exchanges, and consequently State Exchanges 
that choose to implement a DE program, certain existing HHS standards 
applicable to DE entities assisting consumers with enrolling in QHPs 
and applying for APTC/CSRs in FFEs and SBE-FPs, in both the Individual 
Market Exchanges and SHOPs. We anticipate approximately 20 DE entities 
will operate in the 5 State Exchanges and will be required to incur 
this burden for each of the 5 State Exchanges they may operate in. The 
burden associated with these changes includes costs for DE entities 
assisting consumers in State Exchanges to meet the requirements 
described in finalized Sec.  155.221(j) and for State Exchanges related 
to the development and oversight of DE programs within their State. We 
estimate relevant costs based on current Federal costs. These estimates 
are described below.
    The burden associated with operating a DE program includes costs 
for DE entities related to web-development to meet the website display 
requirements being applied to DE entities operating in States with 
State Exchanges and costs for creating, storing, and submitting 
operational readiness documentation for Exchange review. Although these 
policies allow States certain flexibility for State Exchanges to tailor 
their DE program and establish their own standards with respect to 
operational readiness demonstrations by their DE entities, including 
whether to require third-party audits of DE entities and to impose 
additional requirements beyond the proposed HHS minimum standards as 
they determine may be appropriate based on their operational or 
business needs, we expect the costs to reasonably be estimated based on 
the Federal costs as follows.
    We estimate it will take 5 hours for a DE entity's Business 
Operations Specialist at an hourly rate of $73.12 to implement the 
standardized disclaimer required under Sec.  155.221(b)(2), along with 
15 hours at an hourly rate of $80.04 for a Web and Digital Interface 
Designer to modify the DE entity non-Exchange website to implement the 
standardized disclaimer across 5 State Exchanges. Therefore, for the 
standardized disclaimer under Sec.  155.221(b)(2), we estimate each DE 
entity operating in State Exchanges that operate their own eligibility 
and enrollment platform will incur a burden of 20 hours at an estimated 
cost of $1,566.20 (5 hours x $73.12 per hour + 15 hours x $80.04 per 
hour). We estimate the anticipated 20 DE entities will incur a 
cumulative burden of 400 hours at an estimated cost of $31,324 
($1,566.20 x 20 DE entities).
    Costs related to demonstrating operational readiness at finalized 
Sec.  155.221(j) will depend on the DE entity's desired enrollment 
pathway and the options made available by the State Exchange. Although 
we are allowing States the flexibility to establish operational 
readiness requirements, including the form and manner for their DE 
entities to demonstrate operational readiness, we encourage State 
Exchanges to leverage the existing items in Sec.  155.220(b)(4)(i) and 
(ii) as the starting point for their operational readiness reviews. If 
State Exchanges leverage these items, we anticipate the burden 
associated with DE entity demonstration of operational readiness can be 
estimated based on the Federal costs as follows. We estimate it will 
take up to 360 hours for an Auditor at an hourly rate of $75.00 to 
submit business audit documentation across 5 State Exchanges, and we 
estimate 1 DE entities will participate in a manner that would trigger 
this information collection, resulting in an estimated cost of $27,000 
per DE entity (360 hours x $75.00). We estimate it will take up to 122 
hours for an Auditor at an hourly rate of $75.00 to submit security and 
privacy audit documentation across 5 State Exchanges, and we estimate 3 
DE entities will participate in a manner that would trigger this 
information collection, resulting in an estimated cost of $9,150 per DE 
entity (122 hours x $75.00). We estimate it will take 45 hours for a 
Business Operations Specialist to complete and submit a typical 
Enhanced Direct Enrollment (EDE) documentation package and related 
information across 5 State Exchanges at an hourly rate of $73.12, and 
15 DE entities will participate in a manner that will trigger this 
information collection, resulting in an estimated cost of $3,290.40 per 
DE entity (45 hours x $73.12). Therefore, for a DE entity to 
demonstrate operational readiness and compliance with applicable 
requirements to State Exchanges, we estimate each DE entity will incur 
a burden of up to 527 hours at an estimated cost of up to $39,440.40 
(360 hours x $75.00 per hour + 122 hours x $75.00 per hour + 45 hours x 
$73.12), but many DE entities will incur a lower burden and cost due to 
not participating in a manner that would trigger some of these 
information collection costs. We estimate a cumulative burden of 1,401 
hours at an estimated cost of $103,806 for all applicable DE entities 
operating across the 5 State Exchanges ($27,000 x 1 DE entities + 
$9,150 x 3 DE entities + $3,290.40 x 15 entities). We solicited 
feedback from State Exchanges with regards to the form and manner of 
documentation they would require DE entities to submit to demonstrate 
operational readiness, along with the estimated burden associated with 
those submissions.
    We estimate it will take 100 hours for a Web and Digital Interface 
Designer at a rate of $80.04 per hour to modify the DE entity's non-
Exchange website to comply with the requirements to display and market 
QHPs offered through the Exchange, individual health insurance 
coverage, and any other products on at least three separate websites 
pages in accordance with Sec. Sec.  155.221(b)(1) and (3) and (c) 
across 5 State Exchanges. Therefore, for these website display 
requirements, we estimate each DE entity operating in State Exchanges 
will incur an estimated cost of $8,004 (100 hours x $80.04 per hour). 
We estimate 8 DE entities will trigger this information collection with 
a cumulative burden of 800 hours at an estimated cost of $64,032 across 
the State Exchanges ($8,004 x 8 DE entities).
    The burden associated with this change also includes costs for DE 
entities operating in State Exchanges with oversight of direct 
enrollment entity application assisters, as described in Sec.  
155.221(d) (citing Sec.  155.415(b)), for those DE entities that opt to 
use these application assisters, when permitted by the applicable State 
Exchange and only to the extent permitted by applicable

[[Page 26384]]

State law. As described in the preamble, the requirements at Sec. Sec.  
155.415(b)(2) and (b)(3) are already applicable to DE entities 
operating in all Exchanges and therefore do not represent a new burden 
for DE entities. The extension of Sec.  155.221(d) to DE entities 
operating in State Exchanges will require DE entities' application 
assisters to complete appropriate State-required training and 
registration in a manner specified by the State Exchange consistent 
with Sec.  155.415(b)(1). We estimate that up to 1,000 application 
assisters will operate in each State Exchange that opts to implement a 
DE program and allows DE entity application assisters to assist 
Exchange consumers. Accordingly, we anticipate that 5,000 application 
assisters across an estimated 5 States will participate. We estimate 
the burden for 20 DE entities to comply with this requirement at 3 
hours per assister for a total annual burden of 750 hours for a 
Compliance Officer at an hourly wage of $68.94 for a total cost of 
$51,705 per entity. We estimate a cumulative burden of 15,000 hours at 
an estimated cost of $1,034,100 for 20 DE entities operating across the 
5 State Exchanges ($51,705 x 20 entities).
    Finalized paragraph Sec.  155.221(j)(3) will extend requirements 
for DE entities assisting consumers in State Exchanges to implement and 
prominently display changes in a manner that is consistent with the 
display changes made by the State Exchange to the State Exchanges' 
website by meeting standards communicated and defined by the State 
Exchange within a time period set by the State Exchange, unless the 
State Exchange approves a deviation from those standards under the 
deviation request process it would be required to establish should the 
State Exchange elect to permit deviations. The costs associated with DE 
entities implementing this finalized policy in State Exchanges is 
discussed in the ICR section related to finalized paragraph Sec.  
155.221(b)(6).
    Regarding finalized paragraph Sec.  155.221(a) extending 
requirements under Sec.  156.1230(a) to DE QHP issuers operating in 
State Exchanges, we do not anticipate any additional burdens for QHP 
issuers, beyond the estimated burdens for the website display 
requirements described above, to provide consumers with correct 
information, without omission of material fact, regarding the 
Exchanges, QHPs offered through the Exchanges, and insurance 
affordability programs, or to refrain from marketing or conduct that is 
misleading, coercive, or discrimination based on race, color, national 
origin, disability, age, or sex.
    Therefore, we estimate each DE entity operating in State Exchanges 
will incur a one-time burden in PY 2025 of up to 1,397 hours at a cost 
of up to $100,715.60 for an overall total for all DE entities operating 
across the State Exchanges of up to 17,601 hours at an estimated cost 
of $1,233,262 to comply with these finalized requirements. We sought 
comment on the burden of these requirements on DE entities planning to 
participate in State Exchanges. For the purposes of better determining 
burden estimates, we also sought comment on the number of State 
Exchanges that operate their own eligibility and enrollment platforms 
and would be interested in implementing a DE program in their State and 
on the number of DE entities interested in operating in those State 
Exchanges.
    Finalized paragraph Sec.  155.221(j) will require State Exchanges 
to comply with the FFE standards described above and in the preamble. 
Sec.  155.221(j)(1) allows State Exchanges the flexibility to add 
State-specific information to the standardized disclaimer that does not 
conflict with the HHS-provided language. Finalized paragraph (2) under 
this new section also requires State Exchanges to establish the form 
and manner for their DE entities to demonstrate operational readiness 
and compliance with applicable requirements, in the form and manner 
specified by the Exchange. Finalized paragraph (3) will require State 
Exchanges establish requirements for their DE entities to implement and 
prominently display website changes in a manner that is consistent with 
display changes made by the State Exchange to State Exchanges' websites 
by meeting standards communicated and defined by the State Exchange 
within a time period set by the State Exchange. The burden associated 
with these finalized changes includes costs for State Exchanges related 
to drafting new policy, updating standards, and potentially hiring 
additional staff to perform functions not currently being performed by 
the State Exchange, such as for drafting DE entity program requirements 
and guidelines, including establishment of DE entity operational 
readiness programs, establishment of procedures related to defining and 
communicating standards for required display changes, establishment of 
any State-specific disclaimer text, and ongoing monitoring of DE entity 
compliance with applicable HHS standards and any additional State-
specific requirements. DE entities operating in States transitioning 
off of the Federal Platform to a State Exchange will likely have fewer 
costs as they should already be meeting the HHS minimum requirements. 
No State Exchange has implemented DE to date, so we are not able to 
provide precise costs estimates of the burden associated with these 
finalized changes for State Exchanges. However, we anticipate that 
operational costs related to establishing polices and adding staff in 
order to operate a compliant DE program under Sec.  155.221 may be 
estimated based on Federal platform costs and will be added to the 
costs and burdens of transitioning to State Exchange.
    We estimate that 5 States will opt to host a DE program for their 
State Exchanges. We anticipate the total burden associated with the 
State Exchanges developing the associated policies and procedures to be 
up to 528 hours per State. This assumes 480 hours for a GS-13, Step 5 
employee at an hourly rate of $121.66 (the hourly wage rate for a GS-
13, Step 5 employee in the Washington, DC area,\335\ doubled to account 
for fringe benefits and overhead) and 48 hours for a GS-15, Step 5 
employee at an hourly rate of $169.10 (the hourly wage rate for a GS-
15, Step 5 employee in the Washington, DC area,\336\ doubled to account 
for fringe benefits and overhead). In total, for the 5 State Exchanges 
anticipated to participate, we estimate a burden of 2,640 hours (5 
State Exchanges x 528 hours per State Exchange) at a cost of $332,568 
(2,400 hours x $121.66 per hour + 240 hours x $169.10 per hour).
---------------------------------------------------------------------------

    \335\ Office of Personnel Management. (2023, January). Salary 
Table 2023-DCB Incorporating the 4.1% General Schedule Increase and 
a Locality Payment of 32.49% For the Locality Pay Area of 
Washington-Baltimore-Arlington, DC-MD-VA-WV-PA Total Increase: 
4.86%. https://www.opm.gov/policy-data-oversight/pay-leave/salaries-wages/salary-tables/pdf/2023/DCB_h.pdf.
    \336\ Id.
---------------------------------------------------------------------------

    Based on the Federal platform costs, we estimate it will take 60 
hours each for the State Exchange equivalent of 2 GS-13, Step 5 
employees at an hourly rate of $121.66 (the hourly wage rate for a GS-
13, Step 5 employee in the Washington, DC area,\337\ doubled to account 
for fringe benefits and overhead) to complete initial documentation 
review related to all DE entity requirements pursuant to this finalized 
policy, for a total cost to State governments of $14,599.20 (2 
employees x 60 hours per employee x $121.66 per hour) per State 
Exchange. We estimate it will take 12 hours for the equivalent of 1 GS-
15, Step 5 employee at an hourly rate of $169.10 (the hourly wage rate 
for a GS-15, Step 5 employee in the

[[Page 26385]]

Washington, DC area,\338\ doubled to account for fringe benefits and 
overhead) to provide managerial review and oversight, for a total cost 
to State governments of $2,029.20 (12 hours x $169.10 per hour) per 
State Exchange. Additionally, we estimate the total burden for each 
State government for State contract and contractors ongoing reviews for 
oversight will include 1,631 hours for a GS-12, Step 5 employee with an 
hourly rate of $102.30 (the hourly wage rate for a GS-12, Step 5 
employee in the Washington, DC area,\339\ doubled to account for fringe 
benefits and overhead) and 3,458 hours for a GS-13, Step 5 employee 
with an hourly rate of $121.66 (the hourly wage rate for a GS-13, Step 
5 employee in the Washington, DC area,\340\ doubled to account for 
fringe benefits and overhead). We estimate a burden to each State 
government of 5,089 hours at an estimated cost of $587,551.58 for State 
contracts and contractors ongoing reviews for oversight. Therefore, 
each State will incur a burden of 5,749 hours at an estimated cost of 
$670,693.58 ($66,513.60 + $14,599.20 + $2,029.20 + $587,551.58) in 
total for these finalized policies, and all 5 States will incur a total 
burden of 28,745 hours at an estimated cost of $3,353,468 (5 States x 
$670,693.58). We sought comment from State Exchanges on these burden 
estimates.
---------------------------------------------------------------------------

    \337\ Id.
    \338\ Id.
    \339\ Id.
    \340\ Id.
---------------------------------------------------------------------------

    We recognize that some State Exchanges may decide to utilize DE 
entities already assisting consumers in the FFEs and SBE-FPs and 
encourage State Exchanges to leverage DE operational readiness 
demonstrated to participate in the FFEs or SBE-FPs when possible, so as 
to help minimize burden on both the State Exchanges that operate their 
own eligibility and enrollment platform and their DE entities.
    After consideration of comments and for the reasons outlined in the 
proposed rule and our responses to comments, we are finalizing the 
burden estimates with modifications to the burden hours and number of 
entities subject to these information collection requirements. We 
summarize and respond to public comments received regarding this 
provision below.
    Comment: One commenter suggested that the burden estimates are 
inappropriately based on the premise that States will implement DE 
programs in the same manner as the FFEs. One commenter suggested that 
the burden estimates could be substantially reduced if the State 
Exchanges leverage or choose to mirror the HHS requirements.
    Response: We disagree with the comment that these burden estimates 
were inappropriately based on the premise that States will implement DE 
programs in the same manner as the FFEs. The nature of this policy 
requires a consideration of the baseline Federal consumer protection 
requirements, while accounting for the potential variation in the 
ultimate DE requirements determined by each State Exchange. These 
requirements will provide baseline consumer protections across the 
State Exchanges but also allows flexibility with regards to State 
Exchange implementation of DE requirements. Accordingly, States may 
implement more stringent or less stringent standards and oversight 
processes; these estimates intend to strike a balance between the 
Federal implementation and the varied hypothetical possibilities for a 
State's requirements and oversight process. We appreciate the comment 
that the burden estimates could be substantially reduced if the State 
Exchanges leverage the HHS requirements. We encourage State Exchanges 
to leverage the HHS requirements and believe the implementation costs 
for both State Exchanges and DE entities may be substantially reduced 
if the State Exchanges leverage the HHS requirements. However, we note 
the assumption that States can save money by mirroring HHS standards 
assumes that all entities participating have complied and met the HHS 
standards, as verified by HHS, and ignores the possibility that 
entities may participate in a given State's web-broker or DE entity 
program as a net new entity, with no experience or documented 
compliance at the Federal level. We have carefully considered this 
commenter's feedback and reduced relevant burden estimates for 
requirements where we believe there is a high likelihood that State 
Exchanges will adopt the same requirements as the FFE.
    Comment: A few commenters provided comments related specifically to 
the portion of the burden estimate regarding costs for State Exchanges 
to implement DE programs. Both commenters noted that the cost estimates 
for States to implement this proposal are overstated and fail to 
incorporate the potential cost savings and additional user fee revenues 
that States could realize through utilization of DE entities, including 
reduced burdens on State call centers and State Exchanges. One 
commenter expressed concern that the burden estimates were based on 
salary information for Washington, DC, citing higher salaries for that 
locality as compared to employees in the majority of State Exchanges. 
This commenter requested clarification for how the estimated hours for 
contractor oversight of State Exchanges were determined.
    Response: We acknowledge the concern that the burden estimates for 
State Exchanges to implement DE programs are overstated. As 
acknowledged above, this policy provides flexibility to State Exchanges 
in their implementation of DE programs. These burden estimates account 
for the possibility that State Exchanges may implement DE programs 
differing from the FFE program. We encourage State Exchanges to 
leverage the HHS requirements when developing their DE programs and we 
anticipate that doing so would substantially reduce the burden for 
State Exchanges to develop and implement these programs. In addition, 
we acknowledge the comment that DE programs may provide additional user 
fee revenues and cost savings to State Exchanges associated with 
reduced burdens on State call centers and State Exchanges. Although we 
acknowledge that there could be cost savings associated with 
implementing DE programs in State Exchanges, we have not conducted a 
detailed analysis on the cost savings associated with the 
implementation of DE programs in the FFE and, therefore, cannot 
quantify the extent of any such savings. Furthermore, these estimates 
are specific to defining the oversight policies and procedures, and the 
implementation of such oversight for web-brokers and DE entities under 
Sec.  155.220 and Sec.  155.221; these estimates are not intended to 
calculate the total cost--or savings--for any given State to implement 
a web-broker or DE program, including the costs of developing and 
maintaining the technical infrastructure to maintain a web-broker and 
DE entity program. However, we do recognize the potential for savings 
and are open to feedback as we continue to work with our State partners 
on implementation of these programs. We acknowledge the concern 
regarding the use of Washington, DC, labor rates in calculating these 
burden estimates. In the absence of a national average pay scale, we 
acknowledge there will be variations in regional pay scales among State 
Exchanges, including some which may be higher or lower than the rates 
used to calculate these estimates. With regards to the estimates for 
contractor oversight of State Exchanges, we are clarifying that these 
estimates were calculated by

[[Page 26386]]

mapping labor for the relevant requirements to GS categories based on 
the applicable FFE contractor support labor costs and hours for the 
applicable requirements and estimated number of entities. We 
acknowledge that any given State may experience a higher or lower cost 
for implementing these programs depending on the extent (that is, scope 
and frequency) of the State's oversight mechanisms, the scope of the 
State's specific requirements for these programs, and the general 
quality and compliance posture of web-brokers or DE entities intending 
to participate in the State.
    Comment: One supporting commenter provided comments related to the 
portion of the burden estimate regarding costs for DE entities to 
operate in State Exchanges. Specifically, this commenter provided 
detailed feedback on the estimated burden hours based on their 
experience as a DE entity operating in the FFEs. This included feedback 
on the burden associated with implementing Sec.  155.221(j) and various 
web-broker requirements that are relevant to DE entities operating in 
the FFEs. This commenter suggested that the burden estimates should be 
limited to the number of primary EDE entities expected to participate 
in State Exchanges.
    Response: We appreciate the feedback on these burden estimates from 
a DE entity currently operating in the FFEs. We recognize the value of 
feedback from an entity with experience implementing the FFE program 
requirements and we carefully considered this feedback and have 
adjusted the burden estimates where applicable. In making these 
adjustments, we considered that the commenter has considerable 
experience operating in the FFE. As the commenter acknowledged, other 
entities may have differing levels of technical expertise and capacity. 
We have accounted for the costs associated with implementing these 
requirements from the perspective of DE entities with limited 
experience. However, we agree that the burden may be substantially 
lower for DE entities with increased technical experience and capacity. 
In considering the feedback on these burden estimates, we note there 
were several assumptions made regarding the State Exchanges' provision 
of data to DE entities (for example, the provision of QHP data). These 
burden estimates account for a scenario where there may be variability 
between the format of data provided across State Exchanges. We 
encourage State Exchanges to leverage the data formats used in the FFEs 
and are committed to providing technical assistance to State Exchanges 
to facilitate such standardization. We agree with the commenter's 
suggestion that the burden estimates should be limited to the number of 
primary EDE entities expected to participate in State Exchanges. We 
have adjusted the burden estimates to reflect the current number of 
primary entities operating in the FFEs and to account for the 
possibility of new primary DE entities entering the State Exchanges.

H. ICRs Regarding Failure To File and Reconcile Process (45 CFR 
155.305(f)(4))

    We are finalizing amendments to Sec.  155.305(f)(4) to provide that 
when an enrollee or their tax filer is identified as having FTR status 
for one-year State Exchanges must either notify the tax filer directly, 
and alert them of their FTR status, or send informative notices to the 
enrollee or their tax filer that provide information on the APTC 
reconciliation requirement, and lets the recipient know that they are 
at risk of being determined ineligible for APTC without containing 
protected FTI. This requirement will ensure that State Exchanges 
provide notifications, similar to how Exchanges on the Federal platform 
do, and that tax filers on State Exchanges are adequately educated on 
the requirement to file and reconcile. This final rule will impact 
State Exchange FTR noticing processes for PY 2025 and subsequent years. 
For State Exchanges, FTR will be conducted in the same manner it had 
previously been conducted with respect to collection of information, 
with minimal changes to the language of the Exchange application 
questions necessary to obtain relevant information; as such, we 
anticipate that the finalized amendment will not impact the existing 
information collection requirements (OMB control number: 0938-1191) or 
burden for consumers.
    Under previous FTR policy, State Exchanges were already required to 
notify tax filers identified as FTR at a minimum of once per year. As 
such, we do not anticipate this requirement increasing State Exchanges' 
burden of noticing beyond their existing FTR processes. We sought 
comment on these assumptions.
    We did not receive any comments in response to the burden estimates 
for this policy. We are finalizing these estimates as proposed.

I. ICRs Regarding Verification Process Related to Eligibility for 
Enrollment in a QHP Through the Exchange (45 CFR 155.315(e))

    We are finalizing several revisions to Sec.  155.315(e) that will 
allow Exchanges to accept consumer attestation of incarceration status 
without further verification or, alternatively, to propose an 
alternative data source for incarceration verification for HHS 
approval. Exchanges that elect to verify incarceration status will 
continue to be required to use the DMI process if the data source 
provides a mismatch against the consumer attestation of incarceration 
status or other information provided by the applicant or in the records 
of the Exchange. Should a State Exchange choose to propose using an 
alternative electronic data source for verifying incarceration status, 
HHS will review such proposals for consistency with the finalized 
standard in Sec.  155.315(e)(2).
    Of the 18 State Exchanges (operating in 12 States and the District 
of Columbia) that have incarceration verification processes, 8 conduct 
incarceration verifications similar to the one used to date by 
Exchanges on the Federal platform, and 5 have connected to an 
individual State or local incarceration facility for verifications and 
have received approval to do so from HHS. Additionally, 3 States are 
currently in process of transitioning to State Exchanges for PY 2024 or 
beyond and may choose to connect to an alternative incarceration 
verification data source with HHS approval. Subtracting the 5 Exchanges 
with preexisting approvals, we anticipate 11 State Exchanges could 
connect to an alternative incarceration verification data source, 
should they assess that an alternative data source exists and want to 
continue verification of consumer incarceration status using it.
    For the purposes of assessing whether an alternative data source 
should be used, we estimate that a Management Analyst will spend 20 
hours, at an hourly rate of $91.62, to synthesize a cost-benefit 
analysis regarding whether the Exchange should continue to verify 
incarceration status using an approved data source instead of accepting 
a consumer's attestation that they are not incarcerated. If the 
Exchange finds a viable alternative data source and determines that it 
should be used, we anticipate that a Business Operations Specialist 
will take about 2 hours, at an hourly rate of $73.12, to submit a 
request for HHS approval. We also anticipate that it will take a Chief 
Executive equivalent for the Exchange 1 hour, at an hourly rate of 
$182.24, to approve the paperwork for submission to request HHS 
approval of the alternative incarceration data source. In total, the 
assessment of whether the Exchange should continue to verify 
incarceration status using an alternative data source instead of 
accepting

[[Page 26387]]

consumer attestation will take 20 hours at a cost of $1,832.40, and the 
process of approving and submitting a request for HHS approval will 
take 3 hours at a cost of $328.48. Therefore, the total one-time burden 
for each Exchange that elects to verify incarceration status using an 
HHS-approved data source in 2025 will be 23 hours at a cost of 
approximately $2,161, and the total burden across all 11 State 
Exchanges would be 253 hours at a cost of approximately $23,770.
    We did not receive any comments in response to the burden estimates 
for this policy. We are finalizing these estimates as proposed.

J. ICRs Regarding Eligibility Redetermination During a Benefit Year (45 
CFR 155.330(d))

    We are finalizing amendments to Sec.  155.330(d) to require that 
Exchanges periodically examine available data sources described in 
Sec. Sec.  155.315(b)(1) and 155.320(b) to identify changes related to 
death of an applicant on whose behalf APTC or CSRs are being provided. 
The Exchanges have developed electronic data exchanges to support 
obtaining this information to determine the applicant's eligibility at 
the point of application and could reuse those data exchanges here. 
Consequently, we estimate costs associated with this requirement to be 
minimal.
    However, State Exchanges not already conducting Death PDM with the 
required frequency or not deemed in compliance with the finalized PDM 
requirements will be required to engage in IT system development 
activity to communicate with these programs and act on enrollment data 
either in a new way, or in the same way more frequently. Thus, there 
may be additional associated administrative cost for these State 
Exchanges to implement the finalized PDM requirement.
    Based on experience with other PDMs, for each State Exchange not 
already conducting Death PDM at least twice a year, we estimate that it 
will take 40 hours by a Computer Systems Analyst at an hourly rate of 
$98.30 to implement this finalized provision, for a cost of $3,932 per 
State Exchange. Therefore, for all 11 State Exchanges not currently 
meeting the finalized requirement, we estimate a total burden of 440 
hours at a cost of $43,252. We assume that this burden will be incurred 
primarily in 2025.
    We did not receive any comments in response to the burden estimates 
for this policy. We are finalizing these estimates as proposed.

K. ICRs Regarding Establishment of Exchange Network Adequacy Standards 
(45 CFR 155.1050)

    The burden associated with subjecting QHP issuers in State 
Exchanges and SBE-FPs to time and distance standards as proposed at 
Sec.  155.1050 is covered by the information collection currently 
approved under OMB control number 0938-1312 (CMS-10593). We note that 
we are also revising the information collection currently approved 
under OMB control number 0938-1415 (CMS-10803) regarding appointment 
wait time standards encompassed in previously finalized regulations at 
45 CFR 156.230(a)(2)(B). We sought comment on these burden estimates. 
We did not receive any comments related to this collection.
    Under Sec.  155.1050(a)(2)(i)(A), we are finalizing that for plan 
years beginning on or after January 1, 2026, State Exchanges and SBE-
FPs must establish and impose quantitative time and distance network 
adequacy standards for QHPs that are at least as stringent as standards 
for QHPs participating on the FFEs under Sec.  156.230(a)(2)(i)(A).
    Second, we are finalizing that, for plan years beginning on or 
after January 1, 2026, State Exchanges and SBE-FPs must conduct 
quantitative network adequacy reviews prior to certifying any plan as a 
QHP, consistent with the reviews conducted by the FFEs under Sec.  
156.230. Specifically, we are finalizing at Sec.  155.1050(a)(2)(i)(B) 
that, for plan years beginning on or after January 1, 2026, State 
Exchanges and SBE-FPs must conduct quantitative network adequacy 
reviews to evaluate a plan's compliance with network adequacy standards 
under Sec.  156.230(a)(1)(ii), (a)(1)(iii), and (a)(2)(i)(A) prior to 
certifying any plan as a QHP, while providing QHP certification 
applicants the flexibilities described under Sec.  156.230(a)(2)(ii) 
and (a)(3) and (4). Under this policy, State Exchanges and SBE-FPs will 
be prohibited from accepting an issuer's attestation as the only means 
for plan compliance with network adequacy standards.
    We are aware that some State Exchanges employ robust, quantitative 
network adequacy standards that differ from those used by the FFEs, but 
still ensure that QHPs provide consumers with reasonable, timely access 
to practitioners and facilities to manage their health care needs, 
consistent with the ultimate aim of these policies. Therefore, we are 
finalizing Sec.  155.1050(a)(2)(ii) to provide that, for plan years 
beginning on or after January 1, 2026, HHS may grant an exception to 
the requirements described under Sec.  155.1050(a)(2)(i) to a State 
Exchange or SBE-FP that demonstrates with evidence-based data, in a 
form and manner specified by HHS, that (1) the Exchange applies and 
enforces alternate quantitative network adequacy standards that are 
reasonably calculated to ensure a level of access to providers that is 
as great as that ensured by the Federal network adequacy standards 
established for QHPs under Sec.  156.230(a)(1)(iii), (a)(2)(i)(A), and 
(a)(4); and (2) the Exchange evaluates whether plans comply with 
applicable network adequacy standards prior to certifying any plan as a 
QHP. In this final rule, for this exception process, we are clarifying 
that, for (1) above, issuers on the State Exchanges and SBE-FPs do not 
need to comply with the appointment wait time standards under Sec.  
156.230(a)(2)(i)(B).
    Lastly, we are finalizing Sec.  155.1050(a)(2)(i)(C) to provide 
that, for plan years beginning on or after January 1, 2026, State 
Exchanges and SBE-FPs must require that all issuers seeking 
certification of a plan as a QHP submit information to the Exchange 
reporting whether or not network providers offer telehealth services.
    We estimate that the total annual burden associated with State 
Exchanges and SBE-FPs establishing and imposing the finalized network 
adequacy standards, conducting the network adequacy reviews, collecting 
telehealth information from issuers seeking QHP certification, and 
submitting any exception to be up to 900 hours. Assuming the compliance 
officer average hourly rate of $68.94 per hour, we estimate the cost of 
the data collection, operations, and maintenance pertaining to these 
requirements on each State Exchange and SBE-FP to be $62,046 per year 
(900 hours x $68.94 per hour). In total, for the 19 State Exchanges and 
3 SBE-FPs anticipated to be operational in 2025, we estimate a burden 
of 19,800 hours (22 State Exchanges and SBE-FPs x 900 hours per 
Exchange) at a cost of $1,365,012 (22 State Exchanges and SBE-FPs x 900 
hours per Exchange x $68.94 per hour).
    We estimate that the burden for QHP issuers in State Exchanges and 
SBE-FPs to gather and submit the time and distance data, including any 
justification, to the respective State Exchanges or SBE-FPs will be 10 
hours in total for each medical QHP issuer (a QHP issuer that is not an 
SADP issuer) and 2 hours in total for each SADP issuer submitted by a 
compliance officer at a rate of $68.94 per hour. The 10-hour estimate 
includes the burden associated with the requirement that all issuers 
seeking QHP certification submit

[[Page 26388]]

information to the State Exchange or SBE-FP about whether network 
providers offer telehealth services.
    Approximately half of the parent companies of issuers on the State 
Exchanges and over two thirds of the parent companies of issuers on 
SBE-FPs offer Medicare Advantage plans, and Medicare Advantage offers a 
telehealth credit for network adequacy. Therefore, many more issuers on 
State Exchanges and SBE-FPs likely already have access to this 
information. We also believe that 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 directories. For 
these reasons, we estimate that any additional burden resulting from 
the requirement that QHP issuers report whether each network provider 
is furnishing telehealth services would be minimal.
    The requirement that all issuers seeking QHP certification submit 
information to the State Exchange or SBE-FP about whether network 
providers offer telehealth services will account for 3 of the total 10 
hours we estimate for gathering and submitting the time and distance 
data to the respective State Exchange or SBE-FP for medical QHP issuers 
and 30 minutes of the total 2 hours we estimate for SADP issuers. We 
believe the cost estimates of 3 hours for medical QHP issuers and 30 
minutes for SADP issuers to be a maximum and that the burden could be 
less to issuers that are already collecting telehealth data for other 
purposes.
    We estimate that the total annual burden associated with QHP 
issuers in State Exchanges and SBE-FPs to gather and submit the time 
and distance and telehealth data to the respective State Exchanges or 
SBE-FPs for up to 149 medical QHP issuers in State Exchanges and SBE-
FPs would be up to 1,490 hours (10 hours x 149 medical QHP issuers). 
Assuming the compliance officer average hourly rate of $68.94 per hour, 
we estimate that the cost of gathering and submitting this network 
adequacy data for an individual medical QHP issuer could be up to 
$689.40 (10 hours x $68.94 per hour), and for all 149 medical QHP 
issuers in State Exchanges and SBE-FPs, up to $102,720.60 (149 medical 
QHP issuers x 10 hours per issuer x $68.94 per hour). We estimate that 
the total annual burden associated with this requirement for 89 SADP 
issuers in State Exchanges and SBE-FPs will be up to 178 hours (2 hours 
x 89 SADP issuers). Assuming the compliance officer average hourly rate 
of $68.94 per hour, we estimate that the cost of gathering and 
submitting the network adequacy data for an individual SADP could be up 
to $137.88 (2 hours x $68.94 per hour), and for all 89 SADP issuers in 
State Exchanges and SBE-FPs, up to $12,271.32 (89 SADP issuers x 2 
hours per issuer x $68.94 per hour). We estimate the total annual 
burden associated with this finalized requirement across both medical 
QHP and SADP issuers in State Exchanges and SBE-FPs beginning in 2025 
will be approximately $114,992.
    After consideration of comments and for the reasons outlined in the 
proposed rule and our responses to comments, we are finalizing the 
burden estimates as proposed. We summarize and respond to public 
comments received regarding the establishment of Exchange network 
adequacy standards policy below.
    Comment: A few commenters expressed opposition to the collection of 
information about which providers offer telehealth services indicating 
that the proposed rule underestimated the burden of this proposal and 
that the information would not capture the availability of telehealth 
services.
    Response: We believe that the telehealth reporting standards, 
pursuant to which issuers in State Exchanges and SBE-FPs must indicate 
whether each network provider offers telehealth services with the 
options ``Yes,'' ``No,'' or ``Requested information from the provider, 
awaiting their response,'' would not require extensive administrative 
time to gather. Approximately half of the parent companies of issuers 
on the State Exchanges and over two thirds of the parent companies of 
issuers on SBE-FPs offer Medicare Advantage plans, and Medicare 
Advantage offers a telehealth credit for network adequacy. Therefore, 
many more issuers on State Exchanges and SBE-FPs likely already have 
access to this information. We also believe that 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 
directories. For these reasons, we estimate that any additional burden 
resulting from the requirement that QHP issuers report whether each 
network provider is furnishing telehealth services would be minimal.
    We stated in the proposed rule (88 FR 82591, 82638 through 82639) 
that this data would be for informational purposes, would be intended 
to help inform the future development of telehealth standards, and 
would not be displayed to consumers. We believe that the above-
described telehealth reporting standards support these objectives by 
providing State Exchanges and SBE-FPs with a general picture regarding 
the availability of telehealth services in their State. Additionally, 
at this time, since this data will not be displayed to consumers, it is 
not necessary for State Exchanges and SBE-FPs to collect more granular 
telehealth data from their issuers.

