Federal Register, Volume 89 Issue 73 (Monday, April 15, 2024)

[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]

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Vol. 89

Monday,

No. 73

April 15, 2024

Part II

Department of the Treasury

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31 CFR Part 33

Department of Health and Human Services

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Centers for Medicare & Medicaid Services

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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

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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.

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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)

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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.
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\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.
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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

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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\
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\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.
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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

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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:
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\4\ See ACA section 1341 (transitional reinsurance program), ACA
section 1342 (risk corridors program), and ACA section 1343 (HHS
risk adjustment program).
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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\
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\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.
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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\
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\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.
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In the May 14, 2020 Federal Register (85 FR 29164) (2021
Payment Notice), we finalized the benefit and payment parameters for
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\
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\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.
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\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.
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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.
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\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.
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\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.
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[[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\
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\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/.
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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\
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\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.
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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.
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\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.
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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.
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\102\ See 45 CFR 156.1215.
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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.
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\103\ See Circular No. A-25 Revised. https://www.whitehouse.gov/wp-content/uploads/2017/11/Circular-025.pdf.
\104\ Id.
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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.
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\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).
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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.
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\108\ For additional information, see https://www.cms.gov/newsroom/fact-sheets/marketplace-2024-open-enrollment-period-report-final-national-snapshot.
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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.
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\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.
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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\
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\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.
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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.
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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\
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\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.
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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.
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\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.
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\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.
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\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).
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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.
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\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\
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\130\ 85 FR 29164, 29218.
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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\
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\131\ OMB Control Number: 0938-1119.
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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.
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\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.
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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.
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\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.
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\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.
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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.
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\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).
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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\
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\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.
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\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).
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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\
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\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.
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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).

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[[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.
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\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.
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\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.
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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.
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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.
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\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.
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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\
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\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.
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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\
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\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.

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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\
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\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.
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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.
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\217\ The FFEs' and SBE-FPs' costs for accessing these services
would be covered by the FFEs' and SBE-FPs' user fees.
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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.
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\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.
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\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.
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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.
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\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).
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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\
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\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.
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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.
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\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.
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\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.
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\225\ See 42 CFR 433.116.
\226\ See 42 CFR 433.112.
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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.
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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.
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\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/.
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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\
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\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.
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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\
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\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.
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\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.
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\240\ Public Law 117-169.
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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.
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\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.
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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\
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\242\ 86 FR 53438
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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.
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\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.
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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.
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\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.
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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.
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\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.
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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.
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\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.
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\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.
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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).
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\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.
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\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.
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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.
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\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.
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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.
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\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.
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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

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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\
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\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.
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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\
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\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.
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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.
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\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).
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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\
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\316\ 42 U.S.C. 18042(c)(1)(B).
\317\ See Sec. 156.515(c)(1).
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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\
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\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).
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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).''
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\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)
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\345\ Reinsurance collections ended in FY 2018 and outlays in
subsequent years reflect remaining payments, refunds, and allowable
activities.
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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.
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\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.
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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.
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\347\ Public Law 117-2.
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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.
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\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.
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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\
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\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.

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