L. ICRs Regarding the State Selection of EHB-Benchmark Plans for Plan 
Years Beginning On or After January 1, 2026 (45 CFR 156.111)

    The existing OMB approval (0938-1174) PRA package, for which we are 
seeking a renewal for use beginning in March 2024, would remain in 
effect until the amendments to Sec.  156.111 finalized in this rule 
would come into effect.
    We are finalizing several revisions to Sec.  156.111 that will 
reduce the burden associated with State selection of EHB-benchmark 
plans. For plan years beginning on or after January 1, 2026, we are 
finalizing revisions to the standards for State selection of EHB-
benchmark plans at Sec.  156.111 to consolidate the options for States 
to change EHB-benchmark plans at Sec.  156.111(a); revisions to the 
scope of benefit requirements at Sec.  156.111(b)(2); and revisions to 
Sec.  156.111(e)(3) to require States to submit a formulary drug list 
as part of their application to change EHB-benchmark plans only if the 
State is seeking to change their prescription drug EHB. We are also 
finalizing revisions to the actuarial certification requirements at 
Sec.  156.111 to reflect the finalized scope of benefit changes. The 
changes to Sec.  156.111 will first be applicable during the EHB-
benchmark plan selection cycle in 2024 and the anticipated reduction in 
burden to States will begin to be realized at that time.
    The changes to Sec.  156.111 will lead to an overall reduction in 
burden on States to change their EHB-benchmark plans in accordance with 
the revisions to Sec.  156.111. The revisions to Sec.  156.111 will 
remove the requirement that States report which option under Sec.  
156.111(a) they are using as a basis to change their EHB-benchmark 
plans, their methodology for confirming compliance with the generosity 
standard at current Sec.  156.111(b)(2)(ii), and the submission of a 
formulary drug list under Sec.  156.111(e)(3) unless the State is 
seeking to make changes to their prescription drug EHB. We will also 
change the information States submit to HHS to confirm compliance with 
the scope of benefit requirements at

[[Page 26389]]

Sec.  156.111(b)(2), for which we estimate an overall reduction in 
burden.
    These policies will not change the number of documents States will 
be required to submit to change their EHB-benchmark plans under Sec.  
156.111(e)(3), unless the State is not seeking to make changes to its 
prescription drug EHB, in which case, the State will not be required to 
submit a formulary drug list as specified in Sec.  156.111(e)(3). In 
addition, a response will not be required from all States under current 
Sec.  156.111 and its finalized revisions. Only States choosing to 
modify the State's EHB-benchmark plan will need to submit this 
information to HHS.
    Since finalizing the addition of Sec.  156.111 in the 2019 Payment 
Notice, between one and three States have changed their EHB-benchmark 
plan each year between 2019 and 2023. While we anticipate that the 
finalized revisions to Sec.  156.111 will reduce overall burden on 
States and incentivize more frequent changes to EHB-benchmark plans, we 
anticipate that at most 5 States will choose to make a change to their 
EHB-benchmark plans in any given year (15 States over 3 years within 
the authorization of this ICR).
    To change an EHB-benchmark plan, a State currently provides 
confirmation that the State's EHB-benchmark plan selection complies 
with certain requirements, including those under Sec.  156.111(a), (b), 
and (c). This information collection will be revised under the 
finalized policies in this rule. To comply with the finalized 
requirement, we estimate that a financial examiner will require 4 hours 
(at a rate of $79.04 per hour) to fill out, review, and transmit a 
complete and accurate document. We estimate that it will cost each 
State approximately $316.16 to meet the reporting requirement, with a 
total annual burden for all 5 States of 20 hours and an associated 
total cost of $1,580.80.
    Section 156.111(e)(2) currently requires States to submit an 
actuarial certification and associated actuarial report of the methods 
and assumptions when selecting options under Sec.  156.111(a). 
Presently, before compiling this report, States must consider which of 
the options provided at current Sec.  156.111(a) best facilitate their 
intended EHB-benchmark changes. This deliberation often involves both 
research and discussion within the State and between the State and HHS. 
The finalized consolidation of the options currently available at Sec.  
156.111(a) into one overarching approach for EHB-benchmark plan updates 
will eliminate the need for, and time spent by, States contemplating 
the merits of one option or another. This actuarial certification and 
associated actuarial report must also demonstrate compliance with 
section Sec.  156.111(b)(2)(i), which requires a State's EHB-benchmark 
plan to provide a scope of benefits that is equal in scope to the scope 
of benefits under one of the typical employer plans at Sec.  
156.111(b)(2)(i)(A) and (B). While the finalized revisions to Sec.  
156.111(b)(2)(i) will still require a State's EHB-benchmark plan to 
provide benefits that are equal in scope to the scope of benefits under 
a typical employer plan, they will also allow a State to select any 
scope of benefits that is as or more generous than the scope of 
benefits in the least generous plan (supplemented by the State as 
necessary to provide coverage within each EHB category at Sec.  
156.110(a)), and as or less generous than the scope of benefits in the 
most generous plan in the State (supplemented by the State as necessary 
to provide coverage within each EHB category at Sec.  156.110(a)), 
among the plans currently defined at Sec.  156.111(b)(2)(i)(A) and (B). 
We anticipate that these revisions will substantially reduce the burden 
on States to perform the required actuarial analyses. Under this 
revision, we anticipate that a State will typically only need to 
perform three actuarial analyses to determine the scope of benefits in 
the least and most generous plans among the plans currently defined at 
Sec.  156.111(b)(2)(i)(A) and (B), and the scope of benefits in the 
State's new EHB-benchmark plan. Under current regulation, a State may 
need to perform an indeterminate number of actuarial analyses of the 
plans defined at Sec.  156.111(b)(2)(i)(A) and (B) until the State 
identifies a plan with a scope of benefits equal to the State's EHB-
benchmark plan. This revision will significantly reduce the likelihood 
that a State would need to perform as many actuarial analyses. 
Accordingly, we anticipate a reduction in the estimated burden on 
States to perform the actuarial analysis to confirm compliance with 
Sec.  156.111(b)(2)(i).
    This actuarial certification and associated actuarial report must 
also demonstrate compliance with Sec.  156.111(b)(2)(ii), which 
currently requires a State's EHB-benchmark plan to not exceed the 
generosity of the most generous among a set of comparison plans. For 
benefit years beginning on or after January 1, 2026, we are finalizing 
the removal of this requirement and will revise this estimate to 
reflect a reduced burden on States that would no longer need perform 
the actuarial analyses required to confirm compliance with Sec.  
156.111(b)(2)(ii).
    The actuarial certification that will be collected under this ICR 
will be required to include an actuarial report that complies with 
generally accepted actuarial principles and methodologies. This 
estimate includes complying with all applicable actuarial standards of 
practice (ASOPs) (including ASOP 41 on actuarial communications). For 
example, ASOP 41 on actuarial communications includes disclosure 
requirements, including those that apply to the disclosure of 
information on the methods and assumptions being used for the actuarial 
certification and report. The actuarial certification for this 
requirement currently includes an attestation that the standard 
actuarial practices have been followed or that exceptions have been 
noted. The signing actuary is required to be a Member of the American 
Academy of Actuaries. These requirements will continue to apply with 
this finalized policy.
    We estimate that an actuary, who is a member of the American 
Academy of Actuaries, will be required to complete 12 hours of work (at 
a rate of $109.60 per hour) on average for Sec.  156.111(e)(2). This 
will include the certification and associated actuarial report from an 
actuary to affirm, in accordance with generally accepted actuarial 
principles and methodologies that the State's EHB-benchmark plan must 
provide a scope of benefits that is equal to the scope of benefits 
provided under a typical employer plan. For these calculations, the 
actuary will need to conduct the appropriate calculations to create and 
review an actuarial certification and associated actuarial report, 
including minimal time required for recordkeeping. The precise level of 
effort for the actuarial certification and associated actuarial report 
under Sec.  156.111(e)(2) will likely vary depending on the State's 
approach to its EHB-benchmark plan and this certification requirement, 
but we are estimating 12 hours of work for the actuary to complete the 
actuarial certification and associated report in this final rule in 
recognition that the definition of typical employer plan may require 
the actuary to determine whether the typical employer plan meets 
minimum value requirements. We estimate that it will cost each State 
approximately $1,315.20 to meet this reporting requirement, with a 
total annual burden for all 5 States of 60 hours and an associated 
total cost of $6,576.
    We estimate that a financial examiner will require 1 hour (at a 
rate of $79.04 per hour) to review, combine, and

[[Page 26390]]

electronically transmit these documents to HHS, as part of a State's 
EHB-benchmark plan submission. We estimate that each State will incur a 
burden of 1 hour with an associated cost of $79.04 with a total annual 
burden for 5 States of 5 hours at associated total cost of $395.20.
    We require at Sec.  156.111(e)(3) that each State seeking to make a 
change to its EHB-benchmark plan submit its new EHB-benchmark plan 
documents. The level of effort associated with this requirement could 
depend on the State's selection of the EHB-benchmark plan options under 
the regulation at Sec.  156.111(a). However, for the purposes of this 
estimate, we estimate that it will require a financial examiner (at a 
rate of $79.04 per hour) 12 hours on average to create, review, and 
electronically transmit the State's EHB-benchmark plan document that 
accurately reflects the benefits and limitations, resulting in a burden 
of 12 hours and an associated cost of $948.48, with a total annual 
burden for all 5 States of 60 hours and an associated cost of 
$4,742.40. This estimate of 12 hours will also include the burden 
necessary for a State to submit a formulary drug list for the State's 
EHB-benchmark plan in a format and manner specified by HHS, in 
accordance with Sec.  156.111(e)(3). However, we are finalizing 
revisions to Sec.  156.111(e)(3) in this final rule to require a State 
to submit this formulary drug list only if the State is changing the 
prescription drug EHB. We do not anticipate that all States would 
change prescription drug EHB, so we anticipate this burden will be 
lower for some States. To collect the formulary drug list, the State 
will be required to use the template provided by HHS and must submit 
the formulary drug list as a list of RxNorm Concept Unique Identifiers 
(RxCUIs).
    Section 156.111(e)(4) requires a State to submit the documentation 
necessary to operationalize the State's EHB-benchmark plan. This 
reporting requirement includes the EHB summary file that is currently 
posted on CCIIO's website and is used as part of the QHP certification 
process and is integrated into HHS' IT Build systems that feeds into 
the data that is displayed on HealthCare.gov.\341\ We estimate that it 
requires a financial examiner 12 hours, on average, (at a rate of 
$79.04 per hour) to create, review, and electronically submit a 
complete and accurate document to HHS resulting in a burden of 12 hours 
and an associated cost of $948.48, with a total annual burden for all 5 
States of 60 hours and an associated cost of $4,742.40.
---------------------------------------------------------------------------

    \341\ Information on Essential Health Benefits (EHB) Benchmark 
Plans. Accessed at https://www.cms.gov/CCIIO/Resources/Data-Resources/ehb.html.
---------------------------------------------------------------------------

    We estimate that the total number of respondent States would be 5 
per year, for a total yearly burden of 205 hours \342\ and an 
associated cost of approximately $18,036 \343\ to meet these reporting 
requirements.
---------------------------------------------------------------------------

    \342\ This is calculated as follows: (29 hours for the financial 
examiner + 12 hours for the actuary) x 5 States = 205 hours.
    \343\ This is calculated as follows: ($11,460.80 for the 
financial examiner + $6,576.00 for the actuary) x 5 States = 
$18,036.80.
---------------------------------------------------------------------------

    We sought comment on these burden estimates.
    We did not receive any comments on ICRs regarding the amendments to 
State selection of EHB-benchmark plans. We are finalizing these 
estimates as proposed.

M. ICRs Regarding Non-Standardized Plan Option Limits (45 CFR 156.202)

    As was previously discussed in the preamble to this finalized rule, 
we are finalizing permitting issuers to offer non-standardized plan 
options in excess of the limit of two per product network type, metal 
level, inclusion of dental and/or vision benefit coverage, and service 
area for PY 2025 and subsequent years, if issuers demonstrate that 
these additional non-standardized plans beyond the limit at Sec.  
156.202(b) have specific design features that would substantially 
benefit consumers with chronic and high-cost conditions and meet other 
specified requirements.
    Specifically, at Sec.  156.202(d), for PY 2025 and subsequent 
years, an issuer may offer additional non-standardized plan options for 
each product network type, metal level, inclusion of dental and/or 
vision benefit coverage, and service area if it demonstrates that these 
additional plans' cost sharing for benefits pertaining to the treatment 
of chronic and high-cost conditions (including benefits in the form of 
prescription drugs, if pertaining to the treatment of the condition(s)) 
is at least 25 percent lower, as applied without restriction in scope 
throughout the plan year, than the cost sharing for the same 
corresponding benefits in an issuer's other non-standardized plan 
option offerings in the same product network type, metal level, and 
service area.
    We finalized several specifications for issuers seeking to utilize 
this exceptions process at Sec.  156.202(d)(1) through (6). 
Specifically, at paragraph (d)(1), the 25 percent reduction in cost 
sharing for benefits pertaining to the treatment of chronic and high-
cost conditions will be evaluated at the level of total out-of-pocket 
costs for the treatment of the chronic and high-cost condition for a 
population of enrollees with the relevant chronic and high-cost 
condition. At paragraph (d)(2), the reduction must not be limited to a 
part of the year, or an otherwise limited scope of benefits. At 
paragraph (d)(3), the reduction in cost sharing for these benefits 
cannot be conditioned on a consumer having a particular diagnosis.
    At paragraph (d)(4), the required reduction in cost sharing only 
applies to the standard variant of the plan for which an issuer seeks 
an exception, and not to the income-based cost-sharing reduction plan 
variations required by Sec.  156.420(a), nor to the zero and limited 
cost sharing plan variations required by Sec.  156.420(b). At paragraph 
(d)(5), issuers are limited to one exception per product network type, 
metal level, inclusion of dental and/or vision benefit coverage, and 
service area, for each chronic and high-cost condition. At paragraph 
(d)(6), the chronic and high-cost conditions that may qualify an issuer 
for this exception will be determined by HHS. Refer to Sec.  156.202 of 
the preamble to this rule for a more detailed discussion regarding 
these requirements.
    Additionally, at Sec.  156.202(e), an issuer that seeks to utilize 
this exceptions process is required to submit a written justification 
in a form and manner and at a time prescribed by HHS. At paragraph 
(e)(1), the written justification must identify the specific chronic 
and high-cost condition that its additional non-standardized plan 
option offers substantially reduced cost sharing for, in accordance 
with the definition of ``cost sharing'' at Sec.  156.20.
    At paragraph (e)(2), the written justification must identify which 
benefits in the Plans and Benefits Template are discounted to provide 
reduced treatment-specific cost sharing for individuals with the 
specified chronic and high-cost condition. These discounts must be 
relative to the treatment-specific cost sharing for the same 
corresponding benefits in the issuer's other non-standardized plan 
offerings in the same product network type, metal level, inclusion of 
dental and/or vision benefit coverage, and service area. For the 
purposes of this standard, treatment specific cost sharing consists of 
the costs for obtaining services that pertain to the treatment of a 
particular chronic and high-cost disease--but not the costs for 
obtaining services that do not pertain to the treatment of the relevant 
condition. The issuer must identify all services for which the benefits 
substantially reduce cost sharing in the Plans and Benefits Template. 
These benefits must

[[Page 26391]]

encompass a complete list of relevant services pertaining to the 
treatment of the relevant condition.
    At paragraph (e)(3), the written justification must explain how the 
reduced cost sharing for these services pertains to clinically 
indicated guidelines and a representative treatment scenario for 
treatment of the specified chronic and high-cost condition (and include 
any relevant studies, guidelines, or supplementary documents to support 
the application, as applicable). For the purposes of this standard, a 
representative treatment scenario is an annual course of treatment for 
a chronic and high-cost condition.
    At paragraph (e)(4), the written justification must include a 
corresponding actuarial memorandum that explains the underlying 
actuarial assumptions made in the design of the plan the issuer is 
requesting to except. In this memorandum, an issuer must demonstrate 
how the benefits that are discounted to provide reduced treatment-
specific cost sharing of at least 25 percent identified at Sec.  
156.202(e)(2) for the treatment of the condition identified at Sec.  
156.202(e)(1) under the excepted plan compare to the identified in-
limit offering in the same product network type, metal level, inclusion 
of dental and/or vision coverage, and service area. This demonstration 
must specifically be in reference to the specific population that would 
be seeking treatment for the relevant condition and not the general 
population. This memorandum must also include an actuarial opinion 
confirming that this analysis was prepared in accordance with the 
appropriate Actuarial Standards of Practice and the profession's Code 
of Professional Conduct.
    In order for an issuer to complete the necessary documentation to 
submit a request to be excepted from the non-standardized plan option 
limit at Sec.  156.202(b) in accordance with the requirements at Sec.  
156.202(d) through (e), we estimate that it will take an actuary (OES 
occupational code 15-2011) 5 hours annually at a median hourly cost of 
$109.60 per hour (amounting to $548 annually) to create a new plan 
design with sufficiently differentiated cost sharing and to set the 
premium rate for this plan; a general internal medicine physician (OES 
occupational code 29-1216) 2 hours annually at a median hourly cost of 
$206.22 (amounting to $412.44 annually) to complete the justification 
form for this exceptions process; and a general and operations manager 
(OES occupational code 11-1021) 10 hours annually at a median hourly 
cost of $94.32 per hour (amounting to $943.20 annually) to review and 
submit the justification form, including all required data, as part of 
an issuer's portfolio of plan offerings that it seeks certification of 
during QHP certification.
    Altogether, we estimate a total burden of 17 hours at a cost of 
$1,903.64 per issuer annually to create a new non-standardized plan 
option that substantially benefits consumers with a chronic and high-
cost condition, and to submit a request for that new non-standardized 
plan option to be excepted from the non-standardized plan option limit. 
We do not anticipate that issuers will seek to have more than one 
additional non-standardized plan option excepted from the limit. We 
further estimate that approximately 50 FFE and SBE-FP issuers (of the 
228 issuers based on current PY 2024 plan offering data, amounting to 
approximately 22 percent) will request to be excepted from the non-
standardized plan option limit in order to offer these additional plans 
annually, at a total burden of 850 hours and associated cost of $95,182 
for all issuers annually. We estimate that 50 issuers will submit a 
request to be excepted from the non-standardized plan option limit 
since we anticipate that most issuers would believe that the burden of 
creating and certifying additional plans intended to benefit a 
comparatively small population of consumers would outweigh the benefit 
of doing so.
    We sought comment on these burden estimates.
    We did not receive any comments on ICRs associated with non-
standardized plan option limit exceptions.

N. Summary of Annual Burden Estimates for Finalized Requirements

                                           Table 15--Finalized Annual Recordkeeping and Reporting Requirements
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                Total
                                                                       Number of    Number of    Burden per     annual     Labor cost of
              Regulation section(s)                 OMB Control No.   respondents   responses     response      burden     reporting ($)  Total cost ($)
                                                                                                  (hours)      (hours)
--------------------------------------------------------------------------------------------------------------------------------------------------------
45 CFR 155.1050..................................          0938-XXXX           22           22          900       19,800       1,365,012       1,365,012
45 CFR 155.220...................................          0938-XXXX           20           20          505       10,100         860,380         860,380
45 CFR 155.220...................................          0938-XXXX            5            5        4,008       20,040       2,346,128       2,346,128
45 CFR 155.221...................................          0938-XXXX           20           20        1,397       17,601       1,233,262       1,233,262
45 CFR 155.221...................................          0938-XXXX            5            5        5,749       28,745       3,353,468       3,353,468
45 CFR 155.221(b)(6).............................          0938-XXXX          100          100           33        3,125      245,290.50      245,290.50
45 CFR 155.221(b)(6).............................          0938-XXXX           20           20          165        3,105      247,358.70      247,358.70
45 CFR 155.315...................................          0938-XXXX           11           11           23          253          23,770          23,770
45 CFR 155.330(d)................................          0938-XXXX           11           11           40          440          43,252          43,252
45 CFR 156.111...................................          0938-1174            5            5           41          205          18,036          18,036
45 CFR 156.202...................................          0938-XXXX           50           50           17          850          95,182          95,182
                                                  ------------------------------------------------------------------------------------------------------
    Total........................................  .................          269          269       12,878      104,264       9,832,523       9,832,523
--------------------------------------------------------------------------------------------------------------------------------------------------------

    The following information collection requests will be submitted for 
OMB approval outside of this rulemaking, through separate Federal 
Register notices: Exchange requirements for web-brokers (Sec. Sec.  
155.220, 155.221, 155.315) and non-standardized plan options (Sec.  
156.202).

V. Regulatory Impact Analysis

A. Statement of Need

    This rule finalizes several HHS risk adjustment updates, such as to 
use the 2019, 2020, and 2021 data for recalibration of the HHS risk 
adjustment models for benefit year 2025; to update and retain the AI/AN 
CSR adjustment factors for benefit year 2025 and beyond, unless changed 
through notice-and-comment rulemaking; to establish the risk adjustment 
user fee for benefit year 2025; and to give HHS the authority to 
require corrective action plans for certain observations identified as 
a result of risk adjustment audits for the high-cost risk pool. The 
rule further finalizes State Exchange and agent, broker, web-broker, 
and DE entity standards; requiring State Exchanges and State Medicaid 
and CHIP agencies

[[Page 26392]]

to pay to access and use optional CSI data from the Hub for income 
verification; eligibility and auto re-enrollment standards; open 
enrollment period and special enrollment period standards; and 
permitting enrollees to retroactively terminate their enrollment in a 
QHP through the Exchange when the enrollee enrolls in Parts A or B 
Medicare retroactively effective to the date Medicare coverage begins. 
Additionally, the rule finalizes the FFE and SBE-FP user fee rates for 
the 2025 benefit year, as well as EHB-benchmark plan selection updates, 
other EHB updates, minor updates to the standardized plan options for 
PY 2025, an exceptions process for issuers to offer additional non-
standardized plan options in excess of the limit of two for PY 2025, 
Consumer Operated and Oriented Plan (CO-OP) loan term revisions, and 
modifications to section 1332 waiver implementing regulations governing 
public hearing procedures.

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), Executive Order 14094 entitled ``Modernizing 
Regulatory Review'' (April 6, 2023), the Regulatory Flexibility Act 
(RFA) (September 19, 1980, Pub. L. 96-354), section 1102(b) of the Act, 
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). The April 
6, 2023 Executive Order on Modernizing Regulatory Review \344\ amends 
Section 3(f) of Executive Order 12866 to define a ``significant 
regulatory action'' as an action that is likely to result in a rule 
that may: (1) have an annual effect on the economy of $200 million or 
more (adjusted every 3 years by the Administrator of OMB's Office of 
Information and Regulatory Affairs (OIRA) for changes in gross domestic 
product), or adversely affect in a material way the economy, a sector 
of the economy, productivity, competition, jobs, the environment, 
public health or safety, or State, local, territorial, or tribal 
governments or communities; (2) create a serious inconsistency or 
otherwise interfere with an action taken or planned by another agency; 
(3) materially alter the budgetary impacts of entitlements, grants, 
user fees, or loan programs or the rights and obligations of recipients 
thereof; or (4) raise legal or policy issues for which centralized 
review would meaningfully further the President's priorities or the 
principles set forth in the Executive Order, as specifically authorized 
in a timely manner by the Administrator of OIRA in each case.
---------------------------------------------------------------------------

    \344\ Executive Order 14094. https://www.whitehouse.gov/briefing-room/presidential-actions/2023/04/06/executive-order-on-modernizing-regulatory-review/.
---------------------------------------------------------------------------

    A regulatory impact analysis (RIA) must be prepared for significant 
rules. OMB's OIRA has determined that this rulemaking is `significant' 
as measured by the $200 million threshold under section 3(f)(1). We 
have prepared an RIA that to the best of our ability presents the costs 
and benefits of the rulemaking. OMB has reviewed these finalized 
regulations, and the Departments have provided the following assessment 
of their impact.

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

    As required by OMB Circular A-4 (available at https://www.whitehouse.gov/wp-content/uploads/legacy_drupal_files/omb/circulars/A4/a-4.pdf.), we prepared an accounting statement in Table 16 
showing the classification of the impact associated with the provisions 
of this final rule.
    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 
(including merged) health insurance markets and in Exchanges. We are 
unable to quantify all the benefits and costs of this final rule. The 
effects in Table 16 reflect 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 16 include 
changes to costs associated with the risk adjustment user fee paid to 
HHS by issuers.

                                           Table 16--Accounting Table
----------------------------------------------------------------------------------------------------------------
 
----------------------------------------------------------------------------------------------------------------
             Benefits:                     Estimate          Year dollar       Discount rate          Period
                                                                                                         covered
----------------------------------------------------------------------------------------------------------------
Annualized Monetized ($/year).....  $25.79 million.......            2023  7 percent............       2024-2028
                                    26.32 million........            2023  3 percent............       2024-2028
----------------------------------------------------------------------------------------------------------------
Quantitative:
     Annual cost savings to State Exchanges of approximately $20,317,000 beginning in 2025 associated
     with the policy to permit Exchanges to accept consumer incarceration attestations without further
     verification..
     Annual cost savings to the Federal Government of approximately $570,000 beginning in 2025 due to
     the policy to stop generating incarceration DMIs and thereby stop paying the PUPS annual maintenance and
     transaction fees for the purposes of verification incarceration status for QHP eligibility..
     Annual cost savings to the Federal Government of approximately $12.5 million associated with the
     policy to conduct an additional Death PDM check annually beginning in 2025..
----------------------------------------------------------------------------------------------------------------
Qualitative:
     Increased State flexibility with respect to determining the effective date of eligibility for
     enrollment in a standard health plan for purposes of a BHP..

[[Page 26393]]

 
     Improved transparency as a result of the requirement that States seeking to transition to a State
     Exchange must provide the public with a notice and copy of its State Exchange Blueprint application at the
     time of submission to HHS for approval, and conduct periodic public engagements whereby interested parties
     can learn about the State's intent to transition, as well as a State's progress toward transitioning.
     Although, historically, States that have transitioned to State Exchanges conducted some level of public
     engagements that would meet what has been finalized, they have done so voluntarily, so this policy will set
     a clear expectation moving forward for all States that intend to establish and operate a State Exchange..
     Improved consumer experience associated with the requirement that Exchange call centers must
     provide consumers with access to a live call center representative during the Exchanges' published hours of
     operations who must be able to assist consumers with submitting their application for QHP coverage.
     Although all current Exchanges meet this requirement, there may be States transitioning to State Exchanges
     in the future that would not consider offering live call center representatives in the absence of this
     finalized amendment. This policy will set a clear expectation moving forward for all States that intend to
     establish and operate a State Exchange..
     Improved consumer experience and access to accurate insurance information associated with the
     requirement that all Exchanges must have a centralized eligibility and enrollment platform on its website.
     Although all current Exchanges meet this requirement, there may be States transitioning to State Exchanges
     in the future that would not consider operating a centralized eligibility and enrollment platform in the
     absence of this finalized amendment. This policy will set a clear expectation moving forward for all States
     that intend to establish and operate a State Exchange..
     Increased transparency for agents, brokers, and web-brokers by specifying who will be reviewing
     their reconsideration requests..
     Improved consumer experience on non-Exchange websites by requiring DE entities to implement
     HealthCare.gov and State Exchange website display changes that enhance the consumer experience, simplify
     the plan selection process, and increase consumer understanding of plan benefits, cost-sharing
     responsibilities and eligibility for financial assistance..
     Reduced burdens and barriers to care for applicants as a result of the policy to permit Exchanges
     to accept incarceration attestations without further verification..
     Improved continuity of coverage for enrollees due to the requirement that Exchanges must
     automatically re-enroll enrollees in catastrophic coverage into QHP coverage for the coming plan year..
     Reduced consumer confusion and increased consumer access to assisters as a result of the
     requirement that State Exchanges generally must adopt an open enrollment period that begins on November 1
     of the calendar year preceding the benefit year and ends no earlier than January 15 of the applicable
     benefit year, with the option to extend the open enrollment period beyond January 15..
     Reduced consumer confusion and coverage gaps due to the policy to align the effective dates of
     coverage after selecting a plan during certain special enrollment periods across all Exchanges..
     Reduced overlaps in coverage and premium payments for Exchange enrollees who retroactively enroll
     in Medicare Part A or B as a result of the policy to permit Exchange enrollees to retroactively terminate
     Exchange coverage back to the date in which they retroactively enroll in Medicare Part A or B, but no more
     than 6 months before the date that retroactive termination is requested..
     Reduced costs for States to perform actuarial analyses to confirm compliance of EHB-benchmark plans
     with scope of benefit requirements at Sec.   156.111(b)(2)..
     Reduced coverage barriers to expanding access to adult dental benefits, improved State flexibility
     to add benefits to improve adult oral health, and promotion of health equity associated with the policy to
     remove the prohibition on including routine non-pediatric dental services as an EHB..
     Increased issuer flexibility in plan design as a result of the finalized exceptions process to
     allow issuers to offer additional non-standardized plan options in excess of the limit of two per product
     network type, metal level, inclusion of dental and/or vision benefit coverage, and service area, if
     specified requirements are met..
     Streamlined payments and collections processes and limited administrative burden for operating HHS
     programs due to the policy to align netting regulations at Sec.   156.1215 with the policies proposed in
     the Federal Independent Dispute Resolution (IDR) Process Administrative Fee and Certified IDR Entity Fee
     Ranges proposed rule..
----------------------------------------------------------------------------------------------------------------
              Costs:                       Estimate          Year dollar       Discount rate          Period
                                                                                                         covered
----------------------------------------------------------------------------------------------------------------
Annualized Monetized ($/year).....  $10.00 million.......            2023  7 percent............       2024-2028
                                    $10.00 million.......            2023  3 percent............       2024-2028
----------------------------------------------------------------------------------------------------------------
Quantitative:
     Cost to issuers being audited for high-cost risk pool payments of approximately $25,078 to
     complete, submit to HHS, and implement corrective action plans for certain high-cost risk pool audit
     observations for each benefit year being audited, if required by HHS..
     One-time cost in PY 2025 to web-brokers operating in State Exchanges of approximately $860,380 due
     to the policy to ensure agents, brokers, and web-brokers operating in these State Exchanges are meeting
     certain requirements applicable in the FFE and SBE-FPs..
     Costs to States of $2,346,128 associated with the policy that agents, brokers, and web-brokers
     operating in State Exchanges meet certain requirements applicable in the FFEs and SBE-FPs..
     Costs to DE entities operating in FFE and SBE-FP States of approximately $240,120 annually
     beginning in 2025 as a result of the requirement that DE entities implement and prominently display website
     changes in a manner that is consistent with display changes made by HHS to HealthCare.gov by meeting
     standards communicated and defined by HHS within a time period set by HHS, unless HHS approves a deviation
     from those standards..
     Costs to DE entities participating in State Exchanges of approximately $247,359 annually beginning
     in 2025 associated with implementing display changes and submitting requests to deviate from the standards
     defined by the State Exchange..
     Costs to DE entities operating in FFE and SBE-FP States of approximately $5,171 to submit a request
     to deviate from the display approach adopted by HealthCare.gov standards defined by HHS annually beginning
     in 2025..
     Costs to States of $3,353,468 associated with the policy that DE entities operating in State
     Exchanges meet certain requirements applicable in the FFEs and SBE-FPs, including the costs for States
     associated with policy surrounding DE entities operating in State Exchanges regarding implementing display
     changes and reviewing associated deviation requests if the State Exchange permits deviations..
     One-time cost in PY 2025 to DE entities in State Exchanges of approximately $1,233,262 to comply
     with the policy to add language to ensure DE entities operating in these State Exchanges are meeting
     certain requirements applicable in the FFE and SBE-FPs..
     One-time cost in PY 2025 to State Exchanges of $23,770 to conduct an analysis of whether to accept
     consumer attestation of incarceration status or identify an alternative data source to verify incarceration
     status and to make changes to their eligibility systems and processes to either accept consumer attestation
     or use an alternative data source to verify incarceration status..

[[Page 26394]]

 
     One-time cost to HHS of $2,557,077 in 2024 to build the structure and set up operations for the
     purposes of distinguishing costs of accessing CSI data through the VCI Hub service between the State
     Exchange and State Medicaid agency..
     Costs to States of $867,539 in 2024 and $1.7 million annually beginning in fiscal year 2025
     associated with the administrative fee to account for any direct or indirect costs to HHS of making CSI
     income data accessed through the VCI Hub service available to Exchanges and State Medicaid and CHIP
     agencies..
     One-time cost to 1 to 3 States with State Exchanges that currently have one Hub connection shared
     between the State Exchange and Medicaid, of approximately $3 to 6 million in 2024 (averaged to
     approximately $4.5 million for purposes of this final rule) if they elect to build a second, separate Hub
     connection for the purposes of distinguishing costs of accessing CSI data through the VCI Hub service
     between the State Exchange and State Medicaid agency. Should any of these States elect to build a second
     Hub connection, the State will determine if the State Exchange or Medicaid agency will finance the
     implementation and operational costs associated with the second Hub connection..
     One-time cost in 2025 of approximately $43,252 to 11 State Exchanges that are not currently meeting
     the requirement to conduct Death PDM at least twice a year..
     Costs to 5 States per year of approximately $18,036 to comply with the policy regarding the State
     selection of EHB-benchmark plans..
     Costs to 50 issuers of approximately $95,182 annually to complete the exceptions process in order
     to offer one additional non-standardized plan option in excess of the non-standardized option plan limit of
     two for PY 2025 and subsequent years..
     Costs to QHP issuers in State Exchanges and SBE-FPs of approximately $114,992 annually beginning in
     2025 associated with the network adequacy policies in this final rule..
     Costs to State Exchanges and SBE-FPs of approximately $1,365,012 annually beginning in 2025
     associated with the network adequacy policies in this final rule..
     Costs to HHS per year of approximately $58,923 to conduct an additional check for deceased
     enrollees associated with the requirement that Exchanges must conduct periodic checks for deceased
     enrollees twice yearly and subsequently end deceased enrollees' QHP coverage beginning with the 2025
     calendar year..
     One-time cost in 2025 of $1,540,000 to HHS to modify the Federal platform's current incarceration
     verification processes for the purposes of verifying eligibility for QHP, and to update the Federal
     platform's system logic for HHS to stop sending incarceration verification requests to PUPS..
----------------------------------------------------------------------------------------------------------------
Qualitative:
     Increased costs for consumers annually, to the extent that the policies to address State-mandated
     benefits and the process to change EHB-benchmark plans incentivize States to update and modernize the EHB
     with additional benefits, including routine non-pediatric dental services. Such added benefits could lead
     to approximately a 1% increase in second lowest cost silver plan premiums in approximately 5 States
     annually, raising premium costs for consumers..
     Increased administrative burden to States and issuers to develop criteria used to select a consumer
     representative for the P&T committee, to create or revise standard operating procedures for the committee,
     as well as for any additional training..
----------------------------------------------------------------------------------------------------------------
            Transfers:                     Estimate          Year dollar       Discount rate          Period
                                                                                                         covered
----------------------------------------------------------------------------------------------------------------
Annualized Monetized ($/year).....  $1.42 billion........            2023  7 percent............       2024-2028
                                    $1.48 billion........            2023  3 percent............       2024-2028
----------------------------------------------------------------------------------------------------------------
Quantitative:
     Estimated transfers of costs from the Federal Government to States of approximately $72 million to
     $122 million per year beginning in 2024 (averaged to $100 million for purposes of this final rule) by
     requiring State Exchanges and State Medicaid agencies to pay for their use of the optional CSI income data
     accessed through the VCI Hub service..
     Reduction in risk adjustment user fee transfers from issuers to the Federal Government of
     approximately $11 million for benefit year 2025 compared to the prior benefit year..
     Reduction in FFE and SBE-FP user fee rates transfers from issuers to the Federal Government of
     approximately $340 million for benefit year 2025 compared to the prior benefit year..
     Estimated increased APTC outlays from the Federal Government to issuers of $2 billion to $3 billion
     (averaged to $2.5 billion for purposes of this final rule) annually beginning in 2026 associated with the
     policy to remove the limitation that the 150 percent FPL SEP be available only to a consumer whose
     applicable percentage, which is used to determine the amount of the consumer's premium not covered by APTC,
     is zero percent..
----------------------------------------------------------------------------------------------------------------
Qualitative:
     Increased APTC outlays from the Federal Government for APTC to the extent that the policies to
     address State-mandated benefits and the process to change EHB-benchmark plans incentivize States to update
     and modernize the EHB with additional benefits, including routine non-pediatric dental services. Such added
     benefits could lead to an estimated 1% increase in second lowest cost silver plan premiums in an estimated
     5 States annually, necessitating increased outlays in the form of APTC..
     Increase in the overall absolute value of risk adjustment State transfers calculated under the
     State payment transfer formula of approximately 8 percent in Oklahoma, 2.5 percent in Alaska, 2 percent in
     Montana, and less than 0.5 percent in South Dakota and North Dakota as a result of the policy to
     recalibrate the CSR adjustment factors for AI/AN plan variant enrollees..
----------------------------------------------------------------------------------------------------------------


Table 17--Estimated Federal Government Outlays and Receipts for the HHS Risk Adjustment and Reinsurance Programs
                            From Fiscal Year 2025-2029, in Billions of Dollars \345\
----------------------------------------------------------------------------------------------------------------
               Year                     2025         2026         2027         2028         2029      2025-2029
----------------------------------------------------------------------------------------------------------------
HHS Risk Adjustment and                       8            9           10           10           10           47
 Reinsurance Program Payments.....
HHS Risk Adjustment and                       9           10           10           10           10           49
 Reinsurance Program Collections..
----------------------------------------------------------------------------------------------------------------
Note: HHS risk adjustment program payments and receipts lag by one quarter. Receipt will fully offset payments
  over time. Source: Congressional Budget Office. Federal Subsidies for Health Insurance Coverage for People
  Under Age 65: CBO and JCT's May 2023 Baseline Projections. Table 2. May 2023. https://www.cbo.gov/system/files/2023-05/51298-2023-05-healthinsurance.pdf.


[[Page 26395]]

1. Finalized Amendments to Normal Public Notice Requirements (31 CFR 
33.112, 31 CFR 33.120, 45 CFR 155.1312, and 45 CFR 155.1320)
---------------------------------------------------------------------------

    \345\ Reinsurance collections ended in FY 2018 and outlays in 
subsequent years reflect remaining payments, refunds, and allowable 
activities.
---------------------------------------------------------------------------

    In this final rule, the Departments are finalizing modifications to 
the section 1332 waiver implementing regulations to set forth 
flexibilities in the public notice requirements and post-award public 
participation requirements for section 1332 waivers. However, this 
final rule does not alter any of the requirements related to section 
1332 waiver applications, compliance and monitoring, or evaluation in a 
way that will create any additional costs or burdens for States 
submitting proposed waiver applications or those States with approved 
waiver plans that have not already been captured in prior burden 
estimates. The Departments are of the view that both States with 
approved section 1332 waivers and States that apply for section 1332 
waivers will be minimally impacted or would benefit from reduced burden 
by these policy changes. The Departments anticipate that implementing 
these provisions will not significantly change the associated burden 
currently approved under OMB control number: 0938-1389, Expiration 
date: February 29, 2024. The Departments are of the view that section 
1332 waivers help increase State innovation, which in turn lead to more 
affordable health coverage for individuals and families in States that 
consider implementing a section 1332 waiver program.
    The Departments sought comment on these impacts and assumptions but 
did not receive any comments in response to the cost and benefit 
estimates for this policy. We are finalizing these estimates as 
proposed.
2. Increase State Flexibility in the Use of Income and Resource 
Disregards for Non-MAGI Populations (42 CFR 435.601)
    Current 42 CFR 435.601(d) authorizes States to apply less 
restrictive methodologies than those that would otherwise be required 
to be considered in the individual's eligibility determination. 
Paragraph (d)(4) requires that the application of less restrictive 
methodologies by State Medicaid agencies be comparable for all persons 
within each Medicaid eligibility group. For example, if a State wants 
to apply an income disregard to an eligibility group serving 
individuals who are 65 years old or older, it must either agree to 
apply the income disregard to all members of the eligibility group who 
are 65 years old or older or forego application of the disregard. We 
proposed to eliminate this requirement; however, as explained above, we 
are not finalizing the proposal at this time, and therefore, we are not 
finalizing the burden estimates included in the proposed rule.
3. Changes to the Basic Health Program Regulations (42 CFR 600.320)
    Section 1331 of the ACA (42 U.S.C. 18051) requires the Secretary to 
establish a BHP, and section 1331(c)(4) specifically provides that a 
State shall coordinate the administration of, and provision of benefits 
under the BHP with other State programs. These finalized regulations 
build from previous BHP regulations to provide for options for BHP 
implementation and operations beginning with program year 2024.
    In this final rule, we are finalizing the additional options for a 
State establishing a uniform method of determining the effective date 
of eligibility for enrollment in a standard health plan. We believe 
this finalized policy will provide additional flexibility for States 
when implementing their BHP. If the State chooses to follow either new 
effective date of eligibility for enrollment option, we believe this 
finalized policy will also benefit enrollees by providing coverage 
sooner than if the State were to follow the Exchange effective date of 
coverage option. We do not anticipate any costs to States because of 
this finalized policy, as we are only finalizing to provide other 
options by which a State could determine the effective date of 
eligibility for purposes of its BHP.
    We sought comment on these impacts and assumptions.
    We did not receive any comments in response to the burden estimates 
for this policy. We are finalizing these estimates as proposed.
4. HHS Risk Adjustment (45 CFR 153.320)
    We are finalizing the recalibration of the HHS risk adjustment 
models for the 2025 benefit year using the 2019, 2020, and 2021 
enrollee-level EDGE data. We believe that continuing to maintain the 
approach of blending (or averaging) 3 years of separately solved 
coefficients provides stability within the HHS-operated risk adjustment 
program and minimizes volatility in changes to risk scores from the 
2024 benefit year to the 2025 benefit year. We also finalized 
continuing to apply a market pricing adjustment to the plan liability 
associated with Hepatitis C drugs in the HHS risk adjustment models.
    We are finalizing the recalibration of the CSR adjustment factors 
for AI/AN zero-cost sharing and limited cost sharing CSR plan variant 
enrollees for the 2025 benefit year, and to retain the finalized AI/AN 
CSR adjustment factors for all future benefit years unless changed 
through notice-and-comment rulemaking. We also finalized maintaining 
the current CSR adjustment factors for silver plan variant enrollees 
(70 percent, 73 percent, 87 percent, and 94 percent AV plan variants) 
\346\ for the 2025 benefit year and beyond, unless changed through 
notice-and-comment rulemaking. In addition, we affirm that for plan 
liability risk score calculations under the State payment transfer 
formula, we use the CSR adjustment factors that align with the AV of 
the plan. Thus, for unique State-specific plans that have higher plan 
liability than the standard silver plan variants (for example, CSR 
wrap-around and Medicaid-expansion plans), we will continue to apply 
the applicable CSR adjustment factor that corresponds to the plan's AV, 
as determined by HHS in consultation with the applicable State 
Departments of Insurance and other relevant State institutions.
---------------------------------------------------------------------------

    \346\ See 83 FR 16930 at 16953; 84 FR 17478 through 17479; 85 FR 
29190; 86 FR 24181; 87 FR 27235 through 27236; and 88 FR 25772 
through 25774.
---------------------------------------------------------------------------

    We anticipate that changes to the AI/AN CSR adjustment factors will 
result in an increase in overall individual market risk pool HHS risk 
adjustment transfers under the State payment transfer formula in States 
with a sizable share of AI/AN enrollees. We anticipate that the 
finalized recalibration of the AI/AN CSR adjustment factors will 
increase transfer payments (or decrease transfer charges) to the 
issuers with the larger shares of the AI/AN subpopulation and increase 
transfer charges (or decrease transfer payments) under the State 
payment transfer formula for the issuers with smaller shares of the AI/
AN subpopulation. Therefore, we anticipate that issuers with larger 
shares of AI/AN enrollees will have the ability to lower premium rates 
slightly, as the additional plan liability associated with AI/AN CSR 
recipients will be offset by the increase in HHS risk adjustment 
transfer payments (or decrease in transfer charges) to these issuers.
    Based on internal analyses, the States with the highest proportion 
of AI/AN enrollees as a percentage of member months in the 2021 benefit 
year were Oklahoma (15 percent), Alaska (4 percent), Montana (2 
percent), South

[[Page 26396]]

Dakota (2 percent), and North Dakota (1 percent). Based on internal 
analyses of 2021 enrollee-level EDGE data, we anticipate that the 
finalized recalibration of the AI/AN CSR adjustment factors would 
increase total transfers under the State payment transfer formula by 8 
percent in Oklahoma, 2.5 percent in Alaska, 2 percent in Montana, and 
less than 0.5 percent in South Dakota and North Dakota. We further 
anticipate that these transfer impacts would result in modest decreases 
in premiums among issuers that enroll a high proportion of AI/AN 
consumers, as issuers with larger AI/AN enrollment will benefit from 
increased transfer payments (or decreased transfer charges) under the 
State payment transfer formula. We do not anticipate that States with a 
low proportion of AI/AN enrollees would experience a transfer or 
premium impact due to the very low number of enrollees (less than 1 
percent) who would be impacted by the finalized recalibration of CSR 
adjustment factors for this population in those States.
    We sought comment on these impacts and assumptions.
    We did not receive any comments in response to the burden estimates 
for this policy. We are finalizing these estimates as proposed.
5. HHS Risk Adjustment User Fee for 2025 Benefit Year (45 CFR 
153.610(f))
    For the 2025 benefit year, HHS will operate risk adjustment in 
every State and the District of Columbia. As described in the 2014 
Payment Notice (78 FR 15416 through 15417), HHS' operation of risk 
adjustment under section 1343 of the ACA on behalf of States is funded 
through a risk adjustment user fee. For the 2025 benefit year, we 
finalized using the same methodology to estimate our administrative 
expenses to operate the HHS risk adjustment program as was used in the 
2024 Payment Notice. As discussed previously in this final rule, risk 
adjustment user fee costs for the 2025 benefit year are expected to 
increase from the prior 2024 benefit year estimates. However, in the 
proposed rule, we project higher enrollment than our prior estimates in 
the individual and small group (including merged) markets in the 2024 
and 2025 benefit years due to the enhanced PTC subsidies provided for 
in section 9661 of the ARP \347\ and extended through the 2025 benefit 
year pursuant to section 12001 of the IRA.
---------------------------------------------------------------------------

    \347\ Public Law 117-2.
---------------------------------------------------------------------------

    We estimate that the total cost for HHS to operate the risk 
adjustment program on behalf of all States and the District of Columbia 
will increase from $60 million in 2024 to approximately $66 million in 
2025. However, we believe that the increased enrollment projections 
will more than offset the increased risk adjustment user fee costs, and 
therefore, we proposed that the finalized risk adjustment user fee will 
be reduced from the $0.21 PMPM for the 2024 benefit year to $0.20 PMPM 
for the 2025 benefit year. In the proposed rule, we expected that the 
finalized risk adjustment user fee for the 2025 benefit year would 
reduce the amount transferred from issuers of risk adjustment covered 
plans to the Federal Government by approximately $3.5 million.
    Since the proposed rule, we have further revised our enrollment 
projections used for the calculation of the risk adjustment user fee 
based on newly available data, and as result of that data, we are 
finalizing a lower 2025 benefit year risk adjustment user fee rate of 
$0.18 PMPM than proposed. This 2025 benefit year final user fee rate 
will further reduce the amount transferred from issuers of risk 
adjustment covered plans to the Federal Government by approximately $11 
million.
    We sought comment on these impacts and assumptions.
    We did not receive any comments in response to the burden estimates 
for this policy. We are finalizing these estimates as proposed.
6. Audits and Compliance Reviews of Risk Adjustment Covered Plans (45 
CFR 153.620(c))
    We are finalizing amendments to Sec.  153.620(c)(4) to require 
issuers of risk adjustment covered plans to complete, implement, and 
provide to HHS written documentation of any corrective action plans 
when required by HHS if a risk adjustment audit results in the 
inclusion of certain observations in the final audit report. Based on 
data from the 2018 benefit year high-cost risk pool audits, we estimate 
that each issuer audited may receive approximately 2 observations on 
average in future benefit years of high-cost risk pool audits where 
there is evidence of non-compliance with applicable Federal 
requirements, thereby triggering the finalized requirement for the 
issuer to take corrective action. We also estimate that it will take 
approximately 4 hours by a business operations specialist (at $73.12 
per hour), 2 hours by a compliance officer (at $68.94 per hour), and 2 
hours by a computer systems analyst (at $98.30 per hour) to complete, 
implement, and provide documentation to HHS of a corrective action plan 
for 2 observations. This results in a total cost per issuer of $626.96 
(4 hours x $73.12 per hour + 2 hours x $68.94 per hour + 2 hours x 
$98.30 per hour). We estimate that we may conduct high-cost risk pool 
audits for approximately 40 issuers for each benefit year. Therefore, 
the total estimated cost to issuers of risk adjustment covered plans 
for each benefit year being audited will be approximately $25,078 (40 
issuers x $626.96 per issuer).
    We sought comment on these burden estimates and assumptions.
    We did not receive any comments in response to the burden estimates 
for this policy. We are finalizing these estimates as proposed.
7. Approval of a State Exchange (45 CFR 155.105)
    We are finalizing the addition of a requirement that a State 
seeking to transition to a State Exchange must first operate an SBE-FP, 
meeting all requirements under Sec.  155.200(f), for at least one plan 
year, including its first open enrollment period.
    We do not anticipate this finalized policy will create an 
additional burden to the States that are currently transitioning to a 
State Exchange, since those States have already operated an SBE-FP for 
at least 1 year or will first be operating an SBE-FP. Since PY 2020, 
all States that have transitioned to a State Exchange have first 
transitioned to an SBE-FP for one or more plan years. Furthermore, 
based on our experience, the costs for a State to transition from an 
FFE to operating an SBE-FP are relatively low in comparison to the 
costs a State will incur to transition from an FFE, or an SBE-FP, to 
establishing a State Exchange. This is due to the significant 
investment of costs incurred in implementing and operating a State 
Exchange consumer-facing website, eligibility and enrollment technology 
platform, and associated eligibility and enrollment support 
infrastructure, such as the State Exchange's consumer call center 
technology and resources, that FFEs and SBE-FPs rely on HHS to provide. 
We also expect the impact and costs to States that are considering, or 
may consider, establishing a State Exchange in the future to be minimal 
because we believe there will be sufficient time to plan for operating 
an SBE-FP before operating a State Exchange.
    We believe that one of the primary benefits of States operating an 
SBE-FP prior to implementing and operating a State Exchange lies in the 
investment of time and resources that a State transitioning to, and 
operating, an SBE-FP makes in the establishment of direct

[[Page 26397]]

relationships with their consumers, assisters, issuers, and other 
interested parties that will ultimately help in the successful 
implementation and operation of its State Exchange. Furthermore, we 
believe that the benefit of these activities to a State and its 
consumers and partners far outweigh the relatively low cost for the 
State to first transition to, and operate, an SBE-FP for at least one 
year before implementing and operating a State Exchange. We are also of 
the view that this policy will mitigate the significant risk and 
disruption, for consumers, assisters, issuers, and other interested 
parties, associated with a scenario where a State wishes to transition 
from an FFE to establishing and operating a State Exchange in a 
timeframe of less than a year or otherwise not in alignment with the 
timelines associated with the approval of a State Exchange specified in 
Sec.  155.106.
    We sought comment on these assumptions of the financial impact of 
this proposal on States that transition to an SBE-FP for at least one 
plan year before operating a State Exchange pursuant to this proposal.
    We did not receive any comments in response to the burden estimates 
for this policy. We are finalizing these estimates as proposed.
8. Election To Operate an Exchange After 2014 (45 CFR 155.106)
    As discussed in the preamble, we are finalizing that a State, as 
part of its activities for its establishment of a State Exchange, 
provide upon request, supplemental documentation to HHS detailing the 
State's implementation of its State Exchange functionality, including 
information regarding the State's ability to implement and comply with 
Federal requirements for operating an Exchange. Such supporting 
documentation would inform HHS's decision to approve or conditionally 
approve a State Exchange and could include, for example, materials 
demonstrating progress toward meeting State Exchange Blueprint 
application requirements, documentation that details a State's plans to 
implement and meet the Exchange functional requirements as laid out in 
the State Exchange Blueprint application, or plans to engage in 
consumer assistance programs and activities.
    We do not anticipate additional burden associated with this policy. 
The current State Exchange Blueprint application already includes 
requests for supporting documentation that a State is progressing 
toward meeting State Exchange Blueprint application requirements. As a 
result, this provision codifies existing policy, which States currently 
comply with. Blueprint application. The information collection burden 
associated with this policy is already accounted for under approved OMB 
control number: 0938-1172, Expiration date: August 31, 2025.
    Further, as discussed in the preamble, we are finalizing the 
requirement that when a State submits its State Exchange Blueprint 
application to HHS for approval, the State must provide the public with 
notice and a copy of its State Exchange Blueprint application. We are 
also finalizing the requirement that at some point following a State's 
submission of its State Exchange Blueprint application to HHS, a State 
must conduct at least one public engagement (such as a townhall meeting 
or public hearing), in a timeline and manner considered effective by 
the State, with concurrence from HHS, at which interested parties can 
learn about the State's intent to transition to a State Exchange and 
the State's progress toward effectuating that transition. We are also 
finalizing the requirement that while a State is making this transition 
and until HHS has approved or conditionally approved the State Exchange 
Blueprint application, a State conducts periodic public engagements at 
which interested parties can continue to learn about the State's 
progress toward finalizing its transition to a State Exchange, in a 
timeline and manner, either in-person or virtually, considered 
effective by the State.
    We do not anticipate significant additional burden associated with 
these requirements, as States are currently required to submit a State 
Exchange Blueprint application to HHS for approval, and so the impact 
of sharing a copy of the submitted Exchange Blueprint application with 
the public using their website would be de minimis. Further, we believe 
that since States seeking to establish, or are in the process of 
establishing, a State Exchange for PY 2025 or in subsequent years would 
be given broad flexibility to design the public engagements in a manner 
that best suits their respective State, for meeting the interested 
party consultation requirement under Sec.  155.130, that States will 
design their public engagements in a manner such that the additional 
burden incurred by the State would be minimal. The goal of the policy 
changes at Sec.  155.106(a)(2)(ii) is to clearly state, for States that 
are seeking to establish State Exchanges, HHS' expectations of the 
State engaging with the public regarding its transition to a State 
Exchange, thus strengthening the transparency requirements of the State 
Exchange Blueprint review and approval process. We believe this policy 
will help States that establish a State Exchange meet the consultation 
requirements of interested parties at Sec.  155.130 during the period 
when the State is establishing a State Exchange, by formalizing a 
process whereby States and interested parties communicate about the 
State's establishment of a State Exchange throughout the transition 
process. As such, we believe the impact of this policy will be de 
minimis.
    We sought comment on this burden estimate and assumptions.
    We did not receive any comments in response to the burden estimates 
for this policy. We are finalizing these estimates as proposed.
9. Additional Required Benefits (45 CFR 155.170)
    We are finalizing amendments to Sec.  155.170(a)(2) to provide that 
benefits covered in a State's EHB-benchmark plan will not be considered 
in addition to EHB and thus will not be subject to defrayal by the 
State beginning with PY 2025. We believe that this revision will have a 
mixed effect on the cost to the Federal Government. In States that 
update EHB-benchmark plans to include benefits, the costs of which are 
currently being defrayed, the percentage of premium attributable to 
coverage of EHB for purpose of calculating APTC will increase and any 
increase remains subject to the typicality requirement in that section. 
In a State that enacts a mandate for a benefit that is currently 
covered in its EHB-benchmark plan, there will be no effect on Federal 
Government expense as the benefit was already included in the 
percentage of premium attributable to coverage of EHB for purpose of 
calculating APTC. States may choose to evaluate the overlap between 
mandates and EHB-benchmark-plans for benefits they are currently 
defraying the costs of but are not required to. Issuers may have to 
make modifications to their plan designs and plan filings to reflect 
any possible changes in designation of benefits as EHB because of this 
policy in the regular course of updating those annual materials. We do 
not anticipate an additional burden on States or issuers associated 
with this finalized policy.
    We sought comment on this burden estimate and assumptions.
    We did not receive any comments in response to the burden estimates 
for this policy. We are finalizing these estimates as proposed.

[[Page 26398]]

10. Consumer Assistance Tools and Programs of an Exchange (45 CFR 
155.205)
    As discussed in the preamble, we are finalizing the addition of 
minimum standards for Exchange call center operations, such that 
Exchanges, other than SBE-FPs and SHOP Exchanges that do not provide 
for enrollment in SHOP coverage through an online SHOP enrollment 
platform, meet the following additional requirements: their call center 
must provide consumers with access to a live call center representative 
during the Exchanges' published hours of operation and their live call 
center representatives must be able to assist consumers with submitting 
their Exchange application for QHP coverage.
    We believe this policy will support the intent of sections 
1311(d)(4)(B) and 1413(b)(1)(A)(ii) of the ACA by codifying the 
requirement that a consumer must be able to obtain live call center 
support with submitting an application for QHP coverage during 
reliable, published hours of operation. It is our presumption that 
speaking to a live representative will better aid in troubleshooting 
consumer Exchange application issues, provide a real time opportunity 
for a live representative to explain Exchange application terminology 
to a consumer, provide for a live representative to ensure the consumer 
provides the most correct information to the Exchange application 
(thereby alleviating unnecessary follow-up), and provide greater 
overall consumer satisfaction.
    As stated in the preamble, we believe that all State Exchanges 
already meet these finalized minimum standards, and we know that the 
Exchanges on the Federal platform does as well. As such, we do not 
anticipate an additional burden associated with this finalized policy.
    We sought comment on these impacts and assumptions.
    We did not receive any comments in response to the burden estimates 
for this policy. We are finalizing these estimates as proposed.
11. Requirement for Centralized Exchange Eligibility and Enrollment 
Platform on the Exchange's Website (45 CFR 155.205(b) and 
155.302(a)(1))
    We are finalizing amendments to Sec.  155.205(b)(4) to require that 
an Exchange operate a centralized eligibility and enrollment platform 
on the Exchange's website (or, for an SBE-FP, through the Federal 
eligibility and enrollment platform) such that the Exchange allows for 
the submission of the single, streamlined application for enrollment in 
a QHP and insurance affordability programs by consumers, in accordance 
with Sec.  155.405, through the Exchange's website and performs 
eligibility determinations for all consumers based on submissions of 
the single, streamlined application. Further, we are finalizing 
amendments to Sec.  155.302(a)(1) to clarify that the Exchange, through 
the centralized eligibility and enrollment platform operated on the 
Exchange's website (or, for an SBE-FP, the Federal eligibility and 
enrollment platform) is the entity responsible for making all 
determinations regarding the eligibility for QHP coverage and insurance 
affordability programs regardless of whether an individual files an 
application for enrollment in a QHP on the Exchange's website, or on a 
website operated by an entity described under Sec.  155.220, such as a 
web-broker defined at Sec.  155.20, or a direct enrollment entity or 
QHP issuer described under Sec.  155.221. This amendment to Sec.  
155.302(a)(1) will also clarify that only entities that an Exchange 
elects to contract with to operate its centralized eligibility and 
enrollment platform can perform this function on behalf of an Exchange 
and would prohibit Exchanges from solely relying on non-Exchange 
entities, including a web-broker (defined at Sec.  155.20) or other 
entities under Sec.  155.220 or Sec.  155.221, from making such 
eligibility determinations on behalf of an Exchange.
    We also are finalizing amendments to Sec.  155.205(b)(5) to require 
that an Exchange operate a centralized eligibility and enrollment 
platform through the Exchange's website (or, for an SBE-FP, by relying 
on the Federal eligibility and enrollment platform) so that the 
Exchange (or, for an SBE-FP, the Federal eligibility and enrollment 
platform) meets the requirement under Sec.  155.400(c) to maintain 
records of all effectuated enrollments in QHPs, including changes in 
effectuated QHP enrollments.
    Since all Exchanges, including State Exchanges, SBE-FPs, and FFEs, 
currently provide access to a centralized eligibility and enrollment 
platform and process for consumers that they serve, and all Exchanges 
also currently perform all eligibility determinations through the 
operation of a centralized eligibility and enrollment platform on their 
websites, we believe the burden of this policy on Exchanges and 
interested parties will be minimal.
    We sought comment on the assumptions and estimated impacts of this 
proposal.
    We did not receive any comments in response to the burden estimates 
for this policy. We are finalizing these estimates as proposed.
12. Adding and Amending Language To Ensure Web-Brokers Operating in 
State Exchanges Meet Certain HHS Standards Applicable in the FFEs and 
SBE-FPs (45 CFR 155.220)
    We are finalizing amendments to Sec.  155.220 to apply to web-
brokers operating in State Exchanges, and consequently in State 
Exchanges, in both the Individual Market Exchanges and SHOPs, certain 
existing HHS standards governing use of web-brokers' non-Exchange 
websites to assist consumers with enrolling in QHPs and applying for 
APTC/CSRs in a manner that constitutes enrollment through an Exchange. 
As discussed in the preamble of this final rule, the finalized 
regulatory amendments will require these State Exchanges to draft 
policy, update standards, and potentially hire more staff to perform 
functions not currently being performed by the State Exchange as a 
result of applying the identified Sec.  155.220 standards to web-
brokers participating in State Exchanges. These changes will also 
require web-brokers hosting non-Exchange websites in these State 
Exchanges to perform web-development and oversight to ensure compliance 
with the HHS minimum standards this rulemaking finalized to extend to 
these web-brokers. These changes will also require web-brokers in State 
Exchanges who want to assist consumers with enrolling in QHPs and 
applying for ATPC and CSRs to display standardized disclaimers, display 
QHP comparative information, display information pertaining to a 
consumer's eligibility for APTC or CSRs, to participate in operational 
readiness reviews and potentially maintain relevant documentation, and 
to extend downstream agent and broker requirements to web-brokers 
operating in State Exchanges. Although these policies allow States 
certain flexibility for State Exchanges to tailor their web-broker 
program (including the flexibility to add State-specific language to 
standardized disclaimers, provided the additional language does not 
conflict with the HHS-provided standardized disclaimers) and establish 
their own standards with respect to operational readiness 
demonstrations by their web-brokers, we expect the impact and costs to 
be reasonably-based on the impacts seen on the FFEs and SBE-FPs.
    Although there will be some additional burden for web-brokers 
operating in State Exchanges, amounting to approximately $43,019

[[Page 26399]]

per web-broker as discussed in the information collection requirements 
section of this final rule, we anticipate that some of these State 
Exchanges may utilize web-broker entities already participating in the 
FFEs and SBE-FPs, which will help provide administrative savings 
related to the approval process if the State Exchange does not impose 
additional State-specific requirements beyond the HHS minimum 
standards. We encourage State Exchanges to leverage web-broker 
operational readiness demonstrated for the FFEs and SBE-FPs when 
possible. Additionally, we expect those web-brokers already 
participating in the FFEs and SBE-FPs to be able to leverage their 
existing web-development work with additional burden and costs only 
required for tailoring the website display, operational readiness, and 
downstream agent and broker access to any State-specific requirements 
adopted by the applicable State Exchange. Additionally, as described in 
the accompanying ICR discussion, we anticipate an impact on State 
governments totaling $2,346,128 for 5 States to opt to host a web-
broker program for their State Exchange.
    We estimate a total cumulative burden of $860,380 associated with 
this policy for an estimated 20 web-brokers operating across the 5 
State Exchanges. We anticipate these changes to extend certain HHS 
minimum standards governing web-broker participation in FFEs and SBE-
FPs to also apply to State Exchanges and their web-brokers will be 
beneficial to consumers by establishing uniform, baseline requirements 
for agent, broker, and web-broker participation across all Exchange 
types. These finalized changes will allow State Exchanges to leverage 
the framework that has already been established and currently applies 
to FFEs and SBE-FPs, thereby decreasing the burden to these State 
Exchanges to establish such a program, while providing some flexibility 
for these State Exchanges to tailor the new requirements to include 
State-specific content (such as the updating disclaimer language to 
refer to the State Exchange website rather than the HealthCare.gov 
website). Additionally, these finalized changes will establish 
administrative and operational consistency throughout the Exchanges, 
which is beneficial to agents, brokers, and web-brokers by allowing 
them to expand their business into States with State Exchanges in a 
more streamlined fashion, as well as to Exchanges and their consumers.
    We sought comment on these estimated impacts and assumptions.
    After consideration of comments and for the reasons outlined in the 
proposed rule and our responses to comments, we are finalizing the 
burden estimates with the modifications to the estimated burden hours 
for web-brokers to implement the requirements associated with this 
proposal. We summarize and respond to public comments received 
regarding this provision below.
    Comment: One commenter noted that the burden estimates provided are 
overstated and fail to incorporate the potential cost savings and 
additional user fee revenues that States could realize through 
utilization of web-brokers, including reduced burdens on State call 
centers and State Exchanges.
    Response: We acknowledge this comment and have modified the burden 
estimates incorporated within this regulatory impact analysis. Refer to 
the comment summary within this finalized proposal's ICR analysis for a 
detailed summary and response to this comment.
13. Ability of States To Permit Agents and Brokers and Web-Brokers To 
Assist Qualified Individuals, Qualified Employers, or Qualified 
Employees Enrolling in QHPs (45 CFR 155.220(h))
    As discussed in the preamble to this final rule, we are finalizing 
revisions to Sec.  155.220(h) to specify that the CMS Administrator, a 
principal officer, will review agent, broker, and web-broker requests 
for reconsideration of HHS' decision to terminate their Exchange 
agreement(s) for cause. We are finalizing that the CMS Administrator's 
determination would be final and binding. We believe this policy will 
improve transparency for agents, brokers, and web-brokers by ensuring 
they know who will be responsible for handling these reconsideration 
decisions under Sec.  155.220(h).
    We sought comment on the estimates associated with this proposal.
    We received only positive comments on this proposal, with 
commenters stating this would improve transparency and clarity in the 
regulation. We are finalizing these estimates as proposed.
14. Establishing Requirements for DE Entities Mandating HealthCare.gov 
Changes Be Reflected on DE Entity Non-Exchange Websites Within a Notice 
Period Set by HHS (45 CFR 155.221(b))
    We are finalizing amendments to Sec.  155.221 as proposed but with 
technical changes to require that DE entity non-Exchange websites 
assisting consumers in FFEs and SBE-FPs implement and prominently 
display website changes in a manner that is consistent with display 
changes made by HHS to HealthCare.gov by meeting standards communicated 
and defined by HHS within a time period set by HHS, unless HHS approves 
a deviation from those standards. We are also finalizing the 
requirement that State Exchanges must implement a similar process to 
require their DE entities to implement and prominently display website 
changes in a manner that is consistent with display changes made by 
State Exchanges to the State Exchanges' websites by meeting standards 
communicated and defined by the State Exchanges within a time period 
set by the State Exchange, unless the State Exchange approves a 
deviation from those standards under the deviation request process it 
is required to establish should the State Exchange elect to permit 
deviation requests.
    As discussed in the preamble of this final rule, this policy will 
require web-brokers and QHP issuers participating in DE in FFE and SBE-
FP States to update their non-Exchange websites to implement and 
prominently display website changes in a manner that is consistent with 
display changes made by HHS to HealthCare.gov by meeting standards 
communicated and defined by HHS within a time period set by HHS. This 
requirement will provide those DE entities flexibility in their user 
interface graphic design, provided that their design complies with the 
standards defined by HHS. This requirement will also allow those DE 
entities to submit a deviation request for review and approval by HHS 
if they would like to implement a display that does not meet those 
standards. We anticipate an average of three or fewer required display 
changes annually, with the majority of changes being simpler website 
display changes that are relatively easy to implement. Furthermore, HHS 
will provide examples and associated disclaimer text with the release 
of any required website display changes pursuant to this finalized 
policy, and therefore, we expect the overall impact of these simple 
website display changes to be minimal. As described in the information 
collection requirements section of this final rule, we estimate a total 
cumulative annual burden of $240,120 associated with the requirement 
for DE entity non-Exchange websites assisting consumers in FFEs and 
SBE-FPs to implement and prominently display website changes in a 
manner that is consistent with display changes made by HHS to 
HealthCare.gov and a burden of $5,171 associated with completing and 
submitting a request to deviate from the HealthCare.gov display.

[[Page 26400]]

    As discussed in the preamble for this final rule, we continue to 
support DE entities' use of innovative decision-support tools and user 
interface designs, and this policy is not intended to prohibit the 
implementation of display features beyond the baseline provided by 
Exchange websites. As such, there may be occasions where some web-
brokers and QHP issuers participating in direct enrollment may have 
implemented the standards of the desired display before the change was 
made on the Exchange website. In these instances where the DE entity 
non-Exchange website is already meeting the minimum standards 
associated with the website display changes communicated by HHS 
pursuant to this requirement, the entity will not have to make any 
further website updates. We also anticipate approximately one more 
complex display change per plan year, potentially involving updates to 
backend UI algorithms and display methodologies. Although more complex 
display changes may represent additional burden for DE entities, we 
will ease the burden by providing them with examples of the Exchange 
website's display, technical implementation guidance (including 
Marketplace API (MAPI) or Public Use Files (PUF) data integration 
guidance), and technical assistance as needed. We anticipate that 
giving examples of a user interface design that meets HHS' standards 
will ease the burden of implementation as compared to solely providing 
HHS' standards and relying on DE entities to determine how to configure 
their websites to meet those standards.
    Finalized Sec.  155.221(j) will extend this new finalized DE entity 
non-Exchange website display requirement to require State Exchanges to 
require their DE entities to implement and prominently display website 
changes in a manner that is consistent with display changes made by 
State Exchanges to the State Exchanges' websites on their non-Exchange 
websites for purposes of assisting consumers with DE in QHPs offered 
through the Exchange in a manner that constitutes enrollment through 
the Exchange. This will require State Exchanges to establish 
requirements for DE entities operating in State Exchanges to reflect 
changes to the State Exchange website on their DE entity non-Exchange 
websites. This change will also require State Exchanges to establish 
processes for communicating and defining standards and for setting 
advance notice periods. We also encourage State Exchanges to consider 
the same factors (that is, complexity of the change and the urgency 
with which the change must be implemented on the DE entity's non-
Exchange website) when setting advance notice periods. Similarly, we 
encourage State Exchanges to provide DE entities operating in their 
States examples of the State Exchange display, and technical 
assistance, including technical implementation guidance, to ease the 
burden of required display changes.
    We anticipate this requirement will benefit consumers by codifying 
and expanding our existing EDE HHS-initiated change request practices 
to apply to all DE entities and ensuring that all Exchange consumers 
receive consistent, clear, and accurate information in a timely fashion 
as they navigate the QHP selection and enrollment process. We are 
further of the view that this requirement will mitigate the risk that 
consumers receive different, and possibly confusing or misleading, 
information based on the platform they choose to utilize when enrolling 
in or applying for coverage. This requirement will help ensure 
consumers using the DE pathways benefit from policies we introduce to 
improve the HealthCare.gov website display, and in State Exchanges the 
State Exchange website, by enhancing the consumer experience, 
increasing consumer understanding, and simplifying the plan selection 
process.
    As discussed in the ICR for this requirement, the cumulative cost 
estimate as a result of the new finalized paragraph Sec.  155.221(j)(3) 
will be approximately $247,359 for 20 entities operating in the State 
Exchanges in the 2025 benefit year. This includes the estimated costs 
for entities that submit a request to deviate from the display approach 
adopted by the State Exchange website, should the State Exchange elect 
to permit deviation requests, which is estimated at a cost of 
approximately $7,239 annually.
    We sought comment on these estimated impacts.
    We did not receive any comments in response to the burden estimates 
for this policy. We are finalizing these estimates as proposed.
15. Ensuring DE Entities Operating in State Exchanges Meet Certain 
Standards Applicable in the FFEs and SBE-FPs (45 CFR 155.221)
    We are finalizing amendments to Sec.  155.221 to apply to DE 
entities operating in State Exchanges, and consequently State Exchanges 
that utilize DE entities, certain existing HHS standards applicable to 
DE entities assisting consumers with enrolling in QHPs and applying for 
APTC/CSRs in FFEs and SBE-FPs, in both the Individual Market Exchanges 
and SHOPs.
    As discussed earlier in this final rule, regulatory amendments will 
require these State Exchanges to draft policy, update standards, and 
potentially hire additional staff to perform functions not currently 
being performed by the State Exchange because of applying certain Sec.  
155.221 standards to the State. The amendments will also require DE 
entities participating in DE programs in State Exchanges to perform 
web-development to ensure compliance with the Federal minimum standards 
that this rulemaking finalized to extend to these DE entities, along 
with any State-specific requirements that may be adopted under the 
flexibility provided to State Exchanges in this rulemaking.
    Although there will be additional burden for DE entities operating 
in State Exchanges, amounting to approximately $100,716 per DE entity, 
as discussed in the information collection requirements section of this 
final rule, we anticipate that some of these State Exchanges may 
utilize DE entities already participating in the FFEs and SBE-FPs, 
which will help provide administrative savings related to the approval 
process under Sec.  155.221(b)(4) if the State does not impose 
additional State-specific requirements beyond the HHS standards. We 
encourage State Exchanges to leverage DE operational readiness 
demonstrated for the FFEs and SBE-FPs when possible. Additionally, we 
expect those DE entities already participating in the FFEs and SBE-FPs 
to be able to leverage their existing web-development work with 
additional burden only required for tailoring the website display to 
any State-specific requirements adopted by the State Exchange (for 
example, updating website disclaimers to reference the State Exchange 
website rather than the HealthCare.gov website). Although these 
amendments allow States certain flexibility for State Exchanges to 
tailor their DE program and establish their own standards with respect 
to operational readiness demonstrations by their DE entities, including 
whether to require third-party audits of DE entities and to impose 
additional requirements beyond the proposed HHS minimum standards as 
they determine may be appropriate based on their operational or 
business needs, we expect the impact and costs to be reasonably based 
on the impacts seen on the FFEs and SBE-FPs. As described in the 
information collection requirements section, we anticipate a total 
cumulative burden of $1,233,262

[[Page 26401]]

for DE entities in State Exchanges to comply with this policy to ensure 
DE entities operating in these State Exchanges are meeting certain 
requirements applicable in the FFEs and SBE-FPs. Additionally, we 
anticipate this policy will have an impact on State governments 
totaling $3,353,468 for 5 States to opt to host a DE program for their 
State Exchange.
    We anticipate that these finalized changes to extend certain 
minimum HHS standards governing DE entity participation in FFEs and 
SBE-FPs to also apply to State Exchanges will benefit consumers by 
establishing uniform, baseline requirements for DE entity participation 
across all Exchange types. These finalized changes will allow State 
Exchanges to leverage the framework that has already been established 
and currently applies to FFEs and SBE-FPs, thereby decreasing the 
burden to these State Exchanges to establish such a program, while 
providing some flexibility for these State Exchanges to tailor the 
applicable standards to include State-specific content. Additionally, 
this policy will establish administrative and operational consistency 
throughout the Exchanges, which benefits DE entities by allowing them 
to expand their business into States with State Exchanges with minimal 
costs and burdens. Consumers will also benefit by the expansion of 
entities and enrollment pathways available to assist with enrolling in 
health insurance coverage.
    We sought comment on these estimated impacts and assumptions.
    After consideration of comments and for the reasons outlined in the 
proposed rule and our responses to comments, we are finalizing the 
burden estimates with modifications to the burden hours and number of 
entities subject to these information collection requirements. We 
summarize and respond to public comments received regarding this 
provision below.
    Comment: A few commenters noted that the burden estimates provided 
are overstated and fail to incorporate the potential cost savings and 
additional user fee revenues that States could realize through 
utilization of DE entities, including reduced burdens on State call 
centers and State Exchanges.
    Response: We acknowledge these comments and have modified the 
burden estimates incorporated within this regulatory impact analysis. 
Refer to the comment summary within this finalized proposal's ICR 
analysis for a detailed summary and responses to these comments.
16. Failure To Reconcile (FTR) Process (45 CFR 155.305(f)(4))
    We are finalizing in connection with the FTR process described in 
Sec.  155.305(f)(4) that Exchanges will be required to send notices to 
tax filers for the first year in which they failed to reconcile APTC as 
an initial warning to inform and educate tax filers that they need to 
file and reconcile, or risk being determined ineligible for APTC if 
they fail to file and reconcile for a second consecutive year. If the 
Exchange cannot send the notice directly to the tax filer, or otherwise 
cannot send protected FTI, it may send a more general notice to an 
enrollee or their tax filer informing them of the APTC reconciliation 
requirement, along with other possible reasons they may be at risk of 
losing APTC eligibility.
    Under this policy, Exchanges on the Federal platform will continue 
to send notices to tax filers for the year in which they have failed to 
reconcile APTC as an initial warning to inform and educate tax filers 
that they need to file and reconcile, or risk being determined 
ineligible for APTC if they fail to file and reconcile for a second 
consecutive tax year. Our policy to codify this practice and require it 
of all Exchanges, including State Exchanges, to ensure that tax filers 
who have been determined to have FTR status for 1 year are adequately 
educated on the file and reconcile requirement, and have ample 
opportunity to address the issue and file and reconcile their APTC 
before they are determined to have FTR status for 2 consecutive years. 
We requested comment on how best to conduct outreach to tax filers who 
need more intensive assistance in understanding FTR status, including 
directing them to resources such as Navigator or Assisters that could 
help explain what they need to do to reconcile their APTC.
    This policy will support compliance with the filing and reconciling 
requirement under 36B(f) of the Code and its implementing regulations 
at 26 CFR 1.36B-4(a)(1)(i) and (a)(1)(ii)(A), minimize the potential 
for APTC recipients to incur large tax liabilities over time, and 
support eligible enrollees' continuous enrollment in Exchange coverage 
with APTC by avoiding situations where enrollees become uninsured when 
their APTC is terminated. Additionally, this policy will better align 
State Exchanges' failure to reconcile processes with that of the 
Exchanges on the Federal platform.
    We are aware of seven States that will operate their own State 
Exchange for PY 2025 and have not yet fully implemented the 
infrastructure to run FTR operations for plan years through 2024 due to 
the flexibility the Exchanges were given to temporarily pause FTR 
operations due to the COVID-19 PHE.
    We sought comment on the estimated one-time costs for these States 
to fully implement the functionality and infrastructure to conduct FTR 
operations, and the estimated annual costs to maintain FTR operations.
    We did not receive any comments in response to the burden estimates 
for this policy. We are finalizing these estimates as proposed.
17. Verification Process Related to Eligibility for Enrollment in a QHP 
Through the Exchange (45 CFR 155.315(e))
    Finalizing revisions to Sec.  155.315(e) so that Exchanges can 
accept incarceration attestations without further verification and 
verify incarceration status using an HHS-approved data source only if 
they choose to will minimize administrative costs and burdens for 
Exchanges. Flexibility in verifying incarceration status for Exchanges 
will result in significant cost savings through not creating and 
processing incarceration DMIs. The current incarceration verification 
process resulted in a high number of DMIs, almost all of which are 
resolved in favor of the applicant and has been burdensome and costly 
for the Exchanges to implement. By revising the current incarceration 
verification process, this policy will also eliminate undue burdens and 
barriers to care for applicants, particularly formerly incarcerated 
people, a population comprised of a significant number of people with 
disabilities.\348\ Many documents that can prove incarceration status 
cannot be obtained without an unexpired proof of identity document, and 
most cannot be obtained without submitting non-refundable payments. 
Incarceration may inhibit one's financial savings, and formerly 
incarcerated individuals are less likely to secure employment.\349\ As 
discussed further in the information collection requirements section 
for this policy, we anticipate a one-time cost to 11 State Exchanges of 
approximately $23,770 to conduct analyses to determine whether to 
accept consumer attestation of incarceration status or use an 
alternative data source to verify incarceration status and to submit 
such request to HHS, and make associated changes to their eligibility

[[Page 26402]]

systems and processes to implement the option they choose.
---------------------------------------------------------------------------

    \348\ Robert Apel, Gary Sweeten, The Impact of Incarceration on 
Employment during the Transition to Adulthood, Social Problems, 
Volume 57, Issue 3, 1 August 2010, Pages 448-479, https://doi.org/10.1525/sp.2010.57.3.448.
    \349\ Id.
---------------------------------------------------------------------------

    From PY 2018 to 2019, there were 110,802 incarceration DMIs 
generated. In PY 2019, nearly 38,000 out of 78,000 applicants submitted 
documents to attempt to resolve the incarceration DMI. Conducting an 
intensive incarceration verification check through the DMI process for 
each DMI caused HHS to incur additional costs totaling about $0.57 
million per year for verification of incarceration along with the PUPS 
annual maintenance and transaction fees. The additional costs 
associated with generating incarceration DMIs include the costs to 
inform applicants of their DMI through their eligibility determination 
notice, and to process the DMI and any documentation mailed by the 
applicants. State Exchanges have likely incurred similar costs. Of the 
13 State Exchanges (operating in 12 States and the District of 
Columbia) with incarceration verification processes, eight conduct 
incarceration verifications similar to those conducted by the Exchanges 
on the Federal platform. We estimate that incarceration DMI processing 
costs approximately $9,561,000 annually across all eight of these State 
Exchanges. Of the 13 State Exchanges with incarceration verification 
processes, five State Exchanges connected to an individual State or 
local incarceration facility for verifications and fully process 
incarceration DMIs. These State Exchanges currently incur DMI 
processing costs, including costs associated with noticing the 
applicant of their DMIs and costs associated with DMI and appeals 
casework. Based on costs incurred by the Exchanges on the Federal 
platform to process DMIs, we estimate that incarceration DMI processing 
costs State Exchanges approximately $7,171,000 annually across all 5 of 
these State Exchanges. Finally, 3 States are transitioning to State 
Exchanges. We anticipate their incarceration verification operations 
will cost approximately $3,585,000 annually. In total, the costs to an 
anticipated 16 State Exchanges would be approximately $20,317,000 
annually if current policy continued.
    By providing flexibility to Exchanges to verify incarceration 
status and allowing Exchanges to accept applicant attestations without 
verification, this policy will enable HHS and Exchanges to avoid 
incurring the aforementioned costs associated with DMI creation and 
processing. Exchanges will not have to invest resources into building 
data transfer connections with an alternative incarceration 
verification data source and will not have to invest in providing DMI 
notices and support to applicants. Therefore, the cost savings to State 
Exchanges associated with this policy will be approximately 
$20,317,000.
    As previously mentioned, conducting an intensive incarceration 
verification check through the DMI process for each DMI caused HHS to 
incur additional costs totaling approximately $570,000 per year for 
verification of incarceration along with the PUPS annual maintenance 
and transaction fees. While overall, this policy will reduce the burden 
and costs associated with incarceration verification operations and 
data sourcing, there will be a modest up-front cost of $1,200,000 to 
HHS to modify the Federal platform's current incarceration verification 
processes for the purposes of verifying eligibility for QHP, and it 
will cost $340,000 to update the Federal platform's system logic for 
HHS to stop sending incarceration verification requests to PUPS. Once 
these operations and noticing have stopped, no further costs will be 
incurred by HHS, or by Exchanges that opt to act on the flexibilities 
provided by this policy. In total, we anticipate a cost of $1,540,000 
to HHS because of this change. We reiterate that this cost will be 
overshadowed by the expected savings of approximately $20,317,000 
because of this policy.
    We sought comment on these estimates.
    We did not receive any comments in response to the burden estimates 
for this policy. We are finalizing these estimates as proposed.
18. Verification Process Related to Eligibility for Insurance 
Affordability Programs (45 CFR 155.320)
    We are finalizing amendments to Sec.  155.320(c) by adding a new 
requirement at paragraph (c)(1)(iii) to require that State Exchanges 
pay for their utilization of the CSI data provided by the VCI Hub 
service to verify a tax household's attested annual income, or a 
Medicaid applicant's current household income, due to our 
reinterpretation of State Exchange and State Medicaid and CHIP agency 
use of the Hub to access and use the income data provided by the 
optional VCI Hub service as a State Exchange or a State Medicaid and 
CHIP agency function. We are finalizing that beginning on July 1, 2024, 
State Exchanges and State Medicaid and CHIP agencies will be required 
to pay for the costs of their use of the VCI Hub Service. We are also 
finalizing the proposal with a modification: rather than requiring 
States to pay in advance for their use of the VCI Hub Service, HHS will 
invoice States on a monthly basis for their actual utilization of the 
CSI income data accessed through VCI Hub service, as well as an 
administrative fee to account for any direct or indirect costs of 
making CSI income data accessed through VCI Hub service available to 
State Exchanges and State Medicaid and CHIP agencies.\350\ In 
accordance with the modified policy being finalized in this rulemaking, 
we updated our proposed cost estimates between the proposed and final 
rules. We now estimate that the costs to HHS to build the structure and 
set up operations for the purposes of distinguishing costs of accessing 
CSI data through the VCI Hub service between the State Exchange and 
State Medicaid and CHIP agencies will be $2,557,077 in 2024. We also 
estimate that the cost to States associated with the administrative fee 
to account for any direct or indirect costs to HHS of making CSI income 
data accessed through the VCI Hub service available to Exchanges and 
State Medicaid and CHIP agencies will be $867,539 in 2024, and $1.7 
million annually beginning in 2025.
---------------------------------------------------------------------------

    \350\ See Circular No. A-25 Revised. https://www.whitehouse.gov/wp-content/uploads/2017/11/Circular-025.pdf. See also Circular No. 
A-97. https://www.whitehouse.gov/wp-content/uploads/2017/11/Circular-097.pdf.
---------------------------------------------------------------------------

    Because the price per transaction for CSI data is proprietary 
information, we are unable to provide those numbers in this rulemaking, 
or the precise utilization rates for State Exchanges and State Medicaid 
and CHIP agencies as this would be a direct conflict with the contract 
that HHS holds with the CSI contractor. However, based on HHS' own 
analysis, in fiscal year (FY) 2022, State Exchange utilization of the 
VCI Hub service led to costs of approximately $26 million dollars. 
Similarly, in FY 2022, State Medicaid and CHIP agency utilization of 
the VCI Hub service resulted in costs of approximately $77 million 
dollars. We also estimate that by having State Medicaid and CHIP 
agencies pay for 25 percent of their transaction costs, the Federal 
Government can save between $32 to $55 million per year. By having 
State Exchanges pay for 100 percent of their transaction costs, we 
estimate savings to the Federal Government could be between $39 and $67 
million per year; this cost estimate includes an assumption of one to 
two States transitioning to State Exchanges in future years. Assuming 
one to two new States transition to a State Exchange in the next 4 
years, we applied a 5 percent increase to estimate the additional pings 
from these additional States. We

[[Page 26403]]

estimate that taken together, this finalized policy will result in a 
transfer of between $72 to $122 million per year of costs from the 
Federal Government to States beginning in 2024.
    We are aware that six State Exchanges currently only have one 
connection for both their State Exchange and State Medicaid and CHIP 
agency, which may pose a challenge when determining which VCI Hub 
transactions are attributable to the State Exchange, and which are 
attributed to the State Medicaid and CHIP agency. We anticipate that 
one to three State Exchanges may elect to build a separate connection 
in order to accurately account for which VCI Hub transactions originate 
from their State Exchange and their State Medicaid and CHIP agency and 
we estimate about $1 to 3 million in one-time costs in 2024 to build 
the IT infrastructure for a second Hub connection, totaling about $3 to 
6 million in one-time costs for the one to three States that choose to 
make any changes with how they currently access the VCI Hub service. 
States that do not elect to build a separate connection would instead 
need to develop a cost allocation methodology to track VCI Hub 
transaction volume from their State Exchange and State Medicaid and 
CHIP agency and communicate this to HHS so that HHS can invoice 
accurately and appropriately.
    We sought comment on these estimates.
    We did not receive any comments in response to the burden estimates 
for this policy. We are finalizing these estimates as proposed with the 
following modification that rather than requiring States to pay in 
advance for their use of the VCI Hub Service, HHS will invoice States 
on a monthly basis for their actual utilization of the CSI income data 
accessed through the VCI Hub Service, as well as an administrative fee 
to account for any direct or indirect costs of making CSI income data 
accessed through the VCI Hub service available to Exchanges and State 
Medicaid and CHIP agencies, in accordance with the Intergovernmental 
Cooperation Act and interpretive OMB Circulars A-97 and A-25.\351\
---------------------------------------------------------------------------

    \351\ See Circular No. A-25 Revised. https://www.whitehouse.gov/wp-content/uploads/2017/11/Circular-025.pdf. See also Circular No. 
A-97. https://www.whitehouse.gov/wp-content/uploads/2017/11/Circular-097.pdf.
---------------------------------------------------------------------------

19. Eligibility Redetermination During a Benefit Year (45 CFR 
155.330(d))
    We are finalizing revisions to Sec.  155.330(d) to require 
Exchanges to conduct periodic checks for deceased enrollees twice 
yearly and subsequently end deceased enrollees' QHP coverage beginning 
with the 2025 calendar year. Additionally, we are finalizing amendments 
to Sec.  155.330(d)(3) to grant the Secretary the authority to 
temporarily suspend the PDM requirement during certain situations or 
circumstances that lead to the limited availability data needed to 
conduct PDM or of documentation needed for an enrollee to notify the 
Exchange that the result of PDM is inaccurate, as described in Sec.  
155.330(e)(2)(i)(C).
    Currently, Sec.  155.330(d)(3) defines ``periodically'' only for 
PDM activities that identify enrollment in Medicare, Medicaid, CHIP, 
and BHP, meaning that Exchanges must conduct Medicare PDM, Medicaid or 
CHIP PDM, and BHP PDM twice a year. The current regulation does not 
specify the frequency by which PDM activities to identify deceased 
enrollees must occur. The 2019 Program Integrity Rule did not require 
Exchanges to perform PDM for death at least twice in a calendar year so 
that Exchanges could prioritize the implementation of the new 
requirement to conduct PDM for Medicare, Medicaid, CHIP and, if 
applicable, BHP eligibility or enrollment at least twice yearly. 
Periodic checks for deceased enrollees are a critical aspect to 
ensuring Exchange program integrity.
    We are finalizing revisions to Sec.  155.330(d) to require 
Exchanges to conduct periodic checks for deceased enrollees twice 
yearly and subsequently end deceased enrollees' QHP coverage beginning 
with the 2025 calendar year. This policy will not only align with 
current policy and operations on the Exchanges on the Federal platform 
but will also prevent overpayment of QHP premiums and accurately 
capture household QHP eligibility based on household size.
    Based on internal data, we anticipate that it will cost the Federal 
Government approximately $58,923 to conduct an additional check for 
deceased enrollees per year. In 2023, we conducted two rounds of Death 
PDM where the average number of expired households was 7,151; the 
average APTC amount per household was $549 per month; and, at the time 
of the expiration activities, there was an average of 6.5 months left 
in the plan year. We calculate the APTC savings to be approximately $25 
million. Prior to implementing Death PDM in 2019, we looked at the 
number of consumers that were removed from coverage by the surviving 
family without the aid of Death PDM and close to 50 percent of the 
deceased consumers were removed from coverage. Thus, we estimate the 
net amount of APTC saved is estimated will be approximately $12.5 
million per year beginning in 2025.
    State Exchanges that are not already conducting Death PDM with the 
finalized required frequency, or deemed in compliance with PDM 
requirements, will be required to engage in IT system development 
activity to communicate with these programs and act on enrollment data 
either in a new way, or in the same way more frequently if this 
proposal is finalized. Thus, there may be additional associated 
administrative cost for these State Exchanges to implement the PDM 
requirement. As discussed in the information collection requirements 
section of this final rule, for a State Exchange not already conducting 
Death PDM at least twice a year, we estimate that it will cost 
approximately $3,932 per State Exchange (a total of $43,252 for all 11 
State Exchanges currently not meeting the finalized requirement) to 
implement this finalized provision through their system. We assume that 
this cost will be incurred primarily in 2025 by State Exchanges. These 
costs will be incurred by the State Exchanges as they are required to 
be financially self-sustaining and do not receive Federal funding for 
their establishment or operations.
    We sought comments in response to the burden estimates for this 
policy.
    We did not receive any comments in response to the burden estimates 
for this policy. We are finalizing as proposed.
20. Incorporation of Catastrophic Coverage Into the Auto Re-Enrollment 
Hierarchy (45 CFR 155.335(j))
    We are finalizing the policy to incorporate catastrophic coverage 
as defined in section 1302(e) of the ACA into the auto re-enrollment 
hierarchy at Sec.  155.335(j) as proposed, except that we are amending 
the language at Sec.  155.335(j)(1)(v) and (j)(2)(iv) to incorporate 
the phrase, ``to the extent permitted by applicable State law.'' As 
further discussed in preamble for this policy, this language is to 
reflect that, as with existing re-enrollment hierarchy rules, Exchanges 
must take into account applicable State law when implementing auto re-
enrollment. We are also finalizing the addition of Sec.  155.335(j)(5) 
to establish that an Exchange may not newly auto re-enroll an enrollee 
into catastrophic coverage who is currently enrolled in coverage of a 
metal level as defined in section 1302(d) of the ACA. Because this 
policy is being finalized, we will also update the FFE Enrollment 
Manual to incorporate catastrophic coverage into the re-enrollment 
hierarchy for alternate enrollments.

[[Page 26404]]

    We sought comment on the proposal's impacts, including whether it 
would result in an increase in costs and burden for issuers and 
Exchanges. In the proposed rule, we stated that burden for Exchanges on 
the Federal platform and issuers participating in those Exchanges would 
be mitigated because we already encourage issuers to submit crosswalk 
options for catastrophic enrollees, including those who will lose 
eligibility for catastrophic coverage. We also sought comment on our 
belief that this change would make it more likely that catastrophic 
coverage enrollees would be auto re-enrolled.
    After consideration of comments and for the reasons outlined in the 
proposed rule and our responses to comments, we are finalizing the 
burden estimates as proposed. We summarize and respond to public 
comments received regarding the policy to incorporate catastrophic 
coverage into the auto re-enrollment hierarchy below.
    Comment: Some commenters stated that some State Exchanges already 
incorporate catastrophic coverage enrollees into their re-enrollment 
processes, and some comments that cited State Exchanges that do not do 
so. Other commenters stated that the policy could increase burden on 
State Exchanges and issuers that do not currently auto re-enroll 
catastrophic coverage enrollees.
    Response: For a more detailed of these comments and our responses, 
see the preamble for Sec.  155.335(j).
    Comment: A few commenters suggested that the proposed policy could 
impact the individual market risk pool. One commenter stated that the 
policy would have a net positive effect on the individual market risk 
pool, which would benefit market stability and affordability overall, 
because it would increase enrollment in comprehensive coverage among 
individuals who age out of catastrophic coverage. A few commenters 
stated that the policy could help stabilize the individual market by 
improving continuity of coverage. One commenter voiced concern about 
automatically re-enrolling those losing catastrophic coverage 
eligibility into a bronze or higher coverage level QHP because this 
would transfer risk from the catastrophic risk pool into the non-
catastrophic individual market risk pool for the HHS risk adjustment 
program, and because enrollees changing from catastrophic to a higher 
level of coverage would likely see premium increases. However, the 
commenter noted that in some cases this increase could be offset by 
APTC for eligible individuals and by lower out-of-pocket costs and 
expressed general support for actions to prevent enrollees from 
becoming uninsured.
    Response: We agree that promoting continuity of coverage can help 
stabilize the individual market risk pool. However, we do not believe 
that the policy will have a significant impact on the individual market 
risk pool given the small number of catastrophic coverage enrollees. 
For example, during the 2022 open enrollment period for Exchanges on 
the Federal platform, total health plan selections through 
HealthCare.gov for catastrophic coverage were less than one percent of 
total health plan selections, which was 42,087 out of over 10.2 
million, or about 0.41 percent. During the 2023 open enrollment period, 
this total decreased to 28,903 out of over 12.2 million, just 0.24 
percent.\352\
---------------------------------------------------------------------------

    \352\ 2022 and 2023 OEP State, Metal Level, and Enrollment 
Status Public Use Files: see Table 6: Enrollment Status by Metal 
Level.
---------------------------------------------------------------------------

21. Premium Payment Deadline Extensions (45 CFR 155.400(e)(2))
    We anticipate that the finalized amendment to Sec.  155.400(e)(2) 
to codify that flexibility for issuers experiencing billing or 
enrollment problems due to high volume or technical errors is not 
limited to extensions of the binder payment will benefit issuers. 
Because HHS has already provided enforcement discretion in the past to 
account for such situations, we do not anticipate that there will be 
any additional costs for HHS associated with this finalized policy, nor 
do we anticipate any costs to interested parties.
    We sought comment on these impacts and assumptions.
    We did not receive any comments in response to the burden estimates 
for this policy. We are finalizing these estimates as proposed.
22. Initial and Annual Open Enrollment Periods (45 CFR 155.410)
    We are finalizing amendments to Sec.  155.410(e)(4) to revise 
parameters around the adoption of an alternative open enrollment period 
by a State Exchange not utilizing the Federal platform. We are 
finalizing that for benefit years beginning on or after January 1, 
2025, State Exchanges must adopt an open enrollment period that begins 
on November 1 of the calendar year preceding the benefit year and ends 
January 15 of the applicable benefit year or later. We are also adding 
paragraph (e)(4)(iii) to grandfather the open enrollment period of any 
State Exchange that held an open enrollment period that began before 
November 1, 2023, and ended before January 15, 2024, for the 2024 
benefit year so that it can continue to begin open enrollment before 
November 1 in consecutive future benefit years, so long as that State 
Exchange's open enrollment period continues uninterrupted for at least 
11 weeks. If the State Exchange later changes the dates of its open 
enrollment period after the effective date of this rule, it must for 
that, and subsequent benefit years, hold an open enrollment period that 
is compliant with the requirements of (e)(4)(i) and (ii).We have 
previously observed that when open enrollment ends in December, certain 
consumers may be subjected to unexpected plan cost increases that they 
may not be notified about until January. For consumers in the vast 
majority of Exchanges, this policy will be beneficial for reducing such 
unexpected plan cost increases since most Exchanges will end on or 
after January 15. This policy will also ensure ample time for 
Navigators, certified application counselors, agents, and brokers to 
fully assist all interested consumers during open enrollment while also 
improving access to health coverage by giving consumers ample time to 
react to updated plan cost information and seek enrollment assistance, 
including consumers in underserved communities who face additional 
barriers to accessing health coverage. Finally, by reducing consumer 
confusion, increasing consumer access to assisters, and giving 
consumers more time to consider up-to-date plan cost information, this 
policy could increase QHP enrollment, benefiting all interested 
parties, including consumers, Exchanges, issuers, and assisters.
    All 19 State Exchanges except one already meet these finalized 
parameters, beginning their annual open enrollment periods on November 
1 and concluding on or after January 15 of the benefit year, pursuant 
to current Sec.  155.410(e)(4)(ii). Since most State Exchanges already 
are aligned with the parameters described in the policy, we anticipate 
that this new amendment would have a de minimis impact and not impose 
significant additional burden overall.
    We sought comment on this burden estimate and assumptions. We were 
particularly interested in comments regarding whether this proposal 
would impose a significant burden on outlying State Exchanges and 
interested parties (for instance, Navigators, assisters, issuers).
    We did not receive any comments in response to the burden estimates 
for this policy. We are finalizing these estimates as proposed.

[[Page 26405]]

23. Special Enrollment Periods--Effective Dates of Coverage (45 CFR 
155.420(b))
    We are finalizing amendments to Sec.  155.420(b)(1) and (b)(3)(i) 
to align the effective dates of coverage after selecting a plan during 
certain special enrollment periods across all Exchanges, including 
State Exchanges, so that during a special enrollment period that 
follows the regular effective dates of coverage listed at Sec.  
155.420(b)(1), qualifying individuals or enrollees who select and 
enroll in a QHP receive coverage beginning the first day of the month 
after the consumer selects a QHP.
    In the 2021 Payment Notice final rule (85 FR 29251), where this 
policy was finalized for Exchanges on the Federal platform, we noted 
that ensuring that consumers who select a plan during a special 
enrollment period using the regular effective dates at Sec.  
155.420(b)(1) receive coverage on the first day of the following month, 
rather than on the first day of the second month following plan 
selection, would result in several benefits, such as reducing consumer 
confusion and minimizing coverage gaps while also enhancing operational 
efficiency. In addition, we noted that the standardization of effective 
coverage dates for special enrollment periods provided using the 
regular effective dates at Sec.  155.420(b)(1) would result in 
standardization for issuers due to more plans beginning in the same 
month, Exchanges, and consumers; the reduction of system errors and 
related casework, including reduced confusion among relevant consumer 
support staff; and simplified Exchange billing practices due to the 
expedited effective dates. We believe that, similarly, State Exchanges 
and the issuers and consumers in their States will also experience 
these benefits under the policy to align the effective coverage dates 
across all Exchanges for special enrollment periods that use the 
regular effective dates of coverage at Sec.  155.420(b)(1) (unless an 
earlier coverage effective date were selected pursuant to Sec.  
155.420(b)(3), which would reduce potential burdens associated with 
this policy.
    Additionally, we expect that issuers will not incur substantial new 
costs as a result of applying this policy across Exchanges since they 
routinely effectuate coverage on the first of the month following plan 
selection or earlier when permitted or required under applicable 
regulation. We expect that consumers in States which do not currently 
apply this policy will also benefit from a faster effectuation of 
coverage, as this will result in fewer coverage gaps for consumers 
transitioning between or newly enrolling in a health insurance plan.
    We sought comment on these assumptions.
    After consideration of comments and for the reasons outlined in the 
proposed rule and our responses to comments, we are finalizing the 
burden estimates as proposed. We summarize and respond to public 
comments received regarding the policy to align effective dates of 
coverage during certain special enrollment periods across all 
Exchanges.
    Comment: One commenter expressed concern that this policy would 
lead to increased adverse selection by consumers and would lead to 
increased costs to insurers.
    Response: The commenter did not provide evidence or examples of why 
adverse selection would increase, nor have we received information from 
issuers that operate in State Exchanges that follow similar effective 
dates of coverage that adverse selection increased. In addition, we 
believe the benefit of reducing coverage gaps in consumers outweighs 
this potential harm. As a result, we are finalizing this policy as 
proposed.
24. Special Enrollment Periods--Monthly Special Enrollment Period for 
APTC-Eligible Qualified Individuals With a Projected Annual Household 
Income at or Below 150 Percent of the Federal Poverty Level (45 CFR 
155.420(d)(16))
    We are finalizing amendments to Sec.  155.420(d)(16) to revise the 
parameters around the availability of a special enrollment period (SEP) 
for APTC-eligible qualified individuals with a projected annual 
household income at or below 150 percent of the Federal Poverty Level 
(FPL), hereinafter referred to as the ``150 percent FPL SEP.'' 
Specifically, we are finalizing to remove the limitation that this SEP 
is only available to a consumer whose applicable percentage, which is 
used to determine the amount of the consumer's premium not covered by 
APTC, is zero percent, a circumstance provided for under section 9661 
of the ARP and later under the IRA.
    The impact of this policy will be zero if enhanced subsidies under 
the IRA are continued beyond 2025. It is difficult to estimate, with 
confidence, the impacts of this policy on premiums, APTC payments, and 
enrollment if the enhanced subsidies are not continued, and we note 
that those impacts are likely to be quite different by State. However, 
under various scenarios, we estimated that if this policy were to be 
finalized, national premiums in the individual market could increase by 
an average of 3 to 4 percent for plan year 2026 when the enhanced PTC 
provisions of the IRA are due to expire. We would expect that any 
average national impact would have a high variance between States that 
have expanded Medicaid coverage compared to States that have not, 
because States that have not expanded Medicaid coverage are likely to 
have more consumers with projected annual household income below 150 
percent FPL applying for coverage through the Exchange. Unknown factors 
making these parameters difficult to estimate include the utilization 
of this SEP by healthy and unhealthy enrollees, the impact to the 
average duration of coverage for enrollees, and additional policy 
changes between now and 2025. At an aggregate level, APTC outlays could 
increase nationally up to $2 billion to $3 billion beginning in 2026. 
The direction and magnitude of enrollment changes in the individual 
market is also highly uncertain.
    We sought comment on these estimates, including on the premium 
impacts at the State level, but did not receive responses.
    We did not receive any comments in response to the burden estimates 
for this policy. We are finalizing these estimates as proposed.
25. Termination of Exchange Enrollment or Coverage (45 CFR 155.430)
    We anticipate that the policy to permit enrollees in Exchanges on 
the Federal platform to retroactively terminate coverage back to the 
date in which they retroactively enroll in Medicare Part A or B 
(including enrollment in Parts A or B through a Medicare Advantage 
plan), but no earlier than (a) the day before the first day of coverage 
under Medicare Parts A or B or a Medicare Advantage plan, and (b) the 
day that is 6 months before retroactive termination of QHP coverage is 
requested, will benefit enrollees by allowing them to avoid an overlap 
in coverage and paying premiums for coverage they do not need. We 
anticipate that there may be some minor costs for the FFE associated 
with implementing this policy, which is at the option of HHS, such as 
processing the additional requests for retroactive terminations of 
coverage allowed by this policy. However, we do not have adequate data 
to estimate the number of requests for retroactive termination HHS is 
likely to receive, and so we cannot provide an estimate for these 
costs, nor for the amount of APTC that is likely to be returned to the 
government as a

[[Page 26406]]

result of this policy. In addition, we anticipate that there would be a 
minor financial impact to issuers associated with processing the 
additional retroactive termination requests allowed by this policy, 
including reversing claims and refunding premium paid by the enrollee, 
but we likewise do not have adequate data to estimate these costs.
    Finally, we also anticipate that there may be a financial impact to 
State Exchanges associated with implementing this policy, which is 
optional for State Exchanges. However, we do not have access to the 
data necessary to estimate the costs to State Exchanges associated with 
implementing this policy, nor do we have access to the data necessary 
to determine how long it will take State Exchanges to implement it.
    We sought comment on these impacts and assumptions, as well as any 
additional data sources we could use to estimate the costs associated 
with this proposal.
    We did not receive any comments in response to the burden estimates 
for this policy. We are finalizing these estimates as proposed.
26. Establishment of Exchange Network Adequacy Standards (45 CFR 
155.1050)
    Under Sec.  155.1050(a)(2)(i)(A), we are finalizing that for plans 
years beginning on or after January 1, 2026, State Exchanges and SBE-
FPs must establish and impose quantitative time and distance network 
adequacy standards for QHPs that are at least as stringent as standards 
for QHPs participating on the FFEs under Sec.  156.230(a)(2)(i)(A). For 
these purposes, ``as stringent as'' means time and distance standards 
that use a specialty list that includes at least the same specialties 
as our provider specialty lists and time and distance parameters that 
are at least as short as our parameters. States will be permitted to 
implement network adequacy standards that are more stringent than those 
performed by the FFEs under Sec.  156.230. In other words, States could 
use a specialty list that is broader than our specialty lists, but it 
must include all the provider specialties included in our lists. 
Similarly, the time and distance parameters could also be narrower than 
our parameters, meaning they could require shorter time and/or 
distances, but they cannot be less demanding than our time and distance 
parameters. Consistent with the standards for the FFEs, and to 
strengthen QHP enrollees' timely access to a variety of providers to 
meet their health care needs, the State Exchanges and SBE-FPs' time and 
distance standards will be calculated at the county level and vary by 
county designation. State Exchanges and SBE-FPs will be required to use 
a county type designation method that is based upon the population size 
and density parameters of individual counties. Under this policy, the 
time and distance standards State Exchanges and SBE-FPs will establish 
and impose will apply to our provider specialty lists. To count towards 
meeting the time and distance standards, individual and facility 
providers in these lists will have to be appropriately licensed, 
accredited, or certified to provide services in their State, as 
applicable, and will need to have in-person services available.
    Second, we are finalizing that, for plans years beginning on or 
after January 1, 2026, State Exchanges and SBE-FPs must conduct 
quantitative network adequacy reviews prior to certifying any plan as a 
QHP, consistent with the reviews conducted by the FFEs under Sec.  
156.230. Specifically, we are finalizing at Sec.  155.1050(a)(2)(i)(B) 
that, for plans years beginning on or after January 1, 2026, State 
Exchanges and SBE-FPs must conduct quantitative network adequacy 
reviews to evaluate a plan's compliance with network adequacy standards 
under Sec.  156.230(a)(1)(ii), (a)(1)(iii), and (a)(2)(i)(A) prior to 
certifying any plan as a QHP, while providing QHP certification 
applicants the flexibilities described under Sec.  156.230(a)(2)(ii) 
and (a)(3) and (4). Under these flexibilities, the issuer will include 
its justification as part of its QHP application and describe 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 will be required to provide 
information as requested by the State Exchange or SBE-FP to support the 
justification. State Exchanges and SBE-FPs will be required to review 
the issuer's justification to determine whether making such health plan 
available through the Exchange is in the interests of qualified 
individuals in the State or States in which such Exchange operates as 
specified under Sec.  156.230(a)(3). In making this determination, the 
factors State Exchanges and SBE-FPs could consider include whether the 
justification is reasonable based on circumstances such as the local 
availability of providers and variables reflected in local patterns of 
care. If the State Exchange or SBE-FP determines that making such 
health plan available through its Exchange is in the interests of 
qualified individuals in the State or States in which such Exchange 
operates, it could then certify the plan as a QHP. Under this policy, 
State Exchanges and SBE-FPs will be prohibited from accepting an 
issuer's attestation as the only means for plan compliance with network 
adequacy standards.
    We are aware that some States Exchanges employ robust, quantitative 
network adequacy standards that differ from those used by the FFEs, but 
still ensure that QHPs provide consumers with reasonable, timely access 
to practitioners and facilities to manage their health care needs, 
consistent with the ultimate aim of these policies. Therefore, we are 
finalizing Sec.  155.1050(a)(2)(ii) to provide that, for plan years 
beginning on or after January 1, 2026, HHS may grant an exception to 
the requirements described under Sec.  155.1050(a)(2)(i) to a State 
Exchange or SBE-FP that demonstrates with evidence-based data, in a 
form and manner specified by HHS, that (1) the Exchange applies and 
enforces alternate quantitative network adequacy standards that are 
reasonably calculated to ensure a level of access to providers that is 
as great as that ensured by the Federal network adequacy standards 
established for QHPs under Sec.  156.230(a)(1)(iii), (a)(2)(i)(A), and 
(a)(4); and (2) the Exchange evaluates whether plans comply with 
applicable network adequacy standards prior to certifying any plan as a 
QHP. In this final rule, for this exceptions process, we are clarifying 
that, for (1) above, issuers on the State Exchanges and SBE-FPs do not 
need to comply with the appointment wait time standards under Sec.  
156.230(a)(2)(i)(B).
    Lastly, we are finalizing Sec.  155.1050(a)(2)(i)(C) to provide 
that, for plan years beginning on or after January 1, 2026, State 
Exchanges and SBE-FPs must require that all issuers seeking 
certification of a plan as a QHP submit information to the Exchange 
reporting whether or not network providers offer telehealth services. 
This data will be for informational purposes; it will be intended to 
help inform the future development of telehealth standards and will not 
be displayed to consumers. We note that this policy is not intended to 
suggest that telehealth services will be counted in place of in-person 
service access for the purpose of meeting network adequacy standards 
for PY 2025. While we acknowledge the growing importance of telehealth, 
we want to ensure that telehealth services do not reduce the 
availability of in-person care. For this purpose, telehealth 
encompasses professional consultations,

[[Page 26407]]

office visits, and office psychiatry services delivered through 
technology-based methods, including virtual check-ins, remote 
evaluation of pre-recorded patient data, and inter-professional 
internet consultations. Currently, for issuers in FFEs to comply with 
telehealth reporting standards, issuers must indicate whether each 
provider offers telehealth with the options ``Yes,'' ``No,'' or 
``Requested information from the provider, awaiting their response.'' 
We are finalizing the policy that State Exchanges and SBE-FPs also 
impose this same standard.
    As discussed in the information collection requirements section of 
this final rule, we estimate that the total annual burden associated 
with State Exchanges and SBE-FPs establishing and imposing the 
finalized network adequacy standards, conducting the network adequacy 
reviews as finalized, collecting telehealth information from issuers 
seeking QHP certification, and submitting any exception to be up to 
19,800 hours and to have a total cost of $1,365,012 per year. This 
estimate includes State Exchanges and SBE-FPs developing the finalized 
standards, reviewing any issuer justification, and submitting any 
exception requests to HHS. We further estimate that the total annual 
burden associated with both medical QHP and SADP issuers in State 
Exchanges and SBE-FPs gathering and submitting the time and distance 
and telehealth data, including any justification, to the respective 
State Exchanges or SBE-FPs beginning in 2025 would be approximately 
$114,992.
    As discussed in the information collection requirements section of 
this final rule, the requirement that State Exchanges and SBE-FPs 
collect telehealth data may increase related administrative costs for 
State Exchange and SBE-FP issuers that do not already possess these 
data, though many issuers already collect and submit this information 
for network adequacy submissions in other markets. While we anticipate 
that increased burden related to telehealth data collection will be 
minimal for many State Exchange and SBE-FP issuers, the increased 
burden could ultimately lead to an increase in premiums for consumers. 
As noted previously, we believe that obtaining telehealth information 
and using it to inform future network adequacy standards is in the best 
interests of both QHP enrollees and QHP issuers. As such, we anticipate 
that the additional burden will be outweighed by the expected benefits.
    We sought comment on the potential costs and benefits associated 
with this proposal.
    After consideration of comments and for the reasons outlined in the 
proposed rule and our responses to comments, we are finalizing the 
burden estimates as proposed. We summarize and respond to public 
comments received regarding the establishment of Exchange network 
adequacy standards policy below.
    Comment: A few commenters expressed opposition to the collection of 
information about which providers offer telehealth services indicating 
that the proposed rule underestimated the burden of this proposal and 
that the information would not capture the availability of telehealth 
services.
    Response: We believe that the telehealth reporting standards, 
pursuant to which issuers in State Exchanges and SBE-FPs must indicate 
whether each network provider offers telehealth services with the 
options ``Yes,'' ``No,'' or ``Requested information from the provider, 
awaiting their response,'' would not require extensive administrative 
time to gather. Approximately half of the parent companies of issuers 
on the State Exchanges and over two thirds of the parent companies of 
issuers on SBE-FPs offer Medicare Advantage plans, and Medicare 
Advantage offers a telehealth credit for network adequacy. Therefore, 
many more issuers on State Exchanges and SBE-FPs likely already have 
access to this information. We also believe that 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 
directories. For these reasons, we estimate that any additional burden 
resulting from the requirement that QHP issuers report whether each 
network provider is furnishing telehealth services would be minimal.
    We stated in the proposed rule (88 FR 82591, 82638 through 82639) 
that this data would be for informational purposes, would be intended 
to help inform the future development of telehealth standards, and 
would not be displayed to consumers. We believe that the above-
described telehealth reporting standards support these objectives by 
providing State Exchanges and SBE-FPs with a general picture regarding 
the availability of telehealth services in their State. Additionally, 
at this time, since this data will not be displayed to consumers, it is 
not necessary for State Exchanges and SBE-FPs to collect more granular 
telehealth data from their issuers.
27. FFE and SBE-FP User Fee Rates for the 2025 Benefit Year (45 CFR 
156.50)
    We are finalizing an FFE user fee rate of 1.5 percent of monthly 
premiums for the 2025 benefit year, which is a decrease from the 2.2 
percent FFE user fee rate finalized in the 2024 Payment Notice (88 FR 
25845 through 25847). We are also finalizing an SBE-FP user fee rate of 
1.2 percent for the 2025 benefit year, which is a decrease from the 1.8 
percent SBE-FP user fee rate finalized in the 2024 Payment Notice. 
Based on our estimated costs, enrollment (including anticipated 
transitions of States from the FFE and SBE-FP models to either the SBE-
FP or State Exchange model, increased Open Enrollment numbers and 
anticipated Medicaid redeterminations), premiums for the 2025 benefit 
year, and user fee rates, we are estimating that FFE and SBE-FP user 
fee transfers from issuers to the Federal Government will be $340 
million lower compared to those estimated for the prior benefit year. 
We also anticipate that the lower user fee rates may exert downward 
pressure on premiums.
    We sought comment on the impact estimates and assumptions in the 
proposed rule (88 FR 82639).
    We did not receive any comments in response to the burden estimates 
for this policy. We are finalizing these lower estimates.
28. State Selection of EHB-Benchmark Plans for Plan Years Beginning On 
or After January 1, 2026 (45 CFR 156.111)
    For plan years beginning on or after January 1, 2026, we are 
finalizing revisions to the standards for State selection of EHB-
benchmark plans at Sec.  156.111 to consolidate the options for States 
to change EHB-benchmark plans at Sec.  156.111(a); revisions to the 
regulatory standard for States to comply with scope of benefit 
requirements at Sec.  156.111(b)(2); and revisions to Sec.  
156.111(e)(3) to require States to submit a formulary drug list as part 
of their application to change EHB-benchmark plans only if the State is 
seeking to change its prescription drug EHB.
    We understand that certain aspects of the current process to change 
EHB-benchmark plans under Sec.  156.111 may impose unanticipated 
difficulty for and burden on States, and we have received feedback that 
this difficulty can have a chilling effect on States' ability to make 
more frequent or more substantial changes to their EHB-benchmark plans. 
We believe that, to the extent States take advantage of the finalized 
changes to the EHB-benchmark plan standard, States

[[Page 26408]]

will experience an overall decrease in burden to develop new EHB-
benchmark plans compared to if they were to do so under the existing 
requirements at Sec.  156.111. We anticipate that these policies will 
reduce the burden on States to perform additional actuarial analyses to 
comply with the typicality and generosity standards at Sec.  
156.111(b)(2)(i) and (ii), respectively. Instead of performing an 
indeterminate number of actuarial analyses to find a typical employer 
plan with an actuarial equivalent scope of benefits, a State may only 
need to perform two such actuarial analyses to identify the State's 
least generous typical employer plan and the State's most generous 
typical employer plan. Further, States will no longer need to perform 
an actuarial analysis to demonstrate compliance with the generosity 
standard at Sec.  156.111, which we are removing as a requirement in 
this final rule. As a result, we estimate an overall decrease in burden 
to States utilizing this finalized provision to change their EHB-
benchmark plan.
    We also estimate a potential increase in burden to States and 
issuers to develop new policies and implement new plan designs, to the 
extent these finalized changes would result in more frequent or more 
substantial changes to EHB-benchmark plans by States. It is our aim 
that these policies will allow States and issuers to offer more 
comprehensive and innovative benefit structures that benefit the 
consumer, including by addressing health equity concerns.
    However, we realize that this policy will have varied impact on 
consumers depending on how a State chooses to implement these changes. 
To the extent these finalized changes result in more frequent or more 
substantial changes to EHB-benchmark plans by States, consumers 
enrolled in individual and small group market plans will be impacted by 
changes to EHB in that their benefits may change, and in some cases, 
premiums could increase or decrease depending upon State implementation 
of the policies. CMS has approved changes in nine EHB-benchmark plans 
since 2018. Every approved EHB-benchmark plan application was estimated 
an increase in premiums of less than one percent.\353\ While we expect 
the amendments to Sec.  156.111 finalized in this rule will result in 
consistent or marginally higher increases in premiums for plans in 
States that change EHB-benchmark plans to add benefits, we still expect 
any such increase in premiums to be around one percent.
---------------------------------------------------------------------------

    \353\ The actuarial analyses for all EHB-benchmark plan changes 
are available at https://www.cms.gov/marketplace/resources/data/essential-health-benefits.
---------------------------------------------------------------------------

    Additionally, a State's EHB-benchmark plan selection may impact the 
amount of APTC and CSRs for enrollees in a State. For these consumers, 
subsidies will increase or decrease when compared to their State's 
current EHB-benchmark plan. PTC is available only for that portion of a 
plan's premium attributed to EHB, so to the extent that a State's EHB-
benchmark plan leads to lower premiums for the second lowest cost 
silver plan, APTC will be reduced, but not the percent of income a 
consumer with APTC is expected to contribute to their premium. This 
effect will represent a transfer from consumers who receive APTC to the 
Federal Government. Individual and small group market enrollees who do 
not receive APTC would experience lower premiums for less comprehensive 
coverage that could result in more affordable coverage options but 
possibly higher out-of-pocket costs for the consumer. To the extent 
that a State's EHB-benchmark plan leads to higher premiums for the 
second lowest cost silver plan, we expect the opposite outcome to 
occur. Given the nine previously approved State EHB-benchmark plan 
changes, we expect the amendments to Sec.  156.111 finalized in this 
rule will result in around a one percent increase in premium costs for 
the second lowest cost silver plan in State(s) that seek to update 
their EHB-benchmark plans with corresponding impacts on PTC.
    It is not possible to provide more specific estimations for the 
potential cost impacts of these policy changes due to the number of 
unascertainable variables in projecting future State EHB-benchmark plan 
selections and how those selections could influence changes in the 
premiums of plans to cover those EHB, and therefore, cost to the 
Federal Government in the form of APTC. These variables include but are 
not limited to: the number of States that choose to pursue EHB-
benchmark plan updates, the scope of benefits among the set of typical 
employer comparison plans in each of those States, the number and types 
of benefits each State looks to add to or subtract from their EHB-
benchmark plan, and the variable cost and utilization of those 
benefits, especially as they may change over time.
    Consumers who have specific health needs may also be impacted by 
the finalized changes. In the individual and small group markets, 
depending on the selection made by the State in which the consumer 
lives, consumers with more comprehensive plans may gain coverage for 
certain services. In other States, again depending on State choices, 
consumers may no longer have coverage for some services, though we note 
that no State has sought to remove benefits from their EHB-benchmark 
plan to date under Sec.  156.111.
    Although we cannot anticipate in advance exactly how States might 
adjust their EHB-benchmark plan applications as a result of these 
amendments, and as States are not required to make any changes to their 
EHB-benchmark plans, we also believe the reduced burden might produce 
premium savings in the long-term, as States will have greater incentive 
to update their EHB-benchmark plans more frequently and more 
substantively. We believe that States with more regular and more 
substantive EHB-benchmark plan changes would better respond to public 
health priorities and may adjust benefits in ways that could more cost-
effectively contribute to greater overall population health, which 
would improve the health of the State's risk pool over time, reducing 
cost to insurers, therefore potentially enabling issuers to reduce plan 
premiums, increasing affordability of health insurance for consumers in 
the individual and small group markets in the State.
    We stress that States would not be required to make any changes 
under this policy; as already implemented at Sec.  156.115(d)(1), if a 
State does not make an EHB-benchmark plan 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.
    As discussed in the ICR for this policy, we anticipate a total 
annual cost estimate associated with this policy of approximately 
$18,036, in addition to the potential effects on premium costs and 
therefore PTC discussed elsewhere.
    We sought comments on the impact of these proposals on the EHB-
benchmark plan selection process and whether other impacts should be 
considered.
    After consideration of comments and for the reasons outlined in the 
proposed rule and our responses to comments, we are finalizing the 
burden estimates as proposed. We summarize and respond to public 
comments received regarding the proposed updates to the process for 
State Selection of EHB-benchmark plans below.

[[Page 26409]]

    Comment: A few commenters supported the estimates, noting that the 
proposals clarifying and improving the process for States to determine 
and update EHB will reduce the time and costs to States seeking to 
update their EHB-benchmark plan. One commenter suggested that a less 
burdensome approach to the typicality and generosity standards under 
the EHB-benchmark plan process will enable States to focus more of 
their energy on assessing the package of benefits that would be most 
valuable to include as EHB. Another commenter similarly suggested that 
the reduced administrative burden on State actuaries will provide 
resources that can be utilized to perform the network adequacy 
oversight requirements also included in this rule.
    Response: We agree with these commenters that the estimated reduced 
administrative burden on States resulting from this policy will afford 
States flexibility to allocate their resources towards other important 
policy aims, including those pertaining to EHB and network adequacy.
    Comment: A few commenters expressed concern regarding the potential 
APTC impacts of the proposed revisions to Sec.  156.111. Specifically, 
these commenters expressed two concerns: (1) that, generally, making 
the EHB-benchmark plan update process simpler and less burdensome could 
lead to increased EHB-benchmark plan changes and potentially expansions 
of coverage, which could be costly, and (2) that removing the 
generosity standard at Sec.  156.111(b)(2)(ii) would enable States to 
increase the generosity of their EHB-benchmark plans ad infinitum, 
which would lead to equally increasing APTC expenditures.
    Response: We agree with commenters on the first point, that a 
simpler and less burdensome EHB-benchmark plan update process may 
incentivize more frequent EHB-benchmark plan updates. However, we 
believe that this is a positive impact of the proposed provisions, 
which for the reasons discussed elsewhere in this rule, has the 
potential to both improve consumer health and reduce Federal outlays in 
the form of PTC in the long run. The nine States that have sought to 
update their EHB-benchmark plans under Sec.  156.111 thus far have done 
so by affecting only modest, thoughtful increases in plan generosity, 
even when they could have increased generosity more substantially. As 
such, we are not concerned that a marginally more straightforward and 
less costly EHB-benchmark plan update approach will elicit very 
different reactions from States than those we have already observed, in 
which generosity increases, and therefore potentially PTC cost 
increases, have been modest. Further, while we may expect that that the 
majority of applications we will receive from States to change EHB-
benchmark plans with these new flexibilities will seek to add or 
improve the existing scope of benefits, we also do not discount or 
preclude the possibility that a State may change its EHB-benchmark plan 
by reducing the scope of benefits by removing benefits that may no 
longer be clinically effective or high-value for its population.
    Moreover, we disagree with commenters on the second point--that the 
removal of the generosity standard creates an environment in which 
States can add significantly more generous benefits to their EHB-
benchmark plans with impunity. Rather, as discussed elsewhere, while we 
are finalizing the removal of the generosity standard at Sec.  
156.111(b)(2)(ii), the typicality standard at Sec.  156.111(b)(2)(i) 
will still require that State EHB selections be constrained to a 
particular scope of benefits by demonstrating their EHB-benchmark plan 
is as or less generous than the most generous plan among a set of 
typical employer comparison plans. We believe this requirement will 
sufficiently balance States' desired flexibility to design a benefit 
package that best fits the needs of their consumers, while also 
ensuring that coverage does not become unaffordable, nor unreasonably 
increase Federal outlays in the form of PTCs.
29. Provision of EHB (45 CFR 156.115)
    We are finalizing the removal of the regulatory prohibition at 
Sec.  156.115(d) on issuers from including routine non-pediatric dental 
services as an EHB. We are also finalizing that the changes at Sec.  
156.115(d) will be effective beginning with PY 2027.
    Removing the prohibition on issuers from including routine non-
pediatric dental services as an EHB will remove regulatory and coverage 
barriers to expanding access to non-pediatric dental benefits. This 
will allow States greater flexibility to add benefits to improve non-
pediatric oral health and overall health outcomes, which are 
disproportionately low among marginalized communities such as people of 
color and people with low incomes. Therefore, this policy will promote 
health equity by addressing non-pediatric oral health disparities and 
improving the health outcomes of vulnerable populations.
    Pursuant to section 2707(b) of the ACA, a group health plan must 
ensure that any annual cost sharing imposed under the plan does not 
exceed the limitations provided for under section 1302(c)(1) of the 
ACA. To the extent that a group health plan selects an EHB-benchmark 
plan that includes routine non-pediatric dental coverage as an EHB, 
such plan will need to ensure that any cost sharing for those services 
is limited in accordance with section 1302(c)(1) of the ACA.
    We do not anticipate any immediate costs to the Federal Government, 
States, issuers, or enrollees because of this policy. This policy will 
simply remove the prohibition on issuers from including routine non-
pediatric dental services as an EHB; it will not automatically make any 
routine non-pediatric dental services an EHB. This policy will only 
have a premium impact to the extent that States choose to include 
routine non-pediatric dental services in their EHB-benchmark plans. It 
may also increase costs for issuers to expand their networks to cover 
these new required services, although issuers could contract with a 
dental vendor to administer the routine non-pediatric dental EHB if 
such a benefit is adopted by a State as an EHB. It should also be noted 
that the size of non-pediatric dental networks varies by State. 
Therefore, some States would be affected by the need to build a new 
network of dental providers (or contract with dental vendors) more than 
others. It is up to each State to consider the potential costs and 
network burden and determine whether to add routine non-pediatric 
dental services as an EHB.
    We sought comment on the impact of this proposal to remove the 
regulatory prohibition on issuers from including routine non-pediatric 
dental services as an EHB and whether other impacts should be 
considered.
    After consideration of comments and for the reasons outlined in the 
proposed rule and our responses to comments, we are finalizing the 
burden estimates as proposed. We summarize and respond to public 
comments received regarding the routine non-pediatric dental EHB policy 
below.
    Comment: One commenter noted that removing the restriction on adult 
dental care would allow States to include it in their benchmark plans 
if they choose to do so and expressed concern that this could raise 
affordability issues for members as well as operational concerns. They 
recommended that HHS coordinate with health plan actuaries and others 
to conduct a thorough and realistic analysis of potential cost impact 
to individual and small group members before finalizing the proposal.

[[Page 26410]]

    Response: We thank the commenter for their feedback. Please refer 
to III.E.3 of this final rule for a detailed response to potential cost 
and operational concerns for this policy. We emphasize that States 
adding routine non-pediatric dental benefits as EHB are still required 
to comply with the scope of benefits requirements at Sec.  
156.111(b)(2) and must design their EHB-benchmark plans with that 
limitation in mind. Accordingly, any increases in premium and PTC 
resulting from a State adding routine non-pediatric dental benefits as 
EHB is limited by those scope of benefit requirements. CMS has approved 
changes in nine EHB-benchmark plans since 2018. Every approved EHB-
benchmark plan application has estimated an increase in premiums of 
less than one percent.\354\ With the revisions to Sec.  156.111 and 
Sec.  156.115 in this rule, we still expect any such increase in 
premiums to be around one percent, even for States that add routine 
non-pediatric dental benefits as EHB.
---------------------------------------------------------------------------

    \354\ The actuarial analyses for all EHB-benchmark plan changes 
are available at: https://www.cms.gov/marketplace/resources/data/essential-health-benefits.
---------------------------------------------------------------------------

    Given that States are the primary enforcers of EHB and this policy 
is optional for States to adopt, we emphasize that the decision to add 
routine non-pediatric dental benefits as an EHB is entirely up to each 
individual State. Each State considering adding this benefit should 
weigh the advantages against the disadvantages before implementing this 
policy. Therefore, we recommend that States interested in adding 
routine non-pediatric dental benefits as an EHB coordinate with health 
plan actuaries and other relevant stakeholders to conduct a thorough 
analysis of the potential cost impact before implementing this policy, 
should the State see a benefit to conducting such an analysis. We also 
anticipate that the benefit design, cost, and operational impacts will 
vary heavily by each State.
30. Prescription Drug Benefits (45 CFR 156.122)
    At Sec.  156.122(a)(3)(i), we are finalizing updates to P&T 
membership standards by adding new Sec.  156.122(a)(3)(i)(E), which 
will require the P&T committee to include a patient representative as 
part of its membership for plan years beginning on or after January 1, 
2026. While there is no Federal requirement to provide compensation to 
P&T committee members, those plans or issuers that choose to compensate 
their P&T committee members for their service to the committee may 
incur a nominal fee when adding an additional member to the committee. 
Further, we estimate a potential increase in burden to States and 
issuers to develop criteria used to select a consumer representative 
for the P&T committee, to create or revise standard operating 
procedures for the committee, as well as for any additional training 
that may be required of the selectee because of the new membership 
standard. We believe that the impact of this burden will be most 
notable during the initial plan year that this policy goes into effect 
and should be minimal in future years. We solicited comments on the 
impact of this proposal to the P&T committee membership standards and 
whether other impacts should be considered. We did not receive any 
comments in response to the burden estimates for this policy. We are 
finalizing these estimates as proposed.
    We also are finalizing amendments to Sec.  156.122 to codify the 
requirement for coverage of prescription drug benefits. Specifically, 
we are finalizing amendments to Sec.  156.122 by adding a new Sec.  
156.122(f) to further clarify that, to the extent that a health plan 
covers prescription drugs in excess of the benchmark, these drugs will 
be considered EHB and are subject to requirements including the annual 
limitation on cost sharing and the restriction on annual and lifetime 
dollar limits. This policy will apply unless the coverage of the drug 
is mandated by State action and is in addition to EHB pursuant to Sec.  
155.170, in which case the drug will not be considered EHB. Given that 
this revision merely codifies our existing policy regarding the 
coverage of prescription drugs as EHB, we do not anticipate any 
additional burden on States or issuers.
    We sought comment on these impact estimates and assumptions.
    After consideration of comments and for the reasons outlined in the 
proposed rule and our responses to comments, we are finalizing the 
burden estimates as proposed. We summarize and respond to public 
comments received below.
    Comment: One commenter asked that HHS clarify whether the proposed 
amendment at Sec.  156.122 to add paragraph (f), which states that 
drugs in excess of those covered by a State's EHB-benchmark plan are 
considered EHB, is not applicable to the large group market and self-
insured plans and, if not, requested an updated cost estimate to 
reflect the projected impact that this change would have on self-
insured plan sponsors and beneficiaries.
    Response: As described earlier, the proposed rule addressed the 
application of this policy with respect to individual and small group 
market plans. We are finalizing this proposal as proposed. Accordingly, 
this final rule does not address the application of this policy to 
large group market health plans, grandfathered group health plans, and 
self-insured group health plans.
31. Standardized Plan Options (45 CFR 156.201)
    We are finalizing updates to the standardized plan options for PY 
2025 with minor changes to ensure these plans continue to have AVs 
within the permissible de minimis range for each metal level. We 
believe that maintaining a high degree of continuity in the approach to 
standardized plan options year over year minimizes the risk of 
disruption for interested parties, including issuers, agents, brokers, 
States, and enrollees. We believe that making major departures from the 
approach to standardized plan options set forth in the 2023 and 2024 
Payment Notices could result in changes that may cause undue burden for 
interested parties. For example, if the standardized plan options we 
create vary significantly from year to year, those enrolled in these 
plans could experience unexpected financial harm if the cost sharing 
for services they rely upon differs substantially from the previous 
year. Ultimately, we believe consistency in standardized plan options 
is important to allow both issuers and enrollees to become accustomed 
to these plan designs.
    Thus, like the approach taken in the 2023 and 2024 Payment Notices, 
we are finalizing a standardized plan options that will continue to 
resemble the most popular QHP offerings that millions of consumers are 
already enrolled in. As such, these finalized standardized plan options 
are based on updated PY 2023 cost sharing and enrollment data to ensure 
that these plans continue to reflect the most popular offerings in the 
Exchanges.
    By finalizing a policy to maintain an approach to standardized plan 
options like that taken in the 2023 and 2024 Payment Notices, issuers 
will continue to be able to utilize many existing benefit packages, 
networks, and formularies, including those paired with standardized 
plan options for PY 2024. Also, issuers will continue to not be 
required to extend plan offerings beyond their existing service areas.
    Furthermore, as discussed earlier in the preamble, we will continue 
to differentially display standardized plan options on HealthCare.gov 
per Sec.  155.205(b)(1). Since we will continue to assume 
responsibility for differentially displaying standardized

[[Page 26411]]

plan options on HealthCare.gov, FFE and SBE-FP issuers will continue to 
not be subject to this burden.
    In addition, as noted in the preamble, we will continue 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--the Classic DE and EDE Pathways--
at Sec. Sec.  155.220(c)(3)(i)(H) and 156.265(b)(3)(iv), respectively. 
We believe that continuing the enforcement of these differential 
display requirements will not impose a significant burden on these 
entities or require major modification of their non-Exchange websites, 
especially since the bulk of this burden was previously imposed in the 
2018 Payment Notice,\355\ which finalized the standardized plan option 
differential display requirements, or during the PY 2023 open 
enrollment period, when enforcement of these requirements resumed.
---------------------------------------------------------------------------

    \355\ These differential display requirements were first 
effective and enforced beginning with PY 2018. See 81 FR 94117 
through 94118, 94148.
---------------------------------------------------------------------------

    Finally, since we will continue to allow approved web-brokers and 
QHP issuers to submit requests to deviate from the manner in which 
standardized plan options are differentially displayed on 
HealthCare.gov, the burden on these entities will continue to be 
minimal. We intend to continue providing access to information on 
standardized plan options to web-brokers through the Health Insurance 
Marketplace Public Use Files (PUFs) and QHP Landscape file to further 
minimize burden by ensuring that affected entities have timely access 
to accurate and helpful information on standardized plan option 
requirements, including those related to the differential display of 
these plans.
    We sought comment on these impact estimates and assumptions.
    We did not receive any comments in response to the burden estimates 
for this policy. We are finalizing these estimates as proposed.
32. Non-Standardized Plan Option Limits (45 CFR 156.202)
    In this final rule, we are finalizing permitting issuers to offer 
non-standardized plan options in excess of the limit of two per product 
network type, metal level, inclusion of dental and/or vision benefit 
coverage, and service area for PY 2025 and subsequent years, if issuers 
demonstrate that these additional non-standardized plans beyond the 
limit at Sec.  156.202(b) have specific design features that would 
substantially benefit consumers with chronic and high-cost conditions 
and meet other requirements finalized in this rule.
    Specifically, at Sec.  156.202(d), for PY 2025 and subsequent 
years, an issuer may offer additional non-standardized plan options for 
each product network type, metal level, inclusion of dental and/or 
vision benefit coverage, and service area if it demonstrates that these 
additional plans' cost sharing for benefits pertaining to the treatment 
of chronic and high-cost conditions (including benefits in the form of 
prescription drugs, if pertaining to the treatment of the condition(s)) 
is at least 25 percent lower, as applied without restriction in scope 
throughout the plan year, than the cost sharing for the same 
corresponding benefits in an issuer's other non-standardized plan 
option offerings in the same product network type, metal level, and 
service area, subject to the criteria discussed below.
    We finalized several specifications for issuers seeking to utilize 
this exceptions process at Sec.  156.202(d)(1) through (6). 
Specifically, at paragraph (d)(1), the 25 percent reduction in cost 
sharing for benefits pertaining to the treatment of chronic and high-
cost conditions will be evaluated at the level of total out-of-pocket 
costs for the treatment of the chronic and high-cost condition for a 
population of enrollees with the relevant chronic and high-cost 
condition. At paragraph (d)(2), the reduction in cost sharing must not 
be limited to a part of the year, or an otherwise limited scope of 
benefits. At paragraph (d)(3), the reduction in cost sharing for these 
benefits cannot be conditioned on a consumer having a particular 
diagnosis.
    At paragraph (d)(4), the required reduction in cost sharing only 
applies to the standard variant of the plan for which an issuer seeks 
an exception, and not to the income-based cost-sharing reduction plan 
variations required by Sec.  156.420(a), nor to the zero and limited 
cost sharing plan variations required by Sec.  156.420(b). At paragraph 
(e)(5), issuers are limited to one exception per product network type, 
metal level, inclusion of dental and/or vision benefit coverage, and 
service area, for each chronic and high-cost condition. At paragraph 
(d)(6), the chronic and high-cost conditions that may qualify an issuer 
for this exception will be determined by HHS. Refer to Sec.  156.202 of 
the preamble to this rule for a more detailed discussion regarding 
these requirements.
    We do not anticipate that the exceptions process finalized in this 
rule will substantially impact the average weighted number of non-
standardized plan options available to each consumer, the average 
weighted number of standardized plan options available to each 
consumer, the average weighted number of total plan options available 
to each consumer, the number of plan-county discontinuations, or the 
number of affected enrollees since we do not anticipate a substantial 
number of issuers will utilize this exceptions process to offer the 
aforementioned additional non-standardized plan options that will 
substantially benefit consumers with chronic and high-cost conditions. 
This is because we expect that most issuers will believe that the 
burden of creating and certifying additional plans intended to benefit 
a comparatively small population of consumers outweighs the benefit of 
doing so.
    Although we do not anticipate that a substantial number of issuers 
will utilize this exceptions process, we acknowledge that issuers that 
choose to do so will be impacted. Specifically, if issuers choose to 
utilize this exceptions process, they will be required to design 
additional non-standardized plan options and proceed through QHP 
certification for these plans, which will necessarily entail additional 
burden.
    Additionally, at Sec.  156.202(e), an issuer that seeks to utilize 
this exceptions process is required to submit a written justification 
in a form and manner and at a time prescribed by HHS. At paragraph 
(e)(1), the written justification must identify the specific chronic 
and high-cost condition that its additional non-standardized plan 
option offers substantially reduced cost sharing for, in accordance 
with the definition of ``cost sharing'' at Sec.  156.20.
    At paragraph (e)(2), the written justification must identify which 
benefits in the Plans and Benefits Template are discounted to provide 
reduced treatment-specific cost sharing for individuals with the 
specified chronic and high-cost condition. These discounts must be 
relative to the treatment-specific cost sharing for the same 
corresponding benefits in the issuer's other non-standardized plan 
offerings in the same product network type, metal level, inclusion of 
dental and/or vision benefit coverage, and service area. For the 
purposes of this standard, treatment specific cost sharing consists of 
the costs for obtaining services that pertain to the treatment of a 
particular chronic and high-cost disease--but not the costs for 
obtaining services that do not pertain to the treatment of the relevant 
condition. The issuer must identify all services for which the benefits 
substantially reduce cost sharing in the Plans and Benefits

[[Page 26412]]

Template. These benefits must encompass a complete list of relevant 
services pertaining to the treatment of the relevant condition.
    At paragraph (e)(3), the written justification must explain how the 
reduced cost sharing for these services pertains to clinically 
indicated guidelines and a representative treatment scenario for 
treatment of the specified chronic and high-cost condition (and include 
any relevant studies, guidelines, or supplementary documents to support 
the application, as applicable). For the purposes of this standard, a 
representative treatment scenario is an annual course of treatment for 
a chronic and high-cost condition.
    At paragraph (e)(4), the written justification must include a 
corresponding actuarial memorandum that explains the underlying 
actuarial assumptions made in the design of the plan the issuer is 
requesting to except. In this memorandum, an issuer must demonstrate 
how the benefits that are discounted to provide reduced treatment-
specific cost sharing of at least 25 percent identified at Sec.  
156.202(e)(2) for the treatment of the condition identified at Sec.  
156.202(e)(1) under the excepted plan compare to the identified in-
limit offering in the same product network type, metal level, inclusion 
of dental and/or vision coverage, and service area. This demonstration 
must specifically be in reference to the specific population that would 
be seeking treatment for the relevant condition and not the general 
population. This memorandum also must include an actuarial opinion 
confirming that this analysis was prepared in accordance with the 
appropriate Actuarial Standards of Practice and the profession's Code 
of Professional Conduct.
    We estimate the burden of this will be approximately $95,182 for an 
estimated 50 issuers annually, and we discuss this burden in further 
detail in the ICRs Regarding Non-Standardized Plan Option Limits (Sec.  
156.202) section of the Collection of Information Requirements section 
of this final rule.
    We also acknowledge that this exceptions process could impact 
consumers in a range of ways. Specifically, because we are finalizing 
the exceptions process, and if issuers choose to utilize this 
exceptions process to offer additional non-standardized plan options, 
consumers with qualifying chronic and high-cost conditions would 
benefit from reduced cost sharing for benefits that pertain to the 
treatment of these conditions. Reduced cost sharing for these benefits 
would reduce barriers to access to benefits important to consumers with 
chronic and high-cost conditions, which could play an important role in 
combatting health disparities and advancing health equity since 
disadvantaged populations \356\ are disproportionately affected by many 
of these conditions.\357\ In addition to enhancing health outcomes, 
this exceptions process could also reduce the risk of financial harm to 
individuals with chronic and high-cost conditions by reducing their 
cost sharing obligations for treatment for those conditions.
---------------------------------------------------------------------------

    \356\ Disadvantaged populations are groups of persons that 
experience a higher risk of poverty, social exclusion, 
discrimination, and violence than the general population, including, 
but not limited to, ethnic minorities, migrants, people with 
disabilities, isolated elderly people, and children.
    \357\ Waters, H, & Graf, M. (2018). The Cost of Chronic Disease 
in the U.S. Milken Institute. https://milkeninstitute.org/sites/default/files/reports-pdf/ChronicDiseases-HighRes-FINAL_2.pdf
---------------------------------------------------------------------------

    We do not have sufficient data to further estimate the costs 
associated with these finalized changes. As such, we sought comment 
from interested parties regarding cost estimates associated with this 
proposal and data sources that may be used to determine those 
estimates.
    We did not receive any comments in response to the burden estimates 
for this policy. We are finalizing these estimates as proposed.
33. CO-OP Loan Terms (45 CFR 156.520)
    In this rule, we are finalizing revisions to Sec.  156.520(f) to 
provide a clear mechanism by which an existing CO-OP may request 
termination of its loan agreement with CMS to enable it to pursue new, 
innovative business plans that are otherwise not compatible with CO-OP 
requirements, but which CMS believes will be in the best interest of 
affected consumers. Of the 23 CO-OP loan agreements CMS successfully 
executed with qualified borrowers in 2012, only 3 remain in operation 
as active insurance companies offering QHPs. The others have been 
placed in receivership by State regulators, or otherwise gone out of 
business due to the borrower's inability to establish a viable CO-OP 
that is financially stable and on course to ultimately repay the loans. 
As discussed in section III.E.8 of this preamble, CO-OPs operate under 
governance and product limitations that can present significant 
obstacles to new business opportunities. To provide a means to overcome 
these limitations, under the finalized revisions to Sec.  156.520(f), 
we will be able to approve a request by a CO-OP to terminate its loan 
agreement with us for the purpose of permitting the CO-OP to pursue 
innovative business plans that are not otherwise consistent with CO-OP 
requirements, if all outstanding CO-OP loans issued to the loan 
recipient are repaid in full prior to termination of the loan 
agreement, and we believe that granting the request would benefit 
consumers by meaningfully enhancing consumer access to quality, 
affordable, member-focused, non-profit health care options in affected 
markets. Examples of such proposals that may be deemed innovative and 
in the interests of consumers would be plans that appear well-
calculated to lead directly to marketing non-profit, member-focused 
health plans in new regions of a State, to offer health plans on a 
Statewide basis for the first time, to expand operations into new 
States, or enhance consumer access to new non-profit products that are 
not qualified health plans, in particular when such plans are likely to 
favorably impact traditionally underserved communities. These examples 
are illustrative, however, not exclusive.
    This finalized regulatory policy also contemplates plans that 
involve non-profit enterprises, and that reflect a strong consumer 
focus. A strong consumer focus will generally consist of an enterprise 
that focuses informational or financial resources, or plans to focus 
informational or financial resources, on member-oriented programs such 
as health education, consumer education, or forms of direct or indirect 
health-related financial assistance. We recognize that significant 
coordination with State regulators will be essential to implementing 
any plans to act on the finalized regulatory changes.
    Given that only three CO-OPs remain in business operating with 
small portfolios across five States, we do not believe there will be a 
significant economic impact because of this policy for at least several 
years, if ever.
    We sought comment on these impact estimates and assumptions.
    We did not receive any comments in response to the burden estimates 
for this policy. We are finalizing these estimates as proposed.
34. Conforming Amendment to Netting Regulation To Include Federal IDR 
Administrative Fees (45 CFR 156.1215)
    We are finalizing amendments to Sec.  156.1215(b) and (c) to align 
with the policies and regulations proposed in the Federal Independent 
Dispute Resolution Operations proposed rule (88 FR 75744). These 
finalized amendments will provide that administrative fees for 
utilizing the No Surprises Act Federal IDR process for health insurance 
issuers

[[Page 26413]]

that participate in financial programs under the ACA would be subject 
to netting as part of HHS' integrated monthly payment and collections 
cycle.
    To implement this policy, we are finalizing amendments to Sec.  
156.1215(b) to allow HHS to net payments owed to issuers and their 
affiliates operating under the same TIN against amounts due to the 
Federal Government from the issuers and their affiliates operating 
under the same TIN for APTC, advance payments of and reconciliation of 
CSRs, payment of FFE user fees, payment of SBE-FP user fees, HHS risk 
adjustment, reinsurance, and risk corridors payments and charges, and 
administrative fees from these issuers and their affiliates for 
utilizing the Federal IDR process in accordance with Sec.  
149.510(d)(2). We are also finalizing amendments to Sec.  156.1215(c) 
to provide that any amount owed to the Federal Government by an issuer 
and its affiliates for unpaid administrative fees due to the Federal 
Government from these issuers and their affiliates for utilizing the 
Federal IDR process after netting under Sec.  156.1215(b) will be the 
basis for calculating a debt owed to the Federal Government. We will 
not begin netting the Federal IDR administrative fees until disputing 
parties are required to pay Federal IDR administrative fees directly to 
HHS, if the proposal in Federal Independent Dispute Resolution 
Operations proposed rules (88 FR 75744) is finalized. We do not believe 
that the finalized amendments will impose substantial additional costs 
to HHS beyond the costs previously estimated in the Federal Independent 
Dispute Resolution Process proposed rule (88 FR 75814 through 75815). 
Furthermore, this policy will only apply to those issuers and their 
affiliates operating under the same TIN that participate in the 
financial programs under the ACA. Since the provisions of the Federal 
IDR process apply more broadly to include issuers and their affiliates 
that do not participate in the financial programs under the ACA 
currently specified in the list of programs for which netting is 
permitted (86 FR 55982),\358\ we believe that only a small proportion 
of issuers that utilize the Federal IDR process will be subject to 
netting under this policy.
---------------------------------------------------------------------------

    \358\ Explaining that the No Surprises Act applies to group 
health plans and health insurance issuers offering group or 
individual health insurance coverage in the Code, ERISA, and the PHS 
Act.
---------------------------------------------------------------------------

    Therefore, we anticipate that this policy will streamline our 
payments and collections processes and limit the administrative burden 
for operating our programs.
    We sought comment on these impact estimates and assumptions.
    We did not receive any comments in response to the burden estimates 
for this policy. We are finalizing these estimates as proposed.
35. Regulatory Review Cost Estimation
    If regulations impose administrative costs on private entities, 
such as the time needed to read and interpret this final rule, we 
should estimate the cost associated with regulatory review. Due to the 
uncertainty involved with accurately quantifying the number of entities 
that will review the rule, we assume that the total number of unique 
commenters on last year's final rule (286) will be the number of 
reviewers of this final rule. We acknowledge that this assumption may 
understate or overstate the costs of reviewing this rule. It is 
possible that not all commenters reviewed last year's rule in detail, 
and it is also possible that some reviewers chose not to comment on the 
final rule. For these reasons, we believe that the number of past 
commenters will be a fair estimate of the number of reviewers of this 
rule. We welcome any comments on the approach in estimating the number 
of entities which will review this final rule.
    We also recognize that different types of entities are in many 
cases affected by mutually exclusive sections of this final rule, and 
therefore, for the purposes of our estimate we assume that each 
reviewer reads approximately 50 percent of the rule. We sought comments 
on this assumption.
    Using the wage information from the BLS for medical and health 
service managers (Code 11-9111), we estimate that the cost of reviewing 
this rule is $100.80 per hour, including overhead and fringe 
benefits.\359\ Assuming an average reading speed of 250 words per 
minute, we estimate that it would take approximately 7.25 hours for the 
staff to review half of this final rule. For each entity that reviews 
the rule, the estimated cost is $730.80 (7.25 hours x $100.80 per 
hour). Therefore, we estimate that the total cost of reviewing this 
regulation is approximately $209,009 ($730.80 per reviewer x 286 
reviewers).
---------------------------------------------------------------------------

    \359\ https://www.bls.gov/oes/current/oes_nat.htm.
---------------------------------------------------------------------------

D. Regulatory Alternatives Considered

    For the HHS-operated risk adjustment program (Sec.  153.320), we 
are finalizing recalibrating the CSR adjustment factors for AI/AN zero 
cost sharing and limited cost sharing CSR plan variant enrollees for 
the 2025 benefit year, and retaining the AI/AN CSR adjustment factors 
for future benefit years unless changed through notice-and-comment 
rulemaking. We are also finalizing maintaining the current CSR 
adjustment factors for silver plan variant enrollees (70 percent, 73 
percent, 87 percent, and 94 percent AV plan variants) \360\ for the 
2025 benefit year and beyond, unless changed through notice-and-comment 
rulemaking. As an alternative, we considered not proposing any changes 
to the CSR adjustment factors used in the State payment transfer 
formula. However, after continuing to conduct analyses on more recently 
available enrollee-level EDGE data, we found the underprediction of 
plan liability in the State payment transfer formula for AI/AN zero-
cost sharing and limited cost sharing CSR plan variant enrollees 
continued. We also considered recalibrating all the silver CSR 
adjustment factors. However, we are not finalizing any changes to those 
factors at this time, because we continue to find that the current 
silver CSR adjustment factors (70 percent, 73 percent, 87 percent, and 
94 percent plan variants) are reasonably accurately predicted given the 
offsets, described above in VI.4, that continue to occur for these 
enrollees.
---------------------------------------------------------------------------

    \360\ See 83 FR 16930 at 16953; 84 FR 17478 through 17479; 85 FR 
29190; 86 FR 24181; 87 FR 27235 through 27236; and 88 FR 25772 
through 25774.
---------------------------------------------------------------------------

    As an alternative to amendments to Sec.  155.315(e), we considered 
using an electronic data source other than PUPS to verify applicant 
incarceration status. However, we estimate that sourcing an alternative 
national incarceration verification data source would be a significant 
expense to HHS, costing the agency approximately $35 million annually. 
Additionally, these other data sources are currently not sufficiently 
comprehensive to meet the needs of the Exchanges using the Federal 
eligibility and enrollment platform and therefore may not provide 
Exchanges with accurate results on a consistent basis. Thus, the 
alternative data source must be current, accurate, and minimize burden 
and costs to administration.
    About the changes to Sec.  155.320(c), we considered taking no 
action to add new language in paragraph(c)(1)(iii) that State Exchanges 
and State Medicaid and CHIP agencies must pay in advance for their use 
of the VCI Hub service to verify income. However, we determined that 
this finalized reinterpretation and policy change is appropriate given 
our better understanding of how the VCI Hub service is used by State 
Exchanges and State Medicaid and CHIP agencies to verify eligibility 
for QHP coverage or

[[Page 26414]]

other insurance affordability programs. We also considered requiring 
State Medicaid and CHIP agencies and State Exchanges to obtain their 
own contracts to administer their CSI data usage; however, we had 
concerns that these services cannot be procured reasonably and 
expeditiously, which would undermine the system we have implemented 
under section 1413 of the ACA. We also believe that there may be 
benefits to the State Medicaid and CHIP agencies and State Exchanges 
that prefer to use the CSI data accessible through the VCI Hub service 
in their States. Therefore, we are finalizing retaining optional access 
to the VCI Hub service on behalf of State Medicaid and CHIP agencies 
and State Exchanges that prefer to continue to use this service and are 
willing to pay for their CSI data usage with a modification to the 
original proposal that would have required that States pay in advance. 
Under this finalized policy, State Medicaid and CHIP agencies and State 
Exchanges can choose to discontinue their use of the CSI data 
accessible through the VCI Hub service. We are also finalizing that HHS 
will invoice States on a monthly basis for their actual utilization of 
CSI data provided by the VCI Hub service after that utilization occurs.
    About amending 155.330(d)(2), we considered maintaining the status 
quo for continuing the PDM requirements under Sec.  155.330(d)(1)(i) 
and (d)(ii) but note that it may be difficult or infeasible to 
operationalize existing processes and operations during certain 
emergency situations. Allowing consumers to go uninsured during a 
national emergency, such as a public health emergency like the COVID-19 
public health emergency, will not improve the national health and well-
being of all consumers. We found it to be least burdensome for 
Exchanges to implement as a successful pause of PDM operations occurred 
during the 2020 pandemic.
    We considered only updating sub-regulatory guidance to incorporate 
catastrophic coverage into the auto re-enrollment hierarchy, for 
example, through the annual draft and final Letters to Issuers. 
However, we believe that instead incorporating catastrophic coverage 
into the auto re-enrollment hierarchy in regulation at Sec.  155.335(j) 
creates stronger authority for Exchanges to auto re-enroll catastrophic 
enrollees and provides better transparency for our auto re-enrollment 
operations in the Exchanges on the Federal platform. Many public 
comments agreed that this policy would achieve these effects.
    We considered taking no action regarding amendments to Sec.  
155.400(e)(2) to codify that the flexibility for issuers experiencing 
billing or enrollment problems due to high volume or technical errors 
is not limited to extensions of the binder payment. However, we believe 
it is important to clarify for interested parties that HHS may provide 
enforcement discretion for other premium payment requirements.
    We considered taking no action related to amendments to Sec.  
155.420(d)(16), to revise the parameters around the availability of a 
SEP that grants APTC-eligible qualified individuals with a projected 
household income at or below 150 percent of the FPL. However, HHS 
believes that many consumers will benefit from having additional 
opportunities to enroll in low-cost Exchange coverage, and that those 
who will be eligible for this special enrollment period and who do not 
enroll during the annual open enrollment period are likely to have been 
unaware of their option to enroll in a plan with no monthly premium 
through the Exchange, after application of APTC.
    We considered taking no action regarding modifications to Sec.  
155.430(b)(1)(iv) to permit enrollees in Exchanges on the Federal 
Platform to retroactively terminate coverage back to the date in which 
they retroactively enroll in Medicare Parts A and B (including 
enrollment in Parts A and B through a Medicare Advantage plan), but no 
earlier than (a) the day before the first day of coverage under 
Medicare Parts A or B, and (b) the day that is 6 months before 
retroactive termination of QHP coverage is requested. However, we 
believe it is important to allow enrollees to retroactively terminate 
coverage when they were unable to do so prospectively due to 
retroactive enrollment in Medicare coverage. We considered whether to 
also permit Exchange enrollees to retroactively terminate coverage back 
to the date in which they enrolled in Medicaid, CHIP, or BHP coverage 
retroactively, but we determined that this would not be appropriate due 
to the increased risk that claims reversed by QHP issuers would not be 
covered by providers under these programs.
    For standardized plan options (Sec.  156.201), we considered a 
range of proposals, such as modifying the methodology used to create 
the standardized plan options for PY 2025. Specifically, we considered 
lowering the deductibles in these plan designs and offsetting this 
increase in plan generosity by increasing cost sharing amounts for 
several benefit categories. We also considered simultaneously 
maintaining the current cost-sharing structures and decreasing the 
deductibles for these plan designs, which would increase the AVs of 
these plans to the ceiling of each AV de minimis range. Ultimately, we 
decided to finalize maintaining the AVs of these plans near the floor 
of each de minimis range by largely maintaining the cost sharing 
structures and deductible values from the standardized plan options 
from PY 2024, as well as by increasing the maximum out-of-pocket limits 
and, to a lesser degree, the deductible values for these plan designs. 
We believe this finalized approach strikes the greatest balance in 
providing enhanced pre-deductible coverage while ensuring competitive 
premiums for these standardized plan options.
    For non-standardized plan option limits (Sec.  156.202), we 
considered a range of proposals. Specifically, for PY 2025 and 
subsequent years, we considered maintaining the PY 2024 limit of four 
non-standardized plan options per product network type, metal level, 
inclusion of dental and/or vision benefit coverage, and service area. 
We also considered not proposing an exceptions process that would allow 
issuers to offer non-standardized plan options exceeding the limit of 
two that we previously finalized for PY 2025 and subsequent years. We 
also considered basing this exceptions process on a range of other 
factors, including the degree of plan proliferation in a given service 
area (as determined by the number of plan offerings per consumer or 
issuer), whether a plan has a sufficiently differentiated network, and 
whether a plan has a sufficiently differentiated formulary. We also 
considered permitting issuers to request to offer an indefinite number 
of additional non-standardized plan option per product network type, 
metal level, and service area, as opposed to one exception per chronic 
and high-cost condition (as in the finalized policy). We also 
considered permitting exceptions only for an exclusive list of chronic 
and high-cost conditions, as opposed to any condition that is chronic 
and high-cost in nature (as described in the finalized policy).
    However, we ultimately decided to finalize an exceptions process 
that will allow an issuer to offer additional non-standardized plan 
options for each product network type, metal level, inclusion of dental 
and/or vision benefit coverage, and service area if it demonstrates 
that these additional plans' cost sharing for benefits pertaining to 
the treatment of chronic and high-cost conditions (including benefits 
in the form of prescription drugs, if pertaining to the treatment of 
the condition(s)) is at least 25 percent

[[Page 26415]]

lower, as applied without restriction in scope throughout the plan 
year, than the cost sharing for the same corresponding benefits in an 
issuer's other non-standardized plan option offerings in the same 
product network type, metal level, and service area, in accordance with 
Sec.  156.202(d) through (e). This policy is discussed in greater 
detail in section III.E.7 of the preamble to this rule.
    We are finalizing this approach primarily because we believe that 
allowing exceptions to the non-standardized plan option limit of two 
could play an important role in enhancing the quality of life for those 
affected by these conditions, combatting health disparities, advancing 
health equity, and reducing health care expenditures. We further 
believe that introducing this exceptions process will balance the dual 
aims of reducing the risk of plan choice overload while simultaneously 
ensuring that issuers can continue to offer truly innovative plan 
designs that may benefit consumers with chronic and high-cost 
conditions.

E. Regulatory Flexibility Act (RFA)

    The RFA requires agencies to analyze options for regulatory relief 
of small entities, if a rule has a significant impact on a substantial 
number of small entities. For purposes of the RFA, we estimate that 
small businesses, nonprofit organizations, and small governmental 
jurisdictions are small entities as that term is used in the RFA. The 
great majority of hospitals and most other health care providers and 
suppliers are small entities, either by being nonprofit organizations 
or by meeting the SBA definition of a small business (having revenues 
of less than $8.0 million to $41.5 million in any 1 year). We do not 
anticipate that providers will be directly impacted by the provisions 
in this final rule. Individuals and States are not included in the 
definition of a small entity. The provisions in this final rule will 
affect issuers, agents, brokers, web-brokers, and DE entities.
    For purposes of the RFA, we believe that health insurance issuers 
\361\ and DE entities \362\ will 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 $47 million or less will 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 will be $44.5 million or less.\363\ We believe 
that few, if any, insurance companies underwriting comprehensive health 
insurance policies (in contrast, for example, to travel insurance 
policies or dental discount policies) fall below these size thresholds. 
Based on data from MLR annual report submissions for the 2021 MLR 
reporting year, approximately 87 out of 483 issuers of health insurance 
coverage nationwide had total premium revenue of $47 million or 
less.\364\ This estimate may overstate the actual number of small 
health insurance issuers that may be affected, since over 77 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 $47 million. 
Therefore, although it is likely that fewer than 87 issuers are 
considered small entities, for the purposes of this analysis, we assume 
87 small issuers and/or DE entities would be impacted by this final 
rule.
---------------------------------------------------------------------------

    \361\ This includes health insurance issuers that act as DE 
entities pursuant to the definition in Sec.  155.20.
    \362\ DE entities are entities that an Exchange permits to 
assist consumers with direct enrollment in qualified health plans 
offered through the Exchange in a manner considered to be through 
the Exchange as authorized by Sec.  155.220(c)(3), Sec.  155.221, or 
Sec.  156.1230.
    \363\ https://www.sba.gov/document/support-table-size-standards.
    \364\ https://www.cms.gov/CCIIO/Resources/Data-Resources/mlr.html.
---------------------------------------------------------------------------

    We further believe that agents, brokers, and web-brokers \365\ will 
be classified under NAICS code 524210 (Insurance Agencies and 
Brokerages). According to SBA size standards, entities with average 
annual receipts of $15 million or less will be considered small 
entities for these NAICS codes. Therefore, based on SBA data and for 
purposes of this analysis, we assume 122,547 agents, brokers, and web-
brokers are small entities. However, the policies impacting agents, 
brokers, and web-brokers finalized in this rule will only impact such 
entities in States with State Exchanges that host web-broker programs. 
Currently, no States with State Exchanges host web-broker programs, but 
we estimate 5 States could opt to host a web-broker program for their 
State Exchange in the future. We further estimate that 20 web-brokers 
could operate in those States in the future and sought comment on this 
estimate.
---------------------------------------------------------------------------

    \365\ This includes web-brokers that act as DE entities in 
accordance with the definition under Sec.  155.20 to assist 
consumers with direct enrollment in qualified health plans offered 
through the Exchange in a manner considered to be through the 
Exchange as authorized by Sec.  155.220(c)(3), Sec.  155.221, or 
Sec.  156.1230.
---------------------------------------------------------------------------

    The finalized policies that will result in an increased burden to 
small entities are described below.
    We proposed to require issuers of risk adjustment covered plans to 
complete, implement, and provide to HHS written documentation of any 
corrective action plans when required by HHS if a high-cost risk pool 
audit results in the inclusion of certain observations in the final 
audit report. The annual burden per issuer associated with this policy 
is $627. For more details, please refer to the Regulatory Impact 
Analysis section associated with this policy in this final rule.
    We proposed to apply to agents, brokers, and web-brokers operating 
in State Exchanges that operate their own eligibility and enrollment 
platform, and consequently in State Exchanges, in both the Individual 
Market Exchanges and SHOPs, certain existing HHS standards regarding 
web-brokers assisting consumers with enrolling in QHPs and applying for 
APTC/CSRs. The one-time burden per agent, broker, or web-broker 
associated with this policy is $43,019. For more details, please refer 
to the information collection requirements section associated with this 
policy in this final rule.
    We proposed to require that DE entities implement and prominently 
display website changes in a manner that is consistent with display 
changes made by HHS to HealthCare.gov by meeting standards communicated 
and defined by HHS within a time period set by HHS, unless HHS approves 
a deviation from those standards. The annual burden associated with 
this policy is $2,608 ($2,401 to comply with the requirements and $207 
to make a request to deviate from the requirements). For more details, 
please refer to the information collection requirements section 
associated with this policy in this final rule.
    We proposed to apply to DE entities operating in State Exchanges 
that operate their own eligibility and enrollment platform, and 
consequently State Exchanges that utilize DE entities, certain existing 
HHS standards regarding DE entities assisting consumers with enrolling 
in QHPs and applying for APTC/CSRs, in both the Individual Market 
Exchanges and SHOPs. The one-time burden per DE entity associated with 
this policy is $100,715.60. For more details, please refer to the 
information collection requirements section associated with this policy 
in this final rule.
    We also proposed to require State Exchange and SBE-FP issuers to 
gather

[[Page 26416]]

and submit network adequacy data, including time and distance data and 
telehealth data. The annual burden per issuer associated with this 
policy is $689. For more details, please refer to the information 
collection requirements section associated with this policy in this 
final rule.
    Finally, we finalized Sec.  156.202(d) through (e) to permit each 
issuer to offer additional non-standardized plan options for each 
product network type, metal level, inclusion of dental and/or vision 
benefit coverage, and service area if it demonstrates that these 
additional plans' cost sharing for benefits pertaining to the treatment 
of chronic and high-cost conditions (including benefits in the form of 
prescription drugs, if pertaining to the treatment of the condition(s)) 
is at least 25 percent lower, as applied without restriction in scope 
throughout the plan year, than the cost sharing for the same 
corresponding benefits in an issuer's other non-standardized plan 
option offerings in the same product network type, metal level, and 
service area. The annual burden per issuer associated with this policy 
is $1,904. For more details, please refer to the information collection 
requirements section associated with this policy in this final rule.
    Thus, the per-entity estimated annual cost for small issuers and/or 
DE entities is $5,828, and the total estimated annual cost for small 
issuers and/or DE entities is $507,036. The per-entity estimated one-
time cost for small issuers and/or DE entities is $100,716, and the 
total estimated one-time cost for small issuers and/or DE entities is 
$8,762,257. The per-entity estimated one-time cost for small agents, 
brokers, and web-brokers is $43,019, and the total estimated one-time 
cost for small agents, brokers, and web-brokers is $860,380. There is 
no estimated annual cost for small agents, brokers, and web-brokers. 
See Tables 18, 19, 20, and 21.

           Table 18--Detailed Annual Costs for Small Entities
------------------------------------------------------------------------
                                                            Annual cost
                                                             per small
                   Description of cost                     issuer and/or
                                                             DE entity
------------------------------------------------------------------------
Risk adjustment audit...................................            $627
Applying HealthCare.gov display changes.................           2,608
Network adequacy........................................             689
Non-standardized plan option limit exceptions...........           1,904
                                                         ---------------
    Total...............................................          $5,828
------------------------------------------------------------------------


                               Table 19--Aggregate Annual Costs for Small Entities
----------------------------------------------------------------------------------------------------------------
                                                                                                    Aggregate
                                                                Affected small  Annual cost per    annual cost
                       Affected entity                             entities          entity         for small
                                                                                                     entities
----------------------------------------------------------------------------------------------------------------
Issuers and/or DE entities...................................              87           $5,828         $507,036
----------------------------------------------------------------------------------------------------------------


               Table 20--One-Time Costs for Small Entities
------------------------------------------------------------------------
                                           One-time cost   One-time cost
                                             per small       per small
           Description of cost               issuer/DE    agent, broker,
                                              entity       or web-broker
------------------------------------------------------------------------
Applying HHS standards to State Exchange        $100,716         $43,019
 entities...............................
                                         -------------------------------
    Total...............................         100,716          43,019
------------------------------------------------------------------------


                              Table 21--Aggregate One-Time Costs for Small Entities
----------------------------------------------------------------------------------------------------------------
                                                                                                  Aggregate one-
                         Affected entity                          Affected small   One-time cost   time cost for
                                                                     entities       per entity    small entities
----------------------------------------------------------------------------------------------------------------
Issuers and/or DE entities......................................              87        $100,716      $8,762,257
Agents, brokers, and web-brokers................................              20          43,019         860,380
----------------------------------------------------------------------------------------------------------------

    The annual cost per small issuer and/or DE entity of $5,828 is 
approximately 0.32 percent of the average annual receipts per small 
issuer. We anticipate that small issuers could pass on these increased 
costs to consumers in the form of higher premiums, resulting in an 
increase in receipts commensurate with the increase in costs. However, 
because the proportion of cost to receipts is so small, we anticipate 
this would have a de minimis impact on premiums, if any impact at all. 
We sought comment on this assumption.
    We sought comment on this analysis and seek information on the 
number of small issuers, agents, brokers, web-brokers, or DE entities 
that may be affected by the provisions in these final rules.
    As its measure of significant economic impact on a substantial 
number of small entities, HHS uses a change in revenue of more than 3 
to 5 percent. We do not believe that this threshold will be reached by 
the requirements in this final rule, given that the annual per-entity 
cost of $5,828 per small issuer represents approximately 0.32 percent 
of the average annual receipts for a small issuer,\366\ and there is no 
annual per-entity cost per small agent, broker, or web-broker. 
Therefore, the Secretary has certified that this final rule will not 
have a significant economic impact on a substantial number of small 
entities.
---------------------------------------------------------------------------

    \366\ United States Census Bureau (March 2020). 2017 SUSB Annual 
Data Tables by Establishment Industry, Data by Enterprise Receipt 
Size. https://www.census.gov/data/tables/2020/econ/susb/2020-susb-annual.html.
---------------------------------------------------------------------------

    In addition, section 1102(b) of the Act requires us to prepare a 
regulatory

[[Page 26417]]

impact analysis if a rule 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 
the purposes of section 1102(b) of the Act, we define a small rural 
hospital as a hospital that is located outside of a metropolitan 
statistical area and has fewer than 100 beds. While this rule is not 
subject to section 1102 of the Act, we have determined that this rule 
will not affect small rural hospitals. Therefore, the Secretary has 
certified that this final rule will not have a significant impact on 
the operations of a substantial number of small rural hospitals.

F. Unfunded Mandates Reform Act (UMRA)

    Section 202 of the Unfunded Mandates Reform Act of 1995 (UMRA) also 
requires that agencies assess anticipated costs and benefits before 
issuing any rule whose mandates require spending in any 1 year of $100 
million in 1995 dollars, updated annually for inflation. In 2024, that 
threshold is approximately $183 million. Although we have not been able 
to quantify all costs, we expect that the combined impact on State, 
local, or Tribal governments and the private sector does not meet the 
UMRA definition of unfunded mandate.

G. Federalism

    Executive Order 13132 establishes certain requirements that an 
agency must meet when it issues a proposed rule (and subsequent final 
rule) that imposes substantial direct requirement costs on State and 
local governments, preempts State law, or otherwise has Federalism 
implications.
    In compliance with the requirement of E.O. 13132 that agencies 
examine closely any policies that may have Federalism implications or 
limit the policy making discretion of the States, we have engaged in 
efforts to consult with and work cooperatively with affected States, 
including participating in conference calls with and attending 
conferences of the NAIC, and consulting with State insurance officials 
on an individual basis.
    While developing this rule, we attempted to balance the States' 
interests in regulating health insurance issuers with the need to 
ensure market stability. By doing so, we complied with the requirements 
of E.O. 13132.
    Because States have flexibility in designing their Exchange and 
Exchange-related programs, State decisions will ultimately influence 
both administrative expenses and overall premiums. States are not 
required to establish an Exchange or risk adjustment program. For 
States that elected previously to operate an Exchange, those States had 
the opportunity to use funds under Exchange Planning and Establishment 
Grants to fund the development of data. Accordingly, some of the 
initial cost of creating programs was funded by Exchange Planning and 
Establishment Grants. After establishment, Exchanges must be 
financially self-sustaining, with revenue sources at the discretion of 
the State. Current State Exchanges charge user fees to issuers.
    This rule may have 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 (including merged) markets. For example, we are finalizing 
the addition of requirements by which a State seeking to transition to 
a State Exchange provides the public with a notice and copy of its 
State Exchange Blueprint application. We are further finalizing the 
requirement that a State, within 3 months of submitting its State 
Exchange Blueprint to HHS for approval, conduct at least one public 
hearing whereby interested parties can learn about the State's intent 
to transition, as well as a State's progress toward transitioning, and 
conduct regular hearings every 3 months until the transition is 
complete. However, the Federalism implications of this policy may be 
mitigated because States have the option to establish their own 
Exchange, and we do not anticipate any additional burden on States 
because of this policy.
    We believe that the finalized revisions to Sec.  155.220(h) do not 
have Federalism implications as the CMS Administrator's review of 
agent, broker, and web-broker requests for reconsideration of 
administrative decisions is not based on State law, nor does it prevent 
a State from taking other legal actions under State law against an 
entity whose Exchange agreement(s) are terminated for cause by HHS.
    The finalized revisions to Sec. Sec.  155.220 and 155.221 applying 
certain web-broker and DE entity standards to State Exchanges that 
operate their own eligibility and enrollment platform may have 
Federalism implications, but they are substantially mitigated by 
allowing State Exchanges to leverage the oversight framework 
established by HHS for Exchanges that utilize the Federal Platform to 
evaluate web-broker and DE entity operational readiness to participate 
in an Exchange. We expect State Exchanges will be able to leverage 
audits conducted for the FFEs and SBE-FPs, as well as disclaimer 
language developed by HHS, while State operational costs would include 
any State-specific requirements or language to be added at the States' 
discretion. We believe that providing State Exchanges the opportunity 
to leverage the FFEs' oversight framework will likely reduce costs to 
State Exchanges as compared to the costs associated with State 
Exchanges establishing an independent framework for oversight and web-
broker or DE entity approval independent of the FFEs.
    The finalized revisions to Sec.  155.315(e) may have Federalism 
implications due to our policy to use existing requirements and 
flexibilities under Sec.  155.315(e) permitting all Exchanges to accept 
consumer attestation of incarceration status without further electronic 
verification. However, Exchanges that wish to continue electronically 
verifying an individual's incarceration status will be permitted do so, 
if HHS determines their data source is current, accurate, and minimizes 
administrative costs and burdens.
    In addition, this final rule may have Federalism implications due 
to the finalized revisions pertaining to State selection of EHB-
benchmark plans. The existing requirements pertaining to State 
selection of EHB-benchmark plans at Sec.  156.111 already imposed 
Federalism implications on States that choose to change or revise their 
EHB-benchmark plans. As discussed elsewhere in this final rule, we 
understand that certain aspects of the current process to change or 
revise EHB-benchmark plans may impose unanticipated difficulty on and 
create confusion for States. Accordingly, the finalized revisions to 
Sec.  156.111 are intended to reduce State burden and confusion to 
change or revise EHB-benchmark plans. As a result, the finalized 
revisions to Sec.  156.111 may reduce the existing Federalism 
implications.
    Our finalized amendments to Sec.  155.320 adding new paragraph 
(c)(1)(iii) may have Federalism implications for States given that 
State Exchanges and State Medicaid agencies will pay fees for use of 
the VCI Hub service. However, the Federalism implications may be 
mitigated because use of the VCI Hub service is optional such that 
State Exchanges and State Medicaid agencies continue to have 
flexibility under Sec.  155.315(h) and Sec.  155.320(c)(3)(iv) to use 
other data sources, like State wage data, when income is not verified 
using IRS tax data or SSA Title II data.

[[Page 26418]]

    Our finalized amendments to Sec.  155.420(d)(16) may have 
Federalism implications; however, by maintaining the 150 percent FPL 
SEP to be available at the option of the Exchange, these implications 
may be mitigated because we allow State Exchanges to decide whether to 
implement it based on their specific market dynamics, needs, and 
priorities.
    Comment: One commenter disagreed with the assessment in the 
Federalism section of this rule that there would be no additional 
burden on States, stating that the network adequacy provisions would 
place additional burdens on some States because some State departments 
of insurance conduct network adequacy assessments on behalf of the SBE. 
They asserted that, if the proposal is finalized, some State 
departments of insurance would need to contract for additional network 
adequacy assessments, or possibly increase personnel at significant 
cost to the State. Furthermore, the commenter disagreed with the 
conclusion in the Regulatory Flexibility Act section of this rule that 
the rule would not have a significant impact on the operations of a 
substantial number of small rural hospitals. The commenter stated that 
if exchange plans become unavailable in rural counties to the same 
extent that Medicare Advantage plans are unavailable, then some States' 
rural hospitals will be threatened with significant revenue losses.
    Response: We note that the Federalism and Regulatory Flexibility 
Act sections of this final rule have been revised with an updated 
assessment of the implications of this final rule for Federalism, and 
the impact on small entities. The concerns that commenters raised 
regarding Federalism and the Regulatory Flexibility Act are addressed 
in those updated sections.

H. Congressional Review Act

    Pursuant to Subtitle E of the Small Business Regulatory Enforcement 
Fairness Act of 1996 (also known as the Congressional Review Act, 5 
U.S.C 801 et seq.) OIRA has determined that this rule does meet the 
criteria set forth in 5 U.S.C. 804(2). Accordingly, this rule has been 
submitted to each House of the Congress and to the Comptroller General 
a report containing a copy of the rule along with other specified 
information.

    Chiquita Brooks-LaSure, Administrator of the Centers for Medicare & 
Medicaid Services, approved this document on March 27, 2024.

List of Subjects

31 CFR Part 33

    Health care, Health insurance, and Reporting and recordkeeping 
requirements.

42 CFR Part 600

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

45 CFR Part 153

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

45 CFR Part 155

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

45 CFR Part 156

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

Department of the Treasury

    For the reasons set forth in the preamble, the Department of the 
Treasury amends 31 CFR subtitle A, part 33, as set forth below:

PART 33--WAIVERS FOR STATE INNOVATION

0
1. The authority citation for part 33 continues to read as follows:

    Authority:  Sec. 1332, Pub. L. 111-148, 124 Stat. 119.


0
2. Section 33.112 is amended by adding paragraph (c)(3) to read as 
follows:


Sec.  33.112  State public notice requirements.

* * * * *
    (c) * * *
    (3) Such public hearings shall be conducted in an in-person, 
virtual (that is, one that uses telephonic, digital, and/or web-based 
platforms), or hybrid (that is, one that provides for both in-person 
and virtual attendance) format.
* * * * *

0
3. Section 33.120 is amended by revising paragraph (c) introductory 
text to read as follows:


Sec.  33.120  Monitoring and compliance.

* * * * *
    (c) Post award. Within at least 6 months after the implementation 
date of a section 1332 waiver and annually thereafter, a State must 
hold a public forum to solicit comments on the progress of a section 
1332 waiver. The State must hold the public forum at which members of 
the public have an opportunity to provide comments and must provide a 
summary of the forum to the Secretary as part of the quarterly report 
specified in Sec.  33.124(a) that is associated with the quarter in 
which the forum was held, as well as in the annual report specified in 
Sec.  33.124(b) that is associated with the year in which the forum was 
held. The public forum shall be conducted in an in-person, virtual 
(that is, one that uses telephonic, digital, and/or web-based 
platforms), or hybrid (that is, one that provides for both in-person 
and virtual attendance) format.
* * * * *

Department of Health and Human Services

    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 42 CFR 
chapter IV, subchapter I, and 45 CFR subtitle A, subchapter B, as set 
forth below.

42 CFR Chapter IV, Subchapter I

PART 600--ADMINISTRATION, ELIGIBILITY, ESSENTIAL HEALTH BENEFITS, 
PERFORMANCE STANDARDS, SERVICE DELIVERY REQUIREMENTS, PREMIUM AND 
COST SHARING, ALLOTMENTS, AND RECONCILIATION

0
4. The authority citation for part 600 continues to read as follows:


[[Page 26419]]


    Authority: Section 1331 of the Patient Protection and Affordable 
Care Act of 2010 (Pub. L. 111-148, 124 Stat. 119), as amended by the 
Health Care and Education Reconciliation Act of 2010 (Pub. L. 111-
152, 124 Stat. 1029).


0
5. Section 600.320 is amended by revising paragraph (c) to read as 
follows:


Sec.  600.320  Determination of eligibility for and enrollment in a 
standard health plan.

* * * * *
    (c) Effective date of eligibility. The State must establish a 
uniform method of determining the effective date of eligibility for 
enrollment in a standard health plan which--
    (1) Follows the Exchange effective date standards at 45 CFR 
155.420(b)(1);
    (2) Follows the Medicaid effective date standards at Sec.  435.915 
of this chapter exclusive of Sec.  435.915(a);or
    (3) Follows an effective date of eligibility of the first day of 
the month following the month in which BHP eligibility is determined; 
or
    (4) Follows an effective date of eligibility standard established 
by the State and subject to HHS approval to ensure that the effective 
date is:
    (i) No later than the first day of the second month following the 
date that an individual has been determined BHP-eligible; and
    (ii) No more restrictive than paragraphs (c)(1) through (3) of this 
section.
* * * * *

45 CFR Subtitle A, Subchapter B

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

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

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


0
7. The heading for part 153 is revised to read as set forth above.

0
8. Section 153.620 is amended by revising the section heading and 
paragraph (c)(4) introductory text to read as follows:


Sec.  153.620  Compliance with HHS risk adjustment standards.

* * * * *
    (c) * * *
    (4) Final audit findings. If an audit results in the inclusion of a 
finding or observation in the final audit report, the issuer must 
comply with the actions set forth in the final audit report in the 
manner and timeframe established by HHS, and the issuer must complete 
all of the following, if required by HHS:
* * * * *

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.


0
10. Section 155.105 is amended--
0
a. In paragraph (b)(2) by removing ``and'' after the semicolon;
0
b. In paragraph (b)(3) by removing the period at the end and adding in 
its place ``; and''; and
0
c. Adding paragraph (b)(4).
    The addition reads as follows:


Sec.  155.105  Approval of a State Exchange.

* * * * *
    (b) * * *
    (4) The Exchange first operates a State Exchange on the Federal 
platform under Sec.  155.106(c), meeting all requirements established 
under Sec.  155.200(f), for at least one plan year, including its first 
open enrollment period.
* * * * *

0
11. Section 155.106 is amended by revising paragraph (a)(2) to read as 
follows:


Sec.  155.106  Election to operate an Exchange after 2014.

    (a) * * *
    (2) Submit an Exchange Blueprint application for HHS approval at 
least 15 months prior to the date on which the Exchange proposes to 
begin open enrollment as a State Exchange. HHS requires that a State 
submitting a Blueprint Application to operate a State Exchange provide, 
upon request, supplemental information to HHS detailing the State's 
implementation of its State Exchange functionality, including 
information on the ability to implement and comply with Federal 
requirements for operating an Exchange.
    (i) Public notice. Upon submission of an Exchange Blueprint 
application to operate a State Exchange, the State shall issue a public 
notice of its Exchange Blueprint application submission through its 
website and include a copy of the Exchange Blueprint application, a 
description of the Plan Year for which the State seeks to transition to 
a State Exchange, language indicating that the State is seeking 
approval from HHS to transition to a State Exchange, and information 
about when and where the State will conduct public engagements 
regarding the State's Exchange Blueprint application, as described in 
paragraph (a)(2)(ii) of this section.
    (ii) Public engagements. After a State issues its public notice as 
described in paragraph (a)(2)(i) of this section and until HHS 
approves, or conditionally approves, the State's Exchange Blueprint 
application, a State must conduct at least one public engagement (such 
as a townhall meeting or public hearing) either in-person or virtually, 
regarding the State's Exchange Blueprint application progress, in a 
timeline and manner considered effective by the State and with HHS' 
concurrence. A State shall provide public notice of the public 
engagement. Such public engagement shall also provide interested 
parties the opportunity to learn about the State's progress in 
transitioning to a State Exchange and offer input on that transition. 
Following the initial public engagement described in this paragraph and 
until HHS approves or conditionally approves the State Exchange 
Blueprint application, a State shall conduct periodic public 
engagements, either in-person or virtually, in a timeframe and manner 
considered effective by the State.
* * * * *

0
12. Section 155.170 is amended by revising paragraph (a)(2) to read as 
follows:


Sec.  155.170  Additional required benefits.

    (a) * * *
    (2) A benefit required by State action taking place on or before 
December 31, 2011, a benefit required by State action for purposes of 
compliance with Federal requirements, or a benefit covered in the 
State's EHB-benchmark plan is considered an EHB. A benefit required by 
State action taking place on or after January 1, 2012, other than for 
purposes of compliance with Federal requirements, that is not a benefit 
covered in the State's EHB-benchmark plan is considered in addition to 
the essential health benefits.
* * * * *

0
13. Section 155.205 is amended by revising paragraphs (a) and (b)(4) 
and (5) to read as follows:


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

    (a) Call center. If the Exchange is not an Exchange described in 
paragraph (a)(1) or (2) of this section, the Exchange must provide for 
operation of a toll-free call center that addresses the needs of 
consumers requesting assistance and meets the requirements outlined in 
paragraphs (c)(1), (c)(2)(i), and (c)(3) of this section and at Sec.  
155.405(c)(2)(ii). At a minimum, the Exchange call center must provide 
consumers with access to a live call center representative during an 
Exchange's published hours of operation and a live call center

[[Page 26420]]

representative who must be able to assist consumers with filing their 
Exchange application, including providing consumers with information on 
their eligibility for advance premium tax credits and cost-sharing 
reductions, facilitating a consumer's comparison of QHPs, and helping 
consumers complete their Exchange applications for submission to the 
Exchange. If the Exchange is an Exchange described in paragraph (a)(1) 
or (2) of this section, the Exchange must provide at a minimum a toll-
free telephone hotline that includes the capability to provide 
information to consumers about eligibility and enrollment processes, 
and to appropriately direct consumers to the applicable Exchange 
website and other applicable resources.
* * * * *
    (b) * * *
    (4) Allows for an individual to submit a single streamlined 
eligibility application to the Exchange in accordance with Sec.  
155.405 and for the Exchange to make all determinations of eligibility 
for enrollment in a QHP and insurance affordability programs, in 
accordance with subpart D of this part, through the operation of a 
centralized eligibility and enrollment platform on the Exchange's 
website; or, if the Exchange is a State-based Exchange on the Federal 
platform, through the Federal eligibility and enrollment platform.
    (5) Allows a qualified individual to select a QHP and allows the 
Exchange to maintain records of all QHP enrollments, in accordance with 
subpart E of this part, through the operation of a centralized 
eligibility and enrollment platform on the Exchange's website; or, if 
the Exchange is a State-based Exchange on the Federal platform, through 
the Federal eligibility and enrollment platform.
* * * * *

0
14. Section 155.220 is amended by adding paragraph (c)(4)(iii), 
revising paragraphs (h)(2) and (3), and adding paragraph (n) to read as 
follows:


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

* * * * *
    (c) * * *
    (4) * * *
    (iii) Web-brokers operating in State Exchanges that do not use the 
Federal platform that permit other agents and brokers, through a 
contract or other arrangement, to use their internet website to help an 
applicant or enrollee complete a QHP selection or complete the Exchange 
eligibility application must comply with the standards in paragraphs 
(c)(4)(i)(A), (B), (D) and (F) of this section, except that all 
references to ``Federally-facilitated Exchange'' or ``HHS'' in 
paragraphs (c)(4)(i)(A), (B), (D), and (F) will be understood to mean 
``the applicable State Exchange.''
* * * * *
    (h) * * *
    (2) Timeframe for request. The agent, broker, or web-broker must 
submit a request for reconsideration to the CMS Administrator within 30 
calendar days of the written notice from HHS.
    (3) Notice of reconsideration decision. The CMS Administrator will 
provide the agent, broker, or web-broker with a written notice of the 
reconsideration decision within 60 calendar days of the date the CMS 
Administrator receives the request for reconsideration. This decision 
will constitute HHS' final determination.
* * * * *
    (n) Application to State Exchanges that do not use the Federal 
platform. A web-broker that assists or enrolls qualified individuals, 
qualified employers or qualified employees in coverage in a manner that 
constitutes enrollment through the State Exchange, or assists 
individual market consumers with submission of applications for advance 
payments of the premium tax credit and cost-sharing reductions through 
the State Exchange, must comply with the Federally-facilitated Exchange 
standards in paragraphs (c)(3)(i)(A), (G), (I), and (j)(2)(i) of this 
section, including any additional State-specific standards under 
paragraph (n)(1) of this section, and the State Exchange's operational 
readiness standards under paragraph (n)(2) of this section. For the 
purposes of paragraph (j)(2)(i) of this section, references to ``HHS'' 
and ``the federally facilitated Exchanges'' will be understood to mean 
``the applicable State Exchange, applied for web-brokers'', and the 
reference to ``HealthCare.gov'' will be understood to mean ``the State 
Exchange website, applied for web-brokers.''
    (1) State Exchanges may add State-specific information to the 
standardized disclaimers and information under paragraphs (c)(3)(i)(A), 
(G), and (I) of this section that does not conflict with the HHS-
provided language.
    (2) State Exchanges must establish the form and manner for their 
web-brokers to demonstrate operational readiness and compliance with 
applicable requirements in order for the web-broker's internet website 
being used to complete an Exchange eligibility application or a QHP 
selection, which may include submission or completion of the following 
items to the State Exchange, in the form and manner specified by the 
Exchange:
    (i) Operational data including licensure information, points of 
contact and third-party relationships;
    (ii) Enrollment testing, prior to approval or renewal;
    (iii) website reviews performed by the State Exchange;
    (iv) Security and privacy documentation, including:
    (A) Penetration testing results;
    (B) Security and privacy assessment reports;
    (C) Vulnerability scan results;
    (D) Plans of action and milestones; and
    (E) System security and privacy plans.
    (v) Agreements between the web-broker and the State Exchange.

0
15. Section 155.221 is amended by revising paragraphs (a) introductory 
text and adding paragraphs (a)(1)(i) and (ii), (b)(6), and (j) to read 
as follows:


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

    (a) Direct enrollment entities. All Exchanges may permit the 
following entities to assist consumers with direct enrollment in QHPs 
offered through the Exchange in a manner that is considered to be 
through the Exchange, to the extent permitted by applicable State law:
    (1) * * *
    (i) For purposes of applying the requirements of Sec.  156.1230(b) 
of this subchapter to State Exchanges, all references to ``Federally-
facilitated Exchange'' and ``HHS'', and ``HealthCare.gov'' will be 
understood to mean ``the applicable State Exchange'', ``the applicable 
State Exchange'', and ``the applicable State Exchange website'', 
respectively.
    (ii) [Reserved]
* * * * *
    (b) * * *
    (6) Implement and prominently display website changes in a manner 
that is consistent with display changes made to the Federally-
facilitated Exchange website by meeting standards communicated and 
defined by HHS within a time period set by HHS, unless HHS approves a 
deviation from those standards. Direct enrollment entities may request 
a deviation by submitting a proposed alternative display and 
accompanying rationale to HHS for review.
* * * * *
    (j) Application to State Exchanges that do not use the Federal 
platform. A direct enrollment entity that enrolls

[[Page 26421]]

qualified individuals, qualified employers, or qualified employees in 
coverage in a manner that constitutes enrollment through the State 
Exchange, or assists consumers with submission of applications for 
advance payments of the premium tax credit and cost-sharing reductions 
through the State Exchange, must comply with the Federally-facilitated 
Exchange standards in paragraphs (b)(1) through (3) and (d) of this 
section, including the exceptions in paragraph (c) of this section, 
where applicable; any additional State-specific standards under 
paragraph (j)(1) of this section; the State Exchange's operational 
readiness standards under paragraph (j)(2) of this section; and the 
State Exchange's website display change standards under paragraph 
(j)(3) of this section. References to Sec. Sec.  155.415(b), and 
155.415(b)(1) in paragraph (d) of this section will be understood to 
also apply to State Exchanges.
    (1) State Exchanges may add State-specific information to the 
standardized disclaimer under paragraph (b)(2) of this section that 
does not conflict with the HHS-provided language.
    (2) State Exchanges must establish the form and manner for their 
direct enrollment entities to demonstrate operational readiness and 
compliance with applicable requirements in order for the direct 
enrollment entity's internet website being used to complete an Exchange 
eligibility application or a QHP selection, which may include 
submission or completion of the following documentation to the State 
Exchange, in the form and manner specified by the Exchange:
    (i) Business audit documentation including:
    (A) Notices of intent to participate including auditor information;
    (B) Documentation packages including privacy questionnaires, 
privacy policy statements, and terms of service; and
    (C) Business audit reports including testing results.
    (ii) Security and privacy audit documentation including:
    (A) Interconnection security agreements;
    (B) Security and privacy controls assessment test plans;
    (C) Security and privacy assessment reports;
    (D) Plans of action and milestones;
    (E) Privacy impact assessments;
    (F) System security and privacy plans;
    (G) Incident response plans; and
    (H) Vulnerability scan results.
    (3) State Exchanges must require their direct enrollment entities 
to implement and prominently display website changes in a manner that 
is consistent with the display changes made by State Exchanges to the 
State Exchanges' websites, consistent with the process of defining and 
communicating standards and setting advance notice periods in paragraph 
(b)(6) of this section, except that all references in paragraph (b)(6) 
of this section to ``Federally-Facilitated Exchange website'' would be 
understood to mean ``State Exchange website,'' references to ``HHS'' 
would be understood to mean ``State Exchange,'' and the reference to 
``unless HHS approves a deviation from those standards'' would be 
understood to mean ``unless the State Exchange approves a deviation 
from those standards under the deviation request process it is required 
to establish should the State Exchange elect to permit deviation 
requests.''

0
16. Section 155.302 is amended by revising paragraph (a)(1) to read as 
follows:


Sec.  155.302  Options for conducting eligibility determinations.

    (a) * * *
    (1) Directly, through contracting arrangements in accordance with 
Sec.  155.110(a) under which the Exchange carries out all eligibility 
determinations for QHP coverage and related insurance affordability 
programs; or, as a State-based Exchange on the Federal platform, 
through a Federal platform agreement under which HHS carries out 
eligibility determinations and other requirements contained within this 
subpart; or
* * * * *

0
17. Section 155.305 is amended by adding paragraphs (f)(4)(i) and (ii) 
to read as follows:


Sec.  155.305  Eligibility standards.

* * * * *
    (f) * * *
    (4) * * *
    (i) If HHS notifies the Exchange as part of the process described 
in Sec.  155.320(c)(3) that APTC payments were made on behalf of either 
the tax filer or spouse, if the tax filer is a married couple, for 1 
year for which tax data would be utilized for verification of household 
income and family size in accordance with Sec.  155.320(c)(1)(i), and 
the tax filer or the tax filer's spouse did not comply with the 
requirement to file an income tax return for that year as required by 
26 U.S.C. 6011, 6012, and their implementing regulations and reconcile 
APTC for that period (``file and reconcile''), the Exchange must:
    (A) Send a notification to the tax filer, consistent with the 
standards applicable to the protection of Federal Tax Information, that 
informs the tax filer that the Exchange has determined that the tax 
filer or the tax filer's spouse, if the tax filer is married, has 
failed to file and reconcile, and educate the tax filer of the need to 
file and reconcile or risk being determined ineligible for APTC if they 
fail to file and reconcile for a second consecutive tax year; or
    (B) Send a notification to either the tax filer or their enrollee, 
that informs the tax filer or enrollee that they may be at risk of 
being determined ineligible for APTC in the future. These notices must 
educate tax filers or their enrollees on the requirement to file and 
reconcile, while not directly stating that the IRS indicates the tax 
filer or the tax filer's spouse, if the tax filer is married, has 
failed to file and reconcile.
    (ii) [Reserved]
* * * * *

0
18. Section 155.315 is amended by revising paragraph (e) to read as 
follows:


Sec.  155.315  Verification process related to eligibility for 
enrollment in a QHP through the Exchange.

* * * * *
    (e) Verification of incarceration status. The Exchange must verify 
an applicant's attestation that the applicant meets the requirements of 
Sec.  155.305(a)(2) by--
    (1) Accepting an applicant's attestation that they are not 
currently incarcerated; or
    (2) Verifying an applicant's attestation of incarceration status 
using any electronic data source that is available to the Exchange and 
which has been approved by HHS for this purpose. HHS will approve an 
electronic data source for incarceration verification if it provides 
data that are current and accurate, and if its use minimizes 
administrative costs and burdens.
    (3) If an Exchange verifies an applicant's attestation of 
incarceration status using an approved data source under paragraph 
(e)(2) of this section, to the extent that an applicant's attestation 
is not reasonably compatible with information from the approved data 
source or other information provided by the applicant or in the records 
of the Exchange, the Exchange must follow the procedures specified in 
Sec.  155.315(f).
* * * * *

0
19. Section 155.320 is amended by adding paragraph (c)(1)(iii) to read 
as follows.


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

* * * * *
    (c) * * *
    (1) * * *
    (iii) Payment to use income data through the Verify Current Income 
Hub

[[Page 26422]]

service. Beginning July 1, 2024, State Exchanges that elect the option 
to access the Verify Current Income service through the Federal Data 
Services Hub (``the Hub'') to verify an individual's income as 
described in paragraph (c)(3)(vi)(A) of this section, must reimburse 
HHS for the costs of their access to and use of the income data 
provided by the Verify Current Income Hub service. HHS will invoice 
States monthly for the amount the State must pay to HHS based on their 
actual utilization of CSI income data from the prior month and this 
invoiced amount will equal the product of the number of purchased 
transactions returned from the Verify Current Income Hub service and 
the price per transaction established under the contract maintained by 
HHS to provide the VCI Hub service, as well as an administrative fee to 
account for any direct or indirect costs of making CSI income data 
accessed through the VCI Hub service available to State Exchanges and 
State Medicaid and CHIP agencies.
* * * * *

0
20. Section 155.330 is amended by revising paragraph (d)(3) to read as 
follows:


Sec.  155.330  Eligibility redetermination during a benefit year.

* * * * *
    (d) * * *
    (3) Definition of periodically. (i) Beginning with the 2021 
calendar year, the Exchange must perform the periodic examination of 
data sources described in paragraphs (d)(1)(ii) of this section at 
least twice in a calendar year. State Exchanges that have implemented a 
fully integrated eligibility system with their respective State 
Medicaid programs, that have a single eligibility rules engine that 
uses MAGI to determine eligibility for advance payments of the premium 
tax credit, cost-sharing reductions, Medicaid, CHIP, and the BHP, if a 
BHP is operating in the service area of the Exchange, will be deemed in 
compliance with the Medicaid/CHIP PDM requirements and, if applicable, 
BHP PDM requirements, in paragraphs (d)(1)(ii) and (d)(3) of this 
section.
    (ii) Beginning with the 2025 calendar year, the Exchange must 
perform the periodic examination of data sources described in paragraph 
(d)(1)(i) of this section at least twice in a calendar year.
    (iii) Notwithstanding the requirements of paragraphs (d)(3)(i) and 
(ii) of this section, the Secretary has authority to temporarily 
suspend the requirement that Exchanges conduct the PDM processes 
described at paragraph (d)(3)(i) or (ii) of this section during certain 
situations or circumstances that leads to the limited availability of 
data needed to conduct PDM or of documentation needed for an enrollee 
to notify the Exchange that the result of PDM is inaccurate as 
described in paragraph (e)(2)(i)(C) of this section.
* * * * *

0
21. Section 155.335 is amended by--
0
a. Revising paragraphs (j)(1)(ii) through (iv);
0
b. Adding paragraph (j)(1)(v);
0
c. Revising paragraphs (j)(2)(i) through (iii); and
0
d. Adding paragraphs (j)(2)(iv) and (j)(5).
    The revisions and additions read as follows:


Sec.  155.335  Annual eligibility redetermination.

* * * * *
    (j) * * *
    (1) * * *
    (ii) If the enrollee's current QHP is not available through the 
Exchange, the Exchange will re-enroll the enrollee in a QHP within the 
same product at the same coverage level as described in sections 
1302(d) or (e) of the ACA as the enrollee's current QHP that has the 
most similar network compared to the enrollee's current QHP;
    (iii) If the enrollee's current QHP is not available through the 
Exchange and the enrollee's product no longer includes a QHP at the 
same coverage level as described in sections 1302(d) or (e) of the ACA 
as the enrollee's current QHP and--
    (A) The enrollee's current QHP is a silver level plan, the Exchange 
will re-enroll the enrollee in a silver level QHP under a different 
product offered by the same QHP issuer that is most similar to the 
enrollee's current product and that has the most similar network 
compared to the enrollee's current QHP. If no such silver level QHP is 
available for enrollment through the Exchange, the Exchange will re-
enroll the enrollee in a QHP under the same product that is coverage 
level higher or lower than the enrollee's current QHP and that has the 
most similar network compared to the enrollee's current QHP; or
    (B) The enrollee's current QHP is not a silver level plan, the 
Exchange will re-enroll the enrollee in a QHP under the same product 
that is one coverage level higher or lower than the enrollee's current 
QHP and that has the most similar network compared to the enrollee's 
current QHP;
    (iv) If the enrollee's current QHP is not available through the 
Exchange and the enrollee's product no longer includes a QHP that is at 
the same coverage level as described in sections 1302(d) or (e) of the 
ACA as, or one coverage level higher or lower than, the enrollee's 
current QHP, the Exchange will re-enroll the enrollee in any other QHP 
offered under the product in which the enrollee's current QHP is 
offered in which the enrollee is eligible to enroll and that has the 
most similar network compared to the enrollee's current QHP; or
    (v) Notwithstanding the other provisions in this paragraph (j)(1), 
to the extent permitted by applicable State law, if the enrollee's 
current QHP is a catastrophic plan as described in section 1302(e) of 
the ACA, and the enrollee will no longer meet the criteria for 
enrollment in a catastrophic plan as described in section 1302(e)(2) of 
the ACA:
    (A) The Exchange will re-enroll the enrollee in a bronze metal 
level QHP within the same product as the enrollee's current QHP that 
has the most similar network compared to the enrollee's current QHP; or
    (B) If no bronze plan is available through this product, the 
Exchange will re-enroll the enrollee in the QHP with the lowest 
coverage level offered under the product in which the enrollee's 
current QHP is offered in which the enrollee is eligible to enroll and 
that has the most similar network compared to the enrollee's current 
QHP.
    (2) * * *
    (i) The Exchange will re-enroll the enrollee in a QHP at the same 
coverage level as the enrollee's current QHP in the product offered by 
the same issuer that is the most similar to the enrollee's current 
product and that has the most similar network compared to the 
enrollee's current QHP;
    (ii) If the issuer does not offer another QHP at the same coverage 
level as the enrollee's current QHP, the Exchange will re-enroll the 
enrollee in a QHP that is one coverage level higher or lower than the 
enrollee's current QHP and that has the most similar network compared 
to the enrollee's current QHP in the product offered by the same issuer 
through the Exchange that is the most similar to the enrollee's current 
product;
    (iii) If the issuer does not offer another QHP through the Exchange 
at the same coverage level as, or one metal level higher or lower than 
the enrollee's current QHP, the Exchange will re-enroll the enrollee in 
any other QHP offered by the same issuer in which the enrollee is 
eligible to enroll and that has the most similar network compared to 
the enrollee's current QHP in the product that is most similar to the 
enrollee's current product; or
    (iv) Notwithstanding the other provisions in this paragraph (j)(2), 
to the

[[Page 26423]]

extent permitted by applicable State law, if the enrollee's current QHP 
is a catastrophic plan as described in section 1302(e) of the ACA, and 
the enrollee will no longer meet the criteria for enrollment in a 
catastrophic plan as described in section 1302(e)(2) of the ACA:
    (A) The Exchange will re-enroll the enrollee in a bronze metal 
level QHP offered by the same issuer in which the enrollee is eligible 
to enroll and that has the most similar network compared to the 
enrollee's current QHP in the product that is most similar to the 
enrollee's current product; or
    (B) If no bronze plan is available through this product, the 
Exchange will re-enroll the enrollee in the QHP with the lowest 
coverage level offered under the product in which the enrollee's 
current QHP is offered in which the enrollee is eligible to enroll and 
that has the most similar network compared to the enrollee's current 
QHP.
* * * * *
    (5) For purposes of this section, catastrophic coverage is not a 
coverage level that is considered higher or lower than metal level 
coverage when re-enrolling an enrollee to a plan that is a metal level 
higher or lower than their current plan, and an Exchange may not re-
enroll an enrollee that has coverage under section 1302(d) into 
catastrophic coverage.
* * * * *

0
22. Section 155.400 is amended by revising paragraph (e)(2) to read as 
follows:


Sec.  155.400  Enrollment of qualified individuals into QHPs.

* * * * *
    (e) * * *
    (2) Premium payment deadline extension. Exchanges may, and the 
Federally-facilitated Exchanges and State-based Exchanges on the 
Federal platform will, allow issuers experiencing billing or enrollment 
problems due to high volume or technical errors, or issuers directed to 
do so by applicable State or Federal authorities, to implement a 
reasonable extension of the binder payment and other premium payment 
deadlines.
* * * * *

0
23. Section 155.410 is amended by revising paragraph (e)(4)(i) and (ii) 
and adding paragraph (e)(4)(iii) to read as follows:


Sec.  155.410  Initial and annual open enrollment periods.

* * * * *
    (e) * * *
    (4) * * *
    (i) Subject to paragraphs (e)(4)(ii) and (iii) of this section, the 
annual open enrollment period begins on November 1 of the calendar year 
preceding the benefit year and extends through January 15 of the 
benefit year.
    (ii) For State Exchanges, for the benefit years beginning on or 
after January 1, 2025, a later annual open enrollment period end date 
may be adopted, such that the open enrollment period begins on November 
1 of the calendar year preceding the benefit year and ends after 
January 15 of the benefit year.
    (iii) For any State Exchange with an annual open enrollment period 
that began before November 1, 2023, and ended before January 15, 2024, 
for the 2024 benefit year, that State Exchange may continue to begin 
open enrollment before November 1 for consecutive future benefit years, 
so long as the open enrollment period continues uninterrupted for at 
least 11 weeks. If such State Exchange changes the date(s) of their 
annual open enrollment period, it must comply with paragraphs (e)(4)(i) 
and (ii) for all future annual open enrollment periods.
* * * * *

0
24. Section 155.420 is amended by revising paragraphs (b)(1), 
(b)(3)(i), and (d)(16) to read as follows:


Sec.  155.420  Special enrollment periods.

* * * * *
    (b) * * *
    (1) Regular effective dates. Except as specified in paragraphs 
(b)(2) and (3) of this section, for a QHP selection received by the 
Exchange from a qualified individual, the Exchange must ensure a 
coverage effective date of the first day of the month following the QHP 
selection; except that before January 1, 2025, for a QHP selection 
received by the Exchange from a qualified individual between the 
sixteenth and the last day of any month, the Exchange may ensure a 
coverage effective date of the first day of the second month following 
QHP selection.
* * * * *
    (3) * * *
    (i) For a QHP selection received by the Exchange under a special 
enrollment period for which the effective dates of coverage specified 
in paragraph (b)(1) or (b)(2)(i) of this section would apply, the 
Exchange may provide a coverage effective date that is earlier than 
specified in such paragraph.
* * * * *
    (d) * * *
    (16) At the option of the Exchange, a qualified individual or 
enrollee, or the dependent of a qualified individual or enrollee, who 
is eligible for advance payments of the premium tax credit, and whose 
household income, as defined in 26 CFR 1.36B-1(e), is expected to be at 
or below 150 percent of the Federal poverty level, may enroll in a QHP 
or change from one QHP to another one time per month.
* * * * *

0
25. Section 155.430 is amended by revising paragraph (b)(1)(iv) 
introductory text and adding paragraph (b)(1)(iv)(D) to read as 
follows:


Sec.  155.430  Termination of Exchange enrollment or coverage.

* * * * *
    (b) * * *
    (1) * * *
    (iv) The Exchange must permit an enrollee to retroactively 
terminate or cancel the enrollee's coverage or enrollment in a QHP in 
the following circumstances:
* * * * *
    (D) In a Federally-facilitated Exchange or a State-based Exchange 
on the Federal platform, if HHS elects to permit such terminations, and 
in a State Exchange that elects to permit such terminations, the 
enrollee demonstrates to the Exchange that the enrollee enrolled in 
Medicare Part A or B coverage with a retroactive effective date, and 
requests retroactive termination of QHP coverage within 60 days of the 
enrollment. The effective date of the retroactive termination must be 
no earlier than the later of the day before the first day of coverage 
under Medicare Part A or B, and the day that is six months before the 
retroactive termination in QHP coverage is requested. A retroactive 
termination date as described in this paragraph is not available for 
enrollments in stand-alone dental plans.
* * * * *

0
26. Section 155.1050 is amended by revising paragraph (a) to read as 
follows:


Sec.  155.1050  Establishment of Exchange network adequacy standards.

    (a) Except with regard to multi-State plans:
    (1) A federally facilitated Exchange must ensure that the provider 
network of each QHP meets the standards specified in Sec.  156.230 of 
this subtitle.
    (2) State Exchanges and State-based Exchanges on the Federal 
Platform must ensure that the provider network of each QHP meets 
applicable standards specified in Sec.  156.230(a)(1)(ii), (a)(1)(iii), 
and (a)(4) of this subchapter.
    (i) For plan years beginning on or after January 1, 2026, to comply 
with the requirement under paragraph (a)(2) of

[[Page 26424]]

this section, State Exchanges and State-based Exchanges on the Federal 
platform must:
    (A) Establish and impose network adequacy time and distance 
standards for QHPs that are at least as stringent as standards for QHPs 
participating on the Federally-facilitated Exchanges under Sec.  
156.230(a)(2)(i)(A) of this subchapter;
    (B) Conduct, prior to QHP certification, quantitative network 
adequacy reviews to evaluate compliance with requirements under Sec.  
156.230(a)(1)(ii), (a)(1)(iii), and (a)(2)(i)(A) of this subchapter, 
while providing QHP certification applicants the flexibilities 
described under Sec.  156.230(a)(2)(ii) and (a)(3) and (4); and
    (C) Require that all issuers seeking certification of a plan as a 
QHP submit information to the Exchange reporting whether or not network 
providers offer telehealth services.
    (ii) For plan years beginning on or after January 1, 2026, HHS may 
grant an exception to the requirements described under paragraphs 
(a)(2)(i) of this section to a State Exchange or State-based Exchange 
on the Federal platform that demonstrates with evidence-based data, in 
a form and manner specified by HHS, that:
    (A) the Exchange applies and enforces alternate quantitative 
network adequacy standards that are reasonably calculated to ensure a 
level of access to providers that is as great as that ensured by the 
Federal network adequacy standards established for QHPs under Sec.  
156.230(a)(1)(iii), (a)(2)(i)(A), and (a)(4) of this subchapter; and
    (B) the Exchange evaluates whether plans comply with applicable 
network adequacy standards prior to certifying any plan as a QHP.
* * * * *

0
27. Section 155.1312 is amended by adding paragraph (c)(3) to read as 
follows:


Sec.  155.1312  State public notice requirements.

* * * * *
    (c) * * *
    (3) Such public hearings shall be conducted in an in-person, 
virtual (that is, one that uses telephonic, digital, and/or web-based 
platforms), or hybrid (that is, one that provides for both in-person 
and virtual attendance) format.
* * * * *

0
28. Section 155.1320 is amended by revising paragraph (c) introductory 
text to read as follows:


Sec.  155.1320  Monitoring and compliance.

* * * * *
    (c) Post award. Within at least 6 months after the implementation 
date of a section 1332 waiver and annually thereafter, a State must 
hold a public forum to solicit comments on the progress of a section 
1332 waiver. The State must hold the public forum at which members of 
the public have an opportunity to provide comments and must provide a 
summary of the forum to the Secretary as part of the quarterly report 
specified in Sec.  155.1324(a) that is associated with the quarter in 
which the forum was held, as well as in the annual report specified in 
Sec.  155.1324(b) that is associated with the year in which the forum 
was held. The public forum shall be conducted in an in-person, virtual 
(that is, one that uses telephonic, digital, and/or web-based 
platforms), or hybrid (that is, one that provides for both in-person 
and virtual attendance) format.
* * * * *

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

0
29. The authority citation for part 156 continues 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
30. Section 156.111 is amended by revising paragraphs (a), (b)(2), and 
(e)(2) and (3) to read as follows:


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

    (a)(1) Subject to paragraphs (b) through (e) of this section, for 
plan years beginning on or after January 1, 2020, through December 31, 
2025, a State may change its EHB-benchmark plan by:
    (i) Selecting the EHB-benchmark plan that another State used for 
the 2017 plan year under Sec. Sec.  156.100 and 156.110;
    (ii) Replacing one or more categories of EHBs established at Sec.  
156.110(a) in the State's EHB-benchmark plan used for the 2017 plan 
year with the same category or categories of EHB from the EHB-benchmark 
plan that another State used for the 2017 plan year under Sec. Sec.  
156.100 and 156.110; or
    (iii) Otherwise selecting a set of benefits that would become the 
State's EHB-benchmark plan.
    (2) Subject to paragraphs (b) through (e) of this section, for plan 
years beginning on or after January 1, 2026, a State may change its 
EHB-benchmark plan by selecting a set of benefits that would become the 
State's EHB-benchmark plan.
    (b) * * *
    (2) Scope of benefits. (i) For plan years beginning on or after 
January 1, 2020, through December 31, 2025:
    (A) Provide a scope of benefits equal to the scope of benefits 
provided under a typical employer plan (supplemented by the State as 
necessary to provide coverage within each EHB category at Sec.  
156.110(a)), defined as either:
    (1) One of the selecting State's 10 base-benchmark plan options 
established at Sec.  156.100, and available for the selecting State's 
selection for the 2017 plan year; or
    (2) The largest health insurance plan by enrollment within one of 
the five largest large group health insurance products by enrollment in 
the State, as product and plan are defined at Sec.  144.103 of this 
subchapter, provided that:
    (i) The product has at least 10 percent of the total enrollment of 
the five largest large group health insurance products in the State;
    (ii) The plan provides minimum value, as defined under Sec.  
156.145;
    (iii) The benefits are not excepted benefits, as established under 
Sec.  146.145(b), and Sec.  148.220 of this subchapter; and
    (iv) The benefits in the plan are from a plan year beginning after 
December 31, 2013.
    (B) Not exceed the generosity of the most generous among a set of 
comparison plans, including:
    (1) The State's EHB-benchmark plan used for the 2017 plan year, and
    (2) Any of the State's base-benchmark plan options for the 2017 
plan year described in Sec.  156.100(a)(1), supplemented as necessary 
under Sec.  156.110.
    (ii) For plan years beginning on or after January 1, 2026, provide 
a scope of benefits that is equal to the scope benefits of a typical 
employer plan in the State. The scope of benefits in a typical employer 
plan in a State is any scope of benefits that is as or more generous 
than the scope of benefits in the least generous plan (supplemented by 
the State as necessary to provide coverage within each EHB category at 
Sec.  156.110(a)), and as or less generous than the scope of benefits 
in the most generous plan in the State (supplemented by the State as 
necessary to provide coverage within each EHB category at Sec.  
156.110(a)), among the following:
    (A) One of the selecting State's 10 base-benchmark plan options 
established at Sec.  156.100, and available for the selecting State's 
selection for the 2017 plan year; or
    (B) The largest health insurance plan by enrollment within one of 
the five

[[Page 26425]]

largest large group health insurance products by enrollment in the 
State, as product and plan are defined at Sec.  144.103 of this 
subchapter, provided that:
    (1) The product has at least 10 percent of the total enrollment of 
the five largest large group health insurance products in the State;
    (2) The plan provides minimum value, as defined under Sec.  
156.145;
    (3) The benefits are not excepted benefits, as established under 
Sec.  146.145(b), and Sec.  148.220 of this subchapter; and
    (4) The benefits in the plan are from a plan year beginning after 
December 31, 2013.
* * * * *
    (e) * * *
    (2) An actuarial certification and an associated actuarial report 
from an actuary, who is a member of the American Academy of Actuaries, 
in accordance with generally accepted actuarial principles and 
methodologies, that affirms that the State's EHB-benchmark plan 
complies with the applicable scope of benefits requirements at 
paragraph (b)(2) of this section.
    (3) The State's EHB-benchmark plan document that reflects the 
benefits and limitations, including medical management requirements, a 
schedule of benefits and, if the State is changing the number of 
prescription drugs pursuant to Sec.  156.122(a)(1)(ii), a formulary 
drug list in a format and manner specified by HHS; and
* * * * *

0
31. Section 156.115 is amended by revising paragraph (d) to read as 
follows:


Sec.  156.115  Provision of EHB.

* * * * *
    (d) For plan years beginning on or before January 1, 2026, an 
issuer of a plan offering EHB may not include routine non-pediatric 
dental services, routine non-pediatric eye exam services, long-term/
custodial nursing home care benefits, or non-medically necessary 
orthodontia as EHB. For plan years beginning on or after January 1, 
2027, an issuer of a plan offering EHB may not include routine non-
pediatric eye exam services, long-term/custodial nursing home care 
benefits, or non-medically necessary orthodontia as EHB.

0
32. Section 156.122 is amended by adding paragraphs (a)(3)(i)(E) and 
(f) to read as follows:


Sec.  156.122  Prescription drug benefits.

    (a) * * *
    (3) * * *
    (i) * * *
    (E) For plan years beginning on or after January 1, 2026, include 
at minimum one patient representative who must:
    (1) Represent the patient perspective as a member of the P&T 
committee.
    (2) Have relevant experience or participation in patient or 
community-based organizations.
    (3) Be able to demonstrate the ability to integrate data 
interpretations with practical patient considerations.
    (4) Have no fiduciary obligation to a health facility or other 
health agency and have no material financial interest in the rendering 
of health services.
    (5) Have a broad understanding of one or more conditions or 
diseases, associated treatment options, and research.
    (6) Disclose financial interests on their conflict-of-interest 
statements. Disclosed financial interests must include all interests 
with any entity that would benefit from decisions regarding plan 
formularies as well as specific information about their financial 
interests, such as the nature of the relationship and the value of the 
financial interest.
* * * * *
    (f) If a health plan covers prescription drugs in excess of the 
prescription drugs required to be covered under paragraph (a)(1) of 
this section, the additional prescription drugs are considered an 
essential health benefit and subject to requirements including the 
annual limitation on cost sharing and the restriction on annual and 
lifetime dollar limits, unless coverage of the drug is mandated by 
State action and is in addition to an essential health benefit pursuant 
to Sec.  155.170, in which case the drug would not be considered an 
essential health benefit.

0
33. Section 156.202 is amended by adding paragraphs (d) and (e) to read 
as follows:


Sec.  156.202  Non-standardized plan option limits.

* * * * *
    (d) For plan year 2025 and subsequent years, an issuer may offer 
additional non-standardized plan options for each product network type, 
metal level, inclusion of dental and/or vision benefit coverage, and 
service area if it demonstrates that these additional plans' cost 
sharing for benefits pertaining to the treatment of chronic and high-
cost conditions (including benefits in the form of prescription drugs, 
if pertaining to the treatment of the condition(s)) is at least 25 
percent lower, as applied without restriction in scope throughout the 
plan year, than the cost sharing for the same corresponding benefits in 
an issuer's other non-standardized plan option offerings in the same 
product network type, metal level, and service area.
    (1) The 25 percent reduction in cost sharing for benefits 
pertaining to the treatment of chronic and high-cost conditions will be 
evaluated at the level of total out-of-pocket costs for the treatment 
of the chronic and high-cost condition for a population of enrollees 
with the relevant chronic and high-cost condition.
    (2) The reduction in cost sharing must not be limited to a part of 
the year, or an otherwise limited scope of benefits.
    (3) The reduction in cost sharing for these benefits cannot be 
conditioned on a consumer having a particular diagnosis.
    (4) The required reduction in cost sharing only applies to the 
standard variant of the plan for which an issuer seeks an exception, 
and not to the income-based cost-sharing reduction plan variations 
required by Sec.  156.420(a), nor to the zero and limited cost-sharing 
plan variations required by Sec.  156.420(b).
    (5) Issuers are limited to one exception per product network type, 
metal level, inclusion of dental and/or vision benefit coverage, and 
service area, for each chronic and high-cost condition.
    (6) Chronic and high-cost conditions that may qualify an issuer for 
this exception will be determined by HHS.
    (e) An issuer that seeks to utilize this exceptions process is 
required to submit a written justification in a form and manner and at 
a time prescribed by HHS that:
    (1) Identifies the specific chronic and high-cost condition that 
its additional non-standardized plan option offers substantially 
reduced cost sharing for, in accordance with the definition of ``cost 
sharing'' at Sec.  156.20;
    (2) Identifies which benefits in the Plans and Benefits Template 
are discounted to provide reduced treatment-specific cost sharing for 
individuals with the specified chronic and high-cost condition. These 
discounts must be relative to the treatment-specific cost sharing for 
the same corresponding benefits in the issuer's other non-standardized 
plan offerings in the same product network type, metal level, inclusion 
of dental and/or vision benefit coverage, and service area. For the 
purposes of this standard, treatment specific cost sharing consists of 
the costs for obtaining services that pertain to the treatment of a 
particular chronic and high-cost condition--but not the costs for 
obtaining services that do not pertain to

[[Page 26426]]

the treatment of the relevant condition. The issuer must identify all 
services for which the benefits substantially reduce cost sharing in 
the Plans and Benefits Template. These benefits must encompass a 
complete list of relevant services pertaining to the treatment of the 
relevant condition;
    (3) Explains how the reduced cost sharing for these services 
pertains to clinically indicated guidelines and a representative 
treatment scenario for treatment of the specified chronic and high-cost 
condition (and include any relevant studies, guidelines, or 
supplementary documents to support the application, as applicable). For 
the purposes of this standard, a representative treatment scenario is 
an annual course of treatment for a chronic and high-cost condition; 
and
    (4) Includes a corresponding actuarial memorandum that explains the 
underlying actuarial assumptions made in the design of the plan the 
issuer is requesting to except. In this memorandum, an issuer must 
demonstrate how the benefits that are discounted to provide reduced 
treatment-specific cost sharing of at least 25 percent identified at 
Sec.  156.202(e)(2) for the treatment of the condition identified at 
Sec.  156.202(e)(1) under the excepted plan compare to the identified 
in-limit offering in the same product network type, metal level, 
inclusion of dental and/or vision coverage, and service area. This 
demonstration must specifically be in reference to the specific 
population that would be seeking treatment for the relevant condition 
and not the general population. This memorandum must also include an 
actuarial opinion confirming that this analysis was prepared in 
accordance with the appropriate Actuarial Standards of Practice and the 
profession's Code of Professional Conduct.

0
34. Section 156.520 is amended by revising paragraph (f) to read 
follows:


Sec.  156.520  Loan terms.

* * * * *
    (f) Conversions and voluntary terminations. (1) The loan recipient 
shall not convert or sell to a for-profit or non-consumer operated 
entity at any time after receiving a loan under this subpart. The loan 
recipient shall not undertake any transaction that would result in the 
CO-OP implementing a governance structure that does not meet the 
standards in this subpart.
    (2) CMS may, in its sole discretion, approve a request by a loan 
recipient to voluntarily terminate its loan agreement with CMS, and 
cease to constitute a QNHII, for the purpose of permitting a loan 
recipient to pursue innovative business plans that are not otherwise 
consistent with the requirements of this subpart, provided that all 
outstanding CO-OP loans issued to the loan recipient are repaid in full 
prior to termination of the loan agreement, and CMS believes granting 
the request would meaningfully enhance consumer access to quality, 
affordable, member-focused, non-profit health care options in affected 
markets.

0
35. Section 156.1215 is amended by revising paragraphs (b) and (c) to 
read as follows:


Sec.  156.1215  Payment and collections processes.

* * * * *
    (b) Netting of payments and charges for later years. As part of its 
payment and collections process, HHS may net payments owed to issuers 
and their affiliates operating under the same tax identification number 
against amounts due to the Federal Government from the issuers and 
their affiliates under the same taxpayer identification number for 
advance payments of the premium tax credit, advance payments of and 
reconciliation of cost-sharing reductions, payment of federally 
facilitated Exchange user fees, payment of State Exchanges utilizing 
the Federal platform user fees, HHS risk adjustment, reinsurance, and 
risk corridors payments and charges, and administrative fees for 
utilizing the Federal Independent Dispute Resolution process in 
accordance with Sec.  149.510(d)(2) of this subchapter.
    (c) Determination of debt. Any amount owed to the Federal 
Government by an issuer and its affiliates for advance payments of the 
premium tax credit, advance payments of and reconciliation of cost-
sharing reductions, Federally-facilitated Exchange user fees, including 
any fees for State-based Exchanges utilizing the Federal platform, HHS 
risk adjustment, reinsurance, risk corridors, and unpaid administrative 
fees for utilizing the Federal Independent Dispute Resolution process 
in accordance with Sec.  149.510(d)(2), after HHS nets amounts owed by 
the Federal Government under these programs, is a determination of a 
debt.

Xavier Becerra,
Secretary, Department of Health and Human Services.
Aviva Aron-Dine,
Acting Assistant Secretary (Tax Policy), Department of the Treasury.
[FR Doc. 2024-07274 Filed 4-5-24; 8:45 am]
BILLING CODE 4150-28-